[Federal Register Volume 65, Number 219 (Monday, November 13, 2000)]
[Notices]
[Pages 67785-67786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28946]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43509; File No. SR-PCX-00-12]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Pacific Exchange, Inc. Relating to Disciplinary 
Jurisdiction of the Ethics and Business Conduct Committee

November 2, 2000.

I. Introduction

    On March 26, 2000, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission'' or ``SEC'') pursuant to Section 19(b)(1) of Securities 
Exchange Act 1934 (``Act'') \1\ Rule 19b-4 thereunder,\2\ a proposed 
rule change relating to the disciplinary jurisdiction of the Ethics and 
Business Conduct Committee (``EBCC''). On September 12, 2000, the PCX 
filed Amendment No. 1 to the proposed rule change.\3\
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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 (``Amendment No. 
1'').
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    The proposed rule change, including Amendment No. 1, was published 
for comment in the Federal Register on September 27, 2000.\4\ No 
comments were received on the proposal. This order approves the 
proposal.
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    \4\ See Securities Exchange Act Release No. 43312 (September 20, 
2000), 65 FR 58139.
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II. Description of Proposal

    In its proposed rule change, the Exchange seeks to broaden the

[[Page 67786]]

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. Currently, Article IV, Section 9(b) of 
the PCX Constitution, states that ``[t]he jurisdiction of [the EBCC] 
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.'' 
Currently, the rules and regulations governing trading, order, decorum, 
health, safety, and welfare are within the exclusive jurisdiction of 
the Floor Trading Committees (``FTCs''). The Exchange proposes to 
delete the above-quoted section from the PCX Constitution, and grant 
the EBCC and FTCs concurrent jurisdiction over the enforcement of these 
rules and regulations.
    Under the proposal, the EBCC will be the primary disciplinary 
committee at the Exchange and the FTCs will retain jurisdiction to hear 
certain disciplinary matters, if necessary. An FTC rather than the EBCC 
may hear a case if it involves technical issues. For example, an FTC 
may act as the disciplinary committee if a ``Marking the Close'' 
trading violation occurs. That is, an incident that involves a market 
maker changing his quotes at the close to not accurately reflect the 
market in order to improve the market maker's position. In such a case, 
the Exchange believes having the expertise of Floor Officials would be 
appropriate.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with Section 6(b) \5\ of the Act, in general, and furthers the 
objectives of Section 6(b)(6),\6\ in particular, 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)(6).
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    The Commission believes that it is appropriate for the EBCC to have 
jurisdiction over disciplinary matters arising from the floor because 
it is less likely that the members of the EBCC will have personal 
knowledge of relevant incidents or a Floor Official ruling relating to 
the incident. The Commission believes that this will assist in creating 
a more objective disciplinary process at the PCX. Further, the proposed 
rule change will centralize disciplinary actions in one committee at 
the Exchange. The Commission believes that having one primary 
disciplinary committee responsible for hearing complaints will better 
assure consistency in the decisions rendered.
    However, the Commission also believes that it is appropriate for 
the Exchange to allow the FTC to retain jurisdiction to hear those 
disciplinary matters that require specialized knowledge of the trading 
rules. The Commission understands many of the trading rules involve 
complex issues which require a high level of expertise to fully 
comprehend, and evaluate in a meaningful way.
    The Commission believes that the Exchange's proposal to grant the 
EBCC and FTCs concurrent jurisdiction over disciplinary proceedings 
relating to trading, order, decorum, health, safety, and welfare on the 
trading floors, with the EBCC being the primary committee responsible, 
will result in consistent, independent decision-making. Moreover, the 
proposal will also ensure that matters involving complex and technical 
issues are handled by committees appropriately skilled to understand 
them and render fair decisions.

IV. Conclusion

    For all of the aforementioned reasons, the Commission finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\7\
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    \7\ In approving this rule change, the Commission has considered 
the proposal's impact on efficiency, competition, and capital 
formation, consistent with Section 3(f) of the Act. 15 U.S.C. 
78c(f).
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    It is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-PCX-00-12) is approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-28946 Filed 11-9-00; 8:45 am]
BILLING CODE 8010-01-M