[Federal Register Volume 69, Number 167 (Monday, August 30, 2004)]
[Notices]
[Pages 52951-52953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19662]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50230; File No. SR-PCX-2004-67]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change and 
Amendments Nos. 1 and 2 Thereto Amending PCXE Rule 7.55 Relating to the 
Processing of Incoming ITS Commitments

August 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 July 14, 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'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Exchange has filed the 
proposed rule change pursuant to Section 19(b)(3)(A)(i) of the Act,\3\ 
and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. On August 12, 2004, the PCX 
filed Amendment No. 1 to the proposed rule change.\5\ On August 13, 
2004, the PCX filed Amendment No. 2 to the proposed rule change.\6\ The 
Commission is publishing this notice, as amended, 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)(i).
    \4\ 17 CFR 204.19b-4(f)(1).
    \5\ See letter from Mai S. Shiver, Director, Regulatory Policy, 
PCX, to Nancy J. Sanow, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated August 11, 2004. 
Amendment No. 1 replaced the proposed rule change in its entirety.
    \6\ See letter from Mai S. Shiver, Director, Regulatory Policy, 
PCX, to Nancy J. Sanow, Assistant Director, Division, Commission, 
dated August 12, 2004. Amendment No. 2 corrects the pagination and 
attaches Exhibit A, which was inadvertently omitted from the 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend PCXE Rule 7.55 
(``Definitions''), which governs the Archipelago Exchange (``ArcaEx''), 
an equities trading facility of PCXE, to clarify current ArcaEx 
practices with respect to the processing of incoming commitments over 
the Intermarket Trading system (``ITS''). The text of the proposed rule 
change appears below. New text is in italics.
* * * * *

Rule 7

Equities Trading

Section 5--Intermarket Trading System Plan

    Rule 7.55(a)--No change.
    (b) Provisions of the Plan. The Corporation has agreed to comply 
to the best of its ability, and absent reasonable justification or 
excuse, to enforce compliance by its ETP Holders with the provision 
of the Plan. In this connection, the following shall apply:
    (1)-(3)--No change.
    (4) The ETP Holder who made the bid or offer which is sought by 
a commitment to trade received through ITS shall accept such 
commitment to trade, via the facilities of the Corporation, up to 
the amount of the bid or offer if the bid or offer is still 
available when the commitment to trade is received by such ETP 
Holder, via the facilities of the Corporation, unless acceptance is 
precluded by the Rules of the Corporation. In the event that the bid 
or offer which is sought by a commitment to trade is no longer 
available through the facilities of the Corporation when the 
commitment is received, but a new bid or offer is available through 
the facilities

[[Page 52952]]

of the Corporation which would enable the commitment to trade to be 
executed at a price which is more favorable than the price specified 
in such commitment, then the ETP Holder who made the bid or offer 
shall accept, via the facilities of the Corporation, such commitment 
at the price, and up to the amount of, the new bid or offer, unless 
acceptance is precluded by the Rules of the Corporation. An incoming 
commitment received during the time a trade-through complaint 
against the away market is outstanding is presumed to relate to the 
outstanding ITS complaint. Such incoming commitment will be matched 
with the bid or offer traded through at the price of the bid or 
offer residing in the ArcaEx book. The presumption in this rule 
shall have no bearing on the resolution of the ITS complaint.
* * * * *

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 Exchange 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 Exchange 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 Exchange proposes to add language to PCXE Rule 7.55 to clarify 
current ArcaEx practices with respect to the processing of incoming ITS 
commitments sent by an away market during the time a trade-through 
complaint against the away market is outstanding. The ITS Operating 
Committee recently proposed to adopt an ITS Resolution Indicator, or 
``.R'' modifier, that ITS participants would be required to include on 
all commitments to trade sent in resolution of an ITS administrative 
message or complaint from another participant. Currently, there is no 
such modifier available. The PCX states that the proposed .R modifier 
has been under discussion amongst members of the ITS Operating 
Committee for some time and the Exchange is hopeful that it will be 
approved. Until such time, the Exchange believes that the clarification 
in this proposed rule change should provide greater certainty with 
respect to ITS processing and ultimately lead to a more efficient 
marketplace.
    PXCE Rule 7.55 governs how incoming commitments via ITS are handled 
by ArcaEx. The PCX states that on the current ArcaEx listed platform, 
incoming ITS commitments from an away market are executed at the ArcaEx 
best bid or offer (``BBO'') unless an ArcaEx order has been traded-
through by the away market. According to the PCX, if an ArcaEx order is 
traded-through and a complaint is generated by the Exchange, an 
incoming ITS commitment received by ArcaEx is matched, where 
appropriate, with the offended ArcaEx order at the order price (and not 
the BBO should the order price be different from the BBO). The Exchange 
believes that the proposed rule change is designed to more clearly 
describe the ArcaEx processing ``presumption'' that all incoming ITS 
commitments received from an away market during the time a trade-
through complaint against the away market is outstanding relate to the 
outstanding trade-through complaint. The proposed amendment to the rule 
also specifies that this presumption shall have no bearing on the 
resolution of the ITS trade-through complaint.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \7\ of the Act, in general, and further the 
objectives of Section 6(b)(5) \8\ 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 to and perfect 
the mechanisms of a free and open market, and to protect investors and 
the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(50.
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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 were neither solicited nor received with respect 
to the proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act,\9\ and Rule 19b-4(f)(1) thereunder,\10\ 
because it constitutes a stated policy, practice, or interpretation 
with respect to the meaning, administration, or enforcement of an 
existing PCX rule. At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate the 
proposed 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.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(i).
    \10\ 17 CFR 240.19b-4(f)(1).
    \11\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers that period 
to commence on August 13, 2004, the date the PCX submitted Amendment 
No. 2. See 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 comments from 
(http:www.sec.gov/rules/sro.shtml);
     Send an e-mail to [email protected]. Please include 
File Number SR-PCX-2004-67 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-2004-67. 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

[[Page 52953]]

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 Room. 
Copies of the filing also will be available for inspection and copying 
at the principal office of the PCX. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information form submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-PCX-2004-67 and should be submitted on 
or before September 20, 2004.


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-19662 Filed 8-27-04; 8:45 am]
BILLING CODE 8010-01-M