Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendments Nos. 1 and 2 Thereto Relating to Market Order Auction, 43924-43926 [E5-4024]

Download as PDF 43924 Federal Register / Vol. 70, No. 145 / Friday, July 29, 2005 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52103; File No. SR–PCX– 2005–58] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendments Nos. 1 and 2 Thereto Relating to Market Order Auction July 21, 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 April 22, 2005, the Pacific Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’), through its wholly owned subsidiary PCX Equities, Inc. (‘‘PCXE’’ or the ‘‘Corporation’’), 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 PCX. On June 27, 2005, the Exchange amended the proposed rule change (‘‘Amendment No. 1’’).3 On July 8, 2005, the Exchange further amended the proposed rule change (‘‘Amendment No. 2’’).4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules governing the Archipelago Exchange (‘‘ArcaEx’’), the equities trading facility of PCXE. With this filing, the Exchange proposes to modify its Market Order Auction. The text of the proposed rule change, as amended, is available on the PCX Web site (http:// www.pacificex.com), at the PCX’s Office of the Secretary 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, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change, as amended. The text of these statements may be examined at the places specified in Item 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 In Amendment No. 1, the Exchange made clarifying changes to the definition of Indicative Match Price and the purpose section and rule text describing the market auction procedure. 4 In Amendment No. 2, the Exchange made clarifying changes to the purpose section and the rule text describing the market auction procedure. 2 17 VerDate jul<14>2003 17:05 Jul 28, 2005 Jkt 205001 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 As part of its continuing efforts to enhance participation on the ArcaEx facility, the Exchange is proposing to modify its Market Order Auction procedures. In conjunction with these modifications, the Exchange seeks to clarify the existing Indicative Match Price definition as defined in PCXE Rule 1.1(r) and also modify the Market Order Auction rules as described in PCXE Rule 7.35. Further, the Exchange proposes to implement price collars in order to improve the Market Order Auction pricing mechanism. Indicative Match Price Changes Currently, PCXE Rule 1.1(r) describes the Indicative Match Price which generally determines the price at which orders eligible for execution in the ArcaEx auctions 5 are executed. This proposal seeks to clarify the existing Indicative Match Price functionality by indicating that the Indicative Match Price is the best price (that which is closest to the NBBO) at which the maximum volume of shares are executable in the respective auction. In addition, the Exchange seeks to implement a price collar proposal based on a similar standard currently in place for ArcaEx’s Closing Auction which was filed on an immediately effective basis.6 To improve the pricing mechanism, ArcaEx proposes to implement price collars that would limit the price at which the Indicative Match Price could be established. The price collars would be determined by PCX and communicated to ETP Holders via the ArcaEx Web site. Initially, these price collar thresholds would be consistent with the PCXE Demonstrable Erroneous Execution Policy.7 That is, generally the 5 See PCXE Rule 7.35 for a description of the Opening Auction, Market Order Auction, Closing Auction, and Trading Halt Auction. 6 See Securities Exchange Act Release No. 50108 (July 28, 2004); 69 FR 47195 (August 4, 2004) (SR– PCX–2004–66). The Commission clarified this sentence to indicate that this standard was filed on an immediately effective basis. Telephone Conference among Bridget Farrell, Director, Strategy, ArcaEx and Ann Leddy, Special Counsel, Division of Market Regulation (‘‘Division’’), Commission and Mitra Mehr, Attorney, Division, Commission on July 15, 2005. 7 See ArcaEx Web site (http://www.arcaex.com), Orders and Execution policy, Erroneous Execution Policy. Any changes to the thresholds of the price PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 Indicative Match Price would not be permitted to be greater than $1.00 or 10% away from the consolidated last sale price. PCXE would use the preestablished price collars to limit the Market Order Auction Indicative Match Price. PCXE would not have any discretion to modify the auction process and the calculation of the Indicative Match Price other than to change the threshold parameters with prior written notice to ETP Holders. Following is an example of how the Market Order Auction price collars would function for exchange-listed securities for which the Corporation is the primary market and all exchangelisted exchange traded funds: Consolidated last sale price: 12.00 ArcaEx Orders: Buy 50,000 Market Order Sell 30,000 Auction-Only Limit Order @ 12.50 Sell 20,000 Limit Order @ 13.01 Market Order Auction results: Indicative Match Price = 12.50; Matched Volume = 30,000; Total Imbalance = 20,000. The 20,000 limit sell order at 13.01 is outside of the price collar and will not be used to determine the Indicative Match Price. Market Order Auction Changes This proposal also seeks to modify the Market Order Auction functionality and PCXE Rule 7.35(c) such that the functionality would differ depending on the type of security. There would be three categories of securities applicable to this proposal: (1) Exchange-listed securities, excluding: (i) exchange-listed securities for which the Corporation is the primary market; and (ii) all exchange-listed exchange traded funds; (2) exchange-listed securities for which the Corporation is the primary market and all exchange-listed exchange-traded funds; and (3) Nasdaq-listed securities.8 With respect to category (1) described above, currently the Exchange conducts a Market Order Auction of such securities which is based upon the types of orders eligible for execution where the auction price could be based on the Indicative Match Price or the midpoint of the first uncrossed NBBO after 6:30 a.m. (Pacific Time). The Exchange proposes to modify this functionality and would not conduct a Market Order Auction, but rather would route all market orders to the primary market until the first opening print on the primary market. All limit orders and collars will be communicated to ETP Holders with reasonable notice prior to the Market Order Auction. 8 This category includes the QQQQ, which is a Nasdaq-listed exchange traded fund. E:\FR\FM\29JYN1.SGM 29JYN1 Federal Register / Vol. 70, No. 145 / Friday, July 29, 2005 / Notices any market orders after the first primary opening print would be processed pursuant to PCXE Rule 7.37.9 Regarding category (2) described above, currently the Exchange conducts a Market Order Auction of such securities which is based upon the types of orders eligible for execution where the auction price could be based on the Indicative Match Price or the midpoint of the first uncrossed NBBO after 6:30 a.m. (Pacific Time). The Exchange proposes to maintain its existing Market Order Auction functionality for exchange-listed securities for which the Corporation is the primary market and all exchange-listed exchange-traded funds. In this filing, the Exchange seeks to clarify the existing rule language associated with the Market Order Auction. Such changes do not result in any functionality changes, but rather would refine the rule text to be clearer and more consistent with existing functionality. Specifically, the Exchange proposes to clarify PCXE Rule 7.35(c)(3) which describes the determination of the Market Order Auction Price. The clarifying changes would more clearly describe the pricing process as follows: (1) In the instance in which there are limit orders eligible for execution in the Market Order Auction, the Indicative Match Price would determine the auction price. (2) In the instance in which there are no limit orders eligible for execution in the Market Order Auction: (i) In the case of exchange-listed exchange traded funds for which the Corporation is not the primary market, as many buy market orders and sell market orders as possible would be matched and executed at the midpoint of the first uncrossed NBBO after 6:30 a.m. (Pacific Time), once available; or (ii) In the case of exchange-listed securities, including exchange-listed exchange traded funds, for which the Corporation is the primary market, market orders would be rejected. The Market Orders that are eligible for, but not executed in the Market Order Auction, would become eligible for execution in the Core Trading Session immediately upon conclusion of the Market Order Auction. Lastly, with respect to category (3) described above, currently the Exchange conducts a Market Order Auction of such securities which is based upon the types of orders eligible for execution where the auction price could be based on the Indicative Match Price or the 9 PCXE Rule 7.37 describes ArcaEx’s execution processes including the Directed Order Process, Display Order Process, Working Order Process, and Tracking Order Process. VerDate jul<14>2003 17:05 Jul 28, 2005 Jkt 205001 midpoint of the first uncrossed NBBO after 6:30 a.m. (Pacific Time). The Exchange proposes for Nasdaq-listed securities to match and execute as many market orders as possible at the midpoint of the first uncrossed NBBO after 6:30 a.m. (Pacific Time). Limit orders and any remaining market order interest in Nasdaq-listed securities would be ranked in price/time priority as described in PCXE Rule 7.36 and processed pursuant to PCXE Rule 7.37. The Exchange believes that clarifying the Market Order Auction pricing mechanism would help ensure that ETP Holders and investors understand how orders in the auction will be priced. In particular for those types of securities (i.e., exchange-listed securities for which the Corporation is not the primary market excluding exchange traded funds and Nasdaq-listed securities) in which the Exchange may not have sufficient liquidity on the Arca Book at the open to execute the Market Order Auction at a price that is substantially close to the opening price on the primary market, the Exchange seeks to provide its ETP Holders with the opportunity to have those orders execute at the primary markets’ prices. Further, implementing price collars would help ensure that when ArcaEx conducts a Market Order Auction, the auction would execute at prices within range of where the stock is currently trading. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) 10 of the Act, in general, and furthers the objectives of Section 6(b)(5),11 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principals 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 a national market system. The Exchange believes that clarifying and improving the Market Order Auction pricing mechanism as described in this filing should result in a clearer understanding of how orders will be priced at the open and may provide greater assurance that orders will be priced at prices that are substantially close to where the stock is trading. PO 00000 10 15 11 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00089 Fmt 4703 Sfmt 4703 43925 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change, as amended, 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, as amended, were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change, as amended, or (B) Institute proceedings to determine whether the proposed rule change, as amended, should be disapproved. IV. 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–PCX–2005–58 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–2005–58. 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 E:\FR\FM\29JYN1.SGM 29JYN1 43926 Federal Register / Vol. 70, No. 145 / Friday, July 29, 2005 / Notices 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 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–2005–58 and should be submitted on or before August 19, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.12 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–4024 Filed 7–28–05; 8:45 am] BILLING CODE 8010–01–P SOCIAL SECURITY ADMINISTRATION The Ticket to Work and Work Incentives Advisory Panel Meeting AGENCY: Social Security Administration (SSA). Notice of quarterly and strategic planning meeting. ACTION: August 29, 2005–9 a.m. to 6 p.m., August 30, 2005–9 a.m. to 5 p.m., August 31, 2005–9 a.m. to 3 p.m. ADDRESSES: Crowne Plaza Northstar Hotel, 618 Second Avenue South, Minneapolis, MN 55402. SUPPLEMENTARY INFORMATION: Type of Meeting: On August 29–31, 2005, the Ticket to Work and Work Incentives Advisory Panel (the ‘‘Panel’’) will hold a quarterly and strategic planning meeting open to the public. Purpose: In accordance with section 10(a)(2) of the Federal Advisory Committee Act, the Social Security Administration (SSA) announces a meeting of the Ticket to Work and Work Incentives Advisory Panel. Section 101(f) of Public Law 106–170 establishes the Panel to advise the President, the Congress, and the DATES: 12 17 CFR 200.30–3(a)(12). VerDate jul<14>2003 17:05 Jul 28, 2005 Jkt 205001 Commissioner of SSA on issues related to work incentive programs, planning, and assistance for individuals with disabilities as provided under section 101(f)(2)(A) of the Act. The Panel is also to advise the Commissioner on matters specified in section 101(f)(2)(B) of that Act, including certain issues related to the Ticket to Work and Self-Sufficiency Program established under section 101(a). Interested parties are invited to attend the meeting. The Panel will use the meeting time to receive briefings and presentations on matters of interest, conduct full Panel deliberations on the implementation of the Act and receive public testimony. The Panel will meet in person commencing on Monday, August 29, 2005, from 9 a.m. until 6 p.m. The quarterly meeting will continue on Tuesday, August 30, 2005, from 9 a.m. until 5 p.m. The Panel will meet in person for a strategic planning meeting on Wednesday, August 31, 2005, from 9 a.m. until 3 p.m. Members of the public must schedule a time slot in order to comment. In the event public comments do not take the entire scheduled time period, the Panel may use that time to deliberate or conduct other Panel business. Public testimony will be heard on Monday, August 29, 2005, from 5 p.m. until 6 p.m. and Tuesday, August 30, 2005, from 9 a.m. until 9:30 a.m. Individuals interested in providing testimony in person should contact the Panel staff as outlined below to a schedule time slot. Each presenter will be acknowledged by the Chair in the order in which they are scheduled to testify and is limited to a maximum five-minute, verbal presentation. Full written testimony on the Implementation of the Ticket to Work and Work Incentives Program, no longer than five (5) pages, may be submitted in person or by mail, fax or e-mail on an on-going basis to the Panel for consideration. Since seating may be limited, persons interested in providing testimony at the meeting should contact the Panel staff by e-mailing Ms. Shirletta Banks, at Shirletta.banks@ssa.gov or by calling (202) 358–6430. The full agenda for the meeting will be posted on the Internet at http:// www.ssa.gov/work/panel at least one week before the starting date or can be received, in advance, electronically or by fax upon request. Contact Information: Records are kept of all proceedings and will be available for public inspection by appointment at the Panel office. Anyone requiring PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 information regarding the Panel should contact the staff by: Mail addressed to the Social Security Administration, Ticket to Work and Work Incentives Advisory Panel Staff, 400 Virginia Avenue, SW., Suite 700, Washington, DC 20024. Telephone contact with Debra Tidwell-Peters at (202) 358–6430. Fax at (202) 358–6440. E-mail to TWWIIAPanel@ssa.gov. Dated: July 22, 2005. Chris Silanskis, Designated Federal Officer. [FR Doc. 05–14968 Filed 7–28–05; 8:45 am] BILLING CODE 4191–02–P DEPARTMENT OF STATE [Public Notice 5143] 30-Day Notice of Proposed Information Collections Notice of request for public comments and submission to OMB of proposed collection of information. ACTION: SUMMARY: The Department of State has submitted the following information collection request to the Office of Management and Budget (OMB) for approval in accordance with the Paperwork Reduction Act of 1995. • Title of Information Collection: Statement of Registration • OMB Control Number: 1405–0002 • Type of Request: Extension of Currently Approved Collection • Originating Office: Bureau of Political-Military Affairs, Directorate of Defense Trade Controls, PM/DDTC • Form Number: DS–2032 • Respondents: Business and nonprofit organizations • Estimated Number of Respondents: 3,500 (total) • Estimated Number of Responses: 3,500 (per year) • Average Hours Per Response: 2 hours • Total Estimated Burden: 7,000 hours (per year) • Frequency: Every one or two years • Obligation to Respond: Mandatory • Title of Information Collection: Application/License for Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data • OMB Control Number: 1405–0003 • Type of Request: Extension of Currently Approved Collection • Originating Office: Bureau of Political-Military Affairs, Directorate of Defense Trade Controls, PM/DDTC • Form Number: DSP–5 • Respondents: Business and nonprofit organizations E:\FR\FM\29JYN1.SGM 29JYN1

Agencies

[Federal Register Volume 70, Number 145 (Friday, July 29, 2005)]
[Notices]
[Pages 43924-43926]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-4024]



[[Page 43924]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52103; File No. SR-PCX-2005-58]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing of Proposed Rule Change and Amendments Nos. 1 and 2 Thereto 
Relating to Market Order Auction

July 21, 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 April 22, 2005, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly owned subsidiary PCX Equities, Inc. 
(``PCXE'' or the ``Corporation''), 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 PCX. On June 27, 2005, the Exchange amended the proposed rule change 
(``Amendment No. 1'').\3\ On July 8, 2005, the Exchange further amended 
the proposed rule change (``Amendment No. 2'').\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange made clarifying changes to 
the definition of Indicative Match Price and the purpose section and 
rule text describing the market auction procedure.
    \4\ In Amendment No. 2, the Exchange made clarifying changes to 
the purpose section and the rule text describing the market auction 
procedure.
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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 its rules governing the Archipelago 
Exchange (``ArcaEx''), the equities trading facility of PCXE. With this 
filing, the Exchange proposes to modify its Market Order Auction. The 
text of the proposed rule change, as amended, is available on the PCX 
Web site (http://www.pacificex.com), at the PCX's Office of the 
Secretary 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, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change, as 
amended. 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
    As part of its continuing efforts to enhance participation on the 
ArcaEx facility, the Exchange is proposing to modify its Market Order 
Auction procedures. In conjunction with these modifications, the 
Exchange seeks to clarify the existing Indicative Match Price 
definition as defined in PCXE Rule 1.1(r) and also modify the Market 
Order Auction rules as described in PCXE Rule 7.35. Further, the 
Exchange proposes to implement price collars in order to improve the 
Market Order Auction pricing mechanism.
Indicative Match Price Changes
    Currently, PCXE Rule 1.1(r) describes the Indicative Match Price 
which generally determines the price at which orders eligible for 
execution in the ArcaEx auctions \5\ are executed. This proposal seeks 
to clarify the existing Indicative Match Price functionality by 
indicating that the Indicative Match Price is the best price (that 
which is closest to the NBBO) at which the maximum volume of shares are 
executable in the respective auction.
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    \5\ See PCXE Rule 7.35 for a description of the Opening Auction, 
Market Order Auction, Closing Auction, and Trading Halt Auction.
---------------------------------------------------------------------------

    In addition, the Exchange seeks to implement a price collar 
proposal based on a similar standard currently in place for ArcaEx's 
Closing Auction which was filed on an immediately effective basis.\6\ 
To improve the pricing mechanism, ArcaEx proposes to implement price 
collars that would limit the price at which the Indicative Match Price 
could be established. The price collars would be determined by PCX and 
communicated to ETP Holders via the ArcaEx Web site. Initially, these 
price collar thresholds would be consistent with the PCXE Demonstrable 
Erroneous Execution Policy.\7\ That is, generally the Indicative Match 
Price would not be permitted to be greater than $1.00 or 10% away from 
the consolidated last sale price. PCXE would use the pre-established 
price collars to limit the Market Order Auction Indicative Match Price. 
PCXE would not have any discretion to modify the auction process and 
the calculation of the Indicative Match Price other than to change the 
threshold parameters with prior written notice to ETP Holders.
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    \6\ See Securities Exchange Act Release No. 50108 (July 28, 
2004); 69 FR 47195 (August 4, 2004) (SR-PCX-2004-66). The Commission 
clarified this sentence to indicate that this standard was filed on 
an immediately effective basis. Telephone Conference among Bridget 
Farrell, Director, Strategy, ArcaEx and Ann Leddy, Special Counsel, 
Division of Market Regulation (``Division''), Commission and Mitra 
Mehr, Attorney, Division, Commission on July 15, 2005.
    \7\ See ArcaEx Web site (http://www.arcaex.com), Orders and 
Execution policy, Erroneous Execution Policy. Any changes to the 
thresholds of the price collars will be communicated to ETP Holders 
with reasonable notice prior to the Market Order Auction.
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    Following is an example of how the Market Order Auction price 
collars would function for exchange-listed securities for which the 
Corporation is the primary market and all exchange-listed exchange 
traded funds:

Consolidated last sale price: 12.00
ArcaEx Orders:
Buy 50,000 Market Order
Sell 30,000 Auction-Only Limit Order @ 12.50
Sell 20,000 Limit Order @ 13.01

    Market Order Auction results: Indicative Match Price = 12.50; 
Matched Volume = 30,000; Total Imbalance = 20,000. The 20,000 limit 
sell order at 13.01 is outside of the price collar and will not be used 
to determine the Indicative Match Price.
Market Order Auction Changes
    This proposal also seeks to modify the Market Order Auction 
functionality and PCXE Rule 7.35(c) such that the functionality would 
differ depending on the type of security. There would be three 
categories of securities applicable to this proposal: (1) Exchange-
listed securities, excluding: (i) exchange-listed securities for which 
the Corporation is the primary market; and (ii) all exchange-listed 
exchange traded funds; (2) exchange-listed securities for which the 
Corporation is the primary market and all exchange-listed exchange-
traded funds; and (3) Nasdaq-listed securities.\8\
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    \8\ This category includes the QQQQ, which is a Nasdaq-listed 
exchange traded fund.
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    With respect to category (1) described above, currently the 
Exchange conducts a Market Order Auction of such securities which is 
based upon the types of orders eligible for execution where the auction 
price could be based on the Indicative Match Price or the midpoint of 
the first uncrossed NBBO after 6:30 a.m. (Pacific Time). The Exchange 
proposes to modify this functionality and would not conduct a Market 
Order Auction, but rather would route all market orders to the primary 
market until the first opening print on the primary market. All limit 
orders and

[[Page 43925]]

any market orders after the first primary opening print would be 
processed pursuant to PCXE Rule 7.37.\9\
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    \9\ PCXE Rule 7.37 describes ArcaEx's execution processes 
including the Directed Order Process, Display Order Process, Working 
Order Process, and Tracking Order Process.
---------------------------------------------------------------------------

    Regarding category (2) described above, currently the Exchange 
conducts a Market Order Auction of such securities which is based upon 
the types of orders eligible for execution where the auction price 
could be based on the Indicative Match Price or the midpoint of the 
first uncrossed NBBO after 6:30 a.m. (Pacific Time). The Exchange 
proposes to maintain its existing Market Order Auction functionality 
for exchange-listed securities for which the Corporation is the primary 
market and all exchange-listed exchange-traded funds. In this filing, 
the Exchange seeks to clarify the existing rule language associated 
with the Market Order Auction. Such changes do not result in any 
functionality changes, but rather would refine the rule text to be 
clearer and more consistent with existing functionality. Specifically, 
the Exchange proposes to clarify PCXE Rule 7.35(c)(3) which describes 
the determination of the Market Order Auction Price. The clarifying 
changes would more clearly describe the pricing process as follows:
    (1) In the instance in which there are limit orders eligible for 
execution in the Market Order Auction, the Indicative Match Price would 
determine the auction price.
    (2) In the instance in which there are no limit orders eligible for 
execution in the Market Order Auction:
    (i) In the case of exchange-listed exchange traded funds for which 
the Corporation is not the primary market, as many buy market orders 
and sell market orders as possible would be matched and executed at the 
midpoint of the first uncrossed NBBO after 6:30 a.m. (Pacific Time), 
once available; or
    (ii) In the case of exchange-listed securities, including exchange-
listed exchange traded funds, for which the Corporation is the primary 
market, market orders would be rejected.
    The Market Orders that are eligible for, but not executed in the 
Market Order Auction, would become eligible for execution in the Core 
Trading Session immediately upon conclusion of the Market Order 
Auction.
    Lastly, with respect to category (3) described above, currently the 
Exchange conducts a Market Order Auction of such securities which is 
based upon the types of orders eligible for execution where the auction 
price could be based on the Indicative Match Price or the midpoint of 
the first uncrossed NBBO after 6:30 a.m. (Pacific Time). The Exchange 
proposes for Nasdaq-listed securities to match and execute as many 
market orders as possible at the midpoint of the first uncrossed NBBO 
after 6:30 a.m. (Pacific Time). Limit orders and any remaining market 
order interest in Nasdaq-listed securities would be ranked in price/
time priority as described in PCXE Rule 7.36 and processed pursuant to 
PCXE Rule 7.37.
    The Exchange believes that clarifying the Market Order Auction 
pricing mechanism would help ensure that ETP Holders and investors 
understand how orders in the auction will be priced. In particular for 
those types of securities (i.e., exchange-listed securities for which 
the Corporation is not the primary market excluding exchange traded 
funds and Nasdaq-listed securities) in which the Exchange may not have 
sufficient liquidity on the Arca Book at the open to execute the Market 
Order Auction at a price that is substantially close to the opening 
price on the primary market, the Exchange seeks to provide its ETP 
Holders with the opportunity to have those orders execute at the 
primary markets' prices. Further, implementing price collars would help 
ensure that when ArcaEx conducts a Market Order Auction, the auction 
would execute at prices within range of where the stock is currently 
trading.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) \10\ of the Act, in general, and furthers 
the objectives of Section 6(b)(5),\11\ in particular, in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principals 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 a national market system. The Exchange 
believes that clarifying and improving the Market Order Auction pricing 
mechanism as described in this filing should result in a clearer 
understanding of how orders will be priced at the open and may provide 
greater assurance that orders will be priced at prices that are 
substantially close to where the stock is trading.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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, as 
amended, 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, as amended, were 
neither solicited nor received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, as amended, or
    (B) Institute proceedings to determine whether the proposed rule 
change, as amended, should be disapproved.

IV. 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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-PCX-2005-58 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-2005-58. 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

[[Page 43926]]

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 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-2005-58 and should be 
submitted on or before August 19, 2005. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4024 Filed 7-28-05; 8:45 am]
BILLING CODE 8010-01-P