[Federal Register Volume 69, Number 129 (Wednesday, July 7, 2004)]
[Notices]
[Pages 41006-41007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15326]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49949; File No. SR-PCX-2004-55]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to a Twelve-Month Extension of the Automatic Execution System 
Book Function Pilot Program

June 30, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 28, 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 and 
II below, which Items have been prepared by PCX. PCX filed the proposed 
rule change as ``non-controversial'' pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) \4\ thereunder. 
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\ 217 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    PCX is proposing to amend its rules to extend the Automatic 
Execution System (``Auto-Ex'') Book Function Pilot Program for one year 
until June 30, 2005. The text of the proposed rule change is available 
at 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, 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. 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
    On June 22, 2001, the Commission approved, on a one-year pilot 
basis, the Exchange's proposal to amend PCX Rule 6.87, which allows 
automatic executions of orders in the Exchange's Limit Order Book when 
those orders become marketable.\5\ On June 17, 2002, the Commission 
approved a one-year extension of the pilot program.\6\ On June 17, 
2003, the Commission approved a one-year extension of the pilot 
program.\7\ The pilot program is currently set to expire on June 30, 
2004.
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    \5\ See Exchange Act Release No. 44468 (June 22, 2001), 66 FR 
34505 (June 28, 2001).
    \6\ See Exchange Act Release No. 46082 (June 17, 2002), 67 FR 
42307 (June 21, 2002).
    \7\ See Exchange Act Release No. 48043 (June 17, 2003), 68 FR 
37190 (June 23, 2003).
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    The Auto-Ex \8\ Book Function of the Pacific Options Exchange 
Trading System (``POETS'') permits orders in the Limit Order Book to be 
executed via the Auto-Ex system when those orders become marketable 
subject to certain procedures. The function may be used when one or 
more orders in the Limit Book Order become marketable, as indicated by 
a locked or crossed market being displayed on the trading floor. When 
this occurs, the Lead Market Maker may direct the Order Book Official 
to initiate the Auto-Ex Book Function, which will cause marketable 
orders in the Limit Order Book to be automatically executed against the 
accounts of Market Makers who are participating on the Auto-Ex system 
at the time.
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    \8\ Auto-Ex is the Exchange's Automated Execution system feature 
of POETS for market or marketable limit orders. POETS is the 
Exchange's automated trading system comprised of an options order 
routing system, an automatic execution system (``Auto-Ex''), an on-
line limit order book system and an automatic market quote update 
system. Option orders can be sent to POETS via the Exchange's Member 
Firm Interface (``MFI''). Market and marketable limit orders sent 
through the MFI will be executed by Auto-Ex if they meet order type 
and size requirements of the Exchange.
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    The Exchange is requesting an additional extension of the pilot 
program for one year from June 30, 2004 through June 30, 2005. The 
Exchange represents that the added time permits the Exchange to phase-
in the Exchange's new trading platform for options, ``PCX

[[Page 41007]]

Plus,'' on an issue-by-issue basis.\9\ As each issue is phased into PCX 
Plus, the Exchange will simultaneously phase-out such issue from the 
Auto-Ex Book Function. PCX Plus will eventually replace the Auto-Ex 
Book Function in its entirety. Currently, the Auto-Ex Book Function is 
operating as intended and provides a service to both customers and 
members by facilitating the execution of orders in the Limit Order 
Book. Therefore, the Exchange believes that a one-year extension of the 
program is warranted.
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    \9\ See Exchange Act Release No. 47838 (May 13, 2003), 68 FR 
27129 (May 19, 2003) (Order approving PCX Plus).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5),\11\ in particular, in that it is 
designed to facilitate transactions in securities, to promote just and 
equitable principles of trade, and to protect investors and the public 
interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 Exchange has designated the proposed rule change as one that 
does not: (i) Significantly affect the protection of investors or the 
public interest; (ii) impose any significant burden on competition; and 
(iii) by its terms, 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. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6)\13\ 
thereunder.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6)(iii), a proposed ``non-controversial'' rule 
change does not become operative for 30 days after the date of filing, 
unless the Commission designates a shorter time. PCX has requested that 
the Commission waive the five business day pre-filing requirement and 
the 30-day operative delay so that the proposed rule change will become 
immediately effective upon filing, and the PCX Auto-Ex Book Function 
Pilot Program can continue without interruption.
    The Commission believes that waiver of the five-day pre-filing 
requirement and the 30-day operative delay is consistent with the 
protection of investors and the public interest.\14\ The Commission 
notes that the Auto-Ex Book Function Pilot Program expires on June 30, 
2004. Accelerating the operative date will allow for the continued 
operation of PCX's Auto-Ex Book Function Pilot Program without 
interruption until such time as PCX Plus is fully operative. Therefore, 
the Commission designates the proposed rule change to be effective and 
operative immediately.
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    \14\ For purposes only 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 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.\15\
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    \15\ 15 U.S.C. 78s(b)(3)(C).
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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 proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic comments:

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-PCX-2004-55 on the subject line.

Paper comments:

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-PCX-2004-55. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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, 450 Fifth 
Street, NW, Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of PCX. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-PCX-2004-55 
and should be submitted on or before July 28, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-15326 Filed 7-6-04; 8:45 am]
BILLING CODE 8010-01-P