[Federal Register: March 1, 1999 (Volume 64, Number 39)] [Notices] [Page 10052-10053] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr01mr99-120] ----------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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.'' --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \6\ Id. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \11\ See telephone conversation discussed in note 5 above. --------------------------------------------------------------------------- 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). --------------------------------------------------------------------------- For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\13\ --------------------------------------------------------------------------- \13\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 99-4961 Filed 2-26-99; 8:45 am] BILLING CODE 8010-01-M