Self-Regulatory Organization; Pacific Exchange, Inc.; Order Approving Proposed Rule Change to Amend Equity Floor Procedure Advice 2-C To Remove an Exception Regarding Trade Reporting Responsibilities

[Federal Register Volume 64, Number 39 (Monday, March 1, 1999)]
[Notices]
[Pages 10052-10053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4961]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41083; File No. SR-PCX-98-57]


Self-Regulatory Organization; Pacific Exchange, Inc.; Order 
Approving Proposed Rule Change to Amend Equity Floor Procedure Advice 
2-C To Remove an Exception Regarding Trade Reporting Responsibilities

February 22, 1999.

I. Introduction

    On November 6, 1998, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'' or ``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Equity Floor Procedure 
Advice 2-C to remove an exception regarding trade reporting 
responsibilities. The proposed rule change was published for comment in 
the Federal Register on January 15,

[[Page 10053]]

1999.\3\ The Commission received no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 40888 (January 6, 1999), 64 FR 
2694.
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II. Description of the Proposal

    Currently, PCX Rule 5.12 states that ``The seller shall be 
responsible for transactions being promptly recorded by the floor 
reporters.'' This requirement is subject to two exceptions in Equity 
Floor Procedure Advice 2-C, the second of which states that 
``Transactions in local issues in which the specialist acts as the 
buyer an the seller is on the opposite trading floor \4\ are to be 
promptly reported to the tape by the specialist. The seller is required 
to submit a `goldenrod' ticket \5\ to report the transaction for 
clearing purposes only.''
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    \4\ The PCX maintains trading floors in two locations, Los 
Angeles and San Francisco.
    \5\ A goldenrod ticket is a ticket that is printed on gold 
colored paper. It is used for clearing transactions. If a trade is 
properly reported to the tape on a pink ticket, but the parties have 
not been identified, a goldenrod ticket will be issued with the 
parties have been identified for clearing purposes. Telephone 
conversation between Robert P. Pacileo, Staff Attorney, Regulatory 
Policy, PCX, and Robert B. Long, Attorney, Division of Market 
Regulation, Commission, on February 5, 1999.
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    The PCX proposed to delete the second exception to Rule 5.12 in 
Equity Floor Procedure Advice 2-C so that the general requirement in 
Rule 5.12 of seller responsibility shall apply. The Exchange believes 
that the conditions underlying the original exception have changed and 
that there is no longer any reason to exempt these types of 
transactions from the basic requirement. The Exchange believes that 
electronic links between the PCX's two trading floors allow sellers to 
record promptly transactions in local issues in which the specialist 
acts as the buyer even when the seller is on the opposite trading 
floor.\6\ Deleting this exception will make the obligation to report 
transactions consistent with the general requirement that sellers 
report the trades.
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    \6\ Id.
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act \7\ and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of sections 6(b)(5) and 
11A(a)(1)(C)(iii) of the Act.\8\ Section 6(b)(5) of the Act requires 
that the rules of a national securities exchange be designed to perfect 
the mechanism of a free and open market, to promote just and equitable 
principles of trade, and, in general to protect investors and the 
public interest.\9\ In section 11A(a)(1)(C)(iii), Congress found that 
it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers, and investors of information with 
respect to transactions in securities.\10\
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    \7\ In approving this proposal, the Commission has considered 
the proposal's impact on efficiency, competition, and capital 
formation 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b) and 78(k)-1(a)(1)(C)(iii).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78(k)-l(a)(1)(C)(iii).
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    By deleting the second exception to PCX Rule 5.12, the Exchange is 
proposing that transaction in local issues in which the specialists 
acts as the buyer and the seller is on the opposite trading floor are 
to be promptly reported to the tape by the seller. The PCX maintains 
that the second exception provided in Equity Floor Procedure Advice 2-C 
was designed to facilitate the proper recording of transactions when 
communications between the two trading floors was less efficient (under 
the exception, a trade is required to be reported where it was 
executed). According to the PCX, electronic links between the 
Exchange's two trading floors should ensure that the seller is aware of 
the execution in a timely manner and, therefore, able to assume 
responsibility for transactions being promptly recorded by the floor 
brokers.\11\
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    \11\ See telephone conversation discussed in note 5 above.
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    In light of enhanced technology between PCX's Los Angeles and San 
Francisco trading floors, the Commission believes that subjecting 
transactions in local issues in which the specialist acts as the buyer 
and the seller is on the opposite trading floor to the requirements of 
the general rule, Rule 5.12, is consistent with the provisions of the 
Act discussed above because imposing the transaction reporting 
requirements should promote the rapid and efficient reporting of 
transactions to the tape by applying those requirements generally to 
sellers.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-PCX-98-57) is approved.

    \12\ 15 U.S.C. 78s(b)(2).
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    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-4961 Filed 2-26-99; 8:45 am]
BILLING CODE 8010-01-M