[Federal Register Volume 65, Number 16 (Tuesday, January 25, 2000)]
[Notices]
[Pages 4008-4010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1736]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42349; File No. SR-PCX-99-37]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc. Authorizing the PCX ITS 
Coordinator to Accept Inbound Commitments on Behalf of Other PCX 
Specialists

January 19, 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 October 5, 1999, 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 
Exchange. PCX submitted an amendment on November 2, 1999 (``Amendment 
No. 1''),\3\ and an amendment on December 7, 1999 (``Amendment No. 
2'').\4\ The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 5 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Michael Pierson, Director, Regulatory 
Policy, PCX, to Marla Chidsey, Law Clerk, Division of Market 
Regulation, Commission, dated November 1, 1999. Amendment No. 1 
clarifies whether the ITS coordinator must still confirm with other 
PCX specialists, executions made on behalf of those other PCX 
specialists, before executions occur.
    \4\ See Letter from Michael Pierson, Director, Regulatory 
Policy, PCX, to Marla Chidsey, Law Clerk, Division of Market 
Regulation, Commission, dated December 6, 1999. Amendment No. 2 adds 
Rule 5.20(a)(xi) defining the term ``PCX Coordinating Specialist'' 
as the specialist responsible for coordinating the acceptance of 
inbound ITS commitments.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX is proposing to adopt a new rule to allow the ITS 
Coordinator \5\ in a given equity issue to accept ITS

[[Page 4009]]

commitments on behalf of other specialists in that issue.
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    \5\ The Commission would like to clarify that the term ``ITS 
Coordinator'' is used interchangeably with the term ``PCX 
Coordinating Specialist'' as defined in new Rule 5.20(a)(xi).
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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 PCX 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
    At the PCX, there are generally two registered specialists per 
equity issue traded on the Exchange.\6\ However, there is only one 
specialist per issue who acts as the ITS Coordinator. The ITS 
Coordinator is generally responsible for coordinating acceptance of 
incoming ITS commitments among the specialists in a particular stock. 
The PCX expects that there will continue to be only one ITS Coordinator 
per stock after the Exchange expands the number of specialists per 
issue.
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    \6\ The PCX expects that there will be more than one specialist 
per stock when its competing specialist program is implemented. See 
Exchange Act Release No. 41327 (April 22, 1999), 64 FR 23370 (April 
30, 1999).
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    Currently, any PCX specialist may send an outbound ITS commitment 
to another market center without that ITS Coordinator's assistance. A 
PCX specialist who is not an ITS Coordinator may also receive inbound 
ITS commitments without the involvement of the ITS Coordinator, as long 
as the ITS Coordinator is not designated to participate in the trade as 
a result of the inbound commitment.\7\ However, if an inbound 
commitment involves more than one PCX specialist as the contra side, 
then the ITS Coordinator is required to coordinate the execution of the 
commitment among the PCX participants verbally.
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    \7\ The ITS Coordinator need not coordinate the commitment if he 
or she is not quoting at the price of the inbound commitment and is 
not representing an order at that price.
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    The current PCX rules do not expressly authorize the ITS 
Coordinator to accept ITS commitments on behalf of other specialists. 
The ITS Coordinator needs to obtain the verbal consent of the other 
specialist before accepting an inbound commitment on behalf of that 
other specialist. The PCX is now proposing to provide the ITS 
Coordinator with the express authority to accept ITS commitments on 
behalf of other specialists. The Exchange believes that this rule 
change is necessary in order to assure that there will be no delays in 
the acceptance of inbound ITS commitments, where there is more than one 
specialist quoting at the price of the inbound commitment.\8\
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    \8\ Priority and parity rules will not be affected by the 
proposed rule change. Telephone conversation between Michael 
Pierson, Director, Regulatory Policy, PCX, and Christine Richardson, 
Attorney, and Marla Chidsey, Attorney, Division of Market 
Regulation, Commission (January 18, 2000).
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    For example, assume Specialist A and Specialist B (PCX specialists) 
are both bidding $20 (the national best bid) for 500 shares of XYZ 
stock. If the PCX receives an inbound ITS commitment to sell 1,000 
shares of stock, and if Specialist A is the ITS Coordinator, then 
Specialist A will confirm with Specialist B that 500 shares of XYZ may 
be accepted by Specialist A on Specialist B's behalf. The proposed rule 
change would allow Specialist A to accept the 500 shares on Specialist 
B's behalf, on the ground that Specialist B's bid for 500 shares is 
still outstanding at the time that Specialist A receives the inbound 
commitment for 1,000 shares. Whenever an inbound ITS commitment is 
received on the PCX, the specialists whose quotes prompted the inbound 
commitment will be notified by a ``shadow'' message that the inbound 
commitment has been received on the PCX.\9\
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    \9\ See also Amendment No. 1.
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    Specifically, the PCX is proposing to adopt new Rule 5.20, 
Commentary .04, which will provide that in the case of the assignment 
of an ITS stock to more than one PCX Registered Specialist, the PCX 
Coordinating Specialist or PCX Registered Specialist at whose ITS 
station an ITS commitment to trade is received is authorized to accept 
such commitment at the PCX bid or offer price, if still available (or 
at a better price if available), and up to the size of the PCX bid or 
offer without the need to communicate with other PCX members.
2. Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act,\10\ in general, and furthers the objectives of 
Section 6(b)(5),\11\ in particular, in that it is designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to promote just and equitable 
principles of trade and to protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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 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

    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

    Within 35 days of the date 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 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 proposed rule 
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 in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
PCX. All submissions should refer to File No. SR-PCX-99-37 and should 
be submitted by February 15, 2000.


[[Page 4010]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-1736 Filed 1-24-00; 8:45 am]
BILLING CODE 8010-01-M