[Federal Register Volume 71, Number 4 (Friday, January 6, 2006)]
[Notices]
[Pages 958-959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53045; File No. SR-PCX-2005-132]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Obligations of Lead Market Makers

December 30, 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 December 30, 2005, the Pacific Exchange, Inc. (``Exchange'' or 
``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 substantially prepared by the Exchange. 
The Exchange filed the proposed rule change as a ``non-controversial'' 
rule change under Rule 19b-4(f)(6) under the Act,\3\ which rendered the 
proposal 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\ 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 proposes to delete PCX Rule 6.82(c)(15) in its 
entirety. The Exchange also proposes to amend Commentary .02 to PCX 
Rule 6.82. The text of the proposed rule change is available on PCX's 
Web site, http://www.pacificex.com, at PCX's Office of the Secretary, 
and at the Commission's Public Reference Section.

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 this filing is to delete PCX Rule 6.82(c)(15), a 
sub-paragraph of Obligations of Lead Market Makers. Along with the 
deletion of PCX Rule 6.82(c)(15), the PCX proposes to amend Commentary 
.02 to PCX Rule 6.82, which addresses PCX Rule 6.82(c)(15). This rule, 
dealing with the handling of public customer orders that are not 
automatically executed on the PCX because there is a better-displayed 
bid or offer on another exchange, is scheduled to be operative on 
January 1, 2006.
    Under PCX Rule 6.82(c)(15), when a public customer order is not 
automatically executed on the PCX due to a better bid or ask price 
being displayed on another exchange, a Lead Market Maker (``LMM'') is 
obligated, as soon as practical, to address the order by either 
executing the public customer order at a price that matches the best 
available price displayed at any other exchange or by routing the 
public customer order via intermarket linkage (``Linkage'') for 
execution at any other exchange displaying the best price in the market 
at the time. Outbound Linkage orders on the PCX are still handled via 
manual interaction with the Linkage system. Manual interaction with the 
Linkage system can be a time consuming process that potentially could 
result in the delay of a public customer order being executed at a 
better price available at a competing exchange. By deleting PCX Rule 
6.82(c)(15), in the event that an LMM does not execute the order at the 
better price displayed on another exchange, the LMM would not be 
required to send the order to the competing exchange via Linkage. 
Public customer orders that are not executed on the PCX could still be

[[Page 959]]

rejected to the initiating brokerage firm for rerouting to a competing 
exchange.
    Due to delays in technology development, the PCX has not been able 
to implement an automated outbound Linkage function into the PCX Plus 
trading system. The PCX is presently developing a new enhanced options 
trading system, called the OX System. Included in the design plans for 
the OX System is functionality that will route outbound Linkage orders 
to other exchanges via an automated process.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \4\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \5\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) by its terms, 
does not become operative for 30 days after the date of filing, or such 
shorter time as the Commission may designate, if consistent with the 
protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\6\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\7\
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    \6\ 6 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay period for ``non-controversial'' proposals and make the 
proposed rule change effective and operative upon filing. The 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest, 
because PCX Rule 6.82(c)(15) has never become operative (as its 
operative date was January 1, 2006), and deleting a rule that has never 
become operative has no real effect and thus raises no issues of 
regulatory concern. For this reason, the Commission designates the 
proposal to be effective and operative upon filing with the 
Commission.\8\
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    \8\ For the purposes only of accelerating the operative date of 
this proposal, 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 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 the 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-2005-132 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 Number SR-PCX-2005-132. 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, 100 F Street, 
NE., Washington, DC 20549. 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-2005-132 and should be 
submitted on or before January 27, 2006.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Jonathan G. Katz,
Secretary.
[FR Doc. E6-20 Filed 1-5-06; 8:45 am]
BILLING CODE 8010-01-P