[Federal Register Volume 68, Number 10 (Wednesday, January 15, 2003)]
[Notices]
[Pages 2096-2098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-842]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47143; File No. SR-PCX-2002-20]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. 
Relating to a Stay of a Committee Action

January 8, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19-4 thereunder,\2\ notice is hereby given that 
on April 9, 2002, 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 PCX. On December 
31, 2002, PCX filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change and Amendment No. 1 from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced the PCX's original 19b-4 filing in 
its entirety.
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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 an interim stay provision in connection 
with its rules regarding review of committee actions.
    Below is the text of the proposed rule change. Proposed new 
language is italicized; proposed deletions are in [brackets].
    Request for a Stay of a Committee Action
    Rule 11.7(d). (1) An aggrieved person seeking review of a committee 
decision may request a stay of the decision pending a hearing and 
review by the Board Appeals Committee. The request for a stay must 
include a $500 stay fee along with a concise statement of the basis for 
the stay which must be separate from, and in addition to, a statement 
of the basis for the review of the complained of action. Applicants

[[Page 2097]]

seeking a stay must file the request with the Office of the Corporate 
Secretary by the earlier of ten (10) business days after the committee 
renders its decision or forty-eight (48) hours before the committee 
implements action. The Exchange will not be required to consider a 
request for a stay made within the 48 hours before a committee 
implements action.
    (2) A stay of a committee action may be granted in only those cases 
where the aggrieved person has made a showing, based solely on the 
evidence and information presented in the application for a stay, that: 
(A) there is a likelihood the applicant will prevail on the merits on 
review; (B) without a stay, the applicant is likely to suffer 
irreparable injury; (C) it is likely that there will not be substantial 
harm to other parties if a stay is granted; and (D) the issuance of a 
stay is likely to serve the interests of the Exchange or an identified 
public interest.
    (3) The Chair of the Board Appeals Committee will designate a 
single Board Appeals Committee member to rule on a request for a stay. 
The designated Board of Appeals Committee member may summarily render a 
decision on the request for a stay based solely on the documents 
submitted in support of, and in opposition to, the request for a stay. 
In evaluating the merits of a stay application, the Committee member 
will only consider matters relevant to the issuance of the stay, not 
the underlying complaint. The decision of the Committee member whether 
to grant a stay may not be appealed under Rule 10.
    [Rule 11.7(d)-11.7(n)]Rule 11.7(e)-11.7(o)--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 
test 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
    The Exchange's Board of Governors delegates certain powers and 
duties to committees that administer the provisions of the Constitution 
and the Rules of the Exchange.\4\ The rules of the Exchange provide 
that persons aggrieved by committee decisions (other than disciplinary 
matters) may seek review of the decisions subject to the procedural 
prerequisite of PCX Rule 11.7 (Hearing and Review of Committee Action). 
PCX represents that, while the rule does not expressly provide a right 
to interim relief of committee decisions, applicants seeking such 
relief routinely request that the Exchange stay further action pending 
review. In the absence of an express policy or procedures relating to 
interim relief, the Exchange has evaluated the merits of stay 
applications on a case-by-case relying upon the guidelines that are 
used by the Commission in reviewing stay applications of self-
regulatory organization actions.\5\ As a consequence of the Exchange's 
ad hoc review, the Exchange believes that applicants are either not 
aware that they have a right to interim relief or they are not familiar 
with the criteria that they must satisfy in seeking a stay.
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    \4\ See PCX Rule 11.4.
    \5\ See 17 CFR 201.401(d); see also Order Preliminarily 
Considering Whether to Issue Stay Sua Sponte and Establishing 
Guidelines for Seeking Stay Applications, Securities Exchange Act 
Release No. 33870 (April 7, 1994).
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    The Exchange therefore proposes to clearly set forth the criteria 
and procedures necessary to request a stay of committee action. The 
proposed new Exchange rule will set forth four factors that the 
Exchange will consider when evaluating the merits of a stay 
application: (1) Whether there is a likelihood that the applicant will 
prevail on the merits of the appeal; (2) that without a stay, the 
applicant is likely to suffer irreparable injury; (3) that it is likely 
there will not be substantial harm to other parties if the stay is 
granted; and (4) that the issuance of a stay is likely to serve in the 
interests of the Exchange or an identified public interest.\6\ The 
Exchange represents that the applicant must prove each of these factors 
based solely on the evidence and information presented in the 
application for a stay.
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    \6\ The Exchange represents that it relies on the Commission's 
guidelines in proposing these factors.
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    The proposed new Exchange rule will also clarify the procedures 
that an applicant must satisfy in seeking a stay. The proposed rule 
specifies that an applicant must pay a $500 fee in order to request a 
stay. The fee will be used to cover a portion of Exchange expenses 
including the allocation of staff time in processing a request for a 
stay. The proposal also provides that applicants must request a stay by 
the earlier of ten business days after a committee renders its decision 
or forty-eight hours before the committee implements action. From time 
to time, the Exchange represents that it may be required to implement a 
particular committee decision immediately without leaving sufficient 
time for an aggrieved party to request a stay of action. According to 
the Exchange, this situation occurs, for example, when the Exchange 
must identify a particular Lead Market Maker to trade a new option on 
the following business day, or when the Options Floor Trading Committee 
makes ad hoc trading decisions on the trading floor regarding Auto-Ex 
decisions pursuant to PCX Rule 6.87. In those unique situations, the 
Exchange notes that the aggrieved party will not have an opportunity to 
stay the action, but will be able to appeal the committee decision 
pursuant to PCX Rule 11.7. The Exchange also represents that it will 
not be required to consider a request for a stay made within the forty-
eight hours before a committee implements action.
    The proposed new Exchange rule will also provide that the 
Exchange's Board Appeals Committee may render a decision summarily 
based solely on the documents submitted in support of, and opposition 
to, the request for stay. In the event that the Board Appeals Committee 
denies the request for a stay, the Board Appeals Committee will state 
the reasons for its denial and state facts that support its 
decision.\7\ The Exchange believes that these procedures will guide 
applicants through the stay process and will provide the Exchange's 
Board Appeals Committee with a uniform standard by which to judge the 
merits of an application for interim relief. The proposed new Exchange 
rule will not apply to disciplinary matters and will not affect an 
aggrieved person's underlying right to appeal a committee decision.
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    \7\ The Exchange represents that the Board Appeals Committee 
will notify the applicant of its denial of a request for a stay, as 
well as the reasons for its denial. Telephone conversation between 
Mai S. Shiver, Senior Attorney, Regulatory Policy, PCX, and Sapna C. 
Patel, Attorney, Division of Market Regulation, Commission, on 
January 8, 2002.
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2. Statutory Basis
    The Exchange believes that this proposal, as amended, is consistent 
with Section 6(b) \8\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular, in that it 
is designed to facilitate transactions in securities, to promote just 
and equitable principles of trade, to enhance

[[Page 2098]]

competition and to protect investors and the public interest by 
standardizing the method by which stays of committee decisions are 
made. The Exchange also believes that this proposal, as amended, is 
consistent with Section 6(b)(4) of the Act \10\ because it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members, issuers and other persons.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(4).
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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

    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 Exchange 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 proposed rule 
change and Amendment No. 1 are 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. 
SR-PCX-2002-20 and should be submitted by February 5, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-842 Filed 1-14-03; 8:45 am]
BILLING CODE 8010-01-M