[Federal Register Volume 68, Number 1 (Thursday, January 2, 2003)]
[Notices]
[Pages 140-141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-33122]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47088; File No. SR-PCX-2002-78]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to a Six-Month Extension of the Automatic Execution System 
Incentive Pilot Program

December 24, 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 December 18, 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 Exchange. The 
proposed rule change has been filed by the PCX as a ``non-
controversial'' rule change under rule 19b-4(f)(6) of the Act.\3\ 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\ 17 CFR 240.19b-4(f)(6).
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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 extend the Automatic Execution System 
(``Auto-Ex'') Incentive Pilot Program for six months. The text of the 
proposed rule change is available at the Office of the Secretary, 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 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
    On June 7, 2002, the Commission approved, on a six-month pilot 
basis, the Exchange's proposal to amend PCX rule 6.87, which governs 
the operation of Auto-Ex \4\ to provide an Auto-Ex Incentive Program 
for apportioning Auto-Ex trades among Market Makers.\5\ The pilot 
program is currently set to expire on December 24, 2002.\6\
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    \4\ Auto-Ex is the Exchange's Automated Execution system feature 
of the Pacific Options Exchange Trading System (``POETS'') for 
market or marketable limit orders. POETS is the Exchange's automated 
trading system comprised of an options order routing system, Auto-
Ex, an on-line limit order book system, and an automatic market 
quote update system. Option orders may be sent to POETS via the 
Exchange's Member Firm Interface (``MFI''). Market and marketable 
limit orders sent through the MFI will be executed by Auto-Ex if 
they meet order type and size requirements of the Exchange.
    \5\ See Securities Exchange Act Release No. 46115 (June 25, 
2002), 67 FR 44494 (July 2, 2002).
    \6\ The proposed rule changes were, in part, based on CBOE rule 
6.8 Interpretations and Policies .06(c) ``100 Spoke RAES Wheel''.
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    The Auto-Ex Incentive Program allows the Exchange to assign Auto-Ex 
orders to logged-on Market Makers according to their percentage of 
their in-person agency \7\ contracts traded in an issue (excluding 
Auto-Ex contracts traded) compared to all of the Market Maker in-person 
agency contracts traded (excluding Auto-Ex contracts) during the review 
period. The review period is determined by the Options Floor Trading 
Committee (``OFTC'') and may be for any period of time not in excess of 
two weeks.\8\ The percentage distribution determined for a review 
period will be effective for the succeeding review period.
    The Exchange is requesting an additional extension of the pilot 
program for six months from December 24, 2002, through June 24, 2003. 
The added time permits the Exchange to finalize a proposed amendment to 
its program in order that the participation percentages of Market 
Makers who are temporarily away from the trading floor may be 
reinstated in some fashion. Therefore, the Exchange believes that a 
six-month extension of the program is warranted.
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    \7\ Agency contracts are those contracts that are represented by 
an agent and do not include contracts traded between Market Makers 
in person in the trading crowd.
    \8\ The OFTC has set a two-week review period for all options 
classes and the OFTC will not vary the term of the review period 
except for exigent circumstances.

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[[Page 141]]

2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act,\9\ in general, and furthers 
the objectives of section 6(b)(5),\10\ in particular, in that it is 
designed to facilitate transactions in securities, to promote just and 
equitable principles of trade, enhance competition and to protect 
investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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, as 
amended, 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

    Written comments were neither solicited nor received.

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

    The proposed rule change has been filed by the Exchange as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act 
\11\ and rule 19b-4(f)(6) thereunder.\12\ Because the foregoing 
proposed rule change, as amended: (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 after the date of this filing, or such shorter 
time as the Commission may designate, if consistent with the protection 
of investors and the public interest, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file the proposed rule change, along with a brief description and text 
of the proposed rule change, at least five business days prior to the 
date of filing of the proposed rule change, or such shorter time as the 
Commission may designate, it has become effective pursuant to section 
19(b)(3)(A) of the Act \13\ and rule 19b-4(f)(6)\14\ thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay requirement, to permit the Exchange to implement the 
proposal immediately. Under rule 19b-4(f)(6)(iii), a proposed ``non-
controversial'' rule change does not become operative for 30 days after 
the date of filing, unless the Commission designates a shorter time.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Acceleration of the operative date will allow for the continued 
operation of PCX's Auto-Ex Incentive Pilot Program without 
interruption.\15\ For this reason, the Commission designates the 
proposed rule change to be effective and operative upon its filing with 
the Commission. 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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    \15\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rules 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to the File No. SR-PCX-2002-78 
and should be submitted by January 23, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-33122 Filed 12-31-02; 8:45 am]
BILLING CODE 8010-01-P