[Federal Register Volume 65, Number 196 (Tuesday, October 10, 2000)]
[Notices]
[Pages 60235-60236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25919]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43404; File No. SR-PCX-99-50]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Order 
Granting Approval to Proposed Rule Change Relating to Non-Agency Orders 
in P/COAST

October 2, 2000.

I. Introduction

    On November 18, 1999, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission'' or ``SEC'') 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 allow non-agency orders to be 
routed through and executed in the Pacific Computerized Order Access 
SysTem (``P/COAST'').
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on February 3, 2000.\3\ No comments were received on the 
proposal. This order approves the proposal.
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    \3\ See Securities Exchange Release No. 42357 (Jan. 27, 2000), 
65 FR 5383.
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II. Description of Proposal

    The P/COAST system is the Exchange's communication, order routing 
and order execution system for equity securities. Currently, only 
agency orders are permitted to be routed through, and executed in, the 
P/COAST system.\4\ In the proposed rule change, the Exchange seeks to 
abolish the current rule, and allow both agency and principal orders to 
be routed through and executed in the P/COAST system.
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    \4\ See PCX Rule 5.25(b)(1).
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    The Exchange is not proposing to change its existing rules 
regarding the priority of bids and offers,\5\ which do not currently 
distinguish between agency and principal orders. Accordingly, agency 
and principal orders will be able to be routed and executed through the 
P/COAST system.
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    \5\ See, e.g., PCX Rule 5.8(c).
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III. Discussion

    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.\6\ 
In particular, the Commission believes that the proposed rule is 
consistent with the requirements of Section 6(b)(5) of the Act \7\ 
because it is designed to help perfect the mechanism of a free and open 
market and is not designed to permit unfair discrimination between 
customer and brokers or dealers.
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    \6\ In approving this rule proposal, the Commission notes that 
it has also considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    Under the Exchange's proposed rule change, non-agency orders may be 
routed through the P/COAST system for execution. Currently, principal 
orders are executed manually on the floor of the Exchange. The 
Commission believes that the proposed rule change should be beneficial 
because it will allow broker-dealers to take advantage of the increased 
speed associated with the use of P/COAST, thus providing more efficient 
execution of their orders. However, according to the PCX, orders of 
specialists and floor brokers will not be able to be entered into the 
P/COAST system.\8\
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    \8\ Telephone conversation between Michael Pierson, Vice 
President, Regulatory Policy, PCX, and Kelly Riley, Attorney, 
Division of Market Regulation, Commission, on September 12, 2000.
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    The Commission believes that the Exchange's proposal is consistent 
with the Act because it does not discriminate between customers, 
brokers or dealers: all orders in a particular stock will receive the 
same treatment whether the order is an agency or non-agency order. 
However, orders of PCX members will still have to comply with Section 
11(a) of the Act.\9\ Further, the proposal should facilitate 
transactions on the Exchange because all eligible orders will now be 
routed automatically by the P/COAST system. This should lead to more 
timely executions of principal orders.
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    \9\ 15 U.S.C. 78j.
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IV. Conclusion

    It Is therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-PCX-99-50) is approved.
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    \10\ 15 U.S.C. 78f(b)(2).


[[Page 60236]]


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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12)
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-25919 Filed 10-6-00; 8:45 am]
BILLING CODE 8010-01-M