[Federal Register Volume 68, Number 17 (Monday, January 27, 2003)]
[Notices]
[Page 3924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1704]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47211; File No. SR-PCX-2002-55]


Self Regulatory Organizations; Pacific Exchange, Inc.; Order 
Granting Approval to Proposed Rule Change and Amendment No. 1 Thereto 
Regarding Market Maker Quoting Obligations

January 17, 2003.
    On August 7, 2002, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to require options market makers to vocalize a 
legal-width, two-sided market for a minimum of ten contracts whenever a 
floor broker enters a trading crowd and calls for a market in an option 
series that is one of the 120 most actively traded equity options 
(``Top 120 options''). This obligation would apply to: (i) Market 
makers who have executed a transaction in a Top 120 option, but not 
those who have been assigned contracts by the Order Book Official on 
either the day of the floor broker's call for a market or on the 
previous business day; (ii) non-broker-dealer orders; and (iii) series 
not designated as LEAPS.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See PCX Rule 6.4.
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    On November 8, 2002, the Exchange submitted Amendment No. 1 to the 
proposed rule change.\4\ The proposed rule change was published for 
comment in the Federal Register on December 13, 2002.\5\ The Commission 
received no comment letters on the proposal. This order approves the 
proposal, as amended.

    \4\ See letter from Steven B. Matlin, Senior Counsel, PCX, to 
Nancy J. Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated November 7, 2002.
    \5\ See Securities Exchange Act Release No. 46947 (December 4, 
2002), 67 FR 76771.
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \6\ 
and, in particular, the requirements of Section 6(b)(5) of the Act.\7\
    The Commission believes that the proposal should provide greater 
depth and liquidity to the marketplace by increasing from one contract 
to ten contracts most PCX market makers' minimum quoting obligation 
when a floor broker enters the crowd with a non-broker-dealer order and 
calls for a market in the Top 120 options. The Commission notes that 
the increased quote size obligations for the Top 120 options applies to 
market makers that have executed a trade on the same or previous day 
that a floor broker requests a market in a particular Top 120 option. 
The Commission believes it is appropriate that the proposal does not 
apply to market makers that have executed a trade only as a result of 
the assignment of contracts by the Order Book Official in an attempt to 
satisfy an order represented by the floor broker,\8\ because market 
makers should not have their quoting obligations increased when 
fulfilling their obligation to assist an Order Book Official attempting 
to satisfy an order represented by a floor broker.
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    \6\ In approving this proposed rule change, the Commission notes 
that it has considered its impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ See PCX Rule 6.37, Commentary .05.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-PCX-2002-55) is 
approved, as amended.

    \9\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Margaret H. McFarland,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 03-1704 Filed 1-24-03; 8:45 am]
BILLING CODE 8010-01-P