[Federal Register Volume 68, Number 223 (Wednesday, November 19, 2003)]
[Notices]
[Pages 65337-65338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28892]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48767; File No. SR-PCX-2003-48]


Self-Regulatory Organizations; Order Granting Accelerated 
Approval to Proposed Rule Change and Amendment No. 1 Thereto by the 
Pacific Exchange, Inc. Relating to the Establishment of a New Total 
Imbalance Indicator on the Archipelago Exchange

November 10, 2003.

I. Introduction

    On September 22, 2003, the Pacific Exchange, Inc. (``PCX'') filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934\1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change to amend its rules 
governing the Archipelago Exchange facility (``ArcaEx''), the equities 
trading facility of PCX's wholly-owned subsidiary, PCX Equities, Inc. 
(``PCXE''), in order to add a new Total Imbalance indicator to its 
Market Order Auction and Trading Halt auction display. On September 30, 
2003, the PCX submitted Amendment No. 1 to the proposed rule change.\3\ 
Notice of the proposed rule change, as amended, was published for 
comment in the Federal Register on October 16, 2003.\4\ The Commission 
received no comments in response to the proposal. This order approves 
the PCX's proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Peter D. Bloom, Managing Director, 
Regulatory Policy, PCX, to Nancy J. Sanow, Assistant Director, 
Division of Market Regulation, Commission, dated September 29, 2003 
(``Amendment No. 1''). In Amendment No. 1, the PCX submitted a new 
Form 19b-4, which replaced the original filing in its entirety.
    \4\ See Securities Exchange Act Release No. 48603 (October 8, 
2003), 68 FR 59661 (SR-PCX-2003-48). The 21-day comment period 
expired on November 6, 2003.
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II. Description

    PCX proposes to amend PCXE Rule 1.1(q) and PCXE Rule 7.35(c) and 
(d) to add a new order imbalance indicator to the information that is 
displayed during the ArcaEx Market Order Auction \5\ and during the 
Trading Halt Auction.\6\ The new Total Imbalance Indicator would 
display the total net imbalance of market and limit orders at the 
``Indicative Match Price.''\7\ This imbalance indicator will be in 
addition to the existing market order Imbalance indicator that 
exclusively displays the imbalance of unmatched market orders.
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    \5\ See PCXE Rule 7.35(c).
    \6\ See PCXE Rule 7.35(d).
    \7\ See PCXE Rule 1.1(r).
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    Currently, PCXE Rule 1.1(q) defines the term ``Imbalance'' as the 
number of buy or sell shares that cannot be matched with other shares 
at the Indicative Match Price at any given time. The PCX proposes to 
amend PCXE Rule 1.1(q) to define two types of order imbalances, Total 
Imbalance and Market Imbalance. ``Total Imbalance'' would be defined as 
the net imbalance of buy (sell) orders at the Indicative Match Price 
for all orders that are eligible for execution during the Market Order 
Auction or the Trading Halt Auction. ``Market Imbalance'' would mean 
only the imbalance of any buy (sell) Market Orders that are not matched 
for execution during the applicable auction.
    The PCXE's current rules governing the publication of imbalances 
associated with its Market Order Auction and Trading Halt Auction are 
set forth in PCXE Rule 7.35. During the Market Order Auction and the 
Trading Halt Auction, the PCX currently publishes only the unmatched 
portion of market orders (and not limit orders) as the Imbalance 
display. The PCX proposes to amend PCXE Rules 7.35(c) and 7.35(d) to 
establish an indicator that would display the Total Imbalance in 
addition to the Market Imbalance during the Market Order Auction and 
Trading Halt Auction.

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with Section 6(b) of the Act \8\ in general and 
furthers the objectives of Section 6(b)(5) of the Act.\9\ The 
Commission believes that the proposal is designed to promote just and 
equitable principles of trade, to facilitate transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market.\10\
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ In approving this rule, the Commission notes that it has 
considered the proposal's impact on efficiency, competition, and 
capital formation. See 15 U.S.C. 78c(f).
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    The Commission believes that the dissemination of the 
aforementioned imbalance Indicators will provide ETP

[[Page 65338]]

Holders and Sponsored Participants (collectively ``Users'') with 
additional information with which to make trading decisions during 
Market Order Auctions and Trading Halt Auctions. Accordingly, this 
enhancement should facilitate improved order interaction and foster 
price competition. The Commission believes that the proposed rule 
change will provide a more transparent and efficient market operation, 
and will enhance the information available to investors.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice in the Federal Register. The Commission believes that the 
proposed rule change will enhance the information available to ArcaEx 
Users to assist them in making investment decisions during the Opening 
Session and prior to the re-opening of trading in a security following 
a trading halt. The Commission further notes that PCX has represented 
that ArcaEx has already developed the capability to publish the new 
Total Imbalance indicator.\11\
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    \11\ Telephone conversation between Peter Bloom, Regulatory 
Policy, PCX and Tim Fox, Attorney, Commission on October 30, 2003.
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IV. Order Granting Accelerated Approval

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder. Moreover, the Commission finds that 
there is good cause to grant accelerated approval to the proposed rule 
change, as amended.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change, as amended (SR-PCX-2003-48), is 
approved on an accelerated basis.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-28892 Filed 11-18-03; 8:45 am]
BILLING CODE 8010-01-P