[Federal Register Volume 67, Number 204 (Tuesday, October 22, 2002)]
[Notices]
[Pages 64950-64951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26786]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46661; File No. SR-PCX-2002-63]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc. To Amend Its Clearly Erroneous 
Policy

October 15, 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 September 23, 2002, 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. 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, through its wholly owned subsidiary PCX Equities, 
Inc. (``PCXE'' or ``Corporation''), proposes to amend PCXE Rule 7.11(d) 
to confer authority on a PCXE officer designated by the Corporation 
who, in addition to the Chief Executive Officer and President, may 
nullify transactions or modify their terms arising out of any 
disruption or malfunction in the Archipelago Exchange (``ArcaEx'') 
trading system, the equities trading facility of PCXE. Below is the 
text of the proposed rule change. Proposed new language is italicized. 
Proposed deletions are in [brackets].
* * * * *

PCX Equities, Inc.

Rule 7

Equities Trading; Clearly Erroneous Policy

    Rule 7.11(a)-(c)--No change.
    (d) System Disruption and Malfunctions. In the event of any 
disruption or a malfunction in the use or operation of any electronic 
communications and trading facilities of the Corporation, the Chief 
Executive Officer, [or the] President, or such other officer designated 
by the Corporation may declare a transaction arising out of the use or 
operation of such facilities during the period of such disruption or 
malfunction null and void or modify the terms of these transactions. 
Absent extraordinary circumstances, any such action of the Chief 
Executive Officer, [or] President or designated Corporation officer 
pursuant to this subsection (d) shall be taken within thirty (30) 
minutes of detection of the erroneous transaction. Each ETP Holder 
involved in the transaction shall be notified as soon as practicable, 
and the ETP Holder aggrieved by the action may appeal such action in 
accordance with the provisions of Rule 10.13.
* * * * *

Rule 10

Disciplinary Proceedings; Hearings and Review of Decisions by the 
Corporation

Rule 10.13
    (a) General Provisions. This Rule provides the procedure for 
persons aggrieved by any of the following actions taken by the 
Corporation to apply for an opportunity to be heard and to have the 
action reviewed. These actions are:
    (1)-(3)--No change.
    (4) The prohibition or limitation with respect to access to 
services provided by the Corporation, or the access to services of any 
ETP Holder taken pursuant to the Bylaws, or Rules or procedures of the 
Corporation; [or]
    (5)Actions taken by the Corporation pursuant to Rule 7.11;
    (6)[5]--No change.
    (7)[6] Actions taken by the Corporation pursuant to Rule 7.23; or
    (8)[7]--No change.
    (b)-(m)--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.

[[Page 64951]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, in the event of any disruption or malfunction in the use 
or operation of the ArcaEx trading facility, only the Chief Executive 
Officer or President may declare a transaction arising out of the use 
of the facility during the period of such disruption or malfunction 
null and void or modify the terms of such transaction. Absent 
extraordinary circumstances, any such action of the Chief Executive 
Officer or President would be taken within thirty (30) minutes of 
detection of the erroneous transaction. Each ETP Holder involved in the 
transaction would be notified as soon as practicable, and the ETP 
Holder aggrieved by the action could appeal such action in accordance 
with the provisions of PCXE Rule 10.13.
    The Exchange is proposing to amend PCXE Rule 7.11(d) to confer 
authority on a PCXE officer designated by the Corporation who, in 
addition to the Chief Executive Officer and President, may nullify 
transactions or modify their terms arising out of any disruption or 
malfunction in the ArcaEx trading system. This rule change will provide 
the PCXE with more flexibility in making time-sensitive decisions in 
the absence or unavailability of the Chief Executive Officer or 
President. The proposed rule amendment parallels PCXE Rule 7.11(b) 
relating to executions that are ``clearly erroneous'' when there is an 
obvious error in the terms of an order, such as price, quantity or 
identification of the security. The rule change also adds language to 
Rule 10.13 regarding appeals for non-disciplinary matters by clarifying 
that any ETP Holder aggrieved by an officer's determination under the 
PCXE's ``Clearly Erroneous Policy'' may appeal such action. Proposed 
Rule 10.13(a)(5) reiterates the statement in Rule 7.11 that any 
determination made by the Corporation under this policy is subject to 
the provisions of Rule 10.13.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \3\ of the Act, in general, and further the 
objectives of Section 6(b)(5),\4\ in particular, because it is designed 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments and perfect the 
mechanisms of a free and open market and to protect investors and the 
public interest.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 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 PCX 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 publication 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 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 PCX. All submissions 
should refer to File No. PCX-2002-63 and should be submitted by 
November 12, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26786 Filed 10-21-02; 8:45 am]
BILLING CODE 8010-01-P