[Federal Register Volume 70, Number 170 (Friday, September 2, 2005)]
[Notices]
[Pages 52462-52464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4827]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52351; File No. SR-PCX-2005-92]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change and 
Amendment No. 1 Relating to Complex Orders

August 26, 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 August 3, 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 August 17, 2005, the PCX 
submitted Amendment No. 1 to the proposed rule change.\3\ The PCX filed 
the proposal pursuant to Section 19(b)(3)(A) of the Act,\4\ and Rule 
19b-4(f)(6) thereunder,\5\ which renders the proposal effective upon 
filing with the Commission.\6\ 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 revises the proposal to correct a 
typographical error in the original filing and to make minor changes 
clarifying the text of the proposed rule and the PCX's description 
of the proposal.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The PCX has requested that the Commission waive both the 
five-day pre-filing notification requirement and the 30-day 
operative delay, as specified in Rule 19b-4(f)(6)(iii). 17 CFR 
240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PCX proposes to amend PCX Rule 6.91, ``Complex Orders on the 
PCX Plus System,'' to better describe the allocation methodology for 
individual

[[Page 52463]]

orders or quotes residing in the Consolidated Book that execute against 
complex trades. The text of the proposed rule change is available on 
the PCX's Web site (http://www.pacificex.com), at the PCX, and at the 
Commission's Public Reference Room.

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 adopt clarifying 
language to better describe the allocation methodology for individual 
orders or quotes residing in the Consolidated Book that execute against 
complex trades. The Commission recently approved PCX Rule 6.91, which 
sets forth the procedures used to trade complex orders on the PCX Plus 
system.\7\ PCX Rule 6.91 does not specifically state what the 
allocation methodology for individual orders or quotes residing in the 
Consolidated Book that execute against complex trades will be.
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    \7\ See Securities Exchange Act Release No. 52060 (July 19, 
2005), 70 FR 42610 (July 25, 2005) (order approving File No. SR-PCX-
2005-71).
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    According to the PCX, the Exchange intended at all times and built 
its complex order trading system in such a way that the allocation 
methodology for these types of trades would be governed by PCX Rule 
6.75, ``Priority and Allocation Procedures,'' with the exception that 
there would be no guaranteed participation for Lead Market Makers 
(``LMMs'') when two separate orders in the Consolidated Book matched up 
against a complex order in the complex trading engine (``CTE''). The 
PCX believes that removing the LMM guaranteed participation is 
appropriate because it creates more incentive for PCX market makers to 
improve prices when submitting orders into the CTE. With improved 
prices in the CTE, the PCX believes that it is more likely that 
individual legs of the complex order will match up against orders in 
the Consolidated Book, thus providing more liquidity for customer 
orders. The PCX believes that improving prices and creating more 
competition among PCX market makers for complex order trade allocations 
is beneficial to the public. According to the PCX, the proposed rule 
change now clearly states the allocation methodology for these types of 
trades.
    Amendment No. 1 revises the proposal to correct a typographical 
error in the original filing and to make minor clarifying changes to 
the text of PCX Rule 6.91(c)(3)(i) and to the PCX's description of the 
proposal.
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, 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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    \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

    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

    The Exchange has designated the proposed rule change as one that: 
(i) Does not significantly affect the protection of investors or the 
public interest; (ii) does not impose any significant burden on 
competition; and (iii) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\12\ a proposal 
does not become operative for 30 days after the date of its filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest. In addition, Rule 
19b-4(f)(6)(iii) requires a self-regulatory organization to provide the 
Commission with 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, or such shorter time as designated by the 
Commission. The PCX has asked the Commission to waive the five-day pre-
filing requirement and the 30-day operative delay. The PCX notes that 
the proposal clarifies the intent of PCX Rule 6.91. In addition, the 
PCX believes that the proposal will allow more efficient and effective 
market operation by enabling the PCX to provide a competitive means of 
trading complex orders.
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission waives the five-day pre-filing requirement. In 
addition, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because the proposal merely clarifies the intent of PCX Rule 
6.91 and does not raise significant regulatory issues.\13\ For these 
reasons, the Commission designates that the proposed rule change become 
operative immediately.
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    \13\ For purposes of waiving the 30-day operative delay, the 
Commission has 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 the 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.\14\
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    \14\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the 
proposed rule change to have been filed on August 17, 2005, the date 
on which the PCX filed Amendment No. 1.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

[[Page 52464]]

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-2005-92 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 20549-9303.
    All submissions should refer to File No. SR-PCX-2005-92. 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 No. SR-
PCX-2005-92 and should be submitted on or before September 23, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4827 Filed 9-1-05; 8:45 am]
BILLING CODE 8010-01-P