[Federal Register Volume 69, Number 191 (Monday, October 4, 2004)]
[Notices]
[Pages 59287-59289]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2469]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50460; File No. SR-PCX-2004-77]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change and
Amendment No. 1 Thereto To Clarify Routing Away Practices
September 28, 2004.
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 30, 2004, the Pacific Exchange, Inc. (``PCX'' or
``Exchange''), through its wholly owned subsidiary PCX Equities,
[[Page 59288]]
Inc. (``PCXE''), filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which
renders the proposal effective upon filing with the Commission. On
September 1, 2004, the PCX filed Amendment No. 1 to the proposed rule
change.\5\ The Commission is publishing this notice, as amended, 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)(i).
\4\ 17 CFR 204.19b-4(f)(6).
\5\ See letter from Mai S. Shiver, Director, Regulatory Policy,
PCX, to Nancy J. Sanow, Assistant Director, Division of Market
Regulation, Commission, dated August 31, 2004. Amendment No. 1
replaced the proposed rule change in its entirety. For purposes of
calculating the 60-day abrogation period, the Commission considers
the period to commence on September 1, 2004, the date the PCX filed
Amendment No. 1.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend PCXE Rule 7.37 (``Order
Execution''), which governs the Archipelago Exchange (``ArcaEx''), an
equities trading facility of PCXE, to apply the restriction on the size
of an order routed outside ArcaEx only to Intermarket Trading System
``ITS'' Eligible Listed securities, and not to over-the-counter ``OTC''
securities. The text of the proposed rule change appears below. New
text is in italics. Deleted text is in brackets.
* * * * *
Rule 7
Equities Trading
Order Execution
* * * * *
Rule 7.37. (a)-(c) No change.
(d) Step 5: Routing Away.
(1)-(2)--No change.
(A)(i) The order shall be routed, either in its entirety or as
component orders, to another market center or market participant as a
limit order:
(a) for ITS Eligible Listed Securities--equal to the price and no
greater than the size of the quote published by the market center or
market participant[.]; and
(b) for OTC securities--equal to the price of the quote published
by the market center or market participant.
The remaining portion of the order, if any, shall be ranked and
displayed in the Arca Book in accordance with the terms of such order
under Rule 7.36 and such order shall be eligible for execution under
Rule 7.37.
(ii)--No change.
(B)--(E)--No change.
* * * * *
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
The Commission recently approved a rule change to PCXE Rule 7.37
that clarified ArcaEx's execution rules related to routing to away
markets.\6\ Specifically, the rule change amended PCXE Rule
7.37(d)(2)(A) to require that the size of orders routed outside of
ArcaEx to another market center or market participant be no greater
than the size of the quote published by that away market center or
market participant. According to the PCX, this restriction is
consistent with Section 6(b)(iii) of the ITS Plan and as a result, the
Exchange proposes to clarify that the restriction only applies to ITS
Eligible Securities. The Exchange does not believe that PCXE Rule 7.37
should apply to OTC securities as there is no intermarket linkage plan
for OTC securities that places restrictions on the size of orders
routed to an outside market center or market participant. The Exchange
further believes this clarification is necessary in light of the
prevalence of reserve orders in the OTC market in which the size
available for execution is greater than the displayed quote size. By
routing away an order of a size greater than the displayed quote on the
outside market, ArcaEx may be able to fill larger orders.
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\6\ See Securities Exchange Act Release No. 48934 (December 16,
2003), 68 FR 74690 (December 24, 2003) (File No. SR-PCX-2003-54).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \7\ of the Act, in general, and further the
objectives of Section 6(b)(5),\8\ in particular, because it is designed
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 mechanisms of a free and open market, and to protect investors and
the public interest. In addition, the Exchange believes the proposed
rule is consistent with provision of Section 11A(a)(1)(B) of the
Act,\9\ which states that new data processing and communications
techniques create the opportunity for more efficient and effective
market operations.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 9 15 U.S.C. 78k-1(a)(1)(B).
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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 were neither solicited nor received with respect
to the proposed rule change.
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 \10\
and Rule 19b-4(f)(6) thereunder \11\. At any time within 60 days of the
filing of the proposed rule change, the Commission may summarily
abrogate the proposed 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.
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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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The Exchange has requested that the Commission waive the 30-day
operative
[[Page 59289]]
delay to implement the proposed rule change. The PCX contends that
these proposed rules are non-controversial as the Exchange is seeking
to clarify its rules to conform to current practices for OTC
securities. As a result, the Exchange believes that the proposed rule
change does not raise any new regulatory issues, significantly affect
the protection of investors or the public interest, or impose any
significant burden on competition for the proposed rule change to
become immediately operative upon filing. The Commission believes that
waiving the 30-day operative period is consistent with the protection
of investors and the public interest and, therefore, has determined to
allow the proposed rule change to become effective and operative as of
the date of the filing with the Commission.\12\
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\12\ For purposes of waiving the operative period date of this
proposal only, 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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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);
Send an e-mail to [email protected]. Please include
File Number SR-PCX-2004-77 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-PCX-2004-77. 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 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-
2004-77 and should be submitted on or before October 25, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2469 Filed 10-1-04; 8:45 am]
BILLING CODE 8010-01-P