[Federal Register Volume 70, Number 85 (Wednesday, May 4, 2005)]
[Notices]
[Pages 23290-23291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2170]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51627; File No. SR-PCX-2005-27]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. 
Relating to the Calculation of the National Best Bid or Offer When 
Another Exchange is Disconnected From the Intermarket Option Linkage

April 28, 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 31, 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, II and III below, which 
Items have been prepared by the Exchange. On April 19, 2005, the 
Exchange filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 1 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Form 19b-4 dated April 19, 2005 (``Amendment No. 1''). 
Amendment No. 1 replaced and superseded the original filing in its 
entirety.
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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 add Exchange Rule 6.94(e) to add 
provisions for declaring an away market unreliable when an away market 
is disconnected from the Intermarket Option Linkage (``Linkage'') \4\ 
and to relocate the current rule on declaring an away market unreliable 
to Exchange Rule 6.94(e). The text of the proposed rule change, as 
amended, is available on the Exchange's Web site (http://www.pacificex.com), at the principal office of the Exchange, and at the 
Commission Public Reference Room.
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    \4\ ``Linkage'' means the systems and data communications 
network that link electronically the Participants to one another for 
the purpose of sending and receiving Linkage Orders, related 
confirmations, order statuses and Administrative Messages. See 
Section 2(14) of the Plan for the Purpose of Creating and Operating 
and Intermarket Option Linkage.
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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 purpose of the proposed rule change is to codify the Exchange's 
current policy on declaring an away market unreliable when an away 
market is disconnected from Linkage. Currently, the Exchange relies on 
Exchange Rule 6.87(h)(4) to determine whether an away market is 
unreliable.
    In order to clarify the Exchange's practices for declaring an away 
market unreliable, the Exchange is proposing to add Exchange Rule 
6.94(e). Proposed Exchange Rule 6.94(e) is substantially similar to 
current Exchange Rule 6.87(h)(4), except that proposed Exchange Rule 
6.94(e) adds provisions relating to declaring an away market unreliable 
when such away market is disconnected from Linkage. Proposed Exchange 
Rule 6.94(e)(A)(iii) would codify the Exchange's policy to declare an 
away market unreliable if such away market is disconnected from 
Linkage. The Exchange believes that declaring an away market that has 
been disconnected from Linkage unreliable is necessary to eliminate 
quotes from the National Best Bid or Offer (``NBBO'') calculation that 
are not readily available to PCX OTP Holders \5\ and OTP Firms.\6\ When 
the Exchange receives notice that an away market has been disconnected 
from Linkage, the senior person in charge of the Exchange Control Room 
will direct that the away market that has been disconnected from 
Linkage be declared unreliable and removed from the Exchange's NBBO 
calculation until the sooner of the end of the trading day or the time 
that the quotes are confirmed by the Exchange to be reliable again. The 
Exchange believes that the described procedure for removing an away 
market from, or including an away market in, the Exchange's NBBO 
calculation is appropriate and efficient because the Exchange receives 
electronic confirmation that an away market has been disconnected from 
or reconnected to Linkage.\7\ Receipt of this real time information, in 
conjunction with the proposed rule change, will allow the Exchange to 
disseminate the most accurate NBBO calculation to the PCX OTP Holders 
and OTP Firms.
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    \5\ See Exchange Rule 1.1(q).
    \6\ See Exchange Rule 1.1(r).
    \7\ At the request of the Exchange, the Commission staff made a 
change to this sentence to clarify that the Exchange believes that 
the described procedures are appropriate and efficient for both 
removing an away market, as well as for including an away market, in 
the Exchange's NBBO calculation. Telephone conversation between 
Steven Matlin, Senior Counsel, Exchange, and Kim Allen, Attorney, 
Division of Market Regulation, on April 22, 2005.
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    The Exchange is also proposing to move the provisions for declaring 
an away market unreliable in Exchange Rule 6.87(h)(4) to proposed 
Exchange Rule 6.94 (Order Protection), because the Exchange believes 
Exchange Rule 6.94 is a more appropriate rule to address declaring an 
away market unreliable.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \9\ in particular, because the 
proposed rule change 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 mechanism of a free and open market and a national 
market system.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

[[Page 23291]]

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 the 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-2005-27 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-2005-27. 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 the 
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-2005-27 and should be submitted on or before May 25, 
2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-2170 Filed 5-3-05; 8:45 am]
BILLING CODE 8010-01-P