[Federal Register Volume 68, Number 223 (Wednesday, November 19, 2003)]
[Notices]
[Pages 65338-65339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28896]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48768; File No. SR-PCX-2003-54]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc. to Amend PCXE Rule 7.37(d) 
Relating to Routing Orders Away

November 10, 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 September 25, 2003, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly owned subsidiary PCX Equities, Inc. 
(``PCXE''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which the PCX has prepared. 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.
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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 PCXE Rule 7.37(d) relating to the routing 
of orders to away market centers or market participants. The text of 
the proposed rule change appears below. New text is in italics. Deleted 
text is in brackets.

PCX Equities, Inc.

Rule 7

Equities Trading

Order Execution

* * * * *
Rule 7.37. (a)-(c) No change.
    (d) Step 5: Routing Away.
(1)-(2)--No change.
    (A)(i) The order shall be routed, either in its entirety or as 
component orders, to another market center or market participant as a 
limit order equal to the price and no greater than the size [priced at] 
of the quote published by the market center or market participant. The 
remaining portion of the order, if any, shall be ranked and displayed 
in the Arca Book in accordance with the terms of such order under Rule 
7.36 and such order shall be eligible for execution under Rule 7.37.
    (ii)--No change.
    (B) The order that is routed away shall remain outside the 
Archipelago Exchange for a prescribed period of time and may be 
executed in whole or in part subject to the applicable trading rules of 
the relevant market center or market participant. [Archipelago Exchange 
shall attempt to match the part of the order that has not been routed 
away against then available trading interest in the Archipelago 
Exchange for an internal fill by following Steps 1 through 4 as set 
forth in paragraphs (a) through (c) above.]
    (i) While an order remains outside the Archipelago Exchange, it 
shall have no time standing, relative to other orders received from 
Users at the same price which may be executed against the Arca Book.
    (ii) Requests from Users to cancel their orders while the order is 
routed away to another market center or market participant and remains 
outside the Archipelago Exchange shall be processed, subject to the 
applicable trading rules of the relevant market center or market 
participant.
    (C) [Orders routed to other market centers or market participants 
shall remain outside the Archipelago Exchange for a prescribed time 
period during which they may be executed (in whole or in part) or 
declined. While an order remains outside the Archipelago Exchange, it 
shall have no time standing, relative to other orders received from 
Users at the same price which may be executed against the Arca Book. 
Requests from Users to cancel their orders while the order is routed 
away to another market center or market participant and remains outside 
the Archipelago Exchange shall be processed, subject to the applicable 
trading rules of the relevant market center or market participant.]
    [(D)] Where an [In the event that a marketable] order or portion of 
an order is routed away [from the Archipelago Exchange to another 
market center or market participant] and is not executed either in 
whole or in part [in its entirety] at the other market center or market 
participant['s quote] (i.e., all attempts at the fill are declined or 
timed-out), the order shall be ranked and displayed in the Arca Book in 
accordance with the terms of such order under Rule 7.36 and such order 
shall be eligible for execution under Rule 7.37. [the Archipelago 
Exchange shall attempt to match the residual or declined market order 
against then available trading interest in the Archipelago Exchange for 
an internal fill by following Steps 1 through 4 as set forth in 
paragraphs (a) through (c) above. Any remaining unmatched trading 
interest shall be re-routed to another market center or market 
participant at the next available

[[Page 65339]]

displayed price level pursuant to this paragraph (d)(2) above.]
    [(E) When routing an order in an Eligible Security away to another 
market center, the Corporation shall utilize such electronic 
intermarket linkages and order delivery facilities as may be approved 
by the Board of Directors from time to time, subject to such applicable 
requirements as may be agreed to with the relevant market center.]
    [(e) If an order has not been executed in its entirety after 
following Steps 1-5, the order shall be ranked in the Arca Book 
pursuant to Rule 7.36.]
* * * * *

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 had 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, Proposed Rule Change

(1) Purpose
    To clarify language with respect to order execution on the 
Archipelago Exchange (``ArcaEx'') facility, the PCX proposes to modify 
PCXE Rule 7.37(d) relating to the routing of orders to away market 
centers or market participants.\3\ This modification does not seek to 
change ArcaEx's current functionality, but rather to clarify its 
existing functionality.
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    \3\ The fifth step of the ArcaEx execution algorithm involves 
routing orders away to other market centers or market participants. 
This will occur if there are no opportunities to match an order 
within ArcaEx, or to access the best price available in the market. 
Routing is available only to those ETP Holders who have entered into 
a Routing Agreement. See PCXE Rule 7.37(d).
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    Currently, PCXE Rule 7.37(d) describes the process for orders that 
are routed outside the Archipelago Exchange. The rule states that 
orders will be routed to the extent they have not been executed in 
their entirety subject to PCXE Rules 7.37(a) through (c) and are not 
designated as a certain order type.\4\ The proposed rule change would 
clarify the size and price of the routed order. Specifically, the 
proposed rule change designates that orders would be routed at the 
price and at a size no greater than the size of the quote published at 
the away market center or market participant. Furthermore, the proposed 
rule change would clarify that in the case where the order is (i) 
greater than the away market center's quote size, or (ii) is unexecuted 
or canceled by the away market center, the remaining portion of the 
order will be displayed in the ArcaEx Book pursuant to PCXE Rule 7.36 
and eligible for execution under PCXE Rule 7.37.
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    \4\ PCXE Rule 7.37(d) states that orders designated as Fill-or-
Return, Fill-or-Return Plus, or Post No Preference (``PNP'') will be 
canceled without being routed to another market participant.
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(2) Statutory Basis
    The PCX believes that this proposal is consistent with Section 6(b) 
\5\ of the Act, in general, and furthers the objectives of Section 
6(b)(5) \6\, in particular, because it is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments and perfect the mechanisms of a free and open 
market, and to protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The PCX 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

    The PCX neither solicited nor received written comments on 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 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 filings will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-PCX-2003-54 and 
should be submitted by December 10, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-28896 Filed 11-18-03; 8:45 am]
BILLING CODE 8010-01-P