Self-Regulatory Organizations; Pacific Exchange, Inc.; Order Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to the Establishment of a Portfolio Crossing Service on the Archipelago Exchange, 68503-68504 [05-22415]
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Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices
of securities to hedge option series that
have one-dollar strike intervals has
unintentionally become more
restrictive.
The proposed rule change will
remove the two-dollar standard exercise
price interval limitation for listed
options and the definition of ‘‘in-or-atthe-money.’’ As proposed, Rule
431(f)(2)(J) would require permitted
offset transactions be effected for
specialist or market-making purposes
such as hedging, risk reduction,
rebalancing of positions, liquidation, or
accommodation of customer orders, or
other similar specialist or marketmaking purposes, while prohibiting
trading in an underlying security that is
not related to specialist or market
making option activities, or that does
not constitute a reasonable hedge.
Since clearing firms have risk
monitoring systems that alert them to
unhedged positions and haircut
requirements pursuant to Rule 15c3–113
of the Exchange Act 14 perform a similar
function as NYSE margin requirements
relative to providing adequate risk
coverage to broker-dealers, the Exchange
believes that the elimination of the twodollar standard exercise price limitation
and definition of ‘‘in-or-at-the-money’’
will not diminish the ‘‘safety and
soundness’’ protections that Rule 431
provides.
2. Statutory Basis
The basis for the proposed rule
change is the requirement under section
6(b)(5) 15 of the Exchange Act that the
rules of the Exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. In addition, section
6(b)(5) of the Exchange Act requires the
rules of an exchange to foster
cooperation and coordination with
persons engaged in regulating
transactions in securities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act
13 17
CFR 240.15c3–1.
U.S.C. 78a.
15 15 U.S.C. 78f(b)(5).
14 15
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19:02 Nov 09, 2005
Jkt 208001
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
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 reason for so finding or (ii)
as to which the self-regulatory
organization consents, the Commission
will:
(a) By order approve the proposed
rule change, or
(b) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
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–NYSE–2004–39 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–NYSE–2004–39. 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
Frm 00112
Fmt 4703
Sfmt 4703
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, 100 F Street, NE., Washington,
DC 20549. Copies of the filing also will
be available for inspection and copying
at the principal office of the Exchange.
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–NYSE–2004–39 and should
be submitted on or before December 1,
2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 05–22454 Filed 11–9–05; 8:45 am]
BILLING CODE 8010–01–P
IV. Solicitation of Comments
PO 00000
68503
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52719; File No. SR–PCX–
2005–73]
Self-Regulatory Organizations; Pacific
Exchange, Inc.; Order Approving
Proposed Rule Change and
Amendment No. 1 Thereto Relating to
the Establishment of a Portfolio
Crossing Service on the Archipelago
Exchange
November 2, 2005.
I. Introduction
On June 7, 2005, the Pacific Exchange,
Inc. (‘‘PCX’’ 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 establish an after-hours
Portfolio Crossing Service (‘‘PCS’’). The
PCX filed Amendment No. 1 to the
proposed rule change on September 14,
2005.3 The proposed rule change, as
amended, was published for comment
in the Federal Register on September
28, 2005.4 The Commission received no
comments from the public in response
to the proposed rule change. This order
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 replaced and superseded the
original filing in its entirety.
4 See Securities Exchange Act Release No. 52472
(September 20, 2005), 70 FR 56762.
2 17
E:\FR\FM\10NON1.SGM
10NON1
68504
Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices
approves the proposed rule, as
amended.
II. Description
The PCX, through its wholly-owned
subsidiary PCX Equities, Inc. (‘‘PCXE’’),
proposed to establish the PCS, a new
transaction and trade reporting
mechanism for Equity Trading Permit
Holders (‘‘ETP Holders’’) 5 to allow the
execution and reporting of portfolio
trades in equity securities on the
Archipelago Exchange (‘‘ArcaEx’’). In
order to use PCS, ETP Holders would
input a basket of individual cross
orders, each with a basket number
identifier tying it to the other orders in
the basket. These baskets of individual
cross orders would not interact with
other orders residing in the Arca Book.6
Each side of an individual coupled
order in a basket entered into PCS
would execute without regard to the
priority of other orders entered into
PCS.
To be eligible for PCS, orders must be
part of a basket of individual cross
orders comprised of at least 15
securities and with a total market value
of at least $1,000,000.7 All symbols
eligible for trading on ArcaEx would be
eligible for trading on PCS. If a basket
of orders meets the standards as set
forth in proposed Rule 7.65, the basket
would be referred to as a ‘‘PCS Order.’’
Each individual component of a PCS
Order must be appended with a basket
number identifier tying it to the other
order components of the PCS Order.
This identifier would be used to
distinguish the individual components
of any PCS Order from an ordinary
Cross Order 8 destined for ArcaEx.
ETP Holders would be able to enter
PCS Orders at any time during the
Exchange’s trading day.9 When the
Exchange receives a PCS Order, it
would hold such order until the end of
trading, currently 5 p.m. Pacific Time.
All PCS Orders received during any
particular trading day would be
executed simultaneously in PCS at least
one minute after the close of trading on
the Exchange, but in no event later than
8:59 p.m. Pacific Time. Each individual
order component of a PCS Order would
not interact with other PCS Orders or
other orders residing in the Arca Book
5 See
PCXE Rule 1.1(n).
PCXE Rule 1.1(a).
7 See proposed PCXE Rule 7.65(a)(4)(a) for
definition of ‘‘PCS Order.’’
8 See PCXE Rule 7.31(s).
9 The New York Stock Exchange’s Crossing
Session II (‘‘NYSE CS II’’) is another after hours
session which allows member firms the ability to
cross a portfolio of orders. The NYSE CS II,
however, does not accept orders until after the close
of regular trading.
6 See
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19:02 Nov 09, 2005
Jkt 208001
in any way. Furthermore, trading halts
occurring during the normal market
hours in one or more individual stocks
would not affect the execution of PCS
Orders. However, if there is a marketwide halt in a symbol that remains in
effect at 1 p.m. Pacific Time, the
Exchange would halt trading in such
symbol through its PCS.
The Exchange would handle trade
reporting for PCS executions in one of
two different ways, depending on
whether a particular PCS component
execution involved exchange-listed or
Nasdaq-listed securities. With respect to
exchange-listed securities, the system
would calculate the total shares and
total dollar amounts 10 of all exchangelisted symbols executed in PCS on any
particular trading day. The Exchange
would then transmit this total as an
administrative message over the high
speed line to The Securities Industry
Automation Corporation (‘‘SIAC’’).11
The Exchange would not consolidate
the exchange-listed volume attributable
to PCS with the volume in those
securities occurring in the non-PCS
trading session occurring on ArcaEx.
With respect to Nasdaq-listed securities,
the Exchange would report symbols
individually to Nasdaq as regular
transactions as of the following
morning.12
All PCS executions, whether
exchange-listed or Nasdaq securities,
will be ‘‘covered sales’’ occurring on the
Exchange for the purposes of Section 31
of the Act.13 The Exchange will report
PCS activity to the Commission in Part
II of Form R31 under the Act.
In addition, the Exchange has
requested exemptive relief from the
requirement in Rule 11Aa3–1 under the
Act 14 that the Exchange disseminate on
a consolidated basis trading volume for
each of the component securities
executed on the Exchange’s PCS. In
addition, the Exchange has requested
clarification from the Commission with
respect to the application of Rule 10a–
1 under the Exchange Act and
Regulation SHO.
III. Discussion
After careful review, 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.15 In
particular, the Commission finds that
the proposal, as amended, is consistent
with the provisions of Section 6(b)(5) of
the Act,16 which requires, among other
things, that a national securities
exchange’s rules be designed to prevent
fraud and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to and to perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Commission believes that the
establishment of PCS appears to be
reasonably designed to promote a free
and open market and the national
market system by offering ETP Holders
the opportunity to enter crossing
portfolio orders to be executed against
each other following the conclusion of
the ArcaEx Late Trading Session.17 The
establishment of the PCS also appears to
be reasonably designed to enhance order
execution opportunities on ArcaEx by
providing investors and ETP Holders
with greater opportunities for executing
large portfolio trades.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,18 that the
proposed rule change (SR–PCX–2005–
73), as amended, be, and it hereby is,
approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.19
Jonathan G. Katz,
Secretary.
[FR Doc. 05–22415 Filed 11–9–05; 8:45 am]
BILLING CODE 8010–01–P
10 Since
shares and dollar amounts will be
calculated on a aggregate basis, volume and price
information will not be available at an individual
security level.
11 ArcaEx represented that it would coordinate
with SIAC to ensure it would be able to receive
messages from ArcaEx reflecting aggregate PCS
executions. See infra note 14.
12 Nasdaq is the securities information processor
for Nasdaq-listed securities. Section 11 of the
Nasdaq Unlisted Trading Privileges Plan deals with
trade reporting for Nasdaq securities after 6:30 p.m.
Eastern Time.
13 15 U.S.C. 78ee.
14 The Commission notes that Rule 11Aa3–1 has
been redesignated as Rule 601 of Regulation NMS.
17 CFR 242.601.
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
15 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
16 15 U.S.C. 78f(b)(5).
17 See PCXE Rule 7.34(a)(3).
18 15 U.S.C. 78s(b)(2).
19 17 CFR 200.30–3(a)(12).
E:\FR\FM\10NON1.SGM
10NON1
]]>Agencies
[Federal Register Volume 70, Number 217 (Thursday, November 10, 2005)]
[Notices]
[Pages 68503-68504]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22415]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52719; File No. SR-PCX-2005-73]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Order
Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to
the Establishment of a Portfolio Crossing Service on the Archipelago
Exchange
November 2, 2005.
I. Introduction
On June 7, 2005, the Pacific Exchange, Inc. (``PCX'' 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 establish an after-hours Portfolio Crossing
Service (``PCS''). The PCX filed Amendment No. 1 to the proposed rule
change on September 14, 2005.\3\ The proposed rule change, as amended,
was published for comment in the Federal Register on September 28,
2005.\4\ The Commission received no comments from the public in
response to the proposed rule change. This order
[[Page 68504]]
approves the proposed rule, as amended.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced and superseded the original filing
in its entirety.
\4\ See Securities Exchange Act Release No. 52472 (September 20,
2005), 70 FR 56762.
---------------------------------------------------------------------------
II. Description
The PCX, through its wholly-owned subsidiary PCX Equities, Inc.
(``PCXE''), proposed to establish the PCS, a new transaction and trade
reporting mechanism for Equity Trading Permit Holders (``ETP Holders'')
\5\ to allow the execution and reporting of portfolio trades in equity
securities on the Archipelago Exchange (``ArcaEx''). In order to use
PCS, ETP Holders would input a basket of individual cross orders, each
with a basket number identifier tying it to the other orders in the
basket. These baskets of individual cross orders would not interact
with other orders residing in the Arca Book.\6\ Each side of an
individual coupled order in a basket entered into PCS would execute
without regard to the priority of other orders entered into PCS.
---------------------------------------------------------------------------
\5\ See PCXE Rule 1.1(n).
\6\ See PCXE Rule 1.1(a).
---------------------------------------------------------------------------
To be eligible for PCS, orders must be part of a basket of
individual cross orders comprised of at least 15 securities and with a
total market value of at least $1,000,000.\7\ All symbols eligible for
trading on ArcaEx would be eligible for trading on PCS. If a basket of
orders meets the standards as set forth in proposed Rule 7.65, the
basket would be referred to as a ``PCS Order.'' Each individual
component of a PCS Order must be appended with a basket number
identifier tying it to the other order components of the PCS Order.
This identifier would be used to distinguish the individual components
of any PCS Order from an ordinary Cross Order \8\ destined for ArcaEx.
---------------------------------------------------------------------------
\7\ See proposed PCXE Rule 7.65(a)(4)(a) for definition of ``PCS
Order.''
\8\ See PCXE Rule 7.31(s).
---------------------------------------------------------------------------
ETP Holders would be able to enter PCS Orders at any time during
the Exchange's trading day.\9\ When the Exchange receives a PCS Order,
it would hold such order until the end of trading, currently 5 p.m.
Pacific Time. All PCS Orders received during any particular trading day
would be executed simultaneously in PCS at least one minute after the
close of trading on the Exchange, but in no event later than 8:59 p.m.
Pacific Time. Each individual order component of a PCS Order would not
interact with other PCS Orders or other orders residing in the Arca
Book in any way. Furthermore, trading halts occurring during the normal
market hours in one or more individual stocks would not affect the
execution of PCS Orders. However, if there is a market-wide halt in a
symbol that remains in effect at 1 p.m. Pacific Time, the Exchange
would halt trading in such symbol through its PCS.
---------------------------------------------------------------------------
\9\ The New York Stock Exchange's Crossing Session II (``NYSE CS
II'') is another after hours session which allows member firms the
ability to cross a portfolio of orders. The NYSE CS II, however,
does not accept orders until after the close of regular trading.
---------------------------------------------------------------------------
The Exchange would handle trade reporting for PCS executions in one
of two different ways, depending on whether a particular PCS component
execution involved exchange-listed or Nasdaq-listed securities. With
respect to exchange-listed securities, the system would calculate the
total shares and total dollar amounts \10\ of all exchange-listed
symbols executed in PCS on any particular trading day. The Exchange
would then transmit this total as an administrative message over the
high speed line to The Securities Industry Automation Corporation
(``SIAC'').\11\ The Exchange would not consolidate the exchange-listed
volume attributable to PCS with the volume in those securities
occurring in the non-PCS trading session occurring on ArcaEx. With
respect to Nasdaq-listed securities, the Exchange would report symbols
individually to Nasdaq as regular transactions as of the following
morning.\12\
---------------------------------------------------------------------------
\10\ Since shares and dollar amounts will be calculated on a
aggregate basis, volume and price information will not be available
at an individual security level.
\11\ ArcaEx represented that it would coordinate with SIAC to
ensure it would be able to receive messages from ArcaEx reflecting
aggregate PCS executions. See infra note 14.
\12\ Nasdaq is the securities information processor for Nasdaq-
listed securities. Section 11 of the Nasdaq Unlisted Trading
Privileges Plan deals with trade reporting for Nasdaq securities
after 6:30 p.m. Eastern Time.
---------------------------------------------------------------------------
All PCS executions, whether exchange-listed or Nasdaq securities,
will be ``covered sales'' occurring on the Exchange for the purposes of
Section 31 of the Act.\13\ The Exchange will report PCS activity to the
Commission in Part II of Form R31 under the Act.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78ee.
---------------------------------------------------------------------------
In addition, the Exchange has requested exemptive relief from the
requirement in Rule 11Aa3-1 under the Act \14\ that the Exchange
disseminate on a consolidated basis trading volume for each of the
component securities executed on the Exchange's PCS. In addition, the
Exchange has requested clarification from the Commission with respect
to the application of Rule 10a-1 under the Exchange Act and Regulation
SHO.
---------------------------------------------------------------------------
\14\ The Commission notes that Rule 11Aa3-1 has been
redesignated as Rule 601 of Regulation NMS. 17 CFR 242.601.
---------------------------------------------------------------------------
III. Discussion
After careful review, 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.\15\ In particular, the Commission finds that the
proposal, as amended, is consistent with the provisions of Section
6(b)(5) of the Act,\16\ which requires, among other things, that a
national securities exchange's rules be designed to prevent fraud and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and to perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\15\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the establishment of PCS appears to be
reasonably designed to promote a free and open market and the national
market system by offering ETP Holders the opportunity to enter crossing
portfolio orders to be executed against each other following the
conclusion of the ArcaEx Late Trading Session.\17\ The establishment of
the PCS also appears to be reasonably designed to enhance order
execution opportunities on ArcaEx by providing investors and ETP
Holders with greater opportunities for executing large portfolio
trades.
---------------------------------------------------------------------------
\17\ See PCXE Rule 7.34(a)(3).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-PCX-2005-73), as amended,
be, and it hereby is, approved.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\19\
Jonathan G. Katz,
Secretary.
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 05-22415 Filed 11-9-05; 8:45 am]
BILLING CODE 8010-01-P
