[Federal Register Volume 65, Number 188 (Wednesday, September 27, 2000)]
[Notices]
[Pages 58139-58140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24734]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43312; File No. SR-PCX-00-12]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 by the Pacific Exchange, Inc. Relating to 
Disciplinary Jurisdiction of the Ethics and Business Conduct Committee

September 20, 2000.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 26, 2000, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change as described in Items I, II and III 
below, which Items have been prepared by the PCX. On September 12, 
2000, the PCX filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Cindy L. Sink, Senior Attorney, Regulatory 
Policy, PCX, to Jennifer L. Colihan, Attorney, Division of Market 
Regulation, Commission, dated September 11, 2000. In Amendment No. 
1, the Exchange deleted the word ``exclusive'' from Article IV, 
Section 9(a) of the PCX Constitution as the Exchange did not intend 
the jurisdiction described in that Section to be exclusive to the 
Ethics and Business Conduct Committee (``EBCC'' or ``Committee''). 
Also, the Exchange represented that the proposed rule change was 
approved by the PCX membership on January 27, 2000. Lastly, the 
Exchange provided an example of where a Floor Trading Committee 
(``FTC'') may act as the disciplinary committee in place of the 
EBCC.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX proposes to broaden the jurisdiction of the EBCC to include 
the enforcement of rules and regulations relating to trading, order, 
decorum, health, safety, and welfare on the trading floors.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the PCX included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, Article IV, Section 9(b) of the PCX Constitution, 
regarding the jurisdiction of the EBCC, states that ``The jurisdiction 
of this Committee shall not extend to the enforcement of rules and 
regulations of the Floor Trading Committees relating to trading, order, 
decorum, health, safety, and welfare on the trading floors, or to 
hearings held by and sanctions imposed by such committees relating to 
such matters.'' The Exchange now proposes to expand the disciplinary 
jurisdiction of the EBCC to include the enforcement of rules and 
regulations relating to trading, order, decorum, health, safety, and 
welfare on the trading floors by deleting this provision from the PCX 
Constitution.
    Currently, these rules and regulations are within the exclusive 
jurisdiction of the FTCs. It is intended that the EBCC will be used as 
the primary disciplinary committee at the Exchange and the FTCs will 
retain jurisdiction to hear disciplinary matters, if necessary. For 
example, it may be appropriate to take a case to an FTC rather than the 
EBCC if the case involves technical issues. In such a case, having the 
expertise of Floor Officials would be appropriate.\4\
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    \4\ An example of a situation where an FTC may act as the 
disciplinary committee is a ``Marking the Close'' trading violation. 
That is, an incident involves a market maker changing the quotes at 
the close to not accurately reflect the market to improve the market 
maker's position. See Amendment No. 1, supra note 3.
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    The Exchange proposes this change to centralize disciplinary 
actions with one committee at the Exchange. The Exchange believes that 
having one disciplinary committee will better assure consistency in the 
decisions rendered. Moreover, the Exchange notes that, unlike the EBCC, 
the members of the FTCs are Floor Officials on the trading floors.
    In that regard, the Exchange believes that in the process of 
adjudicating disciplinary cases that arise on the trading floor, it is 
less likely that the members of the EBCC will have personal knowledge 
of the relevant incident of a Floor Official ruling relating to the 
incident. Therefore, the Exchange believes that making the EBCC, in 
general, the sole disciplinary committee will result in a more 
objective disciplinary process at the PCX.
2. Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) \5\ of the Act, in general, and furthers the objectives of 
section 6(b)(5),\6\ in particular, in that it is designed to regulate 
communications to and from the Exchange's Options Trading Floor in a 
manner that promotes just and equitable principles of trade and 
protects investors and the public interest. The proposal is also 
consistent with section 6(b)(6) \7\ of the Act in that it is designed 
to assure that Exchange members and persons associated with Exchange 
members are appropriately disciplined for violations of the Act, the 
rules and regulations thereunder, and the rules of the Exchange.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

[[Page 58140]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in Federal 
Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will--
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of 
the submission. all subsequent amendments, all written statement with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for inspection and copying in the Commission's 
Public Reference Room. Copies of such filing will also be availabe for 
inspection and copying at the principal office of the PCX. All 
submissions should refer to File No. SR-PCX-00-12 and should be 
submitted by October 18, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-24734 Filed 9-26-00; 8:45 am]
BILLING CODE 8010-01-M