57916 Federal Register / Vol. 70, No. 191 / Tuesday, October 4, 2005 / Notices 

67 15 U.S.C. 78o–3(b)(6). 

68 15 U.S.C. 78o–3(b)(6). 

69 15 U.S.C. 78s(b)(2). 

70 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)(iii). 

4 17 CFR 240.19b–4(f)(6). 

OATS Reporting Technical 

Specifications within 45 days of 

Commission approval. In addition, 

NASD stated that it would ensure that 

adequate time for testing is incorporated 

into the implementation schedule and 

will make the testing environment 

available at least six weeks prior to the 

implementation date of the proposed 

rule change. 

The Commission believes that the 

proposed changes to the 

implementation schedule for the 

proposed OATS Rules are reasonable as 

the additional time provided should 

allow member firms ample opportunity 

to develop and test their systems to 

ensure compliance with the 

requirements of the proposed rules. 

In Amendment No. 3, NASD also 

proposes to make technical amendments 

to NASD Rule 6957(c) to clarify that the 

OATS order information required under 

NASD Rule 6954(b)(4) and (5) and the 

OATS order transmittal requirements 

under NASD Rule 6954(c)(1) apply to 

manual orders. Currently, NASD Rule 

6957 provides that for manual orders, 

firms shall not be required to record this 

information. However, the Commission 

notes that in Amendment No. 2, NASD 

stated that the proposed rule change 

was to apply to both electronic and 

manual orders. As such, the 

Commission believes that NASD clearly 

intended to have the inter-departmental 

order transmittal requirements apply to 

manual orders. Similarly, the 

Commission believes that it was clear 

that NASD intended that department 

identification information concerning 

where a manual order was originated 

also was intended to be included. 

Therefore, the Commission finds that it 

is consistent with the Act in general, 

and with Section 15A(b)(6) of the Act in 

particular,67 to approve Amendment 

No. 3 to the proposed rule change, as 

reflected in Amendment No.2, on an 

accelerated basis. 

VII. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning Amendment No. 

3, including whether the amendment is 

consistent with the Act. Comments may 

be submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASD–00–23 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Jonathan G. Katz, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–9303. 

All submissions should refer to File 

Number SR–NASD–00–23. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). 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 also will be 

available for inspection and copying at 

the principal office of NASD. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to the File 

Number SR–NASD–00–23 and should 

be submitted on or before October 25, 

2005. 

VIII. Conclusion 

The Commission believes that the 

proposed rule change, as reflected in 

Amendments No. 2 and 3, is appropriate 

and consistent with the requirements of 

the Act applicable to a national 

securities association, and in particular, 

with the requirements of Section 

15A(b)(6) of the Act 68 and the rules and 

regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,69 that 

Amendment No. 2 to the proposed rule 

change (SR–NASD–00–23) is hereby 

approved, and Amendment No. 3 is 

approved on an accelerated basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.70

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–19809 Filed 10–3–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52513; File No. SR–PCX–

2005–106] 

Self-Regulatory Organizations; Pacific 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Rescinding Pilot Rules 

Relating to the Waiver of the California 

Ethics Standards for Neutral 

Arbitrators in Contractual Arbitration 

and Section 1281.92 of the California 

Code of Civil Procedure 

September 27, 2005. 

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 

September 20, 2005, the Pacific 

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by PCX. PCX has 

designated this proposal as ‘‘noncontroversial’’ pursuant to Section 

19(b)(3)(A)(iii) of the Act,3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

the proposed rule change effective 

immediately upon filing with the 

Commission. 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 

PCX is proposing to amend the PCX 

Options and PCX Equities, Inc. 

(‘‘PCXE’’) arbitration rules to rescind the 

pilot rules (the ‘‘Pilot Rules’’) relating to 

the waiver of the California Ethics 

Standards for Neutral Arbitrators in 

Contractual Arbitration (the ‘‘California 

Standards’’) and the waiver of California 

Code of Civil Procedure Section 1281.92 

(‘‘CCCP Claims’’). The text of the 

proposed rule change is available on the 

PCX’s Web site (http:// 

www.pacificex.com), at the PCX’s Office 

Federal Register / Vol. 70, No. 191 / Tuesday, October 4, 2005 / Notices 57917 

5California Rules of Court, Division VI of the 

Appendix. 

6 400 F.3d 1119 (9th Cir. 2005). 

7 Jevne v. The Superior Court of Los Angeles 

County, S121532 (CA Sup. Ct. May 23, 2005). 

8 15 U.S.C. 78s(b). 

9 15 U.S.C. 78s(b)(5). 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(6). 

12 17 CFR 240.19b–4(f)(6)(iii). 

13 Id. 

14 Id. 

15For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

of the Secretary, and at the 

Commission’s Public Reference Room. 

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 

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 purpose of the proposed rule 

change is to rescind the Pilot Rules 

relating to the waiver of the California 

Standards and the CCCP Claims. 

Effective July 1, 2002, the California 

Judicial Council adopted the California 

Standards,5 which contain extensive 

disclosure and disqualification 

requirements for arbitrators. The 

California Standards imposed disclosure 

and disqualification requirements on 

arbitrators that conflict with the 

disclosure requirements of the PCX and 

PCXE. Because PCX and PCXE could 

not administer its arbitration program in 

accordance with its own rules and 

comply with the new California 

Standards at the same time, the PCX 

initially suspended the appointment of 

arbitrators. 

In November 2002, PCX implemented 

the Pilot Rules providing that if parties 

to an arbitration who are customers (or, 

in certain circumstances, associated 

persons) waived application of the 

California Standards to their arbitration 

proceeding, then the firm would be 

required to waive the application of the 

California Standards. Under such a 

waiver, the arbitration proceeds under 

existing PCX and PCXE rules, which 

already contains extensive disclosure 

requirements and provisions for 

challenging arbitrators with potential 

conflicts of interest. PCX will decline 

jurisdiction and dismiss and refund fees 

paid to PCX and PCXE by the parties for 

any arbitration claims in which any of 

the parties to arbitration fails to sign the 

applicable waivers. 

On March 1, 2005, the United States 

Court of Appeals for the Ninth Circuit 

issued its decision in Credit Suisse First 

Boston Corp. v. Grunwald.6 The Ninth 

Circuit held that the Exchange Act 

preempts application of the California 

Standards. On May 23, 2005, the 

Supreme Court of California also held 

that the Act preempts application of the 

California Standards.7

PCX has determined that the Pilot 

Rules should be rescinded prior to its 

expiration as they are no longer 

necessary. Specifically with the recent 

decisions in Grunwald and Jevne, both 

the Ninth Circuit and the California 

Supreme Court have found that the Act 

preempts the application of the 

California Standards. Consequently, the 

PCX believes that it can once again 

appoint arbitrators without requiring a 

waiver of the California Standards. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act,8 in general, and Section 

6(b)(5) of the Act,9 in particular, in that 

it is designed to promote just and 

equitable principles of trade by ensuring 

that Options Trading Permits Holders, 

Options Trading Permits Firms, 

Exchange Trading Permits Holders and 

the public have a fair and impartial 

forum for the resolution of their 

disputes. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange 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 

Written comments on the proposed 

rule change were neither solicited nor 

received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing proposed rule change 

has become effective upon filing 

pursuant to Section 19(b)(3)(A) of the 

Act 10 and Rule 19b–4(f)(6) thereunder 11

because the 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 if 

consistent with the protection of 

investors and the public interest. As 

required under Rule 19b–4(f)(6)(iii),12

the PCX provided the Commission with 

written notice of PCX’s intent to file the 

proposed rule change along with a brief 

description and text of the proposed 

rule change, at least five business days 

prior to the filing date of the proposed 

rule change. 

A proposed rule change filed under 

Rule 19b–4(f)(6) normally may not 

become operative for 30 days after the 

date of its filing.13 However Rule 19b–

4(f)(6)(iii) 14 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection 

investors and the public interest. The 

PCX has requested that the Commission 

waive the 30-day operative delay so that 

the proposed rule change will become 

immediately effective upon filing. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest.15 For these reasons, the 

Commission designates that the 

proposed rule change has become 

effective and operative immediately. 

At any time within 60 days of the 

filing of such 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. 

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. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include Filed 

No. SR–PCX–2005–106 on the subject 

line. 

57918 Federal Register / Vol. 70, No. 191 / Tuesday, October 4, 2005 / Notices 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, the Exchange 

incorporated additional provisions under PCX Rule 

6.93 to apply to the Minor Rule Plan and 

Recommended Fine Schedule, provided more 

detailed descriptions of the PCX Rules that would 

apply to the Minor Rule Plan and Recommended 

Fine Schedule under this proposed rule change, 

and made other non-substantive changes to clarify 

the purpose of the proposal. 

4The terms ‘‘OTP Holder’’ and ‘‘OTP Firm’’ are 

defined in PCX Rules 1.1(q) and 1.1(r), respectively. 

5 If the PCX determines that a violation is not 

minor in nature, including repeated violations of a 

PCX Rule, the PCX may, at its discretion, proceed 

under PCX Rule 10.4 (Complaints) rather than 

under the MRP. See PCX Rule 10.12(f). 

Paper Comments 

• Send paper comments in triplicate 

to Jonathan G. Katz, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–9303. 

All submissions should refer to File 

No. SR–PCX–2005–106. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). 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 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File No. 

SR–PCX–2005–106 and should be 

submitted on or before October 25, 

2005. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.16

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–19773 Filed 10–3–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52523; File No. SR–PCX–

2005–98] 

Self-Regulatory Organizations; Pacific 

Exchange, Inc.; Notice of Filing of 

Proposed Rule Change and 

Amendment No. 1 Thereto To Amend 

Its Minor Rule Plan and Recommended 

Fine Schedule in Connection With 

Rules Regarding Principal Orders, 

Principal Acting as Agent Orders, and 

Limitations on Principal Order Access 

September 28, 2005. 

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 

16, 2005, 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 Exchange. On 

September 27, 2005, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.3 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 

PCX proposes to amend its Minor 

Rule Plan (‘‘MRP’’) and Recommended 

Fine Schedule (‘‘RFS’’) under PCX Rule 

10.12 with respect to provisions of the 

PCX Options Linkage program 

(‘‘Linkage’’) that relate to Principal 

Orders (‘‘P Orders’’), Principal Acting as 

Agent Orders (‘‘P/A Orders’’), and 

Limitations on Principal Order Access. 

The text of the proposed rule change is 

available on the Exchange’s Internet 

Web site (http://www.pacificex.com), at 

the Exchange’s principal office, and at 

the Commission’s Public Reference 

Room. 

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 

Exchange 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 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange’s MRP, which 

incorporates the RFS, under PCX Rule 

10.12 provides for an abbreviated 

procedure for the resolution of minor 

rule violations. The Exchange is 

proposing to amend the MRP and RFS 

to bring additional rules within their 

coverage. PCX believes that inclusion of 

such matters would provide a fair 

means of promptly resolving minor rule 

violations that do not rise to the level of 

formal disciplinary proceedings and 

enforcement action. 

Specifically, the Exchange is 

proposing to add the violation of its 

Linkage rules relating to: (i) P Orders 

and P/A Orders (PCX Rules 6.93(a), (b), 

(c)(1), (d), and (e)), which require OTP 

Holders and OTP Firms 4 to observe 

certain time constraints and Linkage 

order procedures in sending and 

receiving P Orders and P/A Orders 

through Linkage; and (ii) Limitations on 

Principal Order Access (also known as 

80/20) (PCX Rule 6.96), which prohibits 

the sending of P Orders in an eligible 

option class through Linkage for a given 

quarter if a market maker effected 20 

percent or more of its volume by 

sending P Orders through Linkage. As 

proposed, an OTP Holder or OTP Firm, 

who fails to follow the Linkage rules set 

forth above, would be fined $500 for the 

first violation, $1,000 for the second 

violation, and $2,500 for the third 

violation.5

The Exchange believes that the 

proposed rule change would strengthen 

the ability of the Exchange to carry out 

its oversight responsibilities as a selfregulatory organization. The Exchange 

also believes that the proposed rule 

change should aid PCX in carrying out 

its surveillance and enforcement 

functions. The Exchange represents that