[Federal Register Volume 70, Number 54 (Tuesday, March 22, 2005)]
[Notices]
[Pages 14489-14490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1247]



[[Page 14489]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51380; File No. SR-PCX-2005-29]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Regarding Q Orders

March 16, 2005.
    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 March 9, 2005, 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. The Exchange filed this proposal as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the 
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \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, through its wholly-owned subsidiary PCX Equities, Inc. 
(``PCXE''), proposes to amend its rules governing the Archipelago 
Exchange (``ArcaEx''), the equities trading facility of PCXE. With this 
filing, the Exchange proposes to amend its rule describing Q Orders.
    The text of the proposed rule change appears below. Proposed 
deletions are in brackets.
* * * * *

Rules of PCX Equities, Inc.

* * * * *

Rule 7

Equities Trading

* * * * *

Orders and Modifiers

    Rule 7.31 (a)-(j)--No change.
    Rule 7.31 (k) Q Order.
    (1) A Q Order is a limit order submitted to the Archipelago 
Exchange by a Market Maker. [A Q Order may not be a Working Order.]
    (2) Auto Q Order. A Q Order may be designated as an Auto Q Order 
that would automatically repost a Q Order after an execution in the 
ArcaEx book at a designated increment [inferior to the price at which 
it was originally posted] and for the same amount of shares. After an 
execution, the Auto Q order would continue to repost in the ArcaEx book 
pursuant to Rule 7.36 and would be assigned a new price time priority 
as of the time of each reposting at the determined increment and size 
until the total tradable size threshold is reached. When entering an 
Auto Q Order, a Market Maker would establish the following parameters: 
(i) price; (ii) size; (iii) buy or sell; (iv) increment update; and (v) 
total tradable size.
    (l)-(hh)--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, 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
    As part of its continuing efforts to enhance participation on the 
ArcaEx facility, the PCX is proposing to amend PCXE Rule 7.31(k) to 
provide market makers with additional Q Order functionality by allowing 
(i) reserve capability and (ii) re-posting Auto Q Orders at the same 
price.
    Currently, PCXE Rule 7.31(k) requires Auto Q Orders to be re-posted 
at increments inferior to the price at which they were originally 
posted. ArcaEx proposes to modify language of PCXE Rule 7.31(k) to 
enable re-posting at any increment. Currently, PCXE Rule 7.31(k) does 
not allow Q Orders to be Working Orders. ArcaEx proposes removing the 
limitation that Q Orders may not be Working Orders to allow Q Orders 
reserve capability.
    The proposed changes to the Q Order functionality are similar to 
the Auto Quote Refresh (``AQR'') functionality currently available to 
Nasdaq market makers as described in NASD Rule 4710(b)(2)(B). For 
example, the AQR refreshes a market maker's quote when it is 
decremented to an amount and price level designated by the market 
maker. The Auto-Q Order functions in the same manner in that the Q 
Order is updated upon an execution at the size of the original Q order 
and at a price level designated by the market maker. Further, the AQR 
provides reserve capability. Accordingly, ArcaEx seeks to provide that 
same functionality.
    The Exchange believes that implementing these changes will provide 
ETP Holders with greater opportunities for executing orders and attract 
additional market maker participation on the ArcaEx system. 
Furthermore, the Exchange believes the proposed changes are merely 
technical changes to the existing Q Order functionality.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\6\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
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 a national market system.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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 proposed rule change has been designated by the PCX as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act 
\7\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\8\ The foregoing 
rule change: (1) Does not significantly affect the

[[Page 14490]]

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 filing, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest. Consequently, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    Pursuant to Rule 19b-4(f)(6)(iii), a proposed ``non-controversial'' 
rule change does not become operative for 30 days after the date of 
filing, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and the public interest. 
The PCX has requested that the Commission waive the 30-day operative 
delay. The Commission has determined that it is consistent with the 
protection of investors and the public interest to waive the 30-day 
operative delay.\11\ Accelerating the operative date will allow the PCX 
to immediately allow Q Orders reserve capability, and to enable re-
posting at any increment. At any time within 60 days of the filing of 
the 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 Act.
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    \11\ For the 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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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-2005-29 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-2005-29. 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-
2005-29 and should be submitted on or before April 12, 2005.

    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. E5-1247 Filed 3-21-05; 8:45 am]
BILLING CODE 8010-01-P