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

59486 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

10The Plan contemplates that the options

exchanges may wish to consider a pilot program for

one-cent minimum price variations for quoting in

a limited number of options (‘‘Penny Pilot’’) at some

point in the implementation process. The

Commission expects that, before implementing a

Penny Pilot, the options exchanges will carefully

coordinate on such issues as the selection and

number of options to be included in the pilot to

ensure the continued orderly operation of the

markets and clearing organizations. In particular,

the Commission expects that the options exchanges

will consult with the Commission regarding the

impact on market-wide capacity. Before

implementing a Penny Pilot, each options exchange

should also submit appropriate rule filings to the

Commission under Section 19(b) of the Exchange

Act.

11 15 U.S.C. 78f(b).

12 15 U.S.C. 78f(b)(5).

13The Exchange requested the Commission to

waive 5 day pre-filing notice requirement and the

30-day operative period.

14 15 U.S.C. 78s(b)(3)(A).

15 17 CFR 240.19–4(f)(6).

16For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

17 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

6.64, Commentary .03(c)–(d) to replace

fractional references with decimal

references. The Exchange is also

proposing to amend PCX Rule 6.47(a)(2)

and (b)(2), governing non-facilitation

crosses, to require floor brokers to bid

above the highest bid or below the

lowest offer by at least the MPV before

crossing orders.

Finally, the PCX proposes to adopt

new Rule 6.72 to explicitly state and

give effect to the minimum price

increments for options mandated by the

Plan. Thus, to the extent an option class

is pricing in decimals, the MPVs would

be as follows: For options quoting under

$3 a contract, the MPV would be $.05;

and for options quoted at $3 a contract

or greater, the MPV would be $.10.10

This rule would replace current Rule

6.72, which requires bids and offers

above $3 to be expressed in eighths of

the one dollar and bids and offers below

$3 to be expressed in sixteenths of one

dollar.

2. Statutory Basis

The PCX believes that the proposed

rule change is consistent with the

requirements of the Act and the rules

and regulations thereunder that are

applicable to national securities

exchange, and, in particular, with the

requirements of Section 6(b) of the

Act.11 In particular, the PCX believes

that the proposed rule change is

consistent with Section 6(b)(5) 12 in that

it is designed to promote just and

equitable principles of trade, to remove

impediments to and to perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The PCX does not believe that the

proposed rule change will impose any

burden on competition 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

The Exchange did not solicit or

receive written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing proposed rule

change does not: (i) Significantly affect

the protection of investors or the public

interest; (ii) impose any significant

burden on competition; and (iii) become

operative for 30 days from the date on

which it was filed, or such shorter time

as the Commission may designate,13 it

has become effective pursuant to

Section 19(b)(3)(A) of the Act 14 and

Rule 19b–4(f)(6) 15 thereunder. At any

time within 60 days of the filing of the

proposed rule change, the Commission

may summarily abrogate such rule

change if it appears to the Commission

that such action is necessary or

appropriate in the public interest, for

the protection of investors, or otherwise

in furtherance of the purposes of the

Act.

The PCX has requested that the

Commission accelerate the operative

date. The Commission believes that it is

consistent with the protection of

investors and the public interest and

therefore finds good cause to designate

the proposal to become immediately

operative upon filing. Acceleration of

the operative date will ensure that the

PCX is able to operate in accordance

with the terms and conditions of the

Plan. For these reasons, the Commission

finds good cause to designate that the

proposal, as amended, become operative

immediately upon filing.16

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 PCX. All

submissions should refer to the File No.

SR–PCX–00–23 and should be

submitted by October 26, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25592 Filed 10–4–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43384; File No. SR–PCX–

00–31]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

PACEX Reports for Options Order

Flow Providers

September 29, 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

18, 2000, the Pacific Exchange, Inc.

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

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II and III

below, which Items have been prepared

by the PCX. The 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

The PCX proposes to begin furnishing

Pacific Exchange Customer Execution

(‘‘PACEX’’) Reports to its order flow

providers on a daily basis. PACEX

Reports are designed to provide

objective data on option order

executions so that PCX order flow