[Federal Register Volume 70, Number 113 (Tuesday, June 14, 2005)]
[Notices]
[Pages 34514-34515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3061]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51799; File No. SR-PCX-2005-27]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Order 
Granting Approval of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to the Exchange's Calculation of the National Best Bid or 
Offer When Another Market Is Disconnected From the Intermarket Option 
Linkage

June 7, 2005.
    On March 31, 2005, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ to amend its rule regarding the PCX's calculation of the 
National Best Bid or Offer (``NBBO'') when another market is 
disconnected from the Linkage.\3\ On April 19, 2005, the Exchange filed 
Amendment No. 1 to the proposed rule change.\4\ The proposed rule 
change, as amended, was published for comment in the Federal Register 
on May 4, 2005.\5\ The Commission received no comments on the proposal. 
This order approves the proposed rule change, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The term ``Linkage'' means the systems and data 
communications network that link electronically the options markets 
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 an Intermarket Option Linkage (``Linkage Plan'').
    \4\ See Form 19b-4 dated April 19, 2005 (``Amendment No. 1''). 
Amendment No. 1 replaced and superseded the original filing in its 
entirety.
    \5\ See Securities Exchange Act Release No. 51627 (April 28, 
2005), 70 FR 23290.
---------------------------------------------------------------------------

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6 of the Act 
\6\ and the rules and regulations thereunder applicable to a national 
securities exchange.\7\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\8\ 
which requires, among other things, that the rules of an exchange be 
designed to promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Commission believes that it is appropriate for PCX 
to remove a market's disseminated quote from PCX's calculation of the 
NBBO when a market is disconnected from Linkage because access to that 
market's quote is limited during such times. The Commission further 
believes that the proposed rule establishes an appropriate procedure to 
notify PCX OTP Holders \9\ and OTP Firms \10\ of such removal and 
establishes an appropriate standard for when to resume inclusion of the 
affected market's quote in PCX's calculation of the NBBO. The 
Commission also believes that it is consistent with the Act for PCX to 
move its current provisions for declaring an away market unreliable 
from PCX Rule 6.87(h)(4) to proposed PCX Rule 6.94(e) because 
eliminating certain markets' disseminated quotes from PCX's calculation 
of the NBBO removes such quotes from the applicability of other 
provisions of PCX Rule 6.94 that relate to the rights and obligations 
of PCX OTP Holders and OTP Firms in the event of a Trade-Through.\11\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 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).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See Exchange Rule 1.1(q).
    \10\ See Exchange Rule 1.1(r).
    \11\ A ``Trade-Through'' is a transaction in an options series 
at a price that is inferior to the NBBO. See Section 2(29) of the 
Linkage Plan.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-PCX-2005-27) as amended, is 
approved.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).


[[Page 34515]]


---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3061 Filed 6-13-05; 8:45 am]
BILLING CODE 8010-01-P