76808 Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 

6Reserve Orders, defined in PCXE Rule 7.31, are 

limit orders with a portion of the size displayed and 

with a reserve portion of the size not displayed.

7See ITS Plan Exhibit B, Section (d).

8 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).

9 15 U.S.C. 78f(b).

10 15 U.S.C. 78f(b)(5).

11 15 U.S.C. 78s(b)(2).

12 17 CFR 200.30–3(a)(12).

1U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

processing capability for ArcaEx 

Reserve Orders 6 in exchange-listed 

securities. An Equity Trading Permit 

Holder (‘‘ETP Holder’’) could use this 

new order modifier when its Reserve 

Order in an exchange-listed security is 

locked by another market and that 

market has not shipped a commitment 

or moved its quote to clear the lock. The 

Proactive if Locked Reserve modifier 

would allow an ETP Holder to instruct 

ArcaEx to ship its Reserve order to an 

away market when the Reserve Order 

has been locked (or crossed) by the 

away market and the offending away 

market has not resolved the lock (or 

cross) in a timely manner. Under the 

proposal, if the away market does not 

respond to a locked market complaint as 

provided for under the ITS Plan within 

an acceptable time period based on 

average responses from ITS participants, 

ArcaEx would proactively route an 

order to the offending market for the 

away market’s displayed size up to the 

reserve amount of such order.7

After careful review, 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 8 and, in particular, 

the requirements of Section 6(b) of the 

Act 9 and the rules and regulations 

thereunder. The Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,10 which 

requires that the rules of an exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest.

Specifically, the Commission believes 

that, in providing a method for ETP 

Holders to proactively unlock or 

uncross markets and execute their 

orders while working within the 

requirements of the ITS Plan, the 

proposed rule change, as amended, 

should provide greater efficiencies in 

the marketplace by giving ArcaEx 

participants increased opportunities for 

executing orders. In particular, the 

Commission believes that allowing 

ArcaEx participants to utilize this order 

modifier may enhance order interaction 

and foster price competition. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,11 that the 

proposed rule change (File No. SR–

PCX–2004–59), as amended, be, and 

hereby is, approved.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

J. Lynn Taylor, 

Assistant Secretary.

[FR Doc. 04–27940 Filed 12–21–04; 8:45 am] 

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50854; File No. SR–PCX–

2004–122] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change by 

the Pacific Exchange, Inc. Relating to 

the Implementation of a New Order 

Audit Trail System 

December 14, 2004. 

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 December 

14, 2004, the Pacific Exchange, Inc. 

(‘‘PCX’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’) the proposed 

rule change as described in Items I, II 

and III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comment 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 Exchange proposes to amend its 

rules relating to the systematization of 

orders in connection the requirement to 

design and implement a consolidated 

options audit trail system (‘‘COATS’’). 

The text of the proposed rule change 

appears below. Additions are italicized; 

deletions are in brackets.

* * * * *

Rule 6

Options Trading 

Applicability, Definitions and 

References 

Rule 6.1(a)—No change. 

(b) Definitions. The following items as 

used in Rule 6 shall, unless the context 

otherwise indicates, have meanings 

herein specified: 

(1)–(38)—No change. 

(39) The term ‘‘Electronic Order 

Capture System (‘‘EOC’’) means the 

Exchange’s electronic audit trail and 

order tracking system that provides an 

accurate time-sequenced record of all 

orders and transactions on the 

Exchange pursuant to Section IV.B.e.(v) 

of the Commission’s order Instituting 

Public Administrative Proceedings 

Pursuant to Section 19(h)(1) of the 

Securities Exchange Act of 1934, 

Making Findings and Imposing 

Remedial Sanctions. EOC records the 

receipt of an order and documents the 

life of the order through the process of 

execution, partial execution, or 

cancellation. This system includes the 

electronic communications interface 

between EOC booth terminals and then 

Floor Broker Hand Held applications. 

Each OTP Holder or OTP Firm’s EOC 

booth terminal and each Floor Broker 

Hand Held Terminal contains an 

electronic order entry screen that 

displays the terms and conditions of 

each order received by that OTP Holder 

or OTP Firm. OTP Holders and OTP 

Firms may record the details of the 

order directly into the EOC system as 

described herein, or, in the alternative, 

into the Electronic Tablet described in 

subsection (b)(40) below.

(40) The term ‘‘Electronic Tablet’’

means the Exchange’s electronic 

method of recording orders that are 

hand written and transmitted to a Floor 

Broker’s workstation for representation 

in order to create an accurate timesequenced record of orders on the 

Exchange. The Electronic Tablet will 

automatically timestamp the receipt of 

an order when such order is transmitted 

to a Floor Broker’s workstation for 

representation in the trading crowd and 

document the life of the order through 

the process of execution, partial 

execution or cancellation. This system 

includes the ability for a Floor Broker to 

hand write order information and 

automatically timestamp the report and 

provides a method to display report 

images at an OTP Holder or OTP Firm’s 

workstation to manually key the order 

information for clearing purposes. Such 

clearing information will become part of 

the data required pursuant to Section 

IV.B.e.(v) of the commission’s Order 

Instituting Public Administrative 

Proceedings Pursuant to Section 

19(h)(1) of the Securities Exchange Act 

of 1934, Making Findings and Imposing 

Remedial Sanctions. OTP Holders and 

OTP Firms may record the details of the 

order directly into the EOC system (as 

Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 76809

described above in subsection (b)(39)) 

or, in the alternative, into the Electronic 

Tablet as described herein.

(c)–(e)—No change.

* * * * *

Admission to and Conduct on the 

Options Trading Floor 

Rule 6.29a)–(g)—No change. 

(h)(1)–(2)—No change. 

(3) Requirements and Conditions. 

(A)—No change. 

(B) Orders transmitted by registered 

Exchange Market Makers may be 

entered directly to the trading posts. All 

other orders may b e entered directly to 

the trading posts only during outgoing 

telephone calls that are initiated at the 

option posts. Pursuant to Rule 6.67(c), 

all such orders must be immediately 

recorded into the EOC or the Electronic 

Tablet unless the exception set forth in 

Rule 6.67(d)(1)(A) applies, in which 

case the EOC/Electronic Tablet 

Contingency Reporting Procedures will 

be in effect in accordance with Rule 

6.67(d)(2).

(C)—No change. 

(4)—No change. 

(5) Floor Brokers. 

(A)–(B)—No change. 

(C) EOC or Electronic Tablet Ticket to 

Follow Procedures Pursuant to Rule 

6.67(d)(1)(A). A Floor Broker in a 

trading crowd who receives a telephonic 

[a] order from an OTP Holder or OTP 

Firm representative located on the 

Trading Floor may represent that order 

immediately in the trading crowd, 

provided (a) that an order ticket for the 

order must be prepared and time 

stamped in the OTP Holder or OTP Firm 

booth before the order is transmitted 

telephonically to the Floor Broker and 

represented in the trading crowd; and 

(b) that the written, time-stamped order 

ticket for the order must be taken to the 

Floor Broker in the trading crowd 

immediately after it has been prepared. 

(D)—No change. 

(6)–(10)—No change. 

Commentary: 

.01–.02—No change. 

.03 While on the Trading Floor, 

clerks must [shall] display at all times 

the badge(s) supplied to them by the 

Exchange. [Any Market-Maker clerk 

who writes up an option order on the 

Options Floor must give his employer a 

copy of that order before it is delivered; 

the employer must retain the copy on 

his person until it is executed.] A clerk 

receiving a phone order must 

immediately record the details of the 

order into EOC or the Electronic Tablet 

pursuant to Rule 6.67(c), except as 

otherwise provided in Rule 

6.67(d)(1)(A). [must initial, must mark 

as opening or closing and must timestamp the order.] 

.04—No change.

* * * * *

Fast Markets and Unusual Market 

Conditions 

Rule 6.28(a)—No change. 

(b)(1)—No change. 

(2) For orders excepted from EOC or 

the Electronic Tablet, pursuant to Rule 

6.67(d)(1)(A), [T]the OBO may 

temporarily move less active issues to 

another post if the Book is extremely 

active. [Books left at the post may be 

separated and order shoes provided for 

the most active series to facilitate order 

flow. A special time stamp will be 

placed behind the Book to stamp 

incoming transactions before they go to 

Price Reporting.] 

(3)–(6)—No change. 

(c)–(d)—No change.

* * * * *

Appointment of Market Makers 

Rule 6.35—No change. 

Commentary: 

.01–.03—No change. 

.04 For the purposes of this rule, 

temporarily undertaking the obligations 

of a Primary Appointment with respect 

to non-Primary Appointment classes of 

option contracts at the request of an 

Exchange OTP Holder or OTP Firm 

shall not be deemed trading in nonPrimary Appointment classes. In 

addition, a Market Makers’ trades 

effected through a Floor Broker do not 

count for nor against the Market Maker’s 

75% requirement, regardless of whether 

the trades are in issues within or 

without his Primary Appointment. Also, 

Market Makers who are solicited on an 

order on behalf of an account other than 

that of another Market Maker may 

accommodate such orders, provided 

that the orders are clearly announced in 

the trading crowd as solicited, and such 

transactions shall not count for nor 

against the 75% requirement. Such 

orders [trades] must [shall] be designed 

by the Market Maker with an ‘‘S’’ in the 

‘‘[o]Optional Data’’ field [section] of 

[the] EOC or the Electronic Tablet or, for 

orders excepted from EOC or the 

Electronic Tablet pursuant to Rule 

6.67(d)(1)(A), in the ‘‘Optional Data’’

section of the trade ticket. 

.05—No change.

* * * * *

Crossing Orders and Stock/Option 

Orders 

Rule 6.47(a)—No change. 

(b) Crossing of Facilitation Orders. A 

Floor Broker who holds an order for a 

public customer or a broker-dealer 

(‘‘customer order’’) and an order for the 

proprietary account of an OTP Holder 

OTP Firm that is representing that 

customer (the ‘‘facilitation order’’) may 

cross such orders only if the following 

procedures are followed. 

(1)—No change. (2) The option order 

tickets for both the [f]Facilitation orders

and [the] customer orders must be 

entered into EOC or the Electronic 

Tablet and [display] all of the terms of 

such orders, including any 

contingencies involving, and all related 

transactions in, either options or 

underlying or related securities, must be 

displayed on EOC or the Electronic 

Tablet. If facilitation orders and 

customer orders are excepted from EOC 

or the Electronic Tablet, pursuant to 

Rule 6.67(d)(1)(A), then order tickets 

must display this same information. The 

Floor Broker must disclose all securities 

that are components of the customer 

order.

(3)–(6)—No change. 

(c)—No change. 

(1)–(3)—No change. 

(4) ‘‘Solicited’’ must [shall] be entered

[written] in the ‘‘Optional Data’’ field of 

the EOC or the Electronic Tablet or, for 

orders excepted from EOC or the 

Electronic Tablet pursuant to Rule 

6.67(d)(1)(A), written in the ‘‘Optional 

Data’’ section of the trade ticket. [area 

on the order ticket of the solicited order. 

If the solicited order is for a market 

maker account, the order ticket shall be 

personally initialed by the solicited 

market maker, who must have in his 

possession a copy of such order ticket 

at all times such order is active.] 

(5)—No change. 

(d)–(e)—No change. 

(f)(1) Stock/Option and SSF/Option 

Orders. When a stock/option order is 

taken to a crowd for execution, the stock 

transaction or SSF transaction must be 

effected prior to the option transaction 

pursuant to Rule 6.47, Commentary .04. 

The following procedure applies to all 

executions of stock/option and SSF/

option orders: [A]after an agreement 

with other OTP Holders or OTP Firms 

of the crowd has been reached as to the 

terms of the transaction, the option 

order must be entered into EOC or the 

Electronic Tablet or, for orders excepted 

from EOC or the Electronic Tablet, 

pursuant to Rule 6.67(d)(1)(A), written 

on tickets [must be written up] and time 

stamped. However, the option 

transaction will [order tickets should] 

not be reported to Options Price 

Reporting Authority (‘‘OPRA’’) by EOC 

or Electronic Tablet or, for orders 

excepted from EOC or the Electronic 

Tablet, pursuant to Rule 6.67(d)(1)(A),

turned in to the Order Book Official at 

this time. The OTP Holders or OTP 

76810 Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 

Firms will [shall] attempt to 

immediately effect the transaction in the 

underlying or related security. If the 

stock transaction cannot be executed 

immediately or is effected at a price 

other than an [the] agreed-upon price, 

the OTP Holders or OTP Firms will

[shall] not be held to the option 

transaction. If the stock transaction is 

effected at an [the] agreed-upon price, 

then all the OTP Holders or OTP Firms 

who participated in the option 

transaction will [shall] be held to their 

agreed-upon price. At the time the stock 

transaction is effected, the option 

transaction must be immediately 

entered into EOC or the Electronic 

Tablet and reported to OPRA or, for 

orders excepted from EOC or the 

Electronic tablet, pursuant to Rule 

6.67(d)(1)(A), trade tickets must

[should] be given to the Order Book 

Official. 

(f)(2)—No change. 

Commentary: 

.01–.06—No change.

* * * * *

Discretionary Transactions 

Rule 6.48.(a)–(b)—No change. 

(c) A Market Marker shall not exercise 

discretion in an account unless he has 

a direct interest in such account. Market 

Makers may not exercise discretion over 

any account other than: A joint account 

approved pursuant to Rule 6.39, or an 

account in which the Market Maker has 

a direct interest. For purposes of this 

Rule, the term ‘‘direct interest’’ in an 

account is limited in its meaning to 

include only a participation in the 

profits and losses in such account, or in 

the case of a partnership or corporation, 

a representative of such partnership or 

corporation who has a supervisory 

responsibility over such account. Only 

persons registered as Market Makers and 

subject to the performance obligations 

set forth in Rule 6.37, may exercise 

discretion over an account. 

(1) A Market Maker wishing to effect 

such discretionary transactions for 

accounts other than the Market Maker’s 

personal account or a joint account must 

enter the order with a Floor Broker and 

the procedures set forth in Rule 6.85. 

The identification of the order as a 

discretionary order is required pursuant 

to [PCX] Rule 6.68(a)(5). [(7), ‘‘Record of 

Orders.’’] 

(A) The clearing acronym [name] of 

the Market Maker for whom the 

transaction is being executed must be 

[printed at the bottom of the ticket (B–

6–1(c)),] entered into EOC or the 

Electronic Tablet, for orders excepted 

from EOC or the Electronic Tablet, 

pursuant to Rule 6.67(d)(1)(A), written 

on the ticket along with the clearing 

acronym [badge number] of the Market 

Maker exercising discretion [(i.e. e.g., 

Joe Trader/MO7)]; and 

(B) A‘‘D’’ must be placed after the 

Market Maker’s clearing acronym

[number,] for whose account the trade is 

executed[, in the firm box (e.g., MO5 

D)]. 

Solicited Transactions 

Rule 6.49(a)–(b)—No change. 

(c) ‘‘Solicited’’ must [shall] be entered

[written] in the ‘‘Optional Data’’ field of 

EOC or the Electronic Tablet for [area on 

the order ticket of] the Solicited order. 

For orders excepted from EOC or the 

Electronic Tablet, pursuant to Rule 

6.67(d)(1)(A), ‘‘Solicited’’ must be 

written in the ‘‘Optional Data’’ section 

on the order ticket of the Solicited order.

* * * * *

ORDER BOOK OFFICIALS 

Order Book Official Defined 

Obligations for Orders 

Rule 6.52(a)–(d)—No change. 

Commentary:

.01.–.03—No change. 

.04 For purposes of this Section, 

orders excepted from EOC or the 

Electronic Tablet, pursuant to Rule 

6.67(d)(1)(A), will be within the custody 

of Order Book Officials only when they 

have been deposited, properly timestamped and marked, in the proper 

receptacle. 

.05–No change.

* * * * *

Certain Types of Orders Defined 

Rule 6.62(a)–(b)—No change. 

(c) A contingency order is a limit or 

market order to buy or sell that is 

contingent upon a condition being 

satisfied. [while the order is at the Post.] 

(d)—No change. 

(e) Not held order. A not held order 

is an order that provides a broker with 

discretion as to price or time in 

executing the order. A ‘‘not held’’ order 

must be designated as such in the 

‘‘Optional Data’’ field of the EOC or the 

Electronic Tablet. For orders excepted 

from EOC or the Electronic Tablet, 

pursuant to Rule 6.67(d)(1)(A), a [A] not 

held order [is an order that] is market 

‘‘not held’’, ‘‘NH’’, ‘‘take time’’ or 

marked with some [that bears any] 

qualifying notation giving discretion as 

to the price or time at which such order 

is to be executed. The ‘‘not held’’

designation must appear in the ‘‘special 

instructions’’ portion of the order ticket. 

Orders that merely include a ‘‘not held’’

designation as part of the time stamp 

will not be deemed to be ‘‘not held’’

orders. 

(f)–(k)—No change.

* * * * *

Order Format and System Entry 

Requirements 

[Orders Required to be in Written Form] 

Rule 6.67(a). Transmitted to the Floor. 

Each order transmitted to the Floor must 

be recorded legibly in a format [written 

form] that has been approved by the 

Exchange, and the OTP Holder receiving 

such order must record the time of its 

receipt on the Floor. Each such order 

must be in a legible format [written 

form] when transmitted [taken] to the 

post for attempted execution. Orders 

sent electronically through the 

Exchange’s Member Firm Interface or 

orders entered into the Exchange’s EOC 

or the Electronic Tablet are [deemed to 

be written] approved formats (as 

described in subsection (b) below) for 

transmitting orders for purposes of Rule 

6.67. 

(b) Order Format Requirements. 

Orders sent to the Exchange for 

execution must comply with the order 

format requirements established by the 

Exchange relating to, among other 

things, option symbol, expiration 

month, exercise price, type of option 

(call or put), quantity of option 

contracts, clearing member 

organization, whether the order is to buy 

or sell, and whether the order is market 

or limit.

[(b) Cancellations and changes. Each 

cancellation of, or change to, an order 

that has been transmitted to the Floor 

must be recorded legibly in a written 

form that has been approved by the 

Exchange, and the OTP Holder receiving 

such cancellation or change must record 

the time of its receipt on the Floor.] (c) 

EOC or Electronic Tablet Entry 

Requirement. Every OTP Holder or OTP 

Firm that receives an order for 

execution on the Exchange must 

immediately, prior to representation in 

the trading crowd, record the details of 

the order (including any modification of 

the terms of the order or cancellation of 

the order) into either the EOC or the 

Electronic Tablet, unless such order has 

been entered into the Exchange’s other 

electronic order processing facilities 

(e.g., orders sent electronically through 

the Exchange’s Member Firm Interface).

(1) EOC. The details of each order 

required to be recorded upon receipt 

must include the data elements 

prescribed in Rule 6.68(a)(1) through 

(9), and such other information as may 

be required by the Exchange from time 

to time. The remaining elements 

prescribed in Rule 6.68(a) shall be 

recorded as the events occur and/or 

during trade reporting procedures.

Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 76811

(2) Electronic Tablet. The details of 

each order required to be recorded upon 

receipt must include the data elements 

prescribed in Rule 6.68(a)(1) through 

(6), and such other information as may 

be required by the Exchange from time 

to time. The remaining elements 

prescribed in Rule 6.68(a) shall be 

recorded as the events occur and/or 

during trade reporting procedures.

[(c) Executions. An OTP Holder 

transmitting from the Floor a report of 

the execution of an order must record 

the time at which a report of such 

execution is received by such OTP 

Holder.] 

(d)(1) Exceptions to EOC or Electronic 

Tablet Entry Requirements. The EOC or 

Electronic Tablet entry requirement 

provision of subsection (c) will not 

apply to the following:

(A) Any EOC or Electronic Tablet 

system disruption or malfunction as 

confirmed by two Trading Officials or 

Exchange staff (as designated by the 

Chief Regulatory Officer).

(2) EOC/Electronic Tablet 

Contingency Reporting Procedures. If 

the exception set forth in subsection 

(d)(1)(A) applies, then the following 

procedures must be followed.

(A) OTP Holders and OTP Firms shall 

use a backup supply of tickets to record 

the details of all orders (the data 

elements of which are prescribed in 

Rule 6.68(a)(1) through (9)), received 

through non-electronic means. The 

order ticket must be processed in 

accordance with Rule 6.2(h)(5)(C). All 

order events (i.e., receipt, changes, 

execution, partial execution, 

cancellation, or nothing done) must be 

immediately time stamped (a time 

stamp synchronized with the National 

Institute of Standards and Technology 

Atomic Clock in Boulder Colorado 

‘‘NIST Clock’’ will be available at all 

OTP Holder and OTP Firm booths and 

trading posts).

(B) During such circumstances, 

existing rules on manual processing of 

order tickets are applicable.

(C) If there is an EOC or Electronic 

Tablet system disruption/malfunction 

as set forth in subsection (1)(A), the EOC 

or Electronic Tablet order entry 

requirements in Rule 6.67(c) will be 

reinstated once the disruption/

malfunction to the EOC or Electronic 

Tablet system has been corrected as 

determined by one Trading Official or 

Exchange staff (as the case may be). 

Once the disruption/malfunction to the 

EOC or Electronic Tablet system has 

been corrected, all OPT Holders and 

OTP Firms affected by the system 

disruption/malfunction must input all 

relevant orders into an EOC device via 

the ‘‘as-of’’ field, noting the times of 

events of the orders. The required 

information must be entered into EOC 

by such prescribed period of time, as 

determined by the Exchange, following 

the trade, but no later than the end of 

the trading day that such trade occurred 

(or on the day the order was received if 

no trade was executed). Any OTP 

Holder or OTP Firm who fails to follow 

such procedures will be subject to 

disciplinary action pursuant to Rule 10.

[(d) A Floor Broker may represent a 

telephonic order, with a ticket to follow, 

as provided in Rule 6.2(h)(4)(C).] 

[(e) Hand Signals. The following 

regulations govern the proper use of 

hand signals on the Options Trading 

Floor: (1) Hand signals may always be 

used to request and to relay information 

regarding current quotations and market 

size. Hand signals may also be used to 

increase or decrease the size of an order, 

to change the order’s limit, to cancel an 

order or to activate a market order. 

Any cancellation of or change to an 

order relayed to a Floor Broker through 

the use of hand signals also must be 

relayed to the Floor Broker in a time 

stamped, written form immediately 

thereafter. All cancellations and changes 

of orders held by the Order Book 

Official must be in written form. 

Executing brokers who receive such 

communications must have a written 

order in their possession with all of the 

following information on the ticket: 

Underlying security ticker symbol 

Expiration month 

Striking price 

Volume 

Purchase or Sale Notation 

Whether Market or Limit Order 

(2) Cancellaiton of orders held by the 

Floor Broker must be in written form in 

accordance with current practice. A 

Floor Broker may cancel an order 

through the use of hand signals if it is 

followed immediately by written 

cancellation. (3) Any change to an order 

must be documented in writing outside 

of the crowd and the ticket timestamped, before the revised order may 

be represented.] [(f) Any OTP Holder 

desiring to use an order form in a format 

other than that provided by the 

Exchange must submit such form to the 

Exchange and obtain its approval prior 

to using such form on the Floor.] 

(e) The system entry requirement 

prescribed in subsection (c), above, will 

be operative on or before January 10, 

2005.

Commentary .01: FLEX and Cabinet 

Trades are exempt from the EOC and 

Electronic Tablet Entry Requirements as 

set forth in Rule 6.67(c). Such trades 

shall be processed using manual time 

stamped order tickets. The PCX will 

maintain a separate record (i.e., 

spreadsheet) of quotes, orders and 

transactions related to such trades in 

the same format require pursuant to 

Section IV.B.e.(v) of the Commission’s 

order Instituting Public Administrative 

Proceedings Pursuant to Section 

19(h)(1) of the Securities Exchange Act 

of 1934, Making Findings and Imposing 

Remedial Sanctions.

* * * * *

Record of Orders 

Rule 6.68(a). Every OTP Holder or 

OTP Firm must [shall] maintain and 

preserve for the period specified under 

SEC Rule 17a–4, a [written] record of 

every order and of any other instruction 

given or received for the purchase or 

sale of option contracts. The Exchange 

shall maintain and preserve all 

electronic orders on behalf of the OTP 

Holder or OTP Firm. Such record must

[shall] show the terms and conditions 

(market order, limit order, etc.) of the 

order or instruction and of any 

modification or cancellation thereof, 

and in addition must [shall] include: 

[(1) the account designation for which 

such order is to be executed; (2) the date 

and time stamp indicating the time the 

order was entered and executed or 

cancelled; (3) the type of option and the 

underlying stock; (4) the expiration 

month, the exercise price, the number of 

option contracts and the execution price 

(premium); (5) whether the order is a 

purchase or a sale (writing) and whether 

the order is an opening or a closing 

transaction; (6) whether the order is 

solicited or unsolicited; and (7) whether 

the order is discretionary.] 

(1) CMTA Information and claring 

OTP Holder or Firm;

(2) Option symbol, expiration month, 

exercise price, and type of option (call 

or put);

(3) Side of market (buy or sell) and 

order type (customer, firm, firm market 

maker);

(4) Quantity of option contracts;

(5) Any limit price, stop price, or 

special conditions;

(6) Opening or closing transaction;

(7) Time in force;

(8) Account origin code;

(9) Solicited or unsolicited;

(10) Order identification number;

(11) Order entry date and time, or the 

date and time of any modification of the 

terms of the order or cancellation of the 

order;

(12) Order execution time and price;

(13) Identity of the executing broker 

and the other party to the transaction; 

and

(14) Such other information as may be 

required by the Exchange.

(b) Record Retention for Orders 

Excepted from EOC or the Electronic 

76812 Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 

Tablet Pursuant to Rule 6.67(d)(1)(A). In 

addition to the white (control) copy, 

and/or hard copy, which must be kept 

for the entire amount of time specified 

in Securities Exchange Act Rule 17a–4, 

the green (commission) copy must also 

be retained for a minimum of 48 hours 

from the trade date. In the case of those 

orders executed by independent Floor 

Brokers, it is their responsibility to 

retain the green (commission) copy, and 

the executing OTP Holder must retain 

the white or hard copy. Also, all such 

records must be readily available for use 

on the trading floor for the resolution of 

any problems relating to the execution 

of these orders.

* * * * *

Reporting Duties 

Rule 6.69(a)–(e)—No change. 

Commentary: 

.01 EOC or Electronic Tablet 

Reporting Procedure. The Exchange has 

established the following procedure for 

reporting of transactions pursuant to 

Rule 6.69. For each transaction on the 

Exchange in which an OTP Holder [he] 

participates as seller, that [a floor] OTP 

Holder will [shall] immediately record 

into EOC or the Electronic Tablet, [on a 

card or ticket in a form acceptable to the 

Committee his] its assigned broker 

initial code, the symbol of the 

underlying security, the type, expiration 

month and exercise price of the option 

contract sold, the transaction price, the 

number of contract units comprising the 

transaction, the name of the contra 

clearing member, and the assigned 

broker initial code of the contra OTP 

Holder or OTP Firm. OTP Holders or 

OTP Firms must report any [shall 

identify price reporting tickets which 

represent the] partial execution of a 

larger order into EOC or the Electronic 

Tablet [the manner prescribed by the 

Exchange. The card or ticket for a]Any 

agency order must [shall] also include 

the account origin code[,]. [as set forth 

in Commentary .02 below. This 

reporting card or ticket shall 

immediately be time-stamped at the 

station where option contracts of the 

class involved are traded and attached 

to the appropriate ‘‘buy’’ ticket. The 

card or ticket shall then be placed in the 

price reporting card box provided at the 

station. Before placing the tickets in the 

box, the OTP Holder shall use his best 

efforts to make sure that the Order Book 

Official with respect to option contracts 

of the class involved, or the Order Book 

Official clerk, is aware of the transaction 

and its price. In transactions when the 

buyer accepts tickets from the seller(s), 

it shall be the buyer’s responsibility to 

time-stamp the tickets, use best efforts at 

securing the Order Book Staff’s attention 

to the transaction, and submit the 

tickets into the box.] Any OTP Holder 

failing to immediately report a 

transaction in accordance with Rule 

6.69 will [shall] be subject to [being 

fined] disciplinary action pursuant to 

Rule 10. [by the Exchange.] 

.02—Reserved.

[.02 Reporting of Trade Information. 

The responsibility for time stamping 

and reporting of trades to the Order 

Book is as follows: (a) One buyer, 

multiple sellers—responsibility is with 

the buyer 

(b) One seller, multiple buyers—

responsibility is with the seller(c) one 

buyer, one seller—responsibility is with 

the seller] 

.03 Origin Codes for Orders 

Excepted from EOC or the Electronic 

Tablet Pursuant to Rule 6.67(d)(1)(A).

For purposes of Rule 6.69(d), trade 

information includes the proper account 

origin codes, which are as follows: ‘‘C’’

for non-broker-dealer customer 

accounts; ‘‘F’’ for firm proprietary 

accounts; ‘‘M’’ for Market Maker 

accounts; and ‘‘B/D’’ for firm orders of 

non-OTP Holder or OTP Firm brokerdealer accounts, stock specialist 

accounts, or customer account trades of 

the broker-dealer or non-OTP Holder or 

OTP Firm broker-dealer. In addition, 

Market Maker clearing firms are 

directed to instruct their respective 

trading desks to identify Market Maker 

orders that are entered from off the floor 

and not entitled to Market Maker margin 

treatment by placing a ‘‘C’’ after the 

Market Maker’s number in the ‘‘firm’’

box on the ticket. Floor Brokers, when 

accepting an order by phone from a 

Market Maker, are similarly directed to 

identify that order in the same manner. 

.04—No change.

* * * * *

Priority and Order Allocation 

Procedures 

Rule 6.75(a)–(h)—No change. 

Commentary: 

.01–.03—No change. 

.04 Combination, Spread and 

Straddle Orders. Following are the 

proper trading procedures for 

combination, spread and straddle 

orders:

(a) Announcing the Order. Any OTP 

Holder or OTP Firm holding a 

combination, spread, or straddle order 

must [write it on one ticket and must] 

bid or offer for each series in the order. 

For orders expected from EOC or the 

Electronic Tablet, pursuant to Rule 

6.67(d)(1)(A), such orders must be 

written on a ticket in accordance with 

Rule 6.2(h)(5)(C). The OTP Holder or 

OTP Firm may express the order as it 

applies to each separate series or may 

express the order at its total or net debit/

credit alone, so long as it is clear that 

the OTP Holder or OTP Firm is 

attempting to execute both series as a 

combination, spread, or straddle. The 

executing OTP Holder or OTP Firm 

must ensure that the trading crowd is 

aware of the request for a market and 

has an opportunity to participate in the 

transaction. 

(b)–(g)—No change.

* * * * *

Joint Accounts 

Rule 6.84(a)–(h)—No change. 

Commentary: 

.01–.02—No change. 

.03 Transactions on the Floor will be 

presumed to be for the proprietary 

account of the individual OTP Holder or 

OTP Firm unless the executing OTP 

Holder or OTP Firm enters the joint 

account symbol into EOC or the 

Electronic Tablet. For orders excepted 

from EOC or the Electronic Tablet, 

pursuant to Rule 6.67(d)(1)(A), 

transactions on the Floor will be 

presumed to be for the proprietary 

account of the individual OTP Holder or 

OTP Firm unless the joint account 

symbol is given up and used on the 

trade ticket to represent the joint 

account as the executing OTP Holder or 

OTP Firm. 

.04 Any order of a joint account 

participant[,] that [which] is executed 

by a Floor Broker, must [shall] be in 

accordance with the procedures set 

forth in Rule 6.85, except that the joint 

account trading number with its alpha 

identification must be entered into EOC 

or the Electronic Tablet, or, for order 

excepted from EOC or the Electronic 

Tablet, pursuant to Rule 6.67(d)(1)(A), 

the joint account trading number with 

its alpha identification must [should] 

appear in the ‘‘executing firm’’ area. 

Additionally, a joint account may not 

bid, offer, purchase, sell, or enter orders 

in an option series in which a Floor 

Broker holds an order on behalf of the 

joint account or for the proprietary 

account of another participant in the 

joint account. Orders of joint account 

participants in a particular option series 

may not be concurrently represented[,] 

by one or more Floor Brokers. 

.05–.07—No change.

* * * * *

Market Maker Orders Executed By 

Floor Brokers 

Rule 6.85(a)–(c)—No change. 

Commentary: 

.01–.02—No change. 

.03 Orders Excepted from EOC or 

the Electronic Tablet Pursuant to Rule 

6.67(d)(1)(A). Market Maker order 

Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 76813

3See Securities Exchange Act Release No. 48264 

(July 31, 2003), 68 FR 47124 (August 7, 2003) (SR–

PCX–2002–57).

4See Securities Exchange Act Release No. 43268 

(September 11, 2000) and Administrative 

Proceeding File No. 3–10282.

5 Id. at 13–14.

6POETS is the Exchange’s automated trading 

system comprised of an options order routing 

system, an automatic execution system (‘‘Auto-Ex’’), 

an on-line limit order book system (‘‘Auto-Book’’), 

and an automatic market quote update system 

(‘‘Auto-Quote’’).

7See Securities Exchange Act Release No. 47838 

(May 13, 2003), 68 FR 27129 (May 19, 2003) (Order 

approving PCX Plus).

8POPS is the Exchange’s automated system that 

compares trade information entered by OTP 

Holders and Firms and submits trades to the 

Options Clearing Corporation for clearance and 

settlement.

9The Floor Broker Hand Held interface is an 

automated order delivery system that enables Floor 

Brokers to receive and execute orders electronically, 

and to report trade executions to the tape via the 

Options Price Reporting Authority (‘‘OPRA’’) and to 

POPS for clearing. See PCX Rule 6.89.

10An OTP Holder or OTT Firm’s default 

destination may be either a particular firm booth or 

a remote entry site, to which orders that fail to meet 

the eligibility criteria necessary for Auto-Ex or 

Auto-Book will be delivered.

11Former Rules 6.67(b), (c) and (d) are being 

deleted as they are redundant and superfluous 

provisions pursuant to proposed Rules 6.67(c), 

6.67(d) and 6.67(d)(1).

12The Exchange commits that it will implement 

proactive and effective surveillance procedures for 

violations of Exchange rules and federal securities 

laws, including, but not limited to, rules prohibiting 

trading ahead and front running, related to the entry 

of customer orders into the EOC system.

13The EOC entry requirement will also apply to 

PCX Plus.

tickets should be prepared by the 

Market Maker, when possible. All 

orders must [shall] be recorded and 

time-stamped, pursuant to Rule 6.67. 

Order tickets must [shall] include the 

acronym of the Market Maker entering 

the order in the area marked ‘‘buying 

firm/selling firm,’’ within the Market 

Maker’s name printed at the bottom of 

the ticket. Order tickets must be marked 

to indicate whether the order is ‘‘GTC’’

or day only. The acronym of the 

executing Floor Broker must [shall] be 

written in the are marked ‘‘executing 

member.’’ When utilizing a ‘‘partial 

order’’ ticket to facilitate the completion 

of an order, the control number of the 

original order ticket must be written on 

the partial order ticket. Except as 

provided in Rule 6.2(h)(5)[(4)](C) (Ticket 

to Follow Rule), when a Floor Broker 

receives a verbal order from a Market 

Maker, or when a Floor Broker is 

requested by a Market Maker to alter an 

order in his possession in any way, the 

Floor Broker must [shall] immediately 

prepare an order ticket from outside the 

trading crowd and timestamp it.

* * * * *

Floor Broker Hand-held Terminals 

Rule 6.89(a)—No change. 

(b) Proprietary Brokerage Order 

Routing Terminals: 

(1)–(3)—No change. 

(4)(A)—No change. 

(B) Orders Excepted from EOC or the 

Electronic Tablet Pursuant to Rule 

6.67(d)(1)(A). When an OTP Holder or 

OTP Firm executes an order that was 

received over a Terminal, the OTP 

Holder or OTP Firm must fill out and 

immediately time stamp a trading ticket 

[within one minute of the execution]. 

Exchange rules on record keeping and 

trade reporting are unchanged. 

(C)–(D)—No change. 

(5)–(7)—No change. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange 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 Section s 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 

a. Background. The Exchange is 

proposing this rule change to comply 

with the requirement to implement 

COATS. In connection with the filing of 

this proposed rule change, the PCX 

withdraws SR–PCX–2002–57, and 

Amendment Nos. 1–4 thereto, which the 

Exchange previously filed to comply 

with the requirement to implement 

COATS.3

Specifically, the Exchange is 

proposing to effect rule changes to 

support the implementation of its new 

audit trail system known as Electronic 

Order Capture System (‘‘EOC’’). The 

EOC is intended to fulfill one of the 

undertakings contained in the 

Commission’s Order Instituting Public 

Administrative Proceedings Pursuant to 

Sections 19(h)(1) of the Securities 

Exchange Act of 1934, Making Findings 

and Imposing Remedial Sanctions. 

(‘‘Order’’).4 Specifically, this rule filing 

is intended to respond to Section 

IV.B.e(v) of the Order, which requires, 

among other things, that the PCX 

incorporate into its audit trail all nonelectronic orders such that the audit 

trail provides an accurate, timesequenced record of electronic and 

other orders, quotations and 

transactions, beginning with the receipt 

of the order and documenting the life of 

the order through the process of 

execution, partial execution, or 

cancellation.5

Currently, the PCX operates two 

electronic order routing and execution 

system called Pacific Options Exchange 

Trading System (‘‘POETS’’) 6 and PCX 

Plus,7 and other peripheral systems 

including the Pacific Options Processing 

System (‘‘POPS’’) 8 and the Floor Broker 

Hand Held trading system,9 in 

conjunction with traditional open 

outcry trading with Floor Brokers and 

competing Market Makers. The 

Exchange’s Member Firm Interface 

(‘‘MFI’’) enables OTP Holders and OTP 

Firms to send orders electronically to 

the Exchange for delivery to POETS, 

PCX Plus, a Floor Broker Hand Held 

Terminal, or to an OTP Holder or OTP 

Firm’s default destination.10 While all 

executions using POETS, PCX Plus, and 

electronic hand-held devices carry 

immediately assigned system times, 

orders that are routed to the trading 

floor of the Exchange by telephone or 

sent to the OTP Holder or OTP Firm’s 

printers located on the trading floor 

generally require manual trade ticket 

processing. Under the proposal, the EOC 

will eliminate the manual processing of 

order tickets and will further facilitate 

the creation and development of a 

comprehensive audit trail and 

automated surveillance systems for 

these orders that are currently processed 

manually.

b. Summary of Proposed Rule 

Changes. The Exchange is proposing to 

adopt changes to its rules regarding the 

record of orders (principally PCX Rules 

6.67 and 6.68) to enhance the 

Exchange’s audit trail and selfregulatory capabilities. The proposed 

changes to the text of the PCX rules are 

summarized below. 

1. EOC/Electronic Tablet. The 

Exchange is proposing to adopt new 

PCX Rule 6.67(c),11 which requires that 

every OTP holder or OTP Firm that 

receives an order for execution of the 

Exchange must immediately 12 record 

the details of the order (including any 

modification of the terms of the order or 

cancellation of the order) into EOC, 

unless such order has been entered into 

the Exchange’s other electronic order 

processing facilities 13 (e.g., orders sent 

76814 Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 

14The systemic entry requirement would not be 

applicable to transactions initiated on the Floor and 

executed by a registered Market Maker or a Lead 

Market Maker for their own account, as such trades 

that may be initiated on the Floor and that they are 

already reported to POETS via proprietary handheld devices.

15The Exchange notes that certain data elements 

tied to execution, such as executing broker, contra 

broker, execution time and price are not required 

to be entered by this Rule, as they are not available 

at the time that order details are entered into EOC. 

The Exchange also notes that the order entry time 

and identification number are automatically 

assigned upon entry into EOC.

16The proposed rule also includes a provision 

that would require OTP Holders and OTP Firms to 

record such other information as may be required 

by the Exchange from time to time.

17The Exchange’s order processing systems have 

been designed so that the clocking mechanisms do 

not deviate by more than three seconds from the 

Naval Observatory atomic clock in Washington, DC.

18The EOC will not initially support the use of 

a OTP Holder or OTP Firm’s proprietary system to 

comply with the proposed order entry 

requirements.

19Orders sent via the EOC interface to a Floor 

Broker in the trading crowd may subsequently be 

transmitted electronically to another Floor Broker 

on the Floor. When an order is transmitted from one 

OTP Holder or OTP Firm to another, the EOC will 

capture each phase of processing at the order moves 

from entry to execution.

20Under the proposed rule, OTP Holders and 

OTP Firms must use a backup supply of tickets to 

record the details of the order received through 

non-electronic means and time stamp the order of 

events. Once the disruption or malfunction has 

been corrected, as determined by one Floor Official, 

OTP Holders and OTP Firms must input all orders 

into the EOC device using the ‘‘as-of’’ field.

electronically through the Exchange’s 

MFI).14 OTP Holders and OTP Firms 

will have two ways to record the details 

of an order into EOC prior to 

representation in the trading crowd: (i) 

Direct entry into the EOC system, or (ii) 

entry to an Electronic Tablet that 

enables the user to hand-write the order 

information onto the tablet, which 

converts the information into an 

electronic format. The information from 

the Electronic Tablet is then transmitted 

to a Floor Broker’s workstation for 

representation with an automatic 

timestamp for order receipt. A booth 

clerk will then key in the order 

information from the Electronic Tablet 

into the EOC system for clearing 

purposes in order for it to become part 

of the data required for COATS.

The details of each order that will be 

required to be recorded upon receipt if 

directly entered into the EOC system 

include the following:15 (1) CMTA 

information/Clearing OTP Holder or 

Firm; (2) Option symbol, expiration 

month, exercise price, and type of 

option (call or put); (3) Side of market 

(buy or sell); (4) Quantity of option 

contracts; (5) Any limit price, stop price, 

or special conditions, (6) Opening or 

closing transaction; (7) Time in force; (8) 

Account origin code; and (9) Solicited 

or unsolicited.16

The details of each order that will be 

required to be recorded upon receipt if 

entered into the Electronic Tablet 

include the following: (1) CMTA 

information/Clearing OTP Holder or 

Firm; (2) Option symbol, expiration 

month, exercise price, and type of 

option (call or put); (3) Side of market 

(buy or sell); (4) Quantity of option 

contracts; (5) Any limit kprice, stop 

price, or special conditions, and (6) 

Opening or closing transaction. 

Therefore, OTP Holders and OTP 

Firms may comply with proposed PCX 

Rule 6.67(c) in one of three ways: (1) 

Required order details may be 

transmitted via the Exchange’s other 

electronic order processing facilities 

that electronically assign the time of 

receipt on the Exchange; (2) Order 

details may be routed to the OTP Holder 

or OTP Firm booth by telephone or be 

sent to the OTP Holder or OTP Firm’s 

printer located on the Floor, and 

immediately entered into EOC (either 

directly into EOC or via the Electronic 

Tablet), which will electronically assign 

the time of receipt of the Exchange; or 

(3) Orders may be received during 

outgoing telephone calls that are 

initiated at the option post, and then 

immediately entered into the EOC 

(either directly into EOC or via the 

electronic Tablet), which will 

electronically assign the time of receipt 

of the Exchange pursuant to PCX Rule 

6.2(h)(3)(B).17

The EOC device that is used to record 

the details of the order upon receipt on 

the Floor is an Exchange provided 

system.18 The EOC and the 

enhancements to the existing Floor 

Broker Hand Held Terminal 

applications will support the entry of all 

order types (including contingency and 

complex orders, i.e., multiple-leg option 

and stock/option orders) and all 

required information, as well as provide 

quick entry templates to speed data 

entry. Once an OTP Holder or OTP 

Firm’s booth clerk records the details of 

an order into EOC (or the Electronic 

Tablet) or in the case when a Floor 

Broker receives an order pursuant to 

PCX Rule 6.2(h)(3)(B), the order is 

routed electronically to a Floor Broker 

Hand Held Terminal for representation 

in the trading crowd.19 OTP Holders 

and OTP Firms will have the capability 

to track and display all orders that are 

submitted through the EOC, as all orders 

will be assigned a unique identifier that 

will be used throughout the life of the 

order.

The Exchange believes that the 

implementation of EOC and the 

Electronic Tablet, as described above, 

will improve order information 

management features resulting in 

operational efficienies for OTP Holders 

and OTP Firms. 

2. Order Format Requirements. The 

Exchange’s current rules governing the 

order format requirements in 

transmitting orders to the Exchange are 

set forth in PCX Rule 6.67(a). The 

Exchange is proposing to add 

interpretive language to make it clear 

that EOC and the Electronic Tablet are 

approved formats for transmitting orders 

for purposes of this Rule. In addition, 

proposed PCX Rule 6.67(b) requires that 

orders sent to the Exchange for 

execution must comply with the order 

format requirements established by the 

Exchange relating to, among other 

things, option symbol, expiration 

month, exercise price, type of option 

(call or put); quantity of option 

contracts, clearing member organization, 

whether the order is to buy or sell, and 

whether the order is market or limit. 

3. Exceptions to EOC Entry 

Requirement. An exception to the 

requirement for recording order 

information into EOC or the Electronic 

Tablet is contained in proposed PCX 

Rule 6.67(d). Under this proposed rule, 

if a disruption or malfunction to EOC or 

the Electronic Tablet or any other 

Exchange electronic order processing 

system occurs, the EOC or the Electronic 

Tablet entry reuqirement will be 

suspended upon the approval of two 

Trading Officials, and the EOC/

Electronic Tablet Contingency Reporting 

Procedures will be in effect pursuant to 

PCX Rule 6.67(d)(1)(A).20 If the 

Exchange is still able to process and 

disseminate quotes accurately, then any 

orders received by the Exchange will be 

processed manually through the use of 

paper tickets. In such circumstances, all 

other Exchange rules governing options 

trading will remain in effect. 

Accordingly, the Exchange intends to 

retain its existing rules that are 

applicable to the manual processing of 

order tickets. Minor changes have been 

made throughout the existing options 

trading rules to allow for manual 

processing of trade tickets when 

necessary.

4. Record of Orders. Current PCX Rule 

6.68(a) requires OTP Holder and OTP 

Firms to maintain and preserve certain 

information items relating to the terms 

of each option order. The Exchange is 

proposing to make minor technical 

changes to the text by renaming and 

renumbering certain information items 

enumerated in the Rule for clarity. The 

Exchange is also proposing language to 

specify that the Exchange shall maintain 

Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 76815

21See PCX Rule 6.80.

22See PCX Rule 5.30(b)(4).

23See proposed PCX Rule 6.67(f).

24 15 U.S.C. 78f(b).

25 15 U.S.C. 78f(b)(5).

26 15 U.S.C. 78k–1(a)(i)(B). 27 17 CFR 200.30–3(a)(12).

and preserve all electronic orders on 

behalf of OTP Holders and OTP Firms. 

The proposed rule change does not 

replace existing requirements for 

recording orders contained in this Rule. 

The Exchange is also proposing to 

amend PCX Rule 6.68(b) to make it clear 

that OTP Holders and OTP Firms must 

comply with their record keeping 

obligations for order excepted from the 

EOC/Electronic Tablet requirements. 

5. Reporting of Trade Information.

The Exchange proposes to rescind 

current PCX Rule 6.69, Commentary .02, 

which relates to the trade reporting 

requirements of OTP Holders and OTP 

Firms. The Exchange believes that this 

rule is superfluous and that it is 

inconsistent with PCX Rule 6.69(b), 

which already requires that the OTP 

Holder or OTP Firm representing the 

sell side of a transaction is responsible 

for reporting the transaction to the 

Exchange in a form and manner 

presecribed by the Exchange. Therefore, 

because current PCX Rule 6.69(b) 

accurately reflects the PCX’s existing 

trade reporting requirements, the 

Exchange is proposing to eliminate 

Commentary .02 of this rule for clarity. 

Proposed new PCX Rule 6.69, 

Commentary .03 specifies the reporting 

procedures for orders that are manually 

processed when there is a disruption or 

malfunction with the EOC pursuant to 

proposed new PCX Rule 6.67(d)(A)(1). 

This proposed new rule was adopted 

from current PCX Rule 6.67, 

Commentary .01. 

6. Cabinet Trades and FLEX Options.

The Exchange also proposes to add a 

Commentary .01 to PCX Rule 6.67, 

which states that Cabinet Trades 21 and 

FLEX22 options are exempt from the 

EOC and Electronic Tablet Entry 

Requirements as set forth in PCX Rule 

6.67(c). However, such trades will be 

processed using manual time stamped 

order tickets. The PCX will maintain a 

separate record of quotes, orders and 

transactions related to such trades in the 

same format as the COATS data and will 

make such information available upon 

Commission request.

7. Implementation Date. The system 

entry requirement proposed in this rule 

change will become completely 

operative on January 10, 2005.23

8. Miscellaneous Changes. The 

Exchanges proposes to make several 

minor, non-substantive changes to the 

text of several existing PCX Rules to 

correct stylistic, grammatical and 

typographical errors and to conform the 

proposed rules to the new EOC and 

Electronic Table requirements. 

2. Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) 24 of the Act, in general, and 

further the objectives of Section 

6(b)(5),25 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, 

and to remove impediments and perfect 

the mechanisms of a free and open 

market and to protect investors and the 

public interest. In addition, the 

Exchange believes that the proposed 

rule change is consistent with 

provisions of Section 11A(a)(1(B) of the 

Act,26 which states that new data 

processing and communications 

techniques create the opportunity for 

more efficient and effective market 

operations.

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 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 self-regulatory 

organization 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 is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment from (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rulescomments@sec.gov. Please include File 

No. SR–PCX–2004–122 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Jonathon G. Katz, Secretary, 

Securities and Exchange Commission, 

450 Fifth Street, NW., Washington, DC 

20549–0609. 

All submissions should refer to File 

No. SR–PCS–2004–122. 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 

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, 450 Fifth Street, NW., 

Washington, DC 20549. Copies of such 

filing will also 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 No. SR–PCX–2004–

122 and should be submitted on or 

before January 6, 2005.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.27

J. Lynn Taylor, 

Assistant Secretary.

[FR Doc. 04–27941 Filed 12–21–04; 8:45 am] 

BILLING CODE 8010–01–M