Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  and Rule 19b-4 thereunder, notice is hereby given that on September 23, 2002, the Pacific Exchange, Inc. (“PCX”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which the PCX has prepared. The Commission is publishing this notice to solicit comments on the proposal from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The PCX proposes to amend PCX Rule 6.84 in order to allow a market maker to participate in more than two joint accounts. The text of the proposed rule change is below. The deleted text is in brackets.
Text of the Proposed Rule Change
Rule 6.84(a). No Market Maker shall, directly or indirectly, hold any interest or participate in any joint account for buying or selling any option contract or Start Printed Page 63721related security unless (1) each participant in such joint account is a member or member organization of the Exchange, and (2) such joint account agreement is filed with (in a form approved by the Exchange) and approved by the Exchange. [No Market Maker shall, directly or indirectly, concurrently hold any interest or participate in more than two joint accounts.]
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 had received. 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 those statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
PCX rules allow market makers to participate in joint accounts. Under PCX Rule 6.84, a market maker may not participate or hold an interest in more than two joint accounts. This limitation was incorporated into the PCX's rules in 1990. The PCX believes that the joint account limitation may have been imposed originally for the administrative ease of the PCX, but that it does not currently provide any administrative benefit. Furthermore, the PCX believes that the limitation was never intended to create, and does not currently provide, any regulatory safeguards. For instance, the PCX notes that it may track a market maker's activity within a joint account by reference to the badge number associated with a given transaction, regardless of the number of joint accounts in which the market maker participates.
From time to time, market makers have found it necessary, for logistical reasons, to participate in more than two joint accounts. Because the PCX believes that there is no benefit to the investing public in limiting the number of joint accounts in which a market maker participates, the PCX now seeks to remove that limitation and allow market makers to enter into as many joint accounts as their business requires. The PCX believes that the proposed change is consistent with the joint account rules of other options exchanges that do not limit the number of joint accounts in which their market makers or specialists may enter.
The PCX believes that the proposed rule change is consistent with Section 6(b) of the Act  and furthers the objectives of Section 6(b)(5) of the Act  in that it is designed to facilitate transactions in securities, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system.
B. Self-Regulatory Organization's Statement on Burden on Competition
The PCX does not believe that the proposed rule change will impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
The PCX neither solicited nor received written comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The PCX submitted a draft of this filing, including the proposed new rule text, to the Commission on September 11, 2002 in fulfillment of the five-day draft notice period of Rule 19b-4(f)(6). The PCX has further designated that the proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designated if consistent with the protection of investors and the public interest. Therefore, the proposed rule change has become effective immediately upon filing with the Commission pursuant to Section 19(b)(3)(A) of the Act  and Rule 19b-4(f)(6) thereunder. At any time within 60 days after the filing of the proposed rule change, the Commission may summarily abrogate the 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.
A proposed rule change filed under Rule 19b-4(f)(6)  does not become operative until 30 days after the date of filing or such shorter time as the Commission may designate if such action is consistent with the protection of investors and the public interest. The PCX has requested that the Commission accelerate the implementation of this proposed rule change so that it may take effect before the 30-day period specified in Rule 19b-4(f)(6)(iii). The Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day period and to designate that the proposed rule change has become operative as of September 23, 2002, the date the PCX filed the proposal with the Commission.
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 the filing will also be available for inspection and copying at the principal office of the PCX. All submissions should refer to File No. Start Printed Page 63722SR-PCX-2002-60 and should be submitted by November 5, 2002.Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
3. See Securities Exchange Act Release No. 28134 (June 19, 1990), 55 FR 26320 (June 27, 1990).Back to Citation
4. The PCX notes, for example, that current PCX Rule 6.84(a) is virtually identical to Chicago Board Options Exchange (“CBOE”) Rule 8.9(c), except that the CBOE rule does not restrict the number of joint accounts in which a market maker may participate.Back to Citation
10. Id.Back to Citation
12. The Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation for the sole purpose of accelerating the operative date of the proposed rule change. 15 U.S.C. 78c(f).Back to Citation
[FR Doc. 02-26058 Filed 10-11-02; 8:45 am]
BILLING CODE 8010-01-P