[Federal Register Volume 68, Number 241 (Tuesday, December 16, 2003)]
[Notices]
[Pages 70070-70071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30939]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48893; File No. SR-PCX-2003-38]


Self-Regulatory Organizations; Order Granting Approval to 
Proposed Rule Change and Amendment No. 1 Thereto by the Pacific 
Exchange, Inc. Relating to the Establishment of a Cross-and-Post Order 
Type

December 8, 2003.

I. Introduction

    On July 23, 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 implement a new order 
type, the ``Cross-and-Post Order,'' for use on the Archipelago Exchange 
(``ArcaEx''). On September 25, 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 
29, 2003.\4\ The Commission received no comments in response to the 
proposal. This order approves the PCX's proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced the original filing in its 
entirety.
    \4\ See Securities Exchange Act Release No. 48676 (October 21, 
2003), 68 FR 61711 (SR-PCX-2003-38).
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II. Description

    The PCX, through its wholly owned subsidiary, PCX Equities, Inc. 
(``PCXE'') proposed to adopt a new order type called a ``Cross-and-Post 
Order.'' The Cross-and-Post Order would be an order that is executed 
pursuant to the existing ``Cross Order'' rules \5\ while allowing for 
any residual portion of the Cross Order to be displayed in the Arca 
Book. Further, the ArcaEx trading system would cancel a Cross-and-Post 
Order at the time of order entry if: (i) The cross price would cause an 
execution at a price that trades through the NBBO; or (ii) the cross 
price is between the BBO and does not improve the BBO by the minimum 
price improvement increment (``MPII'') pursuant to PCXE Rule 7.6(a), 
Commentary .06.\6\
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    \5\ A ``Cross Order'' is a two-sided order with instructions to 
match the identified buy-side with the identified sell-side at a 
specified price (the ``cross price''). See PCXE Rule 7.31(s).
    \6\ The MPII on ArcaEx is equal to $0.01 or 10% of the NBBO 
spread, whichever is greater. See PCXE Rule 7.6(a), Commentary .06. 
Under current PCXE rules, the MPII requirements must be satisfied in 
the execution of Cross Orders. See PCXE Rule 7.31(s).

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[[Page 70071]]

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change 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\ The 
Commission believes that the proposed rule change is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments and perfect the mechanism of a 
free and open market.\9\
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ In approving this rule, the Commission 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 Cross-and-Post Orders will facilitate 
order interaction on ArcaEx and increase investor choices with respect 
to executing orders. Currently on ArcaEx, any portion of a Cross Order 
that remains unexecuted is canceled. Customers must then re-enter the 
residual portion of the order if they wish to have it posted in the 
Arca Book. The Commission believes that the Cross-and-Post Order will 
enable automatic electronic posting of the residual portion of the 
Cross-and-Post Order.

IV. Order Granting 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.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change, as amended (SR-PCX-2003-38), is 
approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-30939 Filed 12-15-03; 8:45 am]
BILLING CODE 8010-01-P