59482 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

4 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

publishes its reasons for so finding or

(ii) as to which the NASD 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. 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 such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to file number

SR–NASD–00–48 and should be

submitted by October 26, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25595 Filed 10–4–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43367; File No. SR–NASD–

00–42]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to Proposed

Recording and Recordkeeping

Requirements of Certain Quotation

Data

September 27, 2000.

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 June

3,2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’),

through its wholly owned subsidiary,

NASD Regulation, Inc. (‘‘NASD

Regulation’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by NASD Regulation. The

Commission is 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

NASD Regulation is proposing to add

new NASD Rule 6630 to require

members to record and maintain their

quotations displayed in certain

automated, inter-dealer quotation

systems, such as the Electronic Pink

Sheets (‘‘EPS’’), and to report such data

to NASD Regulation upon request.

Below is the text of the proposed rule

change. Additions are italicized;

deletions are in brackets.

* * * * *

6600. [REPORTING TRANSACTIONS

IN] OVER-THE-COUNTER EQUITY

SECURITIES

This Rule 660 Series sets forth

recording and reporting requirements

for certain quotations and unpriced

indications of interest displayed on

inter-dealer quotation systems and the

trade reporting requirements applicable

to members’ transactions in equity

securities for which real-time trade

reporting is not otherwise required

(hereinafter referred to as ‘‘OTC Equity

Securities’’). Members shall utilize the

Automated Confirmation Transaction

Service (ACT) for trade reporting in

OTC Equity Securities. Rules 6610 and

6620 No Change.

Rule 6630. Recording of Quotation

Information

(a) Quotation Recording Requirements

(1) Subject to the terms and

conditions contained herein, each OTC

Market Maker that displays priced

quotations (bid and/or offer) or

unpriced indications of interest in OTC

Equity Securities in an inter-dealer

quotation system that permits quotation

updates on a real-time basis shall record

each item of information described in

paragraph (b) of this Rule. This quote

activity record must reflect all changes

in an OTC Market Maker’s priced

quotation or quotation size displayed or

unpriced indication of interest, and the

time any such change was effected.

(2) Members shall record each item of

information required to be recorded

under this Rule in such form as is

prescribed by the Association from time

to time.

(3) Maintaining and Preserving

Records

(A) Each member shall maintain and

preserve records of the information

required to be recorded under this Rule

for the period of time and accessibility

specified in SEC Rule 17a–4(a).

(B) The records required to be

maintained and preserved under this

Rule may be immediately produced or

reproduced on ‘‘micrographic media’’ as

defined in SEC Rule 17a–4(f)(1)(i) or by

means of ‘‘electronic storage media’’ as

defined in SEC Rule 17a–4(f)(1)(ii) that

meet the conditions set forth in SEC

Rule 17a–4(f) and may be maintained

and preserved for the required time in

that form.

(b) Information to be Recorded

The quotation activity record required

pursuant to paragraph (a) of this Rule

shall contain, at a minimum, the

following information for every priced

quotation (bid and/or offer) or unpriced

indication of interest displayed by the

member during the trading day:

(1) Submitting firm;

(2) Inter-dealer quotation system or

medium;

(3) Trade date;

(4) Time quotation displayed

(expressed in hours, minutes and

seconds);

(5) Security name and symbol;

(6) Bid and bid quotation size (if

applicable);

(7) Offer and offer quotation size (if

applicable);

(8) Prevailing Inside Bid; and

(9) Prevailing Inside Offer

If no updates were entered to an OTC

Market Maker’s quotation or quotation

size for any given trading day, the

member must record the information in

subparagraphs (b)(1) through (7).

(c) Quotations Not Required To Be

Recorded

The recording requirements contained

in paragraphs (a) and (b) of this Rule

shall not apply to quotations of OTC

Equity Securities that are displayed on

an inter-dealer quotation system that is:

(1) qualified pursuant to Section 17B

of the Act; or

(2) operated by a member of the

Association.

(d) Reporting Requirements

(1) General Requirement

Members shall report information

required to be recorded under this Rule

to the Association upon its request.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59483

3While quotation data generally is provided

directly by the exchange or system on which it is

displayed, in this instance, the operator of the

system, Pink Sheets, is not a registered brokerdealer, a member of the NASD, or a national

securities exchange.

4As defined in Rule 15c2–11(e) of the Act, 17

CFR 240.15c2–11(e), the term inter-dealer quotation

system means any system of general circulation to

brokers or dealers which regularly disseminates

quotations of identified brokers or dealers.

5 17 CFR 240.17a–4(a).

6 17 CFR 240.17a–4.

7 15 U.S.C. 78q–2.

8Proposed Rule 6630(e) provides that a

‘‘Reporting Agent’’ means a third party that enters

into any agreement with a member pursuant to

which such third party agrees to fulfill such

member’s obligations under this rule.

(2) Method of Transmitting Data

Members shall transmit this

information in such form prescribed by

the Association.

(e) Reporting Agent Agreements

(1) ‘‘Reporting Agent’’ shall mean a

third party that enters into any

agreement with a member pursuant to

which such third party agrees to fulfill

such member’s obligations under this

Rule.

(2) Any member may enter into an

agreement with a Reporting Agent

pursuant to which the Reporting Agent

agrees to fulfill the obligations of such

member under this Rule. Any such

agreement shall be evidenced in writing,

which shall specify the respective

functions and responsibilities of each

party to the agreement that are required

to effect full compliance with the

requirements of this Rule.

(3) All written documents evidencing

an agreement described in paragraph

(e)(2) shall be maintained by each party

to the agreement.

(4) Each member remains responsible

for compliance with the requirements of

this Rule, notwithstanding the existence

of an agreement described in this

paragraph. If a member knows or has

reason to believe that its Reporting

Agent is not complying with the

requirements of this Rule, the member

must immediately withdraw its

quotations or unpriced indications of

interest until such time that the member

is satisfied that the quotation data is

being properly maintained and

reported.

* * * * *

II. Self Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NASD Regulation 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.

NASD Regulation 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

In September 1999, EPS, which is

operated by the Pink Sheets LLC (‘‘Pink

Sheets’’) began displaying real-time, online stock quotations for approximately

5,000 securities. Some NASD members

may now enter quotations in the EPS,

which are displayed over the Internet at

the EPS website on a real-time basis.

Prior to the availability of EPS, the

‘‘pink sheets’’ consisted of weekly lists

of quotes printed in hard copy by Pink

Sheets. Pink Sheets updated these nonbinding quotations by means of a daily

facsimile to subscribers. Market

participants could learn of changes to

intra-day quotations only by telephone

or similar means of communication to

market makers in the security.

Because the EPS now displays

quotations on a real-time basis, NASD

Regulation staff requires access to this

quotation data to surveil adequately for

member compliance with applicable

rules and regulations and, when

necessary, to reconstruct market

activity. For example, member activities

in the EPS are subject to NASD Rule

3320, ‘‘Offers at Stated Prices,’’ which

requires that a member’s quotations be

‘‘firm,’’ i.e., that the member buy or sell

at least a normal unit of trading in the

quoted stock at its then prevailing

quotations, unless clearly designated

otherwise. In addition, NASD Rule 6750

provides that every member firm that

functions as a market maker in over-thecounter (‘‘OTC’’) equity securities on an

inter-dealer quotation system that

permits quotation updates on a real-time

basis must honor those quotations for

the minimum size applicable to the

market maker’s firm bid or ask.

Although complete trade execution data

would be available through existing

trade reporting requirements and

systems, NASD Regulation staff does not

otherwise have access to historical

quotation activity at the time of trades.3

Therefore, NASD Regulation is

proposing that members that participate

in an inter-dealer quotation system,4

such as the EPS, that permits quotation

updates on a real-time basis, be required

to record and maintain their quotation

data.

Under the proposed rule change,

members that publish quotations on the

EPS (or any similar automated quotation

system) would be required to record and

maintain priced quotations and

unpriced indications of interest data

and to report such quotation data to

NASD Regulation upon its request. The

proposed rule change would require

members to record and report the time

of the quotation displayed, the bid and

bid quotation size, the offer and offer

quotation size, and the prevailing inside

bid and offer in the inter-dealer

quotation system at the time of the

quotation. The member would need to

record this information for all updates

in quotations or quotation size.

The proposed rule change also would

require that members preserve such

records in accordance with Rule 17a–

4(a) under the Act.5 Specifically, under

Rule 17a–4,6 members would be

required to preserve these records for a

period of not less than six years, the first

two years in an accessible place.

The proposed rule change would not

apply to quotations provided on an

inter-dealer quotation system that is

qualified pursuant to Section 17B of the

Act,7 because by definition, such a

system would be sponsored and

regulated by a registered securities

association or national securities

exchange, and quotation information

would be available from the system

directly. This includes, for example, the

OTC Bulletin Board, which is sponsored

and regulated by the NASD. In addition,

the proposed rule change would not

apply to an inter-dealer quotation

system that is operated by a member of

the NASD because the NASD would

obtain quotation data (or in some cases,

the display of limit orders) directly from

the member that operates the system.

The proposed rule change would

permit a member to use a reporting

agent to provide the quotation data to

NASD Regulation.8 NASD Regulation

believes that most, if not all, members

would use the services of a reporting

agent, which would likely be the

operator of the system, such as Pink

Sheets with respect to the EPS. In this

regard, NASD Regulation anticipates

that the system operator, as reporting

agent, would provide NASD Regulation

all relevant quotation data directly on a

daily or ongoing basis. The member,

however, would remain ultimately

responsible for compliance with all

requirements of the proposed rule,

notwithstanding the use of a reporting

agent. If a member knows or has reason

to believe that it or its reporting agent

is not complying with the requirements

of the rule, the member would be

59484 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

9 15 U.S.C. 78o(b)(6).

10Comment letters were received from Thomas

Murphy, Bishop, Rosen & Co. (‘‘Bishop Rosen’’);

Elena Fusillo, Clark Dodge and Company (‘‘Clark

Dodge’’); Trish Stone-Damen, IRM Distributors, Inc.

(‘‘IRM Distributors’’); Michael Dorsey, Knight

Securities, L.P. (‘‘Knight Securities’’); Cromwell

Coulson, Pink Sheets (‘‘NQB’’); and Cindy Witt, US

Bancorp Piper Jaffray (‘‘Piper Jaffray’’).

required immediately to withdraw its

priced quotations or unpriced

indications of interest until such time

that the member is satisfied that the

quotation data is being properly

maintained and reported. In this regard,

NASD Regulation would expect a

member to periodically review or

monitor a reporting agent’s activities to

ensure continued compliance.

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) of

the Act,9 which requires, among other

things, that the Association’s rules 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. NASD

Regulation believes that the proposed

rule change will provide it with the

quotation data necessary to surveil for

and enforce applicable NASD rules and

the federal securities laws.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will result

in any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The proposed rule change was

published for comment in NASD Notice

to Members 00–17 (March 2000)

(‘‘Notice’’). The comment period

expired on April 10, 2000. Six comment

letters were received in response to the

Notice.10 Copies of the Notice and the

comment letters have been provided to

the Commission. Of the six comment

letters received, two supported the

proposal and four opposed the proposal.

The majority of commenters, however,

generally supported the concept that

regulators should have access to the

information sought by the NASD, but

differed on the means of obtaining the

information.

One commenter opposing the

proposal stated that the proposed

requirements were overly burdensome

for members and recommended that the

SEC require that the system operator,

not the member, provide the

information to the NASD. As an initial

matter, NASD Regulation does not have

the authority or jurisdiction to require a

system operator to provide the

necessary information unless the

operator is an NASD member. In

addition, SEC rules currently do not

require the system operators to provide

such information to the NASD. Further,

although members are ultimately

responsible for complying with the

proposed rule, the proposed rule

permits a member to enter into an

agreement with a reporting agent

pursuant to which the reporting agent

agrees to fulfill the obligations of the

member. In this regard, NASD

Regulation expects that, in most cases,

a system operator will transmit the

quotation data to NASD Regulation

pursuant to a reporting agent agreement

with a member.

Two commenters opposing the

proposal recommended, as an

alternative, the negotiation of a private

contract between NASD Regulation and

the system operator. Again, because

NASD Regulation does not have

jurisdiction over the system operator,

NASD Regulation cannot rely on a

private contract to obtain the required

quotation data, since the system

operator could at any time refuse to

provide the data to NASD Regulation.

Where the system operator is an NASD

member, the proposed rule change

specifically excludes quotations on such

a system from the recording and

reporting requirements because NASD

Regulation can obtain the quotation data

directly from the system operator.

Two commenters viewed as

excessively strict the requirement that

members immediately withdraw their

quotations in the information required

by the proposed rule is not furnished to

the NASD. In this regard, one

commenter suggested that, as an

alternative to requiring members to

remove quotations entirely, the

proposed rule change permit members

to maintain unpriced indications of

interest. NASD Regulation, however,

believes that if quotation information,

including unpriced indications of

interest, is not properly recorded, NASD

Regulation will be unable to ensure that

members are in compliance with

applicable rules. Therefore, the

proposed rule requires members to

immediately withdraw their quotations

or unpriced indications of interest until

such time as the member has obtained

assurances that the quotation

information is being properly recorded.

In addition, one commenter stated

that it is overly burdensome to place on

a member firm the responsibility of

determining whether its reporting agent

is complying with the requirements of

the rule. Instead, the commenter

suggests that NASD Regulation notify

the member in writing that the reporting

agent is not complying. However, NASD

Regulation believes that the

responsibility should lie with the

member to determine that, if it chooses

to use a reporting agent, the reporting

agent is reporting properly on the

member’s behalf.

Finally, one commenter stated that

the proposed rule change lacks objective

standards for the form or means of

delivery of the data to NASD

Regulation. NASD Regulation has

specified in the proposed rule change

what quotation data and related

information must be recorded and

reported, and will prescribe the form in

which this data will be required to be

transmitted to NASD Regulation in a

Notice to Members.

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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. 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

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59485

11 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 15 U.S.C. 78s(b)(3)(A).

4 17 CFR 240.19b–4(f)(6).

5The Commission agreed to waive the 5-day prefiling notice requirement. The Commission also

finds good cause to waive the 30-day pre-operative

waiting period. See Rule 19b–4(f)(6)(iii). 17 CFR

240.19b–4(f)(6)(iii).

6See Letter dated August 24, 2000, from Hassan

Abedi, Attorney, Regulatory Policy, PCX, to Nancy

Sanow, Assistant Director, Division of Market

Regulation (‘‘Division’’), Commission

(‘‘Amendment No. 1’’). Amendment No. 1 clarifies

that the Exchange is prohibited from changing the

minimum price variation for securities pricing in

decimals while the Decimals Implementation Plan

submitted to the Commission on July 24, 2000 is in

effect. Amendment No. 1 also withdraws proposed

amendments to PCX Rule 7.40, governing short

sales, and clarifies that the minimum price

variation for SPDRs and MidCap SPDRs trading in

decimals will be $.01. In addition, Amendment No.

1 makes certain technical corrections to the

proposed rule change. See also Letter dated

September 21, 2000, from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy Sanow, Assistant

Director, Division, Commission (‘‘Amendment No.

2’’). Amendment No. 2 conforms PCX Rule 7.66 to

a recent proposed amendment to the Intermarket

Trading System Plan (‘‘ITS Plan’’) relating to

decimal pricing.

7See Securities Exchange Act Release No. 42914

(June 8, 2000), 65 FR 38010 (June 19, 2000).

7The Plan provides for MPVs for equities and

options of no less than one cent. The Order requires

the Participants to submit joint or individual

studies two months after Full Implementation (as

defined in the Plan) regarding the impact of decimal

pricing on systems capacity, liquidity, and trading

behavior, including an analysis of whether there

should be a uniform minimum quoting increment.

If a Participant wishes to move to quoting in an

increment of less than one cent, the Participant

should include in its study a full analysis of the

potential impact of such trading on the Participant’s

market and the markets as a whole. Within thirty

days after submitting the study, and absent

Commission action, the Participants individually

must submit for notice, comment, and Commission

action, proposed rule changes under Section 19(b)

of the Exchange Act to establish their individual

choice of minimum increments by which equities

or options are quoted on their respective markets.

8See Amendment No. 1, supra n.6.

9For example, if a market maker’s bid price is

between $2 and $5, the maximum difference

between that bid price and the corresponding

offering price will be 3⁄8 of $1 (i.e., $.40).

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–00–42 and should be

submitted by October 26, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25596 Filed 10–4–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43369; File No. SR–PCX–

00–23]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change and

Amendment Nos. 1 and 2 by the Pacific

Exchange, Inc. Relating to the

Conversion to Decimal Pricing

September 27, 2000.

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 August 8,

2000, 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 Exchange. The

Exchange filed the proposal pursuant to

Section 19(b)(3)(A) of the Act,3 and Rule

19b–4(f)(6) thereunder,4 which renders

the proposal effective upon filing with

the Commission.5 The Exchange filed

amendments to the proposed rule

change on August 25, 2000 and

September 22, 2000, respectively.6 The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend

certain PCX rules to implement the

securities industry’s Decimals

Implementation Plan submitted to the

Commission on July 24, 2000. The text

of the proposed rule change is available

at the PCX and at the Commission.

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 section 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

On June 8, 2000, the Commission

issued an order (‘‘Order’’) 7 requiring the

national securities exchanges and the

National Association of Securities

Dealers, Inc. (‘‘Participants’’) to act

jointly in planning, discussing,

developing, and submitting to the

Commission a plan that will begin

phasing in the implementation of

decimal pricing in equity securities and

options on or before September 5, 2000

(‘‘Plan’’). The Commission directed the

Participants to submit the Plan to the

Commission by July 24, 2000, and

further directed each Participant to file

the rule changes necessary to implement

the phase-in plan. In compliance with

the Order, the Exchange submitted the

proposed rule change to implement the

Plan.

Equity Trading Rules. The Exchange

proposes to amend PCX Rule 7.10(b) to

establish a $.01 minimum price

variation (‘‘MPV’’) for equity securities

pricing in decimals, as required by the

Plan,7 and to amend Commentary .01 to

Rule 7.10 to clarify that the Exchange is

prohibited from changing the MPV for

securities pricing in decimals while

Plan is in effect.8 The Exchange is also

proposing to amend Rule 7.19(c)(1) to

provide that a bid or offer will have

price priority over another bid or offer

only if its price exceeds the price of the

other bid or offer by the MPV. The

Exchange is proposing to add

commentary .06 to PCX Rule 7.41(b) to

clarify that for the purposes of the rule,

the term ‘‘closest trading differential’’

means the MPV. In addition, the

Exchange is proposing to add

Commentary .01 to PCX Rule 7.29(a) to

clarify that for purposes of the rule, the

term ‘‘price improvement’’ means an

improvement in price by at least the

MPV. The Exchange is also proposing to

amend Rule 7.66 to conform the rule to

recent amendments to the ITS Plan.

Finally, the remaining proposed

changes add a decimal reference to Rule

7.12(b), Commentary .05, Rule

7.66(b)(8)(i)(A)(1), and Rule 7.79(e) to

supplement the existing fractional

references.

Options Trading Rules

PCX Rule 6.37(b)(1) currently

specifies the maximum bid/ask spread

differentials that an options market

maker is permitted to create in the

course of maintaining a fair and orderly

market.9 The Exchange is proposing to

amend this rule to provide the bid/ask

spread differentials in decimals. In

addition, the Exchange is proposing to

amend PCX Rule 6.37(b)(3) and

Commentary .10, Rule 6.75,

Commentaries .02–.03, Rule 6.80,

Commentary .01, Rule 8.102(f), and Rule