[Federal Register Volume 67, Number 94 (Wednesday, May 15, 2002)]
[Notices]
[Pages 34745-34746]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 02-12116]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-45894; File No. SR-PCX-2002-23]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to Market Maker Auto-Ex Log On Requirements
May 8, 2002.
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 April 25, 2002, the Pacific Exchange, Inc. (``Exchange'' or ``PCX'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the PCX. The proposed
rule change has been filed by the PCX as a ``non-controversial'' rule
change under rule 19b-4(f)(6) under the Act.\3\ 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
PCX proposes to amend its rules in order to eliminate the current
requirements for Market Makers, set forth in PCX Rule 6.87(e)(4), to
log on to PCX's automatic execution system (``Auto-Ex'').\4\
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\4\ The PCX Auto-Ex system permits eligible market or marketable
limit orders sent from member firms to be executed automatically at
the displayed bid or offering price. Participating Market Makers are
designated as the contra side to each Auto-Ex order on a rotating
basis. Automatic executions through Auto-Ex are currently available
for public customer orders at 250 contracts or less in all series of
options traded on the PCX's options floor.
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Below is the text of the proposed rule change. Proposed new
language is italicized and proposed deletions are in [brackets].
* * * * *
Automatic Execution System
Rule 6.87
(a)-(d)--No change.
(e) Market Maker Requirements and Eligibility. Any Exchange Member
who is registered as a Market Maker and who has obtained written
authorization from a clearing member is eligible to participate on the
Auto-Ex system, subject to the following conditions and requirements:
(1)-(3)--No change.
(4) Reserved. [Log on Requirement. A Market Maker who has been
logged on to Auto-Ex in an option issue at any time during an
expiration month must continue to be logged on to Auto-Ex in that issue
whenever present in that trading crowd, until the close of business on
the next Expiration Friday. A Market Maker who is limited to ``closing
only'' transactions pursuant to PCX Rules or the requirements of that
Market Maker's clearing firm will be exempt from this provision upon
approval of two Floor Officials.]
(5)-(7)--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
On July 10, 2000, the Exchange effected a new PCX rule establishing
Auto-Ex log-on requirements for Market Makers.\5\ The current Auto-Ex
rules outline the requirements with which a Market Maker (other than a
Lead Market Maker (``LMM'')) must comply in order to be eligible to
participate on Auto-Ex. Among the requirements, a Market Maker who has
been logged on to Auto-Ex in an option issue at any time during an
expiration month must continue to be logged on to Auto-Ex in that issue
whenever present in that trading crowd, until the close of business on
the next expiration Friday. The PCX represents that, by implication, a
Market Maker who logs off of Auto-Ex may not log back on until the
beginning of the next expiration cycle. The Exchange voluntarily
implemented the rule in order to encourage Market Makers to remain on
Auto-Ex throughout the trading month.
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\5\ See Securities Exchange Act Release No. 43150 (August 14,
2000), 65 FR 51390 (August 23, 2000).
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After assessing the impact of the Auto-Ex log on requirement, the
[[Page 34746]]
Exchange believes that, because the requirement provides so little
flexibility, it no longer serves the purpose for which it was created,
i.e., encouraging greater Market Maker participation on Auto-Ex. Thus,
despite the fact that LMMs would prefer Market Makers to participate on
Auto-Ex as their risk profiles allow, the Exchange believes that the
current requirement limits participation in an all-or-none fashion. As
a consequence, the Exchange proposes to remove the log on requirement
in its entirety in order to encourage Market Makers to log on to Auto-
Ex to the extent that their business models permit.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \6\ in general, and furthers the
objectives of section 6(b)(5) of the Act \7\ in particular, because it
is designed to foster cooperation and coordination with persons engaged
in regulating, clearing, settling, processing information with respect
to, and facilitating transactions in securities, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, as well as to protect investors and the public interest.
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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 Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition that is not necessary 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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) does not become operative for 30 days from 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) \8\ of the
Act and Rule 19b-4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ As required under Rule 19b-4(f)(6)(iii), the Exchange
provided the Commission with written notice of its intent to file
the proposed rule change at least five business days prior to the
filing date or such shorter period as designated by the Commission.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The PCX seeks to have the proposed
rule change become operative immediately in order to maintain
competition and efficiency among its market makers.
The Commission, consistent with the protection of investors and the
public interest, has determined to make the proposed rule change
operative immediately upon filing as of April 25, 2002, to allow the
PCX to maintain competition among its market makers and to encourage
market makers to participate on Auto-Ex. 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 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. 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-2002-23 and should
be submitted by June 5, 2002.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-12116 Filed 5-14-02; 8:45 am]
BILLING CODE 8010-01-U