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[Federal Register Volume 69, Number 245 (Wednesday, December 22, 2004)]
[Notices]
[Pages 76807-76808]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27940]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50868; File No. SR-PCX-2004-59

Self-Regulatory Organizations; Pacific Exchange, Inc.; Order 
Approving a Proposed Rule Change and Amendment Nos. 1 and 2 Thereto 
Relating to a New Order Modifier Entitled ``Proactive if Locked 
Reserve''

December 16, 2004.
    On July 1, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly-owned subsidiary PCX Equities, Inc. 
(``PCXE''), 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 amend its rules governing the Archipelago 
Exchange (``ArcaEx''), the equities trading facility of PCXE, by adding 
new processing capability for ArcaEx Reserve Orders in situations where 
a Reserve order in an exchange-listed security is locked by another 
market. On October 26, 2004, the PCX submitted Amendment No. 1 to the 
proposed rule change.\3\ On October 28, 2004, the PCX submitted 
Amendment No. 2 to the proposed rule change.\4\ The proposed rule 
change, as amended, was published for comment in the Federal Register 
on November 15, 2004.\5\ The Commission received no comments on the 
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Steven B. Matlin, Senior Counsel, Regulatory 
Policy, PCX, to Nancy J. Sanow, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated October 25, 
2004, and accompanying Form 19b-4 (``Amendment No. 1''). Amendment 
No. 1 replaced and superseded the originally filed proposed rule 
change.
    \4\ See letter from Steven B. Matlin, Senior Counsel, Regulatory 
Policy, PCX, to Nancy J. Sanow, Assistant Director, Division, 
Commission, dated October 25, 2004 (``Amendment No. 2'') Amendment 
No. 2 made technical corrections to the proposed rule text of the 
proposed rule change, as amended.
    \5\ See Securities Exchange Act Release No. 50645 (November 5, 
2004), 69 FR 65670.
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    The Exchange proposes to add a new order modifier entitled 
``Proactive if Locked Reserve'' as an additional

[[Page 76808]]

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\
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    \6\ Reserve 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.
    \7\ See ITS Plan Exhibit B, Section (d).
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    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.
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    \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).
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    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.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-27940 Filed 12-21-04; 8:45 am]
BILLING CODE 8010-01-M
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