[Federal Register Volume 69, Number 40 (Monday, March 1, 2004)]
[Notices]
[Pages 9670-9672]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4431]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49293; File No. SR-PCX-2004-02]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the Pacific Exchange, Inc. Relating to the Elimination of the Posting 
Period for an Application for Reinstatement

February 23, 2004.
    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 January 28, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly owned subsidiary PCX Equities, Inc. 
(``PCXE''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
items I, II, and III below, which items have been prepared by the 
Exchange. On February 18, 2004, the PCX amended the proposed rule 
change.\3\ The PCX filed the proposal pursuant to section 19(b)(3)(A) 
of the Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the 
proposal effective upon filing with the Commission.\6\ 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.
    \3\ See letter from Steven B. Matlin, Regulatory Policy, PCX, to 
Nancy J. Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated February 9, 2004 (``Amendment No. 
1''). In Amendment No. 1, the PCX provided additional justification 
for its proposal under section 6(b)(3) of the Act and corrected the 
title of the proposed rule change. For purposes of calculating the 
60-day abrogation period, the Commission considers the period to 
have commenced on February 18, 2004, the date the Exchange filed 
Amendment No. 1.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The PCX provided the Commission with notice of its intent to 
file the proposed rule change on January 21, 2004. See Rule 19b-
4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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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 governing the Archipelago 
Exchange (``ArcxEx''), the equities trading facility of PCXE, by 
amending PCXE Rule 11.7 to eliminate the 10-day period upon which the 
Exchange must give notification to all Equity Trading Permit (``ETP'') 
Holders of an application for reinstatement. 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
    As part of its ongoing efforts to enhance participation on ArcaEx, 
the PCX recently amended its rules to expedite the timeframe within 
which new ETP Holders may effect transactions on the Exchange. On 
September 24, 2003, the Exchange eliminated its requirement that the 
names of all new ETP applicants must be published for 10 days in the 
Exchange's Weekly Bulletin.\7\ The Exchange notes that although it 
eliminated the 10-day posting period for new applicants, it maintains 
the 10-day posting period for applicants seeking reinstatement to the 
Exchange pursuant to PCXE Rule 11.7. In order to make the rules 
consistent, the Exchange is proposing to amend PCXE Rule 11.7 to 
eliminate the 10-day period during which the Exchange must give 
notification to all ETP Holders of an application for reinstatement.
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    \7\ See Securities Exchange Act Release No. 34-48532 (September 
24, 2003), 68 FR 56369 (September 30, 2003) (SR-PCX-2003-43).
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    The Exchange's current rules governing reinstatement procedures for 
ETP Holders and associated persons of ETP Holders are set forth in PCXE 
Rule 11.7. Presently, PCXE Rule 11.7 provides that upon sufficient 
proof of a resolution of the problem or problems responsible for such 
suspension, the Exchange shall notify in writing all ETP Holders of the 
application for reinstatement and that a meeting of the PCXE Board will 
be held not less than 10 business days subsequent to such notice. 
Historically, membership-based exchanges in which members have 
ownership and involvement in determining who should be granted access 
to their facilities used posting

[[Page 9671]]

rules to notify members of parties interested in joining the exchange. 
Consistent with the rationale of eliminating the requirement for new 
applicants, the Exchange believes that because PCXE is a demutualized 
organization in which there are no ownership or voting rights, the 
posting period is not a critical part of the application or 
reinstatement process. Accordingly, the Exchange proposes to amend PCXE 
Rule 11.7 to eliminate the 10-day notification period.
    The Exchange believes that the elimination of the posting process 
promotes a more efficient and effective market operation by enabling 
Exchange access to ETP Holders in a more timely manner. Due to the fact 
that ETP Holders are not involved in the application approval process, 
and because the basis for the notification process was to inform 
individuals who were involved in membership decisions of the status of 
such applications, the Exchange believes eliminating the posting period 
is merely an administrative change necessary to streamline the process 
of enabling ETP Holders access to the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\8\ in general, and further the objectives 
of section 6(b)(5),\9\ 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, and to remove impediments and perfect the mechanisms of a 
free and open market and to protect investors and the public interest. 
Furthermore, the Exchange believes the elimination of this requirement 
is consistent with section 6(b)(3) of the Act.\10\ While PCXE is 
demutualized and therefore does not contain the traditional approval 
process for its applicants as a membership-based exchange, the fair 
representation requirements of section 6(b)(3) of the Act \11\ would 
still be satisfied after the proposed rule change is approved through 
the ETP representative on the PCX Board of Governors.\12\
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(3).
    \11\ Id.
    \12\ See Amendment No. 1, supra note 3.
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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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has been filed by the Exchange as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act 
\13\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\14\ 
Consequently, because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest, (2) does not impose any significant burden on competition, 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate, if consistent with the protection of investors and the 
public interest, provided that the self-regulatory organization has 
given the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as the Commission may 
designate, it has become effective pursuant to section 19(b)(3)(A) of 
the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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    Pursuant to Rule 19b-4(f)(6)(iii),\17\ a proposed ``non-
controversial'' rule change does not become operative for 30 days after 
the date of filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest. The PCX has requested that the Commission waive the 30-day 
operative delay so that the proposed rule change will become 
immediately effective upon filing.\18\
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    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ In its original filing, the PCX inadvertently requested 
that the Commission also waive the five-day pre-filing period. The 
PCX had, in fact, already provided the Commission with the 
appropriate five-day pre-filing notice. Telephone call between 
Steven B. Matlin, Regulatory Policy, PCX, and David Hsu, Attorney, 
Division, Commission on February 4, 2004.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest,\19\ because it will allow for a more efficient and effective 
market operation by enabling Exchange access to new ETP Holders in a 
more timely manner. For this reason, the Commission designates the 
proposed rule change to be effective and operative immediately.
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    \19\ For purposes of accelerating the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days after the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed 
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. Comments may also be submitted electronically at the 
following e-mail address: [email protected]. All comment letters 
should refer to File No. SR-PCX-2004-02. This file number should be 
included on the subject line if e-mail is used. To help the Commission 
process and review your comments more efficiently, comments should be 
sent in hard copy or by e-mail but not by both methods. 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 Section. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-PCX-2004-02 and should be 
submitted by March 22, 2004.


[[Page 9672]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4431 Filed 2-27-04; 8:45 am]
BILLING CODE 8010-01-P