[Federal Register Volume 68, Number 188 (Monday, September 29, 2003)]
[Notices]
[Pages 56029-56030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24502]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48522; File No. SR-PCX-2003-31]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. Making 
Housekeeping Changes to Its Options Trading Rules

September 23, 2003.
    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 8, 2003, 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. On September 10, 2003, the 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, 
as amended, 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 replaces the PCX's original Rule 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 amend its rules to clarify existing provisions, 
eliminate superfluous provisions, re-number the rules where appropriate 
in order to coincide with PCX Plus, and otherwise bring the rules up-
to-date.
    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 May 7, 1999, the Exchange filed with the Commission a proposed 
rule change, SR-PCX-99-13,\4\ to modify its rules pertaining to Market 
Makers and Lead Market Makers (``LMMs''). The PCX represents that the 
purpose of that rule change was to clarify existing provisions, 
eliminate superfluous provisions, and otherwise bring its rules up-to-
date. The Exchange withdrew this filing on April 9, 2002, with the 
intention to re-file after its PCX Plus proposal was approved.\5\ The 
Exchange proposes to re-file this proposed rule change with additional 
housekeeping changes as a result of the Commission's approval of PCX 
Plus.
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    \4\ See Securities Exchange Act Release No. 42035 (October 19, 
1999), 64 FR 57681 (October 26, 1999) (notice of filing of File No. 
SR-PCX-99-13).
    \5\ See Securities Exchange Act Release No. 47838 (May 13, 
2003), 68 FR 27129 (May 19, 2003) (order approving PCX Plus, a new 
electronic platform for options trading).
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    The Exchange proposes to make the following changes to the text of 
PCX Rule 6 (``Options Trading--Rules Principally Applicable to Trading 
of Options Contracts'') with regard to Market Makers and LMMs:
    First, the Exchange proposes to amend PCX Rule 6.28(b)(5) with 
respect to Fast Markets and Unusual Market Conditions. Under the 
proposed rule change, the reference to PCX Rule 6.37(f) will be 
corrected to reflect the correct rule number, which is PCX Rule 6.37, 
Commentary .05. This is a technical error that the Exchange wishes to 
correct at this time.
    Second, the Exchange proposes to amend PCX Rule 6.32(e) to clarify 
that the section is only applicable with regard to Market Maker orders 
entered from off the floor that are not entitled to special margin 
treatment pursuant to the previous subsections. The Exchange believes 
that the proposed rule amendment will clarify any possible confusion in 
the rule.
    Third, the PCX proposes changes to PCX Rules 6.35 and 6.38(a) 
regarding the procedures for selection of Market Maker primary 
appointment zones, so that in all cases, Market Makers would be 
required to select a primary zone prior to the expiration of a 60-day 
grace period. Currently, PCX Rule 6.35 requires that the PCX's Options 
Allocation Committee assign Market Makers with a primary appointment 
zone. However, it does not expressly require that Market Makers apply 
for such appointments. It only states that a Market Maker's refusal to 
accept a primary appointment zone may be deemed a sufficient cause for 
termination or suspension of a Market Maker's registration. This change 
should clarify any confusion as to a Market Maker's requirement for 
choosing a primary appointment zone. The Exchange also proposes to make 
PCX Rule 6.38 consistent with the changes to PCX Rule 6.35 by replacing 
the phrase ``shall be given'' a primary appointment zone with the 
phrase ``must obtain'' a primary appointment zone.
    Fourth, the Exchange proposes to move the current text in 
Commentary .03 to PCX Rule 6.35(f), leaving Commentary .03 as reserved. 
The PCX believes it is more appropriate to have this text in the rule 
as opposed to the commentary.
    Fifth, PCX proposes to add a provision on FLEX Option to PCX Rule 
6.36 in order to conform its Letters of Guarantee rule to its Letters 
of Authorization rule, as stated in PCX Rule 6.45. The Exchange 
believes the change would clarify any confusion with respect to letters 
of guarantee and letters of authorization.
    Sixth, the Exchange proposes to eliminate OFPA B-4, Subject: Market 
Maker Trading on the PSE Equity Floors, as the reference to equity 
floors is no longer applicable to PCX.
    Seventh, the PCX proposes to change PCX Rule 6.82 by replacing 
references to ``alternate LMMs'' and ``substitute LMMs'' with 
references to ``interim LMMs'' and ``back-up LMMs,'' respectively. The 
Exchange believes the new references better define the intended role of 
the LMMs in these circumstances. The Exchange also proposes to amend 
PCX Rule 6.82(c)(3) in order to clarify the LMM's obligation to 
generate and update its quotations.
    Eighth, the Exchange proposes to clarify that, under PCX Rule 
6.84(g), a Market Maker trading for a joint account must have a primary 
appointment, but

[[Page 56030]]

the joint account itself is not required to have a primary 
appointment.\6\
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    \6\ PCX Rule 6.84(g) currently provides that ``[j]oint accounts 
shall not be permitted to enter: (1) opening transactions from off 
the Floor for option contracts listed on the Exchange; (2) any 
transactions for option contracts not listed on the Exchange; and 
(3) transactions for any other security. This prohibition shall not 
apply to transactions entered for securities underlying Exchange 
option contracts in the joint account.''
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    Ninth, the PCX proposes to amend PCX Rule 6.92 on Intermarket 
Linkage by adding a reference to ``PCX Plus'' in Rule 6.92(a)(7)(ii). 
This change will clarify that the Intermarket Linkage rules apply to 
Members or Member Firms who are logged on to PCX Plus in an Eligible 
Option Class.
    Tenth, the Exchange proposes to add an example of an Associated 
Person into PCX Rule 6.52, Commentary .03 for clarity.
    Lastly, the Exchange proposes to make various housekeeping, 
grammatical, and conforming numbering changes as a result of PCX Plus, 
to the current rules on Market Makers and LMMs.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\7\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act,\8\ in particular, in that 
it will promote just and equitable principles of trade; facilitate 
transactions in securities, remove impediments to and perfect the 
mechanisms of a free and open market and a national market system; and 
protect investors and the public interest. The Exchange believes that 
the proposed rule change, as amended, is also consistent with Section 
6(b)(6) of the Act,\9\ which requires that members and persons 
associated with members be appropriately disciplined for violations of 
Exchange rules.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(6).
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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 PCX 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, as amended, 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. 
SR-PCX-2003-31 and should be submitted by October 20, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-24502 Filed 9-26-03; 8:45 am]
BILLING CODE 8010-01-P