[Federal Register Volume 70, Number 92 (Friday, May 13, 2005)]
[Notices]
[Pages 25640-25641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2384]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51667; File No. SR-PCX-2004-72]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Order 
Granting Approval to a Proposed Rule Change and Amendments No. 1 and 2 
Thereto and Notice of Filing and Order Granting Accelerated Approval to 
Amendment No. 3 Thereto Relating to Clearly Erroneous Executions on the 
Archipelago Exchange

May 9, 2005.

I. Introduction

    On July 28, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly-owned subsidiary PCX Equities, Inc. 
(``PCXE'' or ``Corporation''), filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposal to amend the rules setting forth the 
procedures that an ETP Holder would be required to follow when seeking 
relief for clearly erroneous executions (``CEE'') on the Archipelago 
Exchange (``ArcaEx''), the equities trading facility of PCXE. PCX filed 
Amendment No. 1 to the proposed rule change on December 29, 2004,\3\ 
and filed Amendment No. 2 to the proposed rule change on February 15, 
2005.\4\ The proposed rule change and Amendments No. 1 and 2 were 
published for comment in the Federal Register on March 1, 2005.\5\ The 
Commission received no comments on the proposal, as amended. PCX filed 
Amendment No. 3 with the Commission on April 22, 2005.\6\ This order 
approves the proposed rule change and Amendments No. 1 and 2 and grants 
accelerated approval to and solicits comment on Amendment No. 3.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Amendment No. 1, submitted by Tania Blanford, Staff 
Attorney, PCX (``Amendment No. 1''). Amendment No. 1 replaces the 
original filing in its entirety.
    \4\ See Amendment No. 2, submitted by James Draddy, Vice 
President, Equities Regulation, PCX (``Amendment No. 2''). Amendment 
No. 2 replaces the original filing and Amendment No 1 in their 
entirety.
    \5\ See Securities Exchange Act Release No. 51280 (March 1, 
2005), 70 FR 11300 (March 8, 2005) (``Notice'').
    \6\ See Partial Amendment, dated April 21, 2005, submitted by 
Tania Blanford, Regulatory Attorney, PCX (``Amendment No. 3''). In 
Amendment No. 3, PCX proposes to adopt an implementation date of May 
16, 2005 for the proposed rule change.
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II. Description of Proposed Rule

    The Exchange proposes to implement a revised appeal process for 
determinations on CEE, to be set forth in proposed PCXE Rule 
7.10(c)(2)-(4). The Exchange's proposal would allow a party affected by 
the determination to request an appeal to the Clearly Erroneous 
Execution Panel (``CEE Panel'') to review the determination made by an 
Exchange officer under proposed PCXE Rule 7.10(c)(1). The CEE Panel 
will be comprised of the PCXE Chief Regulatory Officer (``CRO''), or a 
designee of the CRO,\7\ and representatives from two (2) ETP 
Holders.\8\ Requests for appeal must be made via facsimile or e-mail 
within thirty (30) minutes after the party requesting the appeal is 
given notification of the initial determination. Thereafter, the CEE 
Panel shall review the information and may overturn or modify the 
action taken by the Exchange officer within the time frame prescribed 
by the Corporation. The revised process is intended to provide a timely 
appeal for ETP Holders in place of the lengthy general appeal process 
provided in PCXE Rule 10.13 (Hearings and Review of Decisions by the 
Corporation).
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    \7\ The Exchange represents that the designee of the CRO will be 
an employee of the Corporation with similar stature as the CRO, such 
as the VP of Equities Regulation. See Notice, supra note 5.
    \8\ The Exchange shall designate at least ten (10) ETP Holder 
representatives to be called upon to serve on the CEE Panel. In no 
case shall the CEE Panel include a person related to a party to the 
trade in question. To the extent reasonably possible, the Exchange 
shall call upon the designated representatives to participate in a 
CEE Panel on an equally frequent basis.
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    In addition, the Exchange proposes several other minor changes, as 
well as several organizational and stylistic changes, to PCXE's rules 
governing CEE, including combining PCXE Rules 7.10 and 7.11 into one 
rule, PCXE Rule 7.10, entitled ``Clearly Erroneous Executions.'' \9\
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    \9\ For a full description of the proposed rule changes, see the 
Notice, supra note 5.
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III. Commission Findings and Order Granting Approval

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder that are applicable to a national securities 
exchange. In particular, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act,\10\ which requires that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism for a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.\11\ The proposed rule changes provide for a revised 
appeals process for CEE on the Archipelago Exchange that is faster in 
comparison to the Exchange's general appeal process for disputes among 
members, which previously governed such disputes.\12\ The Commission 
believes that this revised appeals procedure for CEE is designed to 
help ensure that the Exchange's rules are exercised in a fair and 
reasonable manner.
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    \10\ 15 U.S.C. 78f(b)(5).
    \11\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \12\ See PCXE Rule 10.13 (Hearings and Review of Decisions by 
the Corporation).
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    The Commission finds good cause for approving Amendment No. 3 to 
the proposed rule change prior to the thirtieth day after its 
publication in the Federal Register, pursuant to Section 19(b)(2) of 
the Act.\13\ Amendment No. 3 revises the proposal to specify an 
implementation date of May 16, 2005. Amendment No. 3 does not propose 
any substantive changes to the proposal as published for notice and 
comment, and thus the Commission believes it is appropriate to 
accelerate approval of Amendment No. 3.
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    \13\ 15 U.S.C. 78s(b)(2).
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IV. Solicitation of Comments Concerning Amendment No. 3

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 3, including whether it 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-2004-72 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-2004-72. This file 
number should be included on the subject line if e-mail is used. To 
help the

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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-
2004-72 and should be submitted on or before June 3, 2005.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (File No. SR-PCX-2004-72), as 
amended, be approved, and that Amendment No. 3 thereto be approved on 
an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-2384 Filed 5-12-05; 8:45 am]
BILLING CODE 8010-01-P