[Federal Register Volume 69, Number 64 (Friday, April 2, 2004)]
[Notices]
[Pages 17466-17467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7497]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49495; File No. SR-PCX-2004-16]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to Trading Hours for Options on Exchange-Traded Funds

March 29, 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 March 10, 2004, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the PCX. The PCX filed the 
proposal pursuant to section 19(b)(3)(A) under the Act,\3\ and Rule 
19b-4(f)(6) thereunder,\4\ which renders the proposal effective upon 
filing with the Commission.\5\ 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The PCX has asked the Commission to waive the 30-day 
operative delay. 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 Commentary .02 to PCX Rule 4.2, ``Trading 
Sessions,'' to provide that options on exchange-traded funds (``ETFs'') 
will trade until 1:15 p.m. (Pacific Time) each business day. The text 
of the rule appears below. Additions are italicized.

Trading Sessions

    Rule 4.2--No change.
    Commentary:
    .01--No change.
    .02 The hours for trading options on Nasdaq-100 Index Tracking 
Stock and options on Exchange Traded Funds will commence at 6:30 a.m. 
and end at 1:15 p.m. each business day, except the last trading day of 
each calendar month, when trading in options on Nasdaq-100 Index 
tracking Stock will end at 1:05 p.m.

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
    The PCX's rules permit members to effect transactions on the 
options floor of the PCX until 1:02 p.m. (Pacific Time) for equity 
options and until 1:15 p.m. (Pacific Time) for index options each 
business day.\6\ The PCX's rules also provide that the hours for 
trading options on the Nasdaq-100 Index Tracking Stock (``QQQs'') 
commence at 6:30 a.m. (Pacific Time) and end at 1:15 p.m. (Pacific 
Time) each business day except the last trading day of each calendar 
month, when trading in options on the QQQs ends at 1:05 p.m. (Pacific 
Time).
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    \6\ See PCX Rule 4.2, Commentary .01.
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    The purpose of the proposal is to establish the hours of trading in 
options on ETFs from 6:30 a.m. (Pacific Time) to 1:15 p.m. (Pacific 
Time) except the last trading day of each calendar month, when trading 
in options on the QQQs will end at 1:05 p.m. (Pacific Time). According 
to the PCX, with the exception of the last trading day of each calendar 
month, the proposal applies the same trading hours to options on index 
products, options on the QQQs, and options on all other ETFs. The PCX 
believes that although ETFs are not themselves index option 
products,\7\ they nonetheless are designed to closely track the price 
and yield performance of the index products and should be evaluated the 
same way for the purpose of establishing trading hours for ETFs.
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    \7\ For example, the QQQs represent ownership in the Nasdaq-100 
Trust, a long-term unit investment trust established to accumulate 
and hold a portfolio of the equity securities that comprise the 
Nasdaq-100 Index. The Nasdaq-100 Index includes 100 of the largest 
non-financial companies listed on the Nasdaq National Market. The 
Nasdaq-100 reflects Nasdaq's largest growth companies across major 
industry groups with all index components having a market 
capitalization of at least $500 million and an average daily trading 
volume of at least 100,000 shares.
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2. Statutory Basis
    The PCX believes that the proposed amendments will assist in 
allowing the PCX to offer investors the same trading session for 
options on ETFs that it affords to trading options on index products. 
The PCX believes that the proposal is consistent with section 6(b)(5) 
of the Act \8\ in that it is designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
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    \8\ 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

[[Page 17467]]

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
    The PCX has filed the proposed rule change pursuant to section 
19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\10\ 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) does not become operative for 30 days from 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 proposed rule 
change has become effective pursuant to section 19(b)(3)(A) of the Act 
and Rule 19b-4(f)(6) thereunder. As required under Rule 19b-
4(f)(6)(iii), the PCX provided the Commission with written notice of 
its intent to file the proposed rule change at least five business days 
prior to filing the proposal with the Commission or such shorter period 
as designated by the Commission.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The PCX has requested that the 
Commission waive the 30-day operative delay specified in Rule 19b-
4(f)(6) to allow the PCX to implement the proposed rule change as 
quickly as possible. In this regard, the PCX believes that the proposal 
is non-controversial because the Exchange seeks to maintain the 
uniformity of the trading session for all index options, options on the 
QQQs, and options on all ETFs. As a result, the PCX believes that the 
proposed rule change does not raise new regulatory issues, 
significantly affect the protection of investors or the public 
interest, or impose any significant burden on competition. The PCX 
believes that its request is consistent with the protection of 
investors and the public interest and that good cause exists, including 
the PCX's need to maintain competition and efficiency.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because other options exchanges currently permit options on ETFs to 
trade until 4:15 p.m. (Eastern Time).\11\ Accordingly, the PCX's 
proposal will make the PCX's rules consistent with the rules of other 
options exchanges. For this reason, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest, and the Commission designates the 
proposal to be operative upon filing with the Commission.\12\
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    \11\ Telephone conversation between Mai Shiver, Acting Director/
Senior Counsel, Regulatory Policy, PCX, and Yvonne Fraticelli, 
Special Counsel, Division of Market Regulation, on March 26, 2004.
    \12\ For purposes only of waiving the 30-day operative delay, 
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 of the filing of such 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 it 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-
2004-16. The 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 at 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-2004-16 and should be 
submitted by April 23, 2004.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-7497 Filed 4-1-04; 8:45 am]
BILLING CODE 8010-01-P