[Federal Register Volume 68, Number 120 (Monday, June 23, 2003)]
[Notices]
[Pages 37190-37192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15770]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48043; File No. SR-PCX-2003-15]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Pacific
Exchange, Inc. Relating to its Auto-Ex Book Function Pilot Program
June 17, 2003.
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 May 21, 2003, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'' or
``SEC'') the proposed rule change as described in Items I and II below,
which Items have been prepared by the Exchange. On June 6, 2003, the
Exchange filed Amendment No. 1 to the proposed rule change.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule
[[Page 37191]]
change from interested persons. For the reasons described below, the
Commission is granting accelerated approval to the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Tania J. Cho, Attorney, Regulatory Policy,
PCX, to Nancy J. Sanow, Assistant Director, Division of Market
Regulation, Commission, dated June 5, 2003 (``Amendment No. 1''). In
Amendment No. 1, PCX amended its proposal to request an extension of
the pilot program discussed herein until June 30, 2004, rather than
June 24, 2004 as stated in the original proposal, so that the
pilot's expiration will coincide with the date on which the
Exchange's ``PCX Plus'' system will be completely operative. See
infra n. 6, and accompanying text.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
PCX is proposing to amend its rules to extend the Automatic
Execution System (``Auto-Ex'') Book Function Pilot Program to June 30,
2004. The text of the proposed rule change is available at the
principal office of the PCX and at the Commission.
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 III below. 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
On June 17, 2002, the Commission approved, on a one-year basis, the
Exchange's proposal to amend Rule 6.87, which governs the operation of
its Auto-Ex \4\ Book Function.\5\ The pilot program is currently set to
expire on June 22, 2003.
---------------------------------------------------------------------------
\4\ Auto-Ex is the Automated Execution system feature of POETS
for market or marketable limit orders. The Pacific Options Exchange
Trading System (``POETS'') is an automated trading system comprised
of an options order routing system, an automatic execution system
(``Auto-Ex''), an on-line limit order book system and an automatic
market quote update system. Option orders can be sent to POETS via
the Exchange's Member Firm Interface (``MFI''). Market and
marketable limit orders sent through the MFI will be executed by
Auto-Ex if they meet order type and size requirements of the
Exchange.
\5\ See Exchange Act Release No. 46082 (June 17, 2002), 67 FR
42307 (June 21, 2002).
---------------------------------------------------------------------------
The Auto-Ex Book Function of POETS permits orders in the Limit
Order Book to be executed via the Auto-Ex system when those orders
become marketable subject to certain procedures. The function may be
used when one or more orders in the Limit Order Book become marketable,
as indicated by a locked or crossed market being displayed on the
trading floor. When this occurs, the Lead Market Maker may direct the
Order Book Official to initiate the Auto-Ex Book Function, which will
cause marketable orders in the Limit Order Book to be automatically
executed against the accounts of Market Makers who are participating on
the Auto-Ex system at the time.
The Exchange is requesting an additional extension of the pilot
program to June 30, 2004, when the Exchange's new trading platform for
options, ``PCX Plus'', will become completely operative. The added time
permits the Exchange to phase in PCX Plus on an issue-by-issue
basis.\6\ As each issue is phased into PCX Plus, the Exchange will
simultaneously phase out such issue from the Auto-Ex Book Function. PCX
Plus will eventually replace the Auto-Ex Book Function in its entirety.
Currently, the Auto-Ex Book Function is operating as intended and
provides a service to both customers and members by facilitating the
execution of orders in the Limit Order Book. Therefore, the Exchange
believes that a one-year extension of the program is warranted.
---------------------------------------------------------------------------
\6\ See Exchange Act Release No. 47838 (May 13, 2003), 68 FR
27129 (May 19, 2003) (Order approving PCX Plus) (``PCX Plus
Order'').
---------------------------------------------------------------------------
2. Statutory Basis
PCX believes that this proposal is consistent with section 6(b) of
the Act,\7\ in general, and furthers the objectives of section
6(b)(5),\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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
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. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. Persons making written submissions should file
six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 such filing will also be available for
inspection and copying at the principal office of the PCX. All
submissions should refer to File No. SR-PCX-2003-15 and should be
submitted by July 14, 2003.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange,
and, in particular, the requirements of section 6 of the Act.\9\
Specifically, the Commission finds that the proposal is consistent with
section 6(b)(5) of the Act, which requires that the rules of a national
securities exchange be designed to promote just and equitable
principles of trade, as well as to remove impediments to and perfect
the mechanism of a free and open market, and, in general, to protect
investors and the public interest.\10\ The Commission believes that
extension of the pilot program until June 30, 2004, provides an
appropriate period of time for the Exchange to continue its Auto-Ex
Book Function while it phases in its new trading platform for options,
PCX Plus, on an issue-by-issue basis. In this way, the Auto-Ex Book
Function can continue uninterrupted for each options class until PCX
Plus is operative for that option class. Once PCX Plus is fully
operational, the Exchange no longer will need to operate its Auto-Ex
system.\11\
---------------------------------------------------------------------------
\9\ In approving the proposal, the Commission has considered the
rule's impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(5).
\11\ See PCX Plus Order, supra n. 6.
---------------------------------------------------------------------------
The Commission further finds good cause for approving the proposed
rule change prior to the 30th day after the date of publication of
notice thereof in the Federal Register. The Commission notes that this
proposal would merely extend an existing pilot program to June
[[Page 37192]]
30, 2004, while the Exchange phases in its new trading platform for
options. The Commission believes that it is appropriate to grant
accelerated approval to the proposal in order to ensure continuous
operation of this feature of PCX's current framework for the automatic
execution of options orders.
V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-PCX-2003-15) is hereby
approved on an accelerated basis, as a pilot program scheduled to
expire on June 30, 2004.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(2).
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. 03-15770 Filed 6-20-03; 8:45 am]
BILLING CODE 8010-01-P