[Federal Register Volume 70, Number 173 (Thursday, September 8, 2005)]
[Notices]
[Pages 53407-53409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4876]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52373; File No. SR-PCX-2005-99]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Approval of Proposed Rule Changes Relating to 
Direct Communication Between Parties and Arbitrators

September 1, 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 23, 2005, the Pacific Exchange, Inc. (``PCX'') 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 self-regulatory organization. The PCX has designated 
this proposal as ``non-controversial'' pursuant to Section 
19(b)(3)(A)(iii) of the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change effective immediately 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 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 PCX is proposing to amend the PCX Options and PCX Equities, 
Inc. arbitration rules to permit parties in an arbitration to 
communicate directly with the arbitrators if all parties and 
arbitrators agree, and to establish guidelines for such direct 
communication. The text of the proposed rule change is available on the 
PCX's Web site (http://www.pacificex.com), at the PCX's Office of the 
Secretary, 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 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

[[Page 53408]]

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 PCX proposes a rule that would permit direct communication with 
the arbitrators where all parties and arbitrators agree. The rule would 
also establish guidelines for direct communication.
    Under normal procedures, parties may exchange certain documents 
among themselves (such as those relating to discovery), but must 
address all communications intended for the arbitrators to PCX staff, 
who then forward the communications to the arbitrators. If the 
communication includes a motion or similar request, staff members 
customarily solicit a response from the other parties before forwarding 
the motion or request. Similarly, the arbitrators transmit their orders 
and any other communications through PCX staff.
    The proposed rule is based on the rules of the National Association 
of Securities Dealers, Inc. (``NASD'').\5\ Only parties that are 
represented by counsel may use direct communication under the proposed 
rule. If, during the proceeding, a party choses to appear pro se 
(without counsel), the rule will no longer apply. All arbitrators and 
all parties must agree to the use of direct communication before it can 
be used. The scope of direct communication will be set forth in an 
arbitrator order, and parties may send the arbitrators only the types 
of items that are listed in the order.
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    \5\ See NASD Rule 10334.
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    The proposed rule provides that either an arbitrator or a party may 
rescind his or her agreement at any time if direct communication is no 
longer working well. Materials must be sent at the same time and in the 
same manner to all parties and the Director of Arbitration (the 
``Director'') (through an assigned staff member), and staff must 
receive copies of any orders and decisions made as a result of direct 
communication among the parties and the arbitrators. As requested by 
staff, however, the rule contains a provision stating that materials 
more than 15 pages long shall be sent to the Director only by regular 
mail or overnight courier, to avoid tying up busy fax machines and 
printers. Arbitrators (or parties) with similar concerns could include 
a similar provision as to themselves in the direct communication order. 
PCX will prepare a template for direct communication orders to guide 
the arbitrators and parties in considering these issues.
2. Statutory Basis
    For the above reasons, the PCX believes that the proposed rule 
would enhance competition. The PCX believes that the proposed rule is 
consistent with Section 6(b) \6\ of the Act, in general, and furthers 
the objectives of Section 6(b)(5), \7\ in particular, in that it is 
designed to facilitate transactions in securities, to promote just and 
equitable principles of trade, to foster competition and to protect 
investors and the public interest. The PCX believes that permitting 
direct communication with the arbitrators where all parties agree, and 
where specific guidelines are followed, will protect investors and the 
public interest by expediting the arbitration process and giving 
parties more control over their arbitration cases.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The PCX 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 foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) 
thereunder \9\ because the 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. As required under 
Rule 19b-4(f)(6)(iii),\10\ the PCX provided the Commission with written 
notice of PCX's 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 filing date of the proposed rule change.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative for 30 days after the date of its filing.\11\ 
However Rule 19b-4(f)(6)(iii) \12\ permits the Commission to designate 
a shorter time if such action is consistent with the protection 
investors and the public interest. The PCX has requested that the 
Commission waive the 30-day operative delay so that the proposed rule 
change will become immediately effective upon filing.
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    \11\ Id.
    \12\ Id.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\13\ Accelerating the operative date will allow for a more 
efficient and effective market operation by enabling the PCX to provide 
an arbitration forum that is as efficient and effective as arbitration 
forums offered at other self regulatory organizations. For these 
reasons, the Commission designates that the proposed rule change has 
become effective and operative immediately.
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    \13\ For purposes only 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 such 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-2005-99 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission,

[[Page 53409]]

100 F Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-PCX-2005-99. 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 Section, 450 Fifth 
Street, NW, Washington, DC 20549. Copies of such 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-
2005-99 and should be submitted on or before September 29, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-4876 Filed 9-7-05; 8:45 am]
BILLING CODE 8010-01-P