[Federal Register Volume 70, Number 56 (Thursday, March 24, 2005)]
[Notices]
[Pages 15139-15141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1294]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51392; File No. SR-PCX-2004-65]


Self-Regulatory Organizations; Notice of Filing and Proposed Rule 
Change and Amendment Nos. 1 and 2 Thereto by the Pacific Exchange, Inc. 
Relating to the Deletion of Obsolete or Unnecessary Rules

March 17, 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 July 9, 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 Exchange. On February 9, 2005, the 
Exchange filed Amendment No. 1 to the proposed rule change.\3\ On March 
10, 2005, the Exchange filed Amendment No. 2 to the proposed rule 
change.\4\ 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    \3\ Amendment No. 1 replaced and superseded the original 
proposal.
    \4\ In Amendment No. 2, PCX deleted the proposed changes to PCX 
Rule 6.68(a), which would have required an OTP Holder or OTP Firm to 
write its name or badge number on the trade ticket, since the 
necessary changes were made to PCX Rule 6.68(a) on January 7, 2005. 
See Securities Exchange Act Release No. 50998 (January 7, 2005), 70 
FR 2443 (January 13, 2005)(approving File No. SR-PCX-2004-122). In 
SR-PCX-2004-122, PCX amended its rules relating to the 
systematization of orders in connection with the requirement to 
design and implement a consolidated options audit trail system, 
which included PCX Rule 6.68(a). PCX represents that the information 
in PCX Rule 6.68(a) is the same information required in PCX Options 
Floor Procedure Advice D-10. Amendment No. 2 also deleted language 
in the filing related to PCX Rule 6.68(a). In addition, Amendment 
No. 2 corrected a typographical error in the proposed rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete certain of its rules, or portions 
thereof, which have been determined by the Exchange to be obsolete or 
unnecessary. The text of the proposed rule change, as amended, is set 
forth below.
    Proposed deletions are in brackets.
* * * * *

Rule 4

* * * * *

Exemptions

    Rule 4.7 An OTP Holder or OTP Firm shall be exempt from the filing 
requirements prescribed by Rules 4.5 and 4.6 under the following 
conditions:
    (a) Any Floor Broker, Market Maker in listed options, or Lead 
Market Maker in listed options, registered with the Exchange in any 
such capacity, who is exempt from the minimum net capital requirements 
prescribed by Rule 4.1.
    [An OTP Holder or OTP Firm qualifying for an exemption from the 
regular filing requirements pursuant to this Paragraph shall file with 
the Exchange for each calendar quarter a balance sheet and income 
statement in such form as prescribed by the Exchange. Such balance 
sheet and income statement shall be due by the fifteenth calendar day 
following the end of each calendar quarter in which the exemption 
provided in this Paragraph is applicable.]
    (b) Any OTP Holder or OTP Firm that is a member of another self-
regulatory organization, which has been designated the examining 
authority for such OTP Holder or OTP Firm by the Securities and 
Exchange Commission.
    [An OTP Holder or OTP Firm qualifying for an exemption pursuant to 
this Paragraph shall file with the Exchange a copy of Notice and Part 
II of SEC Form X-17A-5, including such supplementary schedules as may 
be required, pursuant to the provisions of Rule 17a-11 under the 
Securities Exchange Act of 1934, as amended, at such time and at such 
frequency as prescribed by such other Designated Examining Authority or 
by any applicable rule.]
* * * * *

Rule 11

Business Conduct

* * * * *

Joint Accounts

    Rule 11.12(a)--No change.
    [(b) Reporting. No OTP Holder or OTP Firm, nor any participant 
therein shall directly or indirectly hold any interest or participation 
in any substantial joint account for buying or selling any security 
through the facilities of the Exchange, unless such joint account is 
reported to and not disapproved by the Exchange. Such reports, in form 
prescribed by the Exchange, shall be filed with the Exchange before any 
transaction is completed through the facilities of the Exchange for 
such joint account.
    The Exchange shall require weekly reports, in form prescribed by 
the Exchange, to be filed with it with respect to every substantial 
joint account for buying or selling any specific security on the 
Exchange and with respect to every joint account which actively trades 
in any security on the Exchange in which any OTP Holder, OTP Firm or 
participant therein holds any interest or participation or of which 
such OTP Holder, OTP Firm or participant therein has knowledge by 
reason of transactions executed by or through such OTP Holder, OTP Firm 
or participant therein; provided, however, that this paragraph shall 
not apply to joint accounts specifically permitted by this Rule.
    In the event the requirements hereof should be applicable to a 
security also dealt in on another national securities exchange having 
requirements substantially equivalent hereto and an OTP Holder or OTP 
Firm is a member or member firm of such other exchange and complies 
with such requirements of such other exchange, then such OTP Holder or 
OTP Firm need not comply with the reporting provisions hereof.]
* * * * *

Options Floor Procedure Advices

* * * * *

Orders

* * * * *
[D-10
Subject: Imprinting the Name of OTP Holder or OTP Firm on Trade Tickets
    Rule 6.66 requires an OTP Holder or OTP Firm to immediately give up 
the name of the clearing member through whom the transaction will be 
cleared and Rule 6.67 requires that orders be in a written form 
approved by the Exchange.
    In order to reduce confusion and potential errors, the Exchange has 
ruled that OTP Holders or OTP Firms ordering trade tickets, other than 
Market Maker trade tickets, either from the Exchange or from other 
approved sources, shall cause to be imprinted or written thereon the 
name of the OTP Holder or OTP Firm that will be given up in 
transactions effected by the use of that ticket.]

[[Page 15140]]

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
    On December 9, 2003, the Exchange responded to a request from the 
Commission's Office of Compliance Inspections and Examinations for 
obligation compliance with respect to Section 19(g) of the Act.\5\ The 
Exchange performed a complete review of PCX rules, as well as the 
surveillance procedures thereto, and found a number of PCX rules that 
are obsolete or superfluous in the current market structure. Thus, the 
Exchange proposes to delete these inapplicable rules, or portions 
thereof, at this time. The proposed rules, or portions thereof, to be 
deleted are:
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    \5\ 15 U.S.C. 78s(b).
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    1. PCX Rule 4.7--This rule requires OTP Holders that are exempt 
from the net capital requirement filings (Options Market Makers without 
proprietary trading and inactive lessors) to file with the Exchange a 
balance sheet and income statement every calendar quarter. The Exchange 
represents that this rule is obsolete because the Exchange never 
implemented this reporting requirement as unnecessary. According to the 
Exchange, under Rule 17a-10 of the Act,\6\ exempt OTP Holders are only 
required to file an annual FOCUS Report, which includes a balance sheet 
and income statement on an annual basis.
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    \6\ 17 CFR 240.17a-10.
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    2. PCX Rule 11.12(b)--This rule relates to PCX Joint Accounts 
reporting requirements. The Exchange proposes to delete this provision 
as unnecessary. According to the Exchange, PCX, by policy, does not 
allow the use of joint accounts by OTP Holders or OTP Firms for which 
the Exchange serves as the Designated Examining Authority, with one 
exception. Joint accounts are allowed for Market Makers who trade on 
the floor. The use of these accounts is controlled by Shareholder and 
Registration Services (``SRS''). SRS assigns the acronyms for use of 
these accounts (e.g., J68). Since these accounts are assigned by SRS, 
and all trades are monitored daily and fed through PCX's existing 
surveillance systems, the Exchange does not require a separate weekly 
reporting requirement.
    3. PCX Options Floor Procedure Advice D-10 (Imprinting the Name of 
OTP Holder or OTP Firm on Trade Tickets)--The Exchange no longer 
requires that the name of the OTP Holder or OTP Firm be imprinted on 
the trade tickets. The required ticket information is now set forth in 
PCX Rule 6.68.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, 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)(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

    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 Exchange 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-2004-65 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-2004-65. 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 Room. 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-2004-65 and should be submitted on or before April 
14, 2005.


[[Page 15141]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1294 Filed 3-23-05; 8:45 am]
BILLING CODE 8010-01-P