Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 3 Thereto Relating to Amendments to the Exchange's Trade-Through and Locked Markets Rules, 46898-46899 [E5-4348]

Download as PDF 46898 Federal Register / Vol. 70, No. 154 / Thursday, August 11, 2005 / Notices It is therefore ordered, pursuant to section 19(b)(2) of the Act 8 that the proposed rule change (SR–NASD–2004– 089) be, and it hereby is, approved, as amended. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.9 J. Lynn Taylor, Assistant Secretary. [FR Doc. E5–4349 Filed 8–10–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52206; File No. SR–PCX– 2005–59] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 3 Thereto Relating to Amendments to the Exchange’s Trade-Through and Locked Markets Rules August 4, 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 27, 2005, the Pacific Exchange, Inc. (‘‘PCX’’) 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 PCX. The PCX filed Amendment No. 1 to the proposed rule change on July 8, 2005.3 The PCX filed Amendment No. 2 to the proposed rule change on July 29, 2005 and withdrew Amendment No. 2 on August 1, 2005. The PCX filed Amendment No. 3 to the proposed rule change on August 1, 2005.4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. on efficiency, competition, and capital formation. See, 15 U.S.C. 78c(f). 8 15 U.S.C. 78s(b)(2). 9 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Form 19b–4 dated July 8, 2005 (‘‘Amendment No. 1’’). In Amendment No. 1, the PCX revised the rule text to use terms consistent with PCX’s current rules and made clarifying changes in the purpose and statutory basis sections. 4 See Partial Amendment dated August 1, 2005 (‘‘Amendment No. 3’’). In Amendment No. 3, the PCX made clarifying changes to the rule text and the purpose section. VerDate jul<14>2003 16:14 Aug 10, 2005 Jkt 205001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The PCX is proposing to codify the ‘‘trade and ship’’ and ‘‘book and ship’’ concepts pursuant to the Intermarket Option Linkage Plan (‘‘Plan’’). The text of the proposed rule change is available on the PCX’s Web site (https:// 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 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 purpose of the proposed rule change is to provide that: (i) A Participant Exchange may trade an order at a price that is one minimum quoting increment inferior to the National Best Bid or Offer (‘‘NBBO’’) if a Linkage Order 5 is transmitted to the NBBO market(s) to satisfy all interest at the NBBO price (this is the ‘‘trade and ship’’ concept); and (ii) a Participant Exchange may book an order that would lock another Participant Exchange if a Linkage Order is sent to such other Participant Exchange to satisfy all interest at the lock price (this is the ‘‘book and ship’’ concept). Under the trade and ship proposal, any execution received from the NBBO market must (pursuant to agency obligations) be reassigned to the customer order that is underlying the Linkage Order that was transmitted to ‘‘take out’’ the NBBO market. Below are examples illustrating the applications of these concepts: Trade and Ship Example. Participant Exchange A is disseminating an offer of $2.00 for 100 contracts. Participant Exchange B is disseminating the national best offer of $1.95 for 10 contracts. No other market is at $1.95. Participant Exchange A receives a 100contract customer buy order to pay PO 00000 $2.00. Under this proposal, Participant Exchange A could execute 90 contracts (or 100 contracts) of the customer order at $2.00 provided Participant Exchange A simultaneously transmits a 10contract Principal Acting as Agent (‘‘P/A’’) 6 Order to Participant Exchange B to pay $1.95. Assuming an execution is obtained from Participant Exchange B, the customer would receive the 10contract fill at $1.95 and 90 contracts at $2.00 (if the customer order was originally filled in its entirety at $2.00, an adjustment would be required to provide the customer with the $1.95 price for 10 contracts reflecting the P/A Order execution). As proposed, this would not be deemed a Trade-Through. Book and Ship Example. Participant Exchange A is disseminating a $1.85– $2.00 market. Participant Exchange B is disseminating a $1.80–$1.95 market. The $1.95 offer is for 10 contracts. No other market is at $1.95. Participant Exchange A receives a customer order to buy 100 contracts at $1.95. Under this proposal, Participant Exchange A could book 90 contracts of the customer buy order at $1.95 provided Participant Exchange A simultaneously transmitted a 10-contract P/A Order to Participant Exchange B to pay $1.95. Assuming an execution is obtained from Participant Exchange B, the customer would receive the 10-contract fill and the rest of the customer’s order will be displayed as a $1.95 bid on Participant Exchange A. The national best offer would likely be $2.00. As proposed, this would not be deemed a ‘‘locked’’ market for purposes of the Plan. 2. Statutory Basis The PCX 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) of the Act 8 in particular, because the proposed rule change is designed to prevent fraudulent and manipulative acts and practices, 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 mechanism of a free and open market and a national market system. B. Self-Regulatory Organization’s Statement on Burden on Competition The PCX does not believe that the proposed rule change will impose any burden on competition that is not 6 See PCX Rule 6.92(a)(12)(i). U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 7 15 5 See PCX Rule 6.92(a)(12). Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\11AUN1.SGM 11AUN1 Federal Register / Vol. 70, No. 154 / Thursday, August 11, 2005 / Notices 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. 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 PCX consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–PCX–2005–59 on the subject line. 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 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–2005–59 and should be submitted on or before September 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.9 J. Lynn Taylor, Assistant Secretary. [FR Doc. E5–4348 Filed 8–10–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52220; File No. SR–Phlx– 2005–49] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Impose Licensing Fees in Connection With the Firm-Related Equity Option and Index Option Fee Cap August 5, 2005. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 Paper Comments notice is hereby given that on July 28, • Send paper comments in triplicate 2005, the Philadelphia Stock Exchange, to Jonathan G. Katz, Secretary, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with Securities and Exchange Commission, the Securities and Exchange 100 F Street, NE., Washington, DC Commission (‘‘Commission’’) the 20549–9303. proposed rule change as described in All submissions should refer to File items I, II, and III below, which items Number SR–PCX–2005–59. This file have been prepared by the Exchange. number should be included on the Phlx has designated this proposal as one subject line if e-mail is used. To help the establishing or changing a due, fee, or Commission process and review your other charge imposed by a selfcomments more efficiently, please use regulatory organization pursuant to only one method. The Commission will section 19(b)(3)(A) of the Act,3 and Rule post all comments on the Commission’s 19b–4(f)(2) thereunder,4 which renders Internet Web site (https://www.sec.gov/ the proposal effective upon filing with rules/sro.shtml). Copies of the the Commission. The Commission is submission, all subsequent amendments, all written statements 9 17 CFR 200.30–3(a)(12). with respect to the proposed rule 1 15 U.S.C. 78s(b)(1). change that are filed with the 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). Commission, and all written 4 17 CFR 240.19b–4(f)(2). communications relating to the VerDate jul<14>2003 16:14 Aug 10, 2005 Jkt 205001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 46899 publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend its schedule of fees to adopt a license fee of $0.10 for options traded on the following products: 5 (1) Keefe, Bruyette & Woods Regional Banking Index or the KBW Regional Banking Index, traded under the symbol KRX, and (2) Keefe, Bruyette & Woods Mortgage Finance Index or the KBW Mortgage Finance Index, traded under the symbol MFX (collectively ‘‘KBW products’’), to be assessed per contract side for index option ‘‘firm’’ transactions (comprised of index option firm/proprietary comparison transactions, index option firm/proprietary transactions and index option firm/proprietary facilitation transactions). This license fee will be imposed only after the Exchange’s $60,000 ‘‘firm-related’’ equity option and index option comparison and transaction charge cap, described more fully below, is reached. Currently, the Exchange imposes a cap of $60,000 per member organization 6 on all ‘‘firm-related’’ equity option and index option comparison and transaction charges combined.7 Specifically, ‘‘firm-related’’ charges include equity option firm/ proprietary comparison charges, equity option firm/proprietary transaction charges, equity option firm/proprietary facilitation transaction charges, index option firm/proprietary comparison charges, index option firm/proprietary transaction charges, and index option firm/proprietary facilitation transaction charges (collectively ‘‘firm-related charges’’). Thus, such firm-related charges in the aggregate for one billing month may not exceed $60,000 per month per member organization. 5 This fee will be charged to Exchange members. firm/proprietary comparison or transaction charge applies to member organizations for orders for the proprietary account of any member or nonmember broker-dealer that derives more than 35% of its annual, gross revenues from commissions and principal transactions with customers. Member organizations are required to verify this amount to the Exchange by certifying that they have reached this threshold by submitting a copy of their annual report, which was prepared in accordance with Generally Accepted Accounting Principles (‘‘GAAP’’). In the event that a member organization has not been in business for one year, the most recent quarterly reports, prepared in accordance with GAAP, are accepted. See Securities Exchange Act Release No. 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000) (SR–Phlx–2000–85). 7 See Securities Exchange Act Release No. 51024 (January 11, 2005), 70 FR 3088 (January 19, 2005) (SR–Phlx–2004–94). 6 The E:\FR\FM\11AUN1.SGM 11AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 154 (Thursday, August 11, 2005)]
[Notices]
[Pages 46898-46899]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-4348]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52206; File No. SR-PCX-2005-59]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing of Proposed Rule Change and Amendment Nos. 1 and 3 Thereto 
Relating to Amendments to the Exchange's Trade-Through and Locked 
Markets Rules

August 4, 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 27, 2005, the Pacific Exchange, Inc. (``PCX'') 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 PCX. The PCX filed Amendment No. 1 to the proposed 
rule change on July 8, 2005.\3\ The PCX filed Amendment No. 2 to the 
proposed rule change on July 29, 2005 and withdrew Amendment No. 2 on 
August 1, 2005. The PCX filed Amendment No. 3 to the proposed rule 
change on August 1, 2005.\4\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Form 19b-4 dated July 8, 2005 (``Amendment No. 1''). In 
Amendment No. 1, the PCX revised the rule text to use terms 
consistent with PCX's current rules and made clarifying changes in 
the purpose and statutory basis sections.
    \4\ See Partial Amendment dated August 1, 2005 (``Amendment No. 
3''). In Amendment No. 3, the PCX made clarifying changes to the 
rule text and the purpose section.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PCX is proposing to codify the ``trade and ship'' and ``book 
and ship'' concepts pursuant to the Intermarket Option Linkage Plan 
(``Plan''). The text of the proposed rule change is available on the 
PCX's Web site (https://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 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 purpose of the proposed rule change is to provide that: (i) A 
Participant Exchange may trade an order at a price that is one minimum 
quoting increment inferior to the National Best Bid or Offer (``NBBO'') 
if a Linkage Order \5\ is transmitted to the NBBO market(s) to satisfy 
all interest at the NBBO price (this is the ``trade and ship'' 
concept); and (ii) a Participant Exchange may book an order that would 
lock another Participant Exchange if a Linkage Order is sent to such 
other Participant Exchange to satisfy all interest at the lock price 
(this is the ``book and ship'' concept). Under the trade and ship 
proposal, any execution received from the NBBO market must (pursuant to 
agency obligations) be reassigned to the customer order that is 
underlying the Linkage Order that was transmitted to ``take out'' the 
NBBO market. Below are examples illustrating the applications of these 
concepts:
---------------------------------------------------------------------------

    \5\ See PCX Rule 6.92(a)(12).
---------------------------------------------------------------------------

    Trade and Ship Example. Participant Exchange A is disseminating an 
offer of $2.00 for 100 contracts. Participant Exchange B is 
disseminating the national best offer of $1.95 for 10 contracts. No 
other market is at $1.95. Participant Exchange A receives a 100-
contract customer buy order to pay $2.00. Under this proposal, 
Participant Exchange A could execute 90 contracts (or 100 contracts) of 
the customer order at $2.00 provided Participant Exchange A 
simultaneously transmits a 10-contract Principal Acting as Agent (``P/
A'') \6\ Order to Participant Exchange B to pay $1.95. Assuming an 
execution is obtained from Participant Exchange B, the customer would 
receive the 10-contract fill at $1.95 and 90 contracts at $2.00 (if the 
customer order was originally filled in its entirety at $2.00, an 
adjustment would be required to provide the customer with the $1.95 
price for 10 contracts reflecting the P/A Order execution). As 
proposed, this would not be deemed a Trade-Through.
---------------------------------------------------------------------------

    \6\ See PCX Rule 6.92(a)(12)(i).
---------------------------------------------------------------------------

    Book and Ship Example. Participant Exchange A is disseminating a 
$1.85-$2.00 market. Participant Exchange B is disseminating a $1.80-
$1.95 market. The $1.95 offer is for 10 contracts. No other market is 
at $1.95. Participant Exchange A receives a customer order to buy 100 
contracts at $1.95. Under this proposal, Participant Exchange A could 
book 90 contracts of the customer buy order at $1.95 provided 
Participant Exchange A simultaneously transmitted a 10-contract P/A 
Order to Participant Exchange B to pay $1.95. Assuming an execution is 
obtained from Participant Exchange B, the customer would receive the 
10-contract fill and the rest of the customer's order will be displayed 
as a $1.95 bid on Participant Exchange A. The national best offer would 
likely be $2.00. As proposed, this would not be deemed a ``locked'' 
market for purposes of the Plan.
2. Statutory Basis
    The PCX 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) of the Act \8\ in particular, because the proposed rule 
change is designed to prevent fraudulent and manipulative acts and 
practices, 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 mechanism of a free and open market and a national market system.
---------------------------------------------------------------------------

    \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 PCX does not believe that the proposed rule change will impose 
any burden on competition that is not

[[Page 46899]]

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. 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 PCX consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change 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 (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-PCX-2005-59 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-2005-59. 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 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-2005-59 and should be submitted on or before 
September 1, 2005.
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
J. Lynn Taylor,
Assistant Secretary. 6
[FR Doc. E5-4348 Filed 8-10-05; 8:45 am]
BILLING CODE 8010-01-P

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