Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by Pacific Stock Exchange, Inc., Relating to the Execution of Cross Transactions on the PSE Equities Floors

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34849; File No. SR-PSE-94-22]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by Pacific Stock Exchange, Inc., Relating to the Execution of

Cross Transactions on the PSE Equities Floors

October 18, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on August

18, 1994, the Pacific Stock Exchange, Inc. (``PSE'' 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 self-regulatory organization. On

October 13, 1994, the Exchange submitted Amendment No. 1.\1\ The

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

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\1\See letter from Michael Pierson, Senior Attorney, PSE, to

Sandra Sciole, Commission, dated October 10, 1994. In Amendment No.

1 the PSE (1) Divided the original proposed rule change into two

filings by removing proposed commentary .06 from this filing and

making it a separate filing; and (2) changed the minimum number of

shares for eligibility under the commentary from 10,000 to 25,000 to

mirror the comparable Amex and NYSE Rules (NYSE Rule 72(b) and Amex

Rule 126(g)).

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I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

The Exchange is proposing to add a new commentary to its Rule

5.14(b), relating to the execution of cross transactions on the

Equities Floors. The text of the proposed rule change is as follows:

italicizing indicates new language:

Rule 5.14(a)--No change.

Rule 5.14(b)--No change.

Commentary .01--.04--No change.

.05 Agency orders to cross 25,000 shares or more at or within the

prevailing quotation will be permitted to establish precedence without

regard to priority of existing bids or offers at that price. Members

will be allowed to better the proposed cross price, but in doing so

shall be required to satisfy all other existing bids or offers at that

price. For purposes of this Commentary .05, proprietary orders of

members, member organizations, and non-member broker dealers shall not

be considered ``agency.''

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 self-regulatory organization

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 self-regulatory organization

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 PSE is proposing to amend its rules regarding the execution of

stock cross transactions (i.e., Rules 5.14(a) and 5.14(b)) by adding a

new commentary to Rule 5.14(b). Proposed Commentary .05 will govern

large agency crosses.

Proposed Commentary .05. Proposed Commentary .05 is designed to

permit the execution of ``clean'' agency crosses of 25,000 shares or

more at or within the prevailing quotation without regard to the

priority of existing bids or offers.

As with the Rule 72(b) of the New York Stock Exchange (``NYSE'')

and the Rule 126(g), Commentary .02, of the American Stock Exchange

(``Amex''), this proposal to allow ``clean'' crosses is designed to

facilitate the execution of agency cross transaction at the PSE.

Although the proposal would allow such cross transactions to be

executed without regard to priority of existing bids or offers, it will

still specifically allow members an opportunity to better the price of

the cross transaction.

The PSE has also written this new rule with a specific limitation

that it be allowed only for ``agency'' order, i.e. non-proprietary

orders of members, member organizations and non-member broker/dealers.

This approach to agency orders is consistent with that taken by the

Amex and NYSE. It is designed to provide an environment for the

facilitation of true agency crosses without giving an unfair advantage

to the proprietary orders of members, member organizations or non-

member broker/dealers over other orders being held in the specialist

books.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent

with Section 6(b) of the Act, in general, and Section 6(b)(5), in

particular, in that it is designed to facilitate transactions in

securities, to promote just and equitable principles of trade, and to

protect investors and the public interest.

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.

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 publication of this notice in the 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 the 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. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street NW., Washington, D.C. 20549.

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 at the

Commission's Public Reference Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such filing will also be available

for inspection and copying at the principal office of the PSE. All

submissions should refer to File No. SR-PSE-94-22 and should be

submitted by November 15, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-26436 Filed 10-24-94; 8:45 am]

BILLING COCE 8010-01-M