[Federal Register Volume 66, Number 228 (Tuesday, November 27, 2001)]
[Notices]
[Pages 59280-59281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29403]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45077; File No. SR-PCX-2001-39]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To 
Eliminate References to Fractional Pricing From PCX and PCXE Rules

November 19, 2001.
    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 30, 2001, the Pacific Exchange, Inc. (``PCX'' 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 Exchange. The 
Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the 
Act,\3\ and Rule 19b-4(f)(6) \4\ thereunder, which renders the proposal 
effective upon filing with the Commission.\5\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange provided the Commission with written notice of 
its intent to file the proposal on or about October 22, 2001. See 
Rule 19b-4(f)(6). 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange proposes to amend its Rules and those of its 
subsidiary, the PCX Equities, Inc. (``PCXE''), so that prices for 
securities traded on the Exchange and trading differentials for bids 
and offers made on the Exchange may be expressed in decimal form. The 
Exchange proposes these amendment in anticipation of the industry-wide 
conversion to quoting and trading in decimals. 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 PCX included statements 
concerning the purpose of and basis of its proposal and discussed any 
comments it received regarding the proposal. 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
    On June 8, 2000, the Commission provided a framework for the 
national securities exchanges and the National Association of 
Securities Dealers, Inc. (collectively ``Participants'') to convert 
quotation pricing in equity securities and options from fractions to 
decimals.\6\ The Commission's Order required that: (i) by June 8, 2001, 
Participants submit studies analyzing how decimal conversion affects 
systems capacity, liquidity and trading behavior, and (ii) by July 9, 
2001, Participants submit rule filings that individually establish the 
minimum price variation (``MPV'') for each market. On May 22, 2001, the 
Commission extended the deadlines to September 10, 2001 (for submitting 
studies) and to November 5, 2001 (for submitting rule filings). On 
September 25, 2001, in view of the market disruption caused by the 
attacks of September 11, 2001, the Commission extended the deadline for 
rule filings to January 14, 2002.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 42914 (June 8, 
2000), 65 FR 38101.
---------------------------------------------------------------------------

    Participants Submitted an implementation plan and successfully 
completed the phasing-in of decimal pricing in all equity securities 
and options by April 9, 2001. In connection with the full 
implementation, the Exchange modified its Rules to include pricing in 
decimal format with cross-references to fractional pricing. This was 
done to allow the Exchange to trade, during the phase-in, some 
securities in decimals and some in fractions. The Exchange also 
established an MPV scheme for each market (equities and options) and 
submitted its study of the results on September 10, 2001.\7\ The 
Exchange now proposes to eliminate references to fractional pricing.
---------------------------------------------------------------------------

    \7\ See The Pacific Exchange, Report on Decimal Trading 
(September 10, 2001).
---------------------------------------------------------------------------

Equity Trading Rules
    PCXE Rule 7.10(a)--Trading Differentials: The PCX is amending PCXE 
Rule 7.10(a) to delete text relating to trade differential increments 
priced in fractions and to eliminate references to fractions currently 
present in the Commentary examples.

[[Page 59281]]

    PCXE Rule 7.12(b)--Firm Quotations: The PCX is amending PCXE Rule 
7.12(b), Commentary .05 for the purpose of deleting reference to 
fractional pricing in the example.
    PCXE Rule 7.66(b)(8)(i)(A)(1)--Intermarket Trading System: The PCX 
is modifying PCXE Rule 7.66(b)(8)(A)(1) relating to price changes that 
trigger obligations in order to delete cross-references to fractional 
pricing in the ``applicable price change.''
    The PCX is modifying PCXE Rule 7.70(h) relating to the Pacific 
Computerized Order Access System (``P/COAST'') in order to replace the 
fractional pricing in the example to decimal values.
    The PCX is modifying Rule 7.79(e) relating to information on tape 
in order to replace the fractional pricing to a decimal value.
Options Trading Rules
    PCX Rule 1.15(b)--Point to Point Testing: The PCX is deleting PCX 
Rule 1.15(b) in its entirety because it relates to testing requirements 
for the conversion of fractional pricing to decimal pricing. Because 
the Exchange has fully implemented decimal pricing, the Rule is no 
longer applicable or necessary.
    PCX Rules 637(b)(1) and 6.37(b)(3)--Obligations of Market Makers: 
The PCX is modifying the maximum bid/ask spread differentials to 
eliminate the cross-references to fractional pricing.
    PCX Rules 6.47(b)(4)(A) and 6.47(b)(4)(B)--Crossing Orders: The PCX 
is modifying the examples relating to crossing markets in order to 
eliminate cross-references to fractional pricing.
    PCX Rule 6.64 Commentary .01(c) and (d)--Trading Rotations: The PCX 
is modifying the examples relating to the determination of opening 
prices in order to eliminate cross-references to fractional pricing.
    PCX Rule 6.72(a)(2) and Commentary .01--Trading Differentials: The 
PCX is amending its Rules to delete text relating to treatment of 
option issues quoted in fractions. Because the Exchange and all Member 
and Member Organizations have fully-implemented decimal pricing, the 
contingency language is no longer applicable.
    PCX Rule 6.75(a)-(e)--Priority of Bids and Offers: The PCX is 
modifying the example relating to bids and offers in order to eliminate 
cross-references to fractional pricing.
    PCX Rule 6.80 Commentary .01--Accommodation Transactions: The PCX 
is modifying its Rules on cabinet securities to delete cross-references 
to fractions.
    PCX Rule 7.9--Meaning of Premium and Offers: The PCX is modifying 
its Rules on bids and offers to change the example by deleting cross-
references to fractional pricing.
    PCX Rule 8.102(f)--Terms of FLEX Options: The PCX is amending its 
Rules to delete text relating to percentage pricing and to delete 
cross-references to fractional pricing.
2. Statutory Basis
    The Exchange believes the proposal is consistent with the 
requirements of Section 6(b) of the Act,\8\ in general, and furthers 
the objectives of Section 6(b)(5),\9\ in particular, in that it is 
designed to promote just and equitable principles of trade, prevent 
fraudulent and manipulative acts and practices, protest investors and 
the public interest.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate such rule change if it appear 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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. 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 number SR-PCX-2001-39 and should be 
submitted December 18, 2001.

    For the Commission, by the division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-29403 Filed 11-26-01; 8:45 am]
BILLING CODE 8010-01-M