[Federal Register Volume 66, Number 162 (Tuesday, August 21, 2001)]
[Notices]
[Pages 43946-43947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-20980]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44697; File No. SR-PCX-2001-29]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to Options Floor Member Examinations

August 14, 2001.
    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 July 26, 2001, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the Exchange. On August 2, 2001, the PCX 
amended the proposal.\3\ The Exchange filed the proposal pursuant to 
Section 19(b)(3)A) of the Act,\4\ and Rule 19b-4(f)(6)\5\ thereunder, 
which renders the proposal effective upon filing with the 
Commission.\6\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240..19b-4.
    \3\ See July 31, 2001 letter from Michael D. Pierson, Vice 
President, Regulatory Policy, PCX, to Joseph Morra, Special Counsel, 
Division of Market Regulation, Commission (``Amendment No. 1''). In 
Amendment No. 1, the Exchange clarified that (a) the Market Maker 
examination consists of 100 questions, and that applicants will be 
given three hours to take the examination; and (b) the Floor Broker 
examination consists of 121 questions, and that applicants will be 
given three and one half hours to take the examination.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The Exchange provided the Commission with written notice of 
its intent to file the proposal on July 9, 2001. The Exchange has 
asked the Commission to waive the 30-day operative delay to allow 
the proposal to be effective upon filing with the Commission. See 
Rule 19b-4(f)(6). 17 CFR 240.19b-4(f)(6).
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1. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to adopt new qualification examinations for 
PCX Options Market Makers and Floor Brokers. The text of the proposed 
rule change is available at the Commission and at the PCX.

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 its proposal and discussed any 
comments it received regarding the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
The PCX 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
    The PCX currently administers examinations to qualify applicants to 
perform the functions of Market Makers and Floor Brokers on the Options 
Floor of the Exchange. Market Makers and Floor Brokers are required to 
pass these examinations pursuant to PCX Rules 6.33 and 6.44, 
respectively. Before being able to operate in the capacity of an 
Options Market Maker or Options Floor Broker, a prospective member must 
successfully complete the proposed examination that corresponds to the 
individual's role as a floor member. The commission approved these 
examinations in 1993.\7\
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    \7\ See Securities Exchange Act Release No. 32550 (June 29, 
1993), 58 FR 36489 (July 7, 1993) (order approving SR-PSE-91-15).
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    The Exchange now proposes to replace the current examinations with 
new sets of questions and answers. The new Floor Member Examination, to 
be taken by both Market Maker and Floor Broker applicants, consists of 
100 questions that cover a variety of topics, including: exercise of 
option contracts, margin and net capital, reporting of financial 
arrangements, rules on bid-ask spread differentials, priority of bids 
and offers, the Exchange's automatic execution system, opening and 
closing rotations, firm quotes, fast markets, trading halts, general 
market maker obligations, position and exercise limits and other such 
subjects. Floor Broker applicants must also take an additional 
examination consisting of 21 questions that cover various topics, 
including the following: due diligence, limit order display, order 
types, error accounts, crossing orders, public outcry requirement, 
priority of bids and offers, fast markets, trading rotations and

[[Page 43947]]

permitted use of telephones on the trading floor. Accordingly, Market 
Makers are required to answer 100 questions and Floor Brokers are 
required to answer 121 questions.
    The questions in both exams are equally weighted. All of the 
questions in the exams are multiple choice, true/false or fill in the 
blank. Applicants for the Market Maker examination will be given three 
hours to complete the examination. Applicants for the Floor Broker 
examination will be given three and one half hours to complete the 
examination. The Exchange believes that the new examinations cover a 
wide range of relevant topics in detail, so that the examination 
requirement will help to ensure that only those candidates with a 
comprehensive knowledge of the specific rules of the Exchange, as well 
as an understanding of relevant provisions of the Act, will be eligible 
for floor membership.
2. Statutory Basis
    The Exchange believes the proposal is consistent with the 
requirements of section 6(b) of the Act,\8\ in general, and furthers 
the objectives of section 6(b)(5),\9\ in particular, in that it is 
designed to promote just and equitable principles of trade, prevent 
fraudulent and manipulative acts and practices, protect investors and 
the public interest. The Exchange also believes that the proposal is 
consistent with sections 6(C)(1)(A) and (B) of the Act, which permit 
the Exchange to condition or deny membership status to persons who do 
not meet such standards of training experience or competence as 
prescribed by Exchange rules.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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.

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

    No 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

    Because the foregoing proposed rule change does not:
    (i) significantly affect the protection of investors or the public 
interests;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission accelerate the 
operative date. The Commission finds good cause to designate the 
proposal to be operative upon filing with the Commission because such 
designation is consistent with the protection of investors and the 
public interest. The Exchange has modified its orientation program for 
new members who intend to take a qualification examination. The 
orientation is intended to cover all of the general topics that are 
included in the qualification examinations. The Exchange provides an 
orientation for new members on the last Wednesday of every month, and 
members generally are permitted to take the qualification examination 
on any day following the orientation. Acceleration of the operative 
date will allow the PCX to immediately implement the new examinations, 
thereby requiring new PCX members to be qualified based upon higher 
standards than those standards applied using the former examination and 
orientation. Higher standards are consistent with the protection of 
investors and the public interest. For these reasons, the Commission 
finds good cause to designate that the proposal is both effective and 
operative upon filing with the Commission.\12\
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    \12\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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 statements 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 available for 
inspection and copying at the principal office of the PCX. All 
submissions should refer to file number SR-PCX-2001-29 and should be 
submitted by September 11, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 01-20980 Filed 8-20-01; 8:45 am]
BILLING CODE 8010-01-M