Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. Relating to Minimum Price Improvement Standards, 8123-8125 [E5-654]

Download as PDF Federal Register / Vol. 70, No. 32 / Thursday, February 17, 2005 / Notices rule change is consistent with the requirements of the Act and in particular Section 17A of the Act and the rules and regulations thereunder. It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,8 that the proposed rule change (File No. SR– NSCC–2003–22) be and hereby is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.9 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–655 Filed 2–16–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51188; File No. SR–NYSE– 2004–63] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 Thereto To Amend Exchange Rules Relating to the Return of Membership Certificates, Notice and Return of Exchange-Issued Identification Cards, and Minor Violations of Rules February 10, 2005. On November 1, 2004, the New York Stock Exchange, Inc. (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to: (1) Delete the requirement in NYSE Rule 343(d) to return certificates of membership upon termination of customer offices or status as a member organization; (2) add NYSE Rule 35.80 to require members and member organizations to notify the Exchange’s security office and surrender Exchangeissued identification cards within 24 hours of all employee terminations, reassignments to non-Floor duties, or cancellations of such identification cards; (3) rescind NYSE Rule 412(g), which currently allows the Exchange to impose fees of up to $100 per securities account per day for violations of NYSE Rule 412; and (4) enable violations of proposed NYSE Rule 35.80 to be administered through the Exchange’s minor rule violation plan (NYSE Rule 476A). On December 15, 2004 and December 23, 2004, the Exchange filed 8 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 9 17 VerDate jul<14>2003 14:41 Feb 16, 2005 Jkt 205001 Amendment Nos. 1 3 and 2 4 to the proposed rule change, respectively. The proposed rule change, as amended, was published for notice and comment in the Federal Register on January 7, 2005.5 The Commission received no comment letters on the proposal. This order approves the proposed rule change, as amended. 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.6 In particular, the Commission believes that the proposal is consistent with Section 6(b)(5) of the Act,7 because rules that are reasonably designed to strengthen the Exchange’s security procedures will protect investors and the public interest. The Commission also believes that the Exchange’s addition to its minor rule violation plan is consistent with Sections 6(b)(1) and 6(b)(6) of the Act,8 which require that the rules of an exchange enforce compliance and provide appropriate discipline for violations of Commission and Exchange rules. In addition, because NYSE Rule 476A provides procedural rights to a person fined under that rule to contest the fine and permit a hearing on the matter, the Commission believes the proposal provides a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d)(1) of the Act.9 Finally, the Commission finds that the proposal is consistent with the public interest, the protection of investors, or otherwise in furtherance of the purposes of the Act, as required by Rule 19d– 1(c)(2) under the Act 10 which governs minor rule violation plans. The Commission believes that the change to the Exchange’s minor rule violation 3 See Form 19b–4 dated December 15, 2004 (‘‘Amendment No. 1’’). In Amendment No. 1, the Exchange included current rule text that was omitted from the original rule filing and made technical changes to the rule text. Amendment No. 1 replaced the original filing in its entirety. 4 See Partial Amendment dated December 23, 2004 (‘‘Amendment No. 2’’). In Amendment No. 2, the Exchange: (i) submitted the proposed rule text changes in an Exhibit 4, which was inadvertently omitted from Amendment No. 1; and (ii) made minor technical corrections to the existing and proposed rule text. 5 See Securities Exchange Act Release No. 50942 (December 29, 2004), 70 FR 1487. 6 In approving this proposed rule change, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(5). 8 15 U.S.C. 78f(b)(1) and 78f(b)(6). 9 15 U.S.C. 78f(b)(7) and 78f(d)(1). 10 17 CFR 240.19d–1(c)(2). PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 8123 plan will strengthen the Exchange’s ability to carry out its oversight and enforcement responsibilities as a selfregulatory organization in cases where full disciplinary proceedings are unsuitable in view of the minor nature of the particular violation. In approving this proposed rule change, the Commission in no way minimizes the importance of compliance with NYSE rules and all other rules subject to the imposition of fines under the Exchange’s minor rule violation plan. The Commission believes that the violation of any selfregulatory organization’s rules, as well as Commission rules, is a serious matter. However, the Exchange’s minor rule violation plan provides a reasonable means of addressing rule violations that do not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. The Commission expects that the Exchange will continue to conduct surveillance with due diligence and make a determination based on its findings, on case-by-case basis, whether fines of more or less than the recommended amount are appropriate for violations under the minor rule violation plan or a violation requires formal disciplinary action. It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act 11 and Rule 19d–1(c)(2) under the Act,12 that the proposed rule change (SR–NYSE–2004– 63), as amended, be, and hereby is, approved and declared effective. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–653 Filed 2–16–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51184; File No. SR–PCX– 2004–129] Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. Relating to Minimum Price Improvement Standards February 10, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 11 15 U.S.C. 78s(b)(2). CFR 240.19d–1(c)(2). 13 17 CFR 200.30–3(a)(12) and 200.30–3(a)(44). 12 17 E:\FR\FM\17FEN1.SGM 17FEN1 8124 Federal Register / Vol. 70, No. 32 / Thursday, February 17, 2005 / Notices (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 29, 2004, the Pacific Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’) 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 Exchange. On January 24, 2005, PCX amended the proposal.3 The Commission is publishing this notice and order to solicit comments on the proposed rule change, as amended, from interested persons and to approve the proposal on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change PCX, through its wholly owned subsidiary, PCX Equities, Inc. (‘‘PCXE’’), proposes to modify Commentary .05 to PCXE Rule 7.6(a) to provide for order entry and trading of securities in subpenny increments. The Exchange also proposes to modify Commentary .01 to PCXE Rule 6.16 to clarify that, for all securities traded pursuant to Commentary .05 to PCXE Rule 7.6(a), the minimum amount of price improvement necessary to execute an incoming marketable order on a proprietary basis is $0.01. The text of the proposed rule change is available on the Exchange’s Web site (https:// www.pacificex.com), at the Exchange’s principal office, 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, 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. 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 As part of its continuing efforts to enhance participation on its Archipelago Exchange (‘‘ArcaEx’’) facility, PCX is proposing to extend its 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 In the amendment (‘‘Amendment No. 1’’), PCX made technical changes to the proposed rule text. 2 17 VerDate jul<14>2003 14:41 Feb 16, 2005 Jkt 205001 request for exemptive relief for rounding sub-penny quotes and trades to securities that are priced greater than $1.00. PCX has requested this extension until June 30, 2005. Recently, PCX was granted exemptive relief for rounding sub-penny prices for securities priced less than $1.00.4 In accordance with that exemption, Commentary .05 to PCXE Rule 7.6(a) was modified to reflect a sub-penny minimum price variation for securities priced less than $1.00 on a pilot basis through September 30, 2005. The Exchange proposes adding to this commentary to allow for order entry and execution in increments smaller than $0.01 for Nasdaq National Market (‘‘NNM’’), SmallCap, and exchangelisted securities. In addition, the Exchange acknowledges the Commission’s concern that allowing trading in sub-penny increments could permit ArcaEx ETP Holders to trade ahead of customers by improving upon the quoted price in sub-penny increments.5 Accordingly, the Exchange is also proposing to revise PCXE Rule 6.16 by providing that the minimum amount of price improvement necessary to execute an incoming marketable order on a proprietary basis by an ETP Holder when holding an unexecuted customer limit order otherwise due an execution pursuant to PCXE Rule 6.16 in that same security is $0.01. In conjunction with this proposal, the Exchange has requested exemptive relief that would permit, through June 30, 2005, ArcaEx’s ETP Holders to provide for order entry and trading of securities traded on ArcaEx (NNM securities, SmallCap securities, and exchangelisted securities) that are executed and reported in sub-penny increments, while vendors that disseminate ArcaEx quotation information do so in penny increments.6 Further, to advance the Commission’s review, and as a condition to the exemptive relief sought, the Exchange has agreed to provide the Commission with monthly reports on its activity in sub-penny increments. Such 4 See letter from David S. Shillman, Associate Director, Division of Market Regulation (‘‘Division’’), Commission, to Mai S. Shiver, Director of Regulatory Policy, PCX, dated September 24, 2004. 5 See PCXE Rule 1.1(n). 6 See letter from Mai Shiver, Director of Regulatory Policy, PCX, to Annette Nazareth, Director, Division, Commission, dated December 28, 2004. In this letter, the Exchange requested exemptive relief from Rules 11 Ac1–1, 11 Ac1–2, and 11 Ac1–4 to allow ArcaEx, its ETP Holders, and vendors that disseminate ArcaEx quotation information to round sub-penny quotes to the nearest penny increment (up, for orders to sell; down, for orders to buy) for display purposes, while such quotes may be entered and executed in increments less than $0.01. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 information will include reported volume of orders received and executed in sub-penny increments (in terms of both trades and shares), the execution price points, and the nature of the subpenny orders received and executed (i.e., agency, principal, or otherwise). The Exchange believes that allowing sub-penny executions on ArcaEx in certain securities would afford ETP Holders with trading opportunities that are consistent with those available at competing exchanges such as the National Stock Exchange and the Chicago Stock Exchange. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,7 in general, and furthers 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, to remove impediments to and perfect the mechanisms of a free and open market, and to protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change would 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 proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–PCX–2004–129 on the subject line. 7 15 8 15 E:\FR\FM\17FEN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 17FEN1 Federal Register / Vol. 70, No. 32 / Thursday, February 17, 2005 / Notices 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–2004–129. 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 (https://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 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– 2004–129 and should be submitted on or before March 10, 2005. IV. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.9 In particular, the Commission believes that the proposal is consistent with Section 6(b)(5) of the Act,10 which requires that the rules of an exchange be designed to promote just and equitable principles of trade and, in general, to protect investors and the public interest. Simultaneous with this order, the Commission is approving an exemption until June 30, 2005, from Rules 11 Ac1– 9 In approving the proposed rule, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b)(5). VerDate jul<14>2003 14:41 Feb 16, 2005 Jkt 205001 1, 11 Ac1–2, and 11 Ac1–4 under the Act 11 that permits ArcaEx, ETP Holders of ArcaEx, and vendors that disseminate ArcaEx quote information to enter, execute, and report quotations in exchange-listed, NNM, and SmallCap securities in increments less than $0.01, although such quotations will be disseminated in rounded, penny increments without a rounding identifier.12 The changes to Commentary .05 to PCXE Rule 7.6(a) incorporate the terms of that Commission exemption into PCXE’s rules. The changes to Commentary .01 to PCXE Rule 6.16 provide that an ETP Holder must price-improve an incoming marketable order by at least $0.01 when holding an unexecuted customer limit order otherwise due an execution pursuant to PCXE Rule 6.16(a). This is an important investor protection because an ETP Holder will be prohibited from stepping ahead of a customer limit order by a sub-penny amount even though sub-penny orders generally may be entered on ArcaEx. The Commission notes that it previously has approved an identical price improvement standard on other exchanges.13 The Commission finds good cause for approving this proposal before the thirtieth day after the publication of notice thereof in the Federal Register. Accelerated approval will provide protection for customer limit orders simultaneous with the effectiveness of the Commission exemption that permits sub-penny quoting, for a limited period, on ArcaEx. V. Conclusion It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,14 that the proposed rule change, as amended (SR– PCX–2004–129), is hereby approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–654 Filed 2–16–05; 8:45 am] BILLING CODE 8010–01–P 11 17 CFR 240.11 Ac1–1, 240.11 Ac1–2, and 240.11 Ac1–4. 12 See letter from David S. Shillman, Associate Director, Division, Commission, to Mai S. Shiver, Director of Regulatory Policy, PCX, dated February 10, 2005. 13 See Securities Exchange Act Release No. 44164 (April 6, 2001), 66 FR 19263 (April 13, 2001) (approving penny price improvement increment on Chicago Stock Exchange); Securities Exchange Act Release No. 46274 (July 29, 2002), 67 FR 50743 (August 5, 2002) (same for Cincinnati—now National—Stock Exchange). 14 15 U.S.C. 78s(b)(2). 15 17 CFR.200.30–3(a)(12). PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 8125 SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration (SSA) publishes a list of information collection packages that will require clearance by the Office of Management and Budget (OMB) in compliance with Pub. L. 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection packages that may be included in this notice are for new information collections, revisions to OMB-approved information collections, and extensions (no change) of OMB-approved information collections. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written comments and recommendations regarding the information collection(s) should be submitted to the OMB Desk Officer and the SSA Reports Clearance Officer. The information can be mailed and/or faxed to the individuals at the addresses and fax numbers listed below: (OMB), Office of Management and Budget, Attn: Desk Officer for SSA, New Executive Building, Room 10235, 725 17th St., NW., Washington, DC 20503, Fax: 202–395–6974; (SSA), Social Security Administration, DCFAM, Attn: Reports Clearance Officer, 1338 Annex Building, 6401 Security Blvd., Baltimore, MD 21235, Fax: 410–965–6400. I. The information collections listed below are pending at SSA and will be submitted to OMB within 60 days from the date of this notice. Therefore, your comments should be submitted to SSA within 60 days from the date of this publication. You can obtain copies of the collection instruments by calling the SSA Reports Clearance Officer at (410) 965–0454 or by writing to the address listed above. 1. Railroad Employment Questionnaire—20 CFR 404.1401, 404.1406–.1408—0960–0078. SSA uses form SSA–671 to secure sufficient information to effect the required coordination with the Railroad Retirement Board for Social Security claims processing. It is completed whenever claimants give indications of having been employed in the railroad industry. The respondents are applicants for Social Security benefits, E:\FR\FM\17FEN1.SGM 17FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 32 (Thursday, February 17, 2005)]
[Notices]
[Pages 8123-8125]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-654]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51184; File No. SR-PCX-2004-129]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto by the Pacific Exchange, Inc. Relating to Minimum Price 
Improvement Standards

February 10, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 8124]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 29, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') 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 Exchange. On January 
24, 2005, PCX amended the proposal.\3\ The Commission is publishing 
this notice and order to solicit comments on the proposed rule change, 
as amended, from interested persons and to approve the proposal on an 
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In the amendment (``Amendment No. 1''), PCX made technical 
changes to the proposed rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    PCX, through its wholly owned subsidiary, PCX Equities, Inc. 
(``PCXE''), proposes to modify Commentary .05 to PCXE Rule 7.6(a) to 
provide for order entry and trading of securities in sub-penny 
increments. The Exchange also proposes to modify Commentary .01 to PCXE 
Rule 6.16 to clarify that, for all securities traded pursuant to 
Commentary .05 to PCXE Rule 7.6(a), the minimum amount of price 
improvement necessary to execute an incoming marketable order on a 
proprietary basis is $0.01. The text of the proposed rule change is 
available on the Exchange's Web site (https://www.pacificex.com), at the 
Exchange's principal office, 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, 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. 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
    As part of its continuing efforts to enhance participation on its 
Archipelago Exchange (``ArcaEx'') facility, PCX is proposing to extend 
its request for exemptive relief for rounding sub-penny quotes and 
trades to securities that are priced greater than $1.00. PCX has 
requested this extension until June 30, 2005. Recently, PCX was granted 
exemptive relief for rounding sub-penny prices for securities priced 
less than $1.00.\4\ In accordance with that exemption, Commentary .05 
to PCXE Rule 7.6(a) was modified to reflect a sub-penny minimum price 
variation for securities priced less than $1.00 on a pilot basis 
through September 30, 2005. The Exchange proposes adding to this 
commentary to allow for order entry and execution in increments smaller 
than $0.01 for Nasdaq National Market (``NNM''), SmallCap, and 
exchange-listed securities. In addition, the Exchange acknowledges the 
Commission's concern that allowing trading in sub-penny increments 
could permit ArcaEx ETP Holders to trade ahead of customers by 
improving upon the quoted price in sub-penny increments.\5\ 
Accordingly, the Exchange is also proposing to revise PCXE Rule 6.16 by 
providing that the minimum amount of price improvement necessary to 
execute an incoming marketable order on a proprietary basis by an ETP 
Holder when holding an unexecuted customer limit order otherwise due an 
execution pursuant to PCXE Rule 6.16 in that same security is $0.01.
---------------------------------------------------------------------------

    \4\ See letter from David S. Shillman, Associate Director, 
Division of Market Regulation (``Division''), Commission, to Mai S. 
Shiver, Director of Regulatory Policy, PCX, dated September 24, 
2004.
    \5\ See PCXE Rule 1.1(n).
---------------------------------------------------------------------------

    In conjunction with this proposal, the Exchange has requested 
exemptive relief that would permit, through June 30, 2005, ArcaEx's ETP 
Holders to provide for order entry and trading of securities traded on 
ArcaEx (NNM securities, SmallCap securities, and exchange-listed 
securities) that are executed and reported in sub-penny increments, 
while vendors that disseminate ArcaEx quotation information do so in 
penny increments.\6\
---------------------------------------------------------------------------

    \6\ See letter from Mai Shiver, Director of Regulatory Policy, 
PCX, to Annette Nazareth, Director, Division, Commission, dated 
December 28, 2004. In this letter, the Exchange requested exemptive 
relief from Rules 11 Ac1-1, 11 Ac1-2, and 11 Ac1-4 to allow ArcaEx, 
its ETP Holders, and vendors that disseminate ArcaEx quotation 
information to round sub-penny quotes to the nearest penny increment 
(up, for orders to sell; down, for orders to buy) for display 
purposes, while such quotes may be entered and executed in 
increments less than $0.01.
---------------------------------------------------------------------------

    Further, to advance the Commission's review, and as a condition to 
the exemptive relief sought, the Exchange has agreed to provide the 
Commission with monthly reports on its activity in sub-penny 
increments. Such information will include reported volume of orders 
received and executed in sub-penny increments (in terms of both trades 
and shares), the execution price points, and the nature of the sub-
penny orders received and executed (i.e., agency, principal, or 
otherwise).
    The Exchange believes that allowing sub-penny executions on ArcaEx 
in certain securities would afford ETP Holders with trading 
opportunities that are consistent with those available at competing 
exchanges such as the National Stock Exchange and the Chicago Stock 
Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers 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, to remove impediments to and perfect the 
mechanisms of a free and open market, 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

    The Exchange does not believe that the proposed rule change would 
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 proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-PCX-2004-129 on the subject line.

[[Page 8125]]

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-2004-129. 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 (https://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 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-2004-129 
and should be submitted on or before March 10, 2005.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
In particular, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act,\10\ which requires that the rules of 
an exchange be designed to promote just and equitable principles of 
trade and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \9\ In approving the proposed rule, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Simultaneous with this order, the Commission is approving an 
exemption until June 30, 2005, from Rules 11 Ac1-1, 11 Ac1-2, and 11 
Ac1-4 under the Act \11\ that permits ArcaEx, ETP Holders of ArcaEx, 
and vendors that disseminate ArcaEx quote information to enter, 
execute, and report quotations in exchange-listed, NNM, and SmallCap 
securities in increments less than $0.01, although such quotations will 
be disseminated in rounded, penny increments without a rounding 
identifier.\12\ The changes to Commentary .05 to PCXE Rule 7.6(a) 
incorporate the terms of that Commission exemption into PCXE's rules. 
The changes to Commentary .01 to PCXE Rule 6.16 provide that an ETP 
Holder must price-improve an incoming marketable order by at least 
$0.01 when holding an unexecuted customer limit order otherwise due an 
execution pursuant to PCXE Rule 6.16(a). This is an important investor 
protection because an ETP Holder will be prohibited from stepping ahead 
of a customer limit order by a sub-penny amount even though sub-penny 
orders generally may be entered on ArcaEx. The Commission notes that it 
previously has approved an identical price improvement standard on 
other exchanges.\13\
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    \11\ 17 CFR 240.11 Ac1-1, 240.11 Ac1-2, and 240.11 Ac1-4.
    \12\ See letter from David S. Shillman, Associate Director, 
Division, Commission, to Mai S. Shiver, Director of Regulatory 
Policy, PCX, dated February 10, 2005.
    \13\ See Securities Exchange Act Release No. 44164 (April 6, 
2001), 66 FR 19263 (April 13, 2001) (approving penny price 
improvement increment on Chicago Stock Exchange); Securities 
Exchange Act Release No. 46274 (July 29, 2002), 67 FR 50743 (August 
5, 2002) (same for Cincinnati--now National--Stock Exchange).
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    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. Accelerated approval will provide protection for 
customer limit orders simultaneous with the effectiveness of the 
Commission exemption that permits sub-penny quoting, for a limited 
period, on ArcaEx.

V. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change, as amended (SR-PCX-2004-129), 
is hereby approved on an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR.200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-654 Filed 2-16-05; 8:45 am]
BILLING CODE 8010-01-P

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