[Federal Register Volume 65, Number 132 (Monday, July 10, 2000)]
[Notices]
[Pages 42412-42414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17334]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42998; File No. SR-PCX-00-17]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange Inc., 
Relating to Mandatory Decimal Pricing Testing

June 30, 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 June 23, 2000, 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 
Exchange has designed this proposal as one concerned solely with the 
administration of the Exchange under Section 19(b)(3)(A)(iii) of the 
Act,\3\ which renders the proposal effective upon filing with the 
Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX proposes to adopt new Rule 1.15(b), Mandatory Decimal 
Pricing Testing, which would require member organizations to 
participate in industry testing of computer systems designed to prepare 
for the industry conversion to decimal pricing. 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 proposed rule change and 
discussed any comments it received on the proposed

[[Page 42413]]

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
    As the securities industry prepares for the conversion to decimal 
pricing, testing by and among the various securities industry 
constituents will be necessary to avoid widespread systems problems. 
The PCX, in cooperation with the Commission and other self-regulatory 
organizations has been working toward a successful transition to 
decimal pricing. The purpose of proposed rule change is to require PCX 
member firms to participate in testing of computer systems designed to 
prepare for the industry conversion to decimal pricing.
    Proposed Rule 1.15(b) would require PCX members to participate in 
testing of computer systems, in a manner and frequency prescribed by 
the Exchange. It is the PCX's understanding that other self-regulatory 
organizations, including the National Association of Securities 
Dealers, the New York Stock Exchange, the American Stock Exchange and 
the Chicago Board Options Exchange, are also proposing rules to require 
decimal pricing testing by their member organizations.
    To ensure that the securities industry is adequately prepared to 
convert to decimals, the Securities Industry Association has undertaken 
to coordinate industry-wide testing. Testing will include, among 
others, exchanges, registered clearing corporations, data processors 
and broker-dealers. There are multiple industry-wide tests, the first 
of which occurred in April 2000. New Rule 1.15(b) will be employed to 
require mandatory testing of PCX member organizations in these tests, 
and further provides that any firm with an electronic interface with 
the Exchange will be required to conduct point-to-point testing with 
the Exchange. Point-to-point testing means testing between two 
entities, in this case between the member with the electronic interface 
and the Exchange.\4\
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    \4\ A member organization can be exempted from this requirement 
if the member organization has its electronic interface through a 
service provider if the service provider conducts successful tests 
with the Exchange on behalf of the firms it serves, if the member 
firm conducts successful point-to-point testing with the service 
provider by a time designated by the Exchange, and if the Exchange 
agrees that no further testing is necessary.
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    The Exchange will require its members to participate in industry-
wide testing to the extent those firms can be accommodated into the 
testing schedule. The Exchange would exercise its authority under this 
Rule to the extent it is deemed important for particular member 
organizations to participate and to the extent those member 
organizations choose not to participate voluntarily.
    The proposed rule would also require member organizations to file 
reports with the PCX concerning the required tests in the manner and 
frequency required by the Exchange. A member organization that is 
subject to the Rule and fails to participate in the tests or fails to 
file any required reports will be subject to disciplinary action 
pursuant to Rule 10 of the Exchange's rules.
    It should be noted that the Exchange believes that it currently has 
the authority without the approval of this Rule to require testing and 
reporting with respect to the implementation of decimal pricing under 
its broad authority to enforce the provisions of the Act and to ensure 
the safety of its marketplace. The Exchange believes, however, that its 
membership is better served by having the specifics of its intentions 
with respect to this matter defined in a stand-alone rule.
    This Rule will expire automatically upon the full completion of 
decimal pricing implementation.
2. Statutory Basis
    The Exchange represents that by adopting a new rule to help ensure 
the participation of Exchange members in important industry testing to 
prepare for the conversion to decimal pricing, the proposed rule change 
is consistent with Section 6(b) of the Act \5\ in general and further 
the objectives of Section 6(b)(5) \6\ in particular, in that they are 
designed to promote just and equitable principles of trade and to 
protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and subparagraph (f)(3) of Rule 19b-4 
thereunder \8\ because it is concerned solely with the administration 
of the Exchange. 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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(3).
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IV. Solicitation of Comments

    Interested person 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, NW., Washington, DC 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 in Washington, DC.
    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-00-17 and should be submitted by July 31, 
2000.


[[Page 42414]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-17334 Filed 7-7-00; 8:45 am]
BILLING CODE 8010-01-M