[Federal Register Volume 69, Number 179 (Thursday, September 16, 2004)]
[Notices]
[Pages 55857-55858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2224]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50346; File No. SR-PCX-2004-84]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc. Relating to the Definition of Firm 
Customer Quote Size and Firm Principal Quote Size Pursuant to the 
Intermarket Options Linkage Plan

September 10, 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 September 1, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') submitted to 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 PCX. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Pacific Exchange, Inc. (``PCX'' or ``Exchange'') is proposing 
to amend the definitions of Firm Customer Quote Size (``FCQS'') and 
Firm Principal Quote Size (``FPQS'') pursuant to the intermarket 
options linkage (``Linkage'').
    The text of the proposed fee schedule is below. Proposed additions 
are italicized.
* * * * *
Rules of the Pacific Exchange, Inc.
* * * * *
Definitions
    Rule 6.92(a)(1)-(8)--(No Change).
    (9) ``Firm Customer Quote Size'' with respect to a P/A Order means 
the lesser of (a) the number of option contracts that the Participant 
Exchange sending a P/A Order guarantees it will automatically execute 
at its disseminated quotation in a series of an Eligible Option Class 
for Customer orders entered directly for execution in that market; or 
(b) the number of option contracts that the Participant Exchange 
receiving a P/A Order guarantees it will automatically execute at its 
disseminated quotation in a series of Eligible Option Class for 
Customer orders entered directly for execution in that market. This 
number will be at least 10 unless the receiving Participant Exchange is 
disseminating a quotation of less than 10 contracts, in which case this 
number may equal such quotation size.
    (10) ``Firm Principal Quote Size'' means the number of option 
contracts that a Participant Exchange guarantees it will execute at its 
disseminated quotation for incoming Principal Orders in an Eligible 
Option Class. This number will be at least 10 however if the 
Participant Exchange is disseminating a quotation size of less than 10 
contracts, this number may equal such quotation size.
    (11)-(21)--(No Change).
* * * * *

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 had 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 purpose of this rule change is to implement proposed Joint 
Amendment No. 13 to the Plan for the Purpose of Creating and Operating 
an Intermarket Option Linkage (``Linkage Plan'') into the PCX Rules.\3\ 
Joint Amendment No. 13, together with this proposed rule change, would 
change the definitions of both FCQS and FPQS. While Joint Amendment No. 
13 and this proposed rule change would maintain a general requirement 
that the FCQS and FPQS be at least 10 contracts, such a minimum would 
not apply if the Exchange were disseminating a quotation of fewer than 
10 contracts. In that case, the Exchange may establish a FQCS or FPQS 
equal to its disseminated size.\4\
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    \3\ The participants in the Linkage Plan (``Participants'') have 
filed an amendment to the Linkage Plan to change the definitions of 
FCQS and FPQS (``Joint Amendment No. 13''). See Securities Exchange 
Act Release No. 50211 (August 18, 2004), 69 FR 52050 (August 26, 
2004) (File No. 4-429).
    \4\ The PCX would only disseminate a quotation of fewer than 10 
contracts when the Exchange's rule, as approved by the Commission, 
permitted such dissemination.
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    As with Principal and Principal Acting as Agent (``P/A'') Orders 
today, if a Principal or P/A Order is of a size eligible for automatic 
execution (``auto-ex''),\5\ the receiving Participant must provide for 
the auto-ex of the order. If this is not the case (for example, the 
receiving Participant's auto-ex system is not engaged), the receiving 
Participant may allow the order to drop to manual handling. However, 
the receiving Participant must nonetheless provide manual execution of 
the order for at least the FCQS or FPQS, as appropriate (in this case, 
the size of its disseminated quotation of less than 10 contracts). The 
proposed rule change would allow the Exchange to accommodate natural 
size of quotations for Linkage Orders.
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    \5\ At the request of the Exchange, Commission staff removed an 
extraneous reference provided in the original filing regarding the 
automatic execution size at exchanges sending and receiving 
Principal Orders. Telephone conversation between Steven B. Matlin, 
Senior Counsel, Regulatory Policy, PCX and Tim Fox, Attorney, 
Division of Market Regulation, Commission, on September 10, 2004.

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[[Page 55858]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act\7\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade,\8\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ At the request of the Exchange, Commission staff made a 
technical correction to this section of the filing. Telephone 
conversation between Steven B. Matlin, Senior Counsel, Regulatory 
Policy, PCX and Tim Fox, Attorney, Division of Market Regulation, 
Commission, on September 10, 2004.
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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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the PCX consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2004-84 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-2004-84. 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 the Exchange. 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-2004-84 and should be submitted on or before October 
7, 2004.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E4-2224 Filed 9-15-04; 8:45 am]
BILLING CODE 8010-01-P