[Federal Register Volume 70, Number 146 (Monday, August 1, 2005)]
[Notices]
[Pages 44136-44138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4082]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52109; File No. SR-PCX-2005-72]


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

July 22, 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 June 7, 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 the Exchange. On July 6, 2005, the Exchange 
amended the proposed rule change (``Amendment No. 1'').\3\ The Exchange 
has designated the proposed rule change as ``non-controversial'' under 
section 19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ 
which renders the proposed rule change 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\ In Amendment No. 1, the Exchange inserted the Statutory 
Basis section, which had been inadvertently omitted, and corrected 
the language set forth in Item III. The effective date of the 
original proposed rule change is June 7, 2005, and the effective 
date of the amendment is July 6, 2005. For purposes of calculating 
the 60-day period within which the Commission may summarily abrogate 
the proposed rule change, as amended, under section 19(b)(3)(C) of 
the Act, the Commission considers the period to commence on July 6, 
2005, the date on which the PCX submitted Amendment No. 1. See 15 
U.S.C. 78s(b)(3)(C).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 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

    The Exchange, 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 modify its Q Order definition. The 
text of the proposed rule change is set forth below. Proposed new 
language is in italics; proposed deletions are in [brackets].
* * * * *
Rule 7
Equities Trading
Orders and Modifiers
    Rule 7.31 (a)-(j)--No Change.
    (k) Q Order
    (1) A Q Order is a limit order submitted to the Archipelago 
Exchange by a Market Maker.
    (A) A Market Maker may instruct the Archipelago Exchange before 
6:28 a.m. (Pacific Time) to enter a Q Order on their behalf as follows:
    (1) At the last price and size entered by the Market Maker during 
the previous trading day, either including or excluding reserve size;
    (2) At a specified percentage from the best bid or offer;
    (3) At the standard Q defined as $0.01 bid and 2 times the previous 
day's close for the offer with specified display and reserve sizes.
    Upon execution, the Q Order entered pursuant to the above 
instructions will automatically repost with the original size and $10 
below the original bid or $10 above the original offer, but never below 
$0.01.
    Rule 7.31(k)(2)-(h)(h)--No Change.
* * * * *

[[Page 44137]]

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 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. The 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 modify its Q Order definition. 
In particular, the Exchange seeks to provide Market Makers with the 
option to instruct ArcaEx to submit a Q Order on their behalf.
    Currently, PCXE Rule 7.31(k) describes Q Orders as a limit order 
submitted to the Exchange by a Market Maker. As part of their Market 
Maker obligations, pursuant to PCXE Rule 7.23, Market Makers are 
required to maintain continuous, two-sided Q Orders in the securities 
in which the Market Maker is registered to trade. In order to assist 
the Market Makers with this obligation, the Exchange proposes to offer 
functionality in which the Market Makers could choose to have the 
Exchange enter and maintain a Q Order on their behalf. At 6:28 a.m. 
Pacific time, the Exchange would extract information submitted by the 
Market Maker that provides specific quote instructions for the Exchange 
to enter a quote on the Market Maker's behalf. Specifically, the Market 
Maker would instruct ArcaEx to enter a Q Order based on one of the 
following options:
    (1) At the last price and size entered by the Market Maker during 
the previous trading day, either including or excluding reserve size;
    (2) At a specified percentage from the best bid or offer; or
    (3) At the standard Q defined as $0.01 bid and 2 times the previous 
day's close for the offer with specified display and reserve sizes.
    Conversely, the Market Maker could choose to enter their own Q 
Order, or request that their previous day's Q Order be canceled. In 
addition, upon execution of the Q Order that was entered according to 
one of the aforementioned options, the Exchange would automatically 
repost the Q Order with the original size and $10 below the original 
bid or above the original offer, but never below $0.01. Lastly, in an 
instance of a bulk cancel, the Exchange would not automatically cancel 
Q orders.
    The proposed rule change would be similar to Nasdaq Stock Market 
rules that were recently published in the Federal Register for 
immediate effectiveness.\6\ In particular, Nasdaq proposed 
functionality for Nasdaq Quoting Market Participants to instruct Nasdaq 
to open their quotes based on a variety of choices.
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    \6\ See Securities Exchange Act Release No. 51522 (April 11, 
2005), 70 FR 20955 (April 22, 2005) (SR-NASD-2005-050).
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2. Statutory Basis

    The Exchange believes that its proposal 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 
facilitate transactions in securities, to promote just and equitable 
principles of trade, to enhance competition 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 inappropriate 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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to section 19(b)(3)(A) of the Act \9\ and 
Rule 19b-4(f)(6) thereunder.\10\ The PCX has requested that the 
Commission waive the 30-day operative delay for ``non-controversial'' 
proposals because the proposed rule change is similar to rules in 
effect on the Nasdaq Stock Market. The Commission believes that waiver 
of the 30-day operative delay is consistent with the protection of 
investors and the public interest because the proposal would allow the 
PCX to offer market makers a means by which to manage their Q Orders. 
In addition, the proposal would introduce a functionality that is 
similar to one in effect on The Nasdaq Stock Market. For this reason, 
the Commission designates the proposal to be effective and operative 
upon filing with the Commission.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). The Commission notes that PCX 
provided written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change at least five business days prior to the date of filing of 
the proposed rule change.
    \11\ For purposes only of waiving the 30-day operative delay of 
the proposed rule change, the Commission considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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    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 purposes of the Act.

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-2005-72 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9309.
    All submissions should refer to File Number SR-PCX-2005-72. This 
file number should be included on the subject line if e-mail is used. 
To help the

[[Page 44138]]

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 
PCX. 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-
2005-72 and should be submitted on or before August 22, 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. E5-4082 Filed 7-29-05; 8:45 am]
BILLING CODE 8010-01-P