[Federal Register Volume 67, Number 152 (Wednesday, August 7, 2002)]
[Notices]
[Pages 51312-51314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19939]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46294; File No. SR-PCX-2002-46]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to the Size of Option Orders Eligible for Facilitation 
Crossing

August 1, 2002.
    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 July 25, 2002, 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 PCX. The Exchange filed the proposed 
rule change pursuant to section 19(b)(3)(A) of the Act,\3\ and Rule 
19b-4(f)(6) thereunder,\4\ 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).
    \4\ 17 CFR 240.19b-4(f)(6). PCX provided the Commission with 
notice of its intention to file this proposal on July 16, 2002.

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[[Page 51313]]

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

    PCX proposes to amend its rules by reducing the minimum number of 
contracts necessary for member firms to effect facilitation crossing 
transactions on the Trading Floor pursuant to PCX Rule 6.47(b). 
Specifically, the Exchange proposes to reduce the minimum contract size 
parameter under PCX Rule 6.47(b) from 200 contracts to 50 contracts. 
The text of the proposed rule change is below. New proposed language is 
italicized; deleted language is in brackets.
* * * * *
4987 ``Crossing'' Orders and Stock/Option Orders
    Rule 6.47(a)--No change.
    (b) Crossing of Facilitation Orders. A Floor Broker who holds an 
order for a public customer or a broker-dealer (``customer order'') and 
an order for the proprietary account of a member organization that is 
representing that customer (the ``facilitation order'') may cross those 
orders only if the following procedures and requirements are followed.
    (1) The size of the customer order subject to facilitation must be 
at least fifty [two hundred (200)] contracts. Orders for less than 
fifty [200] contracts may be facilitated pursuant to this rule but are 
not subject to subsection (4) below pertaining to firm guarantees.
    (2)-(6)--No change.
    (c)-(f)--No change.
* * * * *

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
    Under current PCX Rule 6.47(b), a Floor Broker who holds an order 
for a public customer or broker-dealer (``customer order'') and an 
order for the proprietary account of a member organization that is 
representing that customer or broker-dealer (``firm order'') may cross 
those orders, but only if certain procedures and requirements set forth 
in PCX Rule 6.47(b) are followed. If the transaction occurs at a price 
between the trading crowd's quoted market, then up to 40% of the 
customer order may be crossed with the firm order.\5\ If the 
transaction occurs at a price that is equal to the trading crowd's 
quoted market, then up to 25% of the customer order may be crossed with 
the firm order.\6\ In addition, current PCX Rule 6.47(b)(1) establishes 
a minimum order size parameter for facilitation crossing transactions. 
Specifically, it states that the size of a customer order subject to 
facilitation must be at least two hundred (200) contracts. It further 
states that orders for less than 200 contracts may be facilitated 
pursuant to PCX Rule 6.47(b), but such orders would not be subject to 
subsection (4) pertaining to firm guarantees. The Exchange is proposing 
to amend PCX Rule 6.47(b)(1) by replacing two references to ``200 
contracts'' with references to ``50 contracts.''
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    \5\ See PCX Rule 6.47(b)(4)(A).
    \6\ See PCX Rule 6.47(b)(4)(B).
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    The purpose of the proposal is to assure that member firms may 
receive guaranteed contracts to be eligible for participation on 
customer orders for 50 contracts or more. In that regard, the Exchange 
notes that the facilitation crossing rules of other options exchanges 
currently permit orders for at least 50 contracts for a guarantee 
whereby the firm entering the order may participate in the trade to a 
certain extent not to exceed 40%.\7\
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    \7\ See Rule 950(d), Commentary .02(d) of the American Stock 
Exchange; Rule 6.74(d) of the Chicago Board Options Exchange; and 
Rule 716(d) of the International Securities Exchange.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5),\9\ in particular, because it is designed to promote just and 
equitable principles of trade, prevent fraudulent and manipulative acts 
and practices, and protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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.

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

    The foregoing proposed rule change: (1) Does not significantly 
affect the protection of investors or the public interest; (2) does not 
impose any significant burden on competition; and (3) by its terms does 
not become operative for 30 days from the date of filing. In addition, 
the Exchange provided the Commission with written notice of its intent 
to file the proposed rule change at least five business days prior to 
the filing date. The proposed rule change has therefore become 
effective pursuant to section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such 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.

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, 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 No.

[[Page 51314]]

SR-PCX-2002-46 and should be submitted by August 28, 2002.

    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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-19939 Filed 8-6-02; 8:45 am]
BILLING CODE 8010-01-P