[Federal Register Volume 69, Number 224 (Monday, November 22, 2004)]
[Notices]
[Pages 67999-68001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3269]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50668; File No. SR-PCX-2004-90]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To 
Extend the Applicability of the Cross-and-Post Functionality on the 
Archipelago Exchange Facility to PNP Cross Orders

November 16, 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 November 3, 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, II, 
and III below, which items have been prepared by the PCX. On November 
10, 2004, the PCX filed Amendment No. 1 to the proposed rule change.\3\ 
The Exchange proposed the rule change under Section 19(b)(3)(A) of the 
Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders it effective 
upon filing.\6\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ For purpose 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 November 10, 2004, the date that the PCX filed 
Amendment No. 1.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PCX, through its wholly owned subsidiary PCX Equities, Inc. 
(``PCXE''), proposes to amend its rules relating to the Cross and Post 
Order to make clear that this order type applies to PNP Cross Orders.
    The text of the proposed rule change, as amended, is below. 
Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *

Rule 7 Equities Trading

Rule 7.31 Orders and Modifiers
    (a)-(r)--No change.
    (s)(1)-(2)--No change.
    (3) Following the execution parameters described above, any 
unexecuted portion of a Cross Order shall be cancelled, unless the 
Cross Order has been designated as a Cross and Post, as defined in Rule 
7.31(ff), in which case any unexecuted portion will be displayed in 
Arca Book at the cross price.
    (t)-(aa)--No change.
    (bb) PNP (Post No Preference) Cross Order. A Cross Order that is to 
be executed in whole or in part on the Corporation and the portion not 
so executed is to be canceled, without routing any portion of the Cross 
Order to another market center. When the cross price is equal to or 
better than the NBBO and is at the BBO, the relevant portion of the PNP 
Cross Order will be matched first against displayed orders with 
priority in the Arca Book, and then the remainder of the PNP Cross 
Order will be matched. Any unexecuted portion of the PNP Cross will be 
canceled, unless the PNP Cross Order has been designated as a Cross and 
Post, as defined in Rule 7.31(ff), in which case any unexecuted portion 
will be displayed in Arca Book at the cross price. The Corporation will 
cancel either the entire PNP Cross Order at the time of order entry, or 
the unexecuted portion of a PNP Cross Order (whether or not it has been 
designated as a Cross and Post) at any time during the order execution 
process, whichever is applicable, if:
    (1) The cross price would cause an execution at a price that trades 
through the NBBO, except as provided in Rule 7.37;
    (2) The cross price is between the BBO and does not improve the BBO 
by the MPII pursuant to Rule 7.6(a), Commentary .06.
    (cc)-(ee)--No Change.
    (ff) Cross-and-Post Order. A Cross Order or PNP Cross Order that is 
to be executed in whole or in part on the Corporation [pursuant to Rule 
7.31(s)] where any unexecuted portion of the Cross-and-Post Order will 
be displayed in the Arca Book at the cross price.
    (1)-(2)--No Change.
* * * * *

[[Page 68000]]

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
    As part of its continuing efforts to enhance participation on the 
Archipelago Exchange (``ArcaEx'') facility, the PCX is proposing to 
amend PCXE Rule 7.31(ff) to clarify that the Cross-and-Post Order type 
may be applied to the PNP (Post No Preference) Cross Order type.\7\
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    \7\ See PCXE Rule 7.31(bb).
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    Currently, PCXE Rule 7.31(ff) states that the Cross-and-Post Order 
functionality is limited to Cross Orders defined in PCXE Rule 
7.31(s).\8\ PCXE Rule 7.31(s) defines the basic ArcaEx Cross Order. 
Because the ArcaEx rulebook now includes cross order types defined in 
other paragraphs of PCXE Rule 7.31, the Exchange proposes to clarify 
PCXE Rule 7.31(ff) so that the Cross-and-Post functionality will be 
understood to be available for PNP Cross Orders. Accordingly, the 
Exchange proposes to delete the reference to PCXE Rule 7.31(s) in the 
current PCXE Rule 7.31(ff) text. In addition, minor changes are 
proposed for PCXE Rule 7.31(s) to make clear that any unexecuted 
portion of a basic Cross Order is cancelled.
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    \8\ The relevant portion of PCXE Rule 7.31(ff) reads: ``A Cross 
Order that is to be executed in whole or in part on the Corporation 
pursuant to Rule 7.31(s) where any unexecuted portion of the Cross-
and-Post Order will be displayed in the Arca Book at the cross 
price.''
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    Further, the Exchange proposes to amend PCXE Rule 7.31(bb), which 
defines the PNP Cross Order, and PCXE Rule 7.31(ff) to clarify that the 
Cross and Post functionality will be available for PNP Cross Orders. 
Currently, the unexecuted portion of any PNP Cross Order cancels as 
described in PCXE Rule 7.31(bb). The proposed rule change specifies 
that when Cross and Post functionality is applied to a PNP Cross Order, 
any unexecuted portion of the PNP Cross will post to the Arca Book if 
certain pricing conditions provided in the existing rule are met.\9\ 
The Exchange believes that implementing these changes will provide 
investors and ETP Holders\10\ with greater opportunities for executing 
orders with the Cross-and-Post functionality.
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    \9\ See supra note 7.
    \10\ See PCXE Rule 1.1 (n).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\12\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principals of trade, 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 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

    PCX has designated that the proposed rule change as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the 
Act\13\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\14\ The 
Exchange has stated that the foregoing 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) by its terms does not 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.\15\ Therefore, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act\16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \13\ See supra note 4.
    \14\ See supra note 5.
    \15\ Rule 19b-4(f)(6)(iii) under the Act also requires that a 
self-regulatory organization provide the Commission with written 
notice of its intent to file a proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five days prior to the date of filing the proposed rule change. The 
Exchange complied with this requirement.
    \16\ See supra note 4.
    \17\ See supra note 5.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the rule change if it 
appears to the Commission that the action is necessary or appropriate 
in the public interest, for the protection of investors, or would 
otherwise further the purposes of the Act.\18\
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    \18\ See supra note 6.
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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 No. SR-PCX-2004-90 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 No. SR-PCX-2004-90. 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

[[Page 68001]]

provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 450 Fifth Street, 
NW., Washington, DC 20549. Copies of such filing will also 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 from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-PCX-2004-90 and should be 
submitted on or before December 13, 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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3269 Filed 11-19-04; 8:45 am]
BILLING CODE 8010-01-P