Document ID: SEC-2005-0069-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Pacific Exchange, Inc.
Posted Date: 2005-10-04T04:00Z

[Federal Register: October 4, 2005 (Volume 70, Number 191)]
[Notices]               
[Page 57918-57919]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04oc05-111]                         

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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.
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    \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.
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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\
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    \4\ The 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).
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    The Exchange believes that the proposed rule change would 
strengthen the ability of the Exchange to carry out its oversight 
responsibilities as a self-regulatory 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

[[Page 57919]]

it does not minimize the importance of compliance with these rules and 
all other rules subject to the imposition of fines under the Exchange's 
MRP. The Exchange relies on its MRP as a tool to address enumerated 
violations to provide the Exchange with greater flexibility in 
addressing violations that may not require formal disciplinary 
proceedings. Under the proposed rule change, the Exchange's Enforcement 
Department would continue to exercise its discretion under PCX Rule 
10.12(f) and pursue certain cases as a formal disciplinary matter under 
PCX Rule 10.4 to the extent that the facts or circumstances warrant 
such action.\6\
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    \6\ See supra note 5.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ in particular, in that it 
would promote just and equitable principles of trade, facilitate 
transactions in securities, remove impediments to and perfect the 
mechanisms of a free and open market and a national market system, and 
protect investors and the public interest. The proposal is also 
consistent with, and furthers the objectives of, Sections 6(b)(6) and 
6(b)(7) of the Act \9\ in that it would help ensure that members and 
persons associated with members are appropriately disciplined for 
violations of the Act, the rules and regulations thereunder, and the 
rules of the Exchange, and provide a fair procedure for disciplining 
members and persons associated with members.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(6) and (7).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
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 Register or 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, as amended, 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 rule-comments@sec.gov. Please include 

File Number SR-PCX-2005-98 on the subject line.

Paper comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

    All submissions should refer to File Number SR-PCX-2005-98. 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 Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal offices of the Exchange. 
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 Number SR-PCX-2005-98 
and should be submitted on or before October 25, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-19807 Filed 10-3-05; 8:45 am]

BILLING CODE 8010-01-P