[Federal Register Volume 64, Number 102 (Thursday, May 27, 1999)]
[Notices]
[Pages 28850-28852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13468]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41430; File No. SR-PCX-99-12]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Amending PCX Rule 15--``PCX Application of the OptiMark System''
May 20, 1999.
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 April 22, 1999, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 adopt a stated policy and practice
with respect to the meaning and administration of Rule 15 of the
Exchange's of Board of Governors--``PCX Application of the OptiMark
System.'' The Exchange's proposed policy and practice clarifies the
meaning and administration of the PCX Application of the OptiMark
System (``PCX Application'') and makes a few technical amendments to
Rule 15.
The text of the proposed rule change is available at the PCX and at
the Commission.
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 Exchange 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.
[[Page 28851]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background. The PCX Application is a new, computerized, screen-
based trading service intended for use by Exchange members and their
customers (``Users'').\3\ As described in the Approval Order, it
provides automatic order formulation, matching, and execution
capabilities in the equity securities listed or traded on the Exchange
(``PCX Securities''). The PCX Application is intended to be used in
addition to the Exchange's traditional floor facilities by allowing
Users to submit expressions of trading interest known as ``Profiles''
anonymously from their computer terminals.
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\3\ For a detailed description of the PCX Application, see
Securities Exchange Act Release No. 39086 (Sep. 17, 1997), 62 FR
50036 (Sep. 24, 1997) (``Approval Order'').
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Method of Operation. As stated in the Approval Order, the PCX
Application consists of two distinct system operations: (1) The central
information processing system and related administrative and
communications terminal network of the OptiMark System, which includes
computers that collect and process data, log activities, and switch
messages from and to other systems and carriers, as well as the
communications network linking such computers with customer terminals;
and (2) the computer hardware and software needed (collectively, the
``PCX Interfaces'') for the OptiMark System to communicate with PCX's
computerized order system and other facilities to permit execution and
reporting.
The Exchange has direct ownership and control over the PCX
Interfaces. The OptiMark System is operated on a non-exclusive basis by
OptiMark Services, Inc. (``OSI''), a wholly-owned subsidiary of
OptiMark Technologies, Inc. (``OTT''). The OptiMark System has been
developed by OTI and OTI is licensing the OptiMark System to OSI for
purposes of the PCX Application. OSI is responsible for day-to-day
operation and maintenance of the OptiMark System. The primary site of
the OptiMark System, which houses the computer software and hardware
complex that conducts the central processing of Profiles on a periodic
basis, is located in Toronto.
Users located off the Exchange trading floors log onto the OptiMark
System from their own computer terminals and communicate with the
OptiMark System over any customary information services and network of
their choice. OSI, in its capacity as a facility operator for the PCX
Application, provides telecommunications access support (either
directly to such Users or to third party network vendors servicing such
Users), enabling the Users to enter Profiles into the OptiMark system
and receive the reports of any resulting trades from their own computer
terminals. The computerized data entry system located at any such User
site linked to the OptiMark System is not a part of the PCX
Application.
Users located on the Exchange trading floors must obtain access to
the OptiMark System from designated terminal locations approved by the
Exchange. PCX Specialist are provided with a uniquely designed
electronic interface through the P/COAST terminals located at their
posts to facilitate representation of their limit order book interest
in the OptiMark System. The P/COAST terminal interface is a part of the
PCX Interfaces and a part of the PCX Application. As for the PCX floor
brokers, they are expected to use existing proprietary terminals from
the member firm booths located on the trading floors to communicate
with the OptiMark System. The proprietary computerized terminal system
located at any such member firm booth--while maintained with the
Exchange's consent--is not part of the PCX Interfaces and not a part of
the PCX Application.
The Exchange will assure that, at all relevant times, the PCX
Application complies fully with the applicable rules of the Exchange,
including adherence to the Exchange's system integrity an capacity
standards. The system operations of both the PCX Interfaces and the
OptiMark System will be monitored on an ongoing basis under the
Exchange's inspection, surveillance and compliance programs. In this
regard, the PCX notes that both the PCX Interfaces and the OptiMark
System have been reviewed pursuant to the Commission's automation
oversight program and the Exchange's internal audit and control
procedures in accordance with the Automation Review Policy (``ARP'')
policy statements.\4\
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\4\See Securities Exchange Act Release No. 29185 (May 9, 1991),
56 FR 22490 (May 15, 1991) (ARP II); Securities Exchange Act Release
No. 27445 (Nov. 16, 1989), 54 FR 48703 (Nov. 24, 1989) (ARP I).
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Exchange members that are Users or Designated Brokers as defined in
PCX Rule 15.1 will be assessed transaction charges for the use of the
new trading service, as set forth in the Schedule of Fees and Charges
for Exchange Services and filed with the Commission. These charges are,
in part, derive from a processing fee that the Exchange will pay to
OSI, for OSI's services as an exchange facility manager responsible for
operating portions of the PCX Application and delivering the trading
service to Exchange members and their customers.\5\ There are no
transaction fees payable directly by Users or Designated Brokers to OSI
related to the PCX Application.
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\5\ See Securities Exchange Act Release No 40442 (Sep. 16,
1998), 63 FR 50951 (Sep. 23, 1998).
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The Exchange also proposed to make a few technical amendments to
Rule 15 to correct typographical errors and obsolete references.
2. Statutory Basis
The proposed rule change is consistent with the provisions of
Section 6(b)(5) \6\ of the Act, in that PCX Application is a facility
that is designed to promote just and equitable principles of trade and
protect investors and the public interest, and is not designed to
permit unfair discrimination between customers, issuers, brokers or
dealers. In addition, the PCX believes that the proposed rule change is
consistent with the provisions of Section 11A(a)(1)(B) \7\ of the Act,
which states that new data processing and communications techniques
create the opportunity for more efficient and effective market
operations.\8\
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\6\ 15 U.S.C. 78f(b)(5).
\7\ 15 U.S.C. 78K-1(a)(1)(B).
\8\ In reviewing this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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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 inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
According to the PCX, the foregoing rule change constitutes a
stated policy, practice or interpretation with respect to the meaning,
administration, or enforcement of an existing rule of the Exchange and
therefore, has become effective pursuant to Section
[[Page 28852]]
19(b)(3)(A)(i) of the Act \9\ and subparagraph (f)(1) of Rule 19b-4
thereunder.\10\ 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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\9\ 15 U.S.C. 78s(b)(3)(A)(i).
\10\ 17 CFR 240.19b-4(f)(1).
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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 proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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 at the
Commission's Public Reference Room. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-PCX-99-12 and
should be submitted by June 17, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 99-13468 Filed 5-26-99; 8:45 am]
BILLING CODE 8010-01-M