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Notice

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

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Start Preamble 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.

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]

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.

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.Start Printed 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.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

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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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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[FR Doc. 00-24734 Filed 9-26-00; 8:45 am]

BILLING CODE 8010-01-M