[Federal Register Volume 69, Number 129 (Wednesday, July 7, 2004)]
[Notices]
[Pages 41007-41009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15327]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49948; File No. SR-PCX-2004-54]


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 
Incentive 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

[[Page 41008]]

(``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'' under 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'') Incentive 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 September 25, 2001, the Commission approved, on a nine-month 
pilot basis, the Exchange's proposal to amend PCX Rule 6.87 to provide 
an Auto-Ex \5\ Incentive Pilot Program for apportioning Auto-Ex trades 
among Market Makers.\6\ On June 25, 2002, the Commission approved an 
additional six-month extension of the pilot program.\7\ On December 24, 
2002, the Commission approved an additional six-month extension of the 
pilot program.\8\ On June 11, 2003, the Commission approved a one-year 
extension of the pilot program.\9\ The pilot program is currently set 
to expire on June 30, 2004.
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    \5\ Auto-Ex is the Exchange's Automated Execution system feature 
of the Pacific Options Exchange Trading System (``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.
    \6\ See Exchange Act Release No. 44847 (Sept. 25, 2001), 66 FR 
50237 (Oct. 2, 2001).
    \7\ See Exchange Act Release No. 46115 (June 25, 2002), 67 FR 
44494 (July 2, 2002).
    \8\ See Exchange Act Release No. 47088 (Dec. 24, 2002), 68 FR 
140 (Jan. 2, 2003).
    \9\ See Exchange Act Release No. 48019 (June 11, 2003), 68 FR 
36621 (June 18, 2003).
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    The Auto-Ex Incentive Pilot Program allows the Exchange to assign 
Auto-Ex orders to a logged-on Market Maker according to the percentage 
of its in-person agency contracts \10\ traded in an issue (excluding 
Auto-Ex contracts) compared to all of the Market Makers in-person 
agency contracts traded (excluding Auto-Ex contracts) during the review 
period. The review period is determined by the Exchange and may be for 
any period of time not in excess of two weeks.\11\ The percentage 
distribution determined for a review period will be effective for the 
succeeding review period.
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    \10\ Agency contracts are those contracts that are represented 
by an agent and do not include contracts traded between Market 
Makers in person in the trading crowd.
    \11\ The Exchange has set a two-week review period for all 
options classes and the Exchange will not vary the term of the 
review period except for exigent circumstances.
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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 Plus,'' on an 
issue-by-issue basis.\12\ As each issue is phased into PCX Plus, the 
Exchange will simultaneously phase-out such issue from the Auto-Ex 
Incentive Pilot Program. PCX Plus will eventually replace the Auto-Ex 
Incentive Pilot Program in its entirety. Therefore, the Exchange 
believes that a one-year extension of the program is warranted.
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    \12\ 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,\13\ in general, and furthers the 
objectives of section 6(b)(5),\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 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\15\ and Rule 19b-4(f)(6) \16\ 
thereunder.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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 Incentive 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.\17\ The Commission 
notes that the Auto-Ex Incentive Pilot Program expires on June 30, 
2004. Accelerating the operative date will allow for the continued 
operation of PCX's Auto-Ex Incentive Pilot Program without interruption 
until such time as PCX Plus is fully operative. Therefore, the 
Commission designates

[[Page 41009]]

the proposed rule change to be effective and operative immediately.
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    \17\ 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.\18\
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    \18\ 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-2004-54 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-2004-54. 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-2004-54 
and should be submitted on or before July 28, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-15327 Filed 7-6-04; 8:45 am]
BILLING CODE 8010-01-P