[Federal Register Volume 69, Number 45 (Monday, March 8, 2004)]
[Notices]
[Pages 10803-10804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5054]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49342; File No. SR-PCX-2004-09]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the Pacific Exchange, Inc. 
To Allow Ratio Orders to be Executed at the Exchange

March 1, 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 February 19, 2004, 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 Exchange. 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\ 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 Exchange is proposing amend its rules to allow ratio orders to 
be executed at the Exchange. The text of the proposed rule change is 
available at the 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
    PCX Rule 6.62 lists and defines several types of orders that are 
permissible at the PCX. Of the several types of orders defined, three 
are complex orders: spread, straddle and combination orders.\3\ The PCX 
proposes to add another type of complex order, ratio orders, to the 
list of orders included in Rule 6.62.\4\ A ratio order is either a 
spread, straddle, or combination order in which the stated number of 
option contracts to buy (sell) is not equal to the stated number of 
option contracts to sell (buy), provided that the number of contracts 
differs by a permissible ratio. Under the PCX proposal, a permissible 
ratio is any ratio that is equal to or greater than one to three (.333) 
or less than or equal to three to one (3.0). For example, a one to two 
(.5) ratio, a two to three (.667) ratio, or a two to one (2.0) ratio is 
permissible, whereas a one to four (.25) or four to one (4.0) ratio is 
not.
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    \3\ These types of orders are defined in PCX Rule 6.62(d), (g), 
and (h), respectively.
    \4\ The proposed rule change is based on the rules of the 
Chicago Board Options Exchange, Inc., Rules 6.45 and 6.53.
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    The PCX believes that ratio orders are merely slight variations on 
the types of complex orders currently permitted at the PCX. For this 
reason, the PCX believes that it is appropriate to treat ratio orders 
in a manner similar to the existing complex orders that currently 
permitted to trade at the PCX. Accordingly, the PCX proposes to have 
ratio orders within the permissible ratio follow the current priority 
rules under PCX Rule 6.75(h) Commentary .04.
    Specifically, PCX Rule 6.75(h) Commentary .04 sets forth the proper 
trading procedures for combination, spread and straddle orders. Under 
the PCX proposal, ratio orders that are equal to or greater than one to 
three (.333) or less than or equal to three to one (3.0) will be 
treated the same as combination, spread and straddle orders.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Act,\5\ in general, and furthers the objectives of 
section 6(b)(5) of the Act,\6\ in particular, because it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of change, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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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 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 foregoing proposed rule change, as amended, has become 
effective pursuant to section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6)\8\ thereunder, because it (i) does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) does not become 
operative for 30 days from the date on which it was filed, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest. At any time within 60 
days of 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. The PCX provided the Commission with written 
notice of its intent to file this proposed rule change at least five 
business days prior to the date of filing the proposed rule change.
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    \7\ 15 U.S.C. 78(s)(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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

[[Page 10804]]

e-mail address: [email protected]. All comment letters should refer 
to File No. SR-PCX-2004-09. 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 
hardcopy 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 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-2004-09 and should be 
submitted by March 29, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-5054 Filed 3-5-04; 8:45 am]
BILLING CODE 8010-01-P