[Federal Register Volume 66, Number 125 (Thursday, June 28, 2001)]
[Notices]
[Page 34505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16259]



[[Page 34505]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44468; File No. SR-PCX-00-03]


Self-Regulatory Organizations; Order Approving Proposing Rule 
Change, and Notice of Filing and Order Granting Accelerated Approval to 
Amendment No. 1 to Proposed Rule Change, by the Pacific Exchange, Inc. 
Implementing a One-Year Pilot Program Relating to Its Automatic 
Execution System

June 22, 2001.

I. Introduction and Description of the Proposed Rule Change

    On February 15, 2000, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') file with 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 implement a one-year pilot 
program relating to its automatic execution system.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The Exchange proposes to amend its rules to allow, for the duration 
of the pilot program, automatic executions of orders in its Limit Order 
Book (``Book'') when those orders become marketable. Specifically, when 
one or more orders in the Book become marketable, as indicated by a 
locked or crossed market being displayed on the trading floor, the Lead 
Market Maker (``LMM'') may direct the Order Book Official to initiate 
the ``Auto-Ex Book'' function, which will cause marketable orders in 
the Book to be automatically executed against the accounts of market 
makers who are participating in the Exchange's Auto-Ex system at the 
time.\3\
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    \3\ Alternatively, however, the LMM or members of the trading 
crowd may provide price improvement to the customer orders in the 
book. In such case, the Auto-Ex Book feature would not be used.
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    Notice of the proposed rule change was published for comment in the 
Federal Register on May 7, 2001.\4\ No comments were received on the 
proposed rule change. On June 21, 2001, the Exchange filed Amendment 
No. 1 to the proposed rule change.\5\ This order approves the proposed 
rule change. In addition, the Commission is publishing this notice to 
solicit comments on Amendment No. 1 to the proposed rule change and is 
simultaneously approving Amendment No. 1 on an accelerated basis.
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    \4\ See Securities Exchange Act Release No. 44234 (April 30, 
2001), 66 FR 23059 (May 7, 2001).
    \5\ In Amendment No. 1, the Exchange made certain changes to the 
numbering and lettering of the proposed rules. The Amendment did not 
make any changes to the substance of the proposal. See Letter from 
Michael D. Pierson, Vice President, Regulatory Policy, PCX, to 
Andrew Shipe, Attorney, Division of Market Regulation, dated June 
20, 2001.
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II. Discussion

    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 proposal is consistent 
with Section 6(b)(5) of the Act,\7\ which requires, among other things, 
that the rules of an exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market, and to protect investors and the public 
interest. The proposed rule change should help to facilitate the more 
efficient execution of orders; eliminate inefficiencies associated with 
manual trading; eliminate backlogs of unexecuted orders; promoted fair 
participation in trading against orders in the Book, and in general 
market efficiency on the PCX. Moreover, the Exchange is proposing to 
implement the Auto-Ex Book function as a one-year pilot program, which 
will enable the Exchange and the Commission to evaluate its operation 
before it can be renewed.
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    \6\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78(c)(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission further finds good cause to approve Amendment No. 1 
to the proposed rule change prior to the thirtieth day after the date 
of publication of notice thereof in the Federal Register. In Amendment 
No. 1, the Exchange simply re-numbered and re-lettered certain 
paragraphs of rule text, and made no substantive changes to the 
proposal. Therefore, the Commission finds good cause to approve 
Amendment No. 1 on an accelerated basis.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 1, including whether Amendment No. 1 
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-00-03 and should be 
submitted by July 19, 2001.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-PCX-00-03) be, and 
it hereby is, approved as a pilot program through June 22, 2002.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-16259 Filed 6-28-01; 8:45 am]
BILLING CODE 8010-01-M