[Federal Register Volume 70, Number 181 (Tuesday, September 20, 2005)]
[Notices]
[Page 55200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18622]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52417; File No. SR-PCX-2005-59]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Order 
Approving a Proposed Rule Change and Amendments No. 1 and 3 Thereto To 
Amend the Exchange's Trade-Through and Locked Markets Rules

September 13, 2005.
    On April 27, 2005, the Pacific Exchange, Inc. (``PCX''), filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ to implement Amendment 
No. 15 to the Plan for the Purpose of Creating and Operating an 
Intermarket Option Linkage \3\ by amending PCX Rules 6.92 and 6.95 to 
add a ``trade and ship'' exception to the definition of ``Trade-
Through'' and add a ``book and ship'' exception to the provision 
relating to locked markets, respectively. On July 8, 2005, the PCX 
filed Amendment No. 1 to the proposed rule change.\4\ The PCX filed 
Amendment No. 2 to the proposed rule change on July 29, 2005 and 
withdrew Amendment No. 2 on August 1, 2005. The PCX filed Amendment No. 
3 to the proposed rule change on August 1, 2005.\5\ The proposed rule 
change, as amended, was published for comment in the Federal Register 
on August 11, 2005.\6\ The Commission received no comments on the 
proposal. This order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
option linkage proposed by the American Stock Exchange LLC, the 
Chicago Board Options Exchange, Incorporated, and the International 
Securities Exchange, Inc. See Securities Exchange Act Release No. 
43086 (July 28, 2000), 65 FR 48023 (August 4, 2000) (``Linkage 
Plan''). Subsequently, upon separate requests by the Philadelphia 
Stock Exchange, Inc., the PCX, and the Boston Stock Exchange, Inc., 
the Commission issued orders to permit these exchanges to 
participate in the Linkage Plan. See Securities Exchange Act Release 
Nos. 43573 (November 16, 2000), 65 FR 70851 (November 28, 2000); 
43574 (November 16, 2000), 65 FR 70850 (November 28, 2000); and 
49198 (February 5, 2004), 69 FR 7029 (February 12, 2004).
    \4\ In Amendment No. 1, the PCX revised the rule text to use 
terms consistent with PCX's current rules and made clarifying 
changes in the purpose and statutory basis sections.
    \5\ In Amendment No. 3, the PCX made clarifying changes to the 
rule text and the purpose section.
    \6\ See Securities Exchange Act Release No. 52206 (August 4, 
2005), 70 FR 46898.
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    Under the proposed rule change, a Participant Exchange \7\ could 
trade an order at a price that is one minimum quoting increment 
inferior to the national best bid or offer (``NBBO'') if a Linkage 
Order \8\ is sent contemporaneously to the market(s) disseminating the 
NBBO to satisfy all interest at the NBBO price. The proposed rule 
change also would provide that an OTP Holder, OTP Firm, or Eligible 
Market Maker may book an order that would otherwise lock another market 
if a Linkage Order is sent contemporaneously to such other market to 
satisfy all interest at the lock price and only the remaining portion 
of the order is booked. The PCX proposes that, under trade and ship, 
any execution received from the market disseminating the NBBO must 
(pursuant to agency obligations) be reassigned to the customer order 
that is underlying the Linkage Order that was sent to trade with the 
market disseminating the NBBO.
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    \7\ See PCX Rule 6.92(a)(16).
    \8\ See PCX Rule 6.92(a)(12).
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    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6 of the Act 
\9\ and the rules and regulations thereunder applicable to a national 
securities exchange.\10\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\11\ 
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 
a national market system, and, in general, to protect investors and the 
public interest. The Commission believes that the proposed rule change 
should help to implement the Linkage Plan by facilitating the ability 
of PCX's participants to execute their customer orders in a timely 
manner and potentially could decrease the incidence of Trade-Throughs 
and locked markets.
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    \9\ 15 U.S.C. 78f.
    \10\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
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    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-PCX-2005-59) as amended, is 
approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18622 Filed 9-19-05; 8:45 am]
BILLING CODE 8010-01-P