[Federal Register Volume 65, Number 221 (Wednesday, November 15, 2000)]
[Notices]
[Pages 69112-69113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29185]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43519; File No. SR-PCX-00-18]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc. To Increase the Maximum Auto-Ex 
Order Size to 100 Contracts

November 3, 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 30, 2000, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
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 the PCX. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX is proposing to increase the maximum size of equity and 
index option contracts that may be designated for automatic execution 
to 100 contracts.

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 Sections A, 
B,

[[Page 69113]]

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
    The Exchange's automatic execution system (``Auto-Ex'') 
automatically executes public customer market and marketable limit 
orders within certain size parameters. PCX Rule 6.87(b) currently 
provides that the Options Floor Trading Committee (``OFTC'') shall 
determine the size of orders that are eligible to be executed through 
Auto-Ex. The rule further provides that although the OFTC may change 
the order size parameter on an issue-by-issue basis, the maximum order 
size for execution through Auto-Ex is fifty contracts for both equity 
and index options.\3\ The Exchange is now proposing to increase the 
maximum size of option orders that are eligible for automatic 
execution, subject to designation by the OFTC on an issue-by-issue 
basis, to 100 contracts.\4\
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    \3\ See Securities Exchange Act Release No. 41823 (September 1, 
1999), 64 FR 49265 (September 10, 1999) (approving PCX proposal to 
increse the maximum size of index and equity option orders that may 
be automatically executed, from twenty to fifty contracts). 
Concurrent with its issuance of this notice, the Commission 
approved, on an accelerated basis, a PCX proposal to increase the 
maximum order size for Auto-Ex eligibility from fifty contracts to 
seventy-five contracts. See Securities Exchange Act Release No. 
43518 (November 3, 2000).
    \4\ The Exchange notes that, pursuant to PCX Rule 6.86(g), if 
the OFTC determines, pursuant to PCX Rule 6.87(b), that the size of 
orders in an issue that are eligible to be executed on Auto-Ex will 
be greater than twenty contracts, then the trading crowd will be 
required to provide a market depth for manual (non-electronic) 
orders in that greater amount, as provided in PCX Rule 6.86(a).
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    The Exchange believes that these changes will help it to meet the 
changing needs of customers in the marketplace and give the Exchange 
better means of competing with other options exchanges for order flow, 
particularly in multiply traded issues. The Exchange also believes that 
increasing to 100 the number of option contracts executable through the 
Exchange's Auto-Ex order execution system will enable the Exchange to 
more effectively and efficiently manage increased order flow in 
actively traded option issues consistent with its obligations under the 
Act. In addition, this increase should bring the speed and efficiency 
of automated execution to a greater number of retail orders. The PCX 
further believes that it should have flexibility to compete for order 
flow with other exchanges without being limited to responding to 
increases in automatic execution eligibility levels initiated by those 
other exchanges.\5\
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    \5\ See PCX Rule 6.87(c) (permitting the PCX to match the 
maximum size of orders eligible for automatic execution that are 
permitted on another options exchange in multiply traded issues).
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    The Exchange represents that it believes that the increase will not 
expose the Exchange's Auto-Ex system to risk of failure or operational 
breakdown. The Exchange represents that it further believes that its 
systems capacity is sufficient to accommodate the increased number of 
automatic executions anticipated to result from implementation of this 
proposal.
2. Statutory Basis
    The Exchange believes that this proposal is consistent with section 
6(b) \6\ of the Act, in general, and furthers the objectives of section 
6(b)(5),\7\ in that it is designed to promote just and equitable 
principles of trade, to facilitate transactions in securities, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and to protect investors and the 
public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    PCX 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 Registeror 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, 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 
PCX. All submissions should refer to File No. SR-PCX-00-18 and should 
be submitted by December 6, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-29185 Filed 11-14-00; 8:45 am]
BILLING CODE 8010-01-M