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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To Amend the Definition of “Primary Only Order”

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Start Preamble October 8, 2002.

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 16, 2002, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by PCX. PCX filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act [3] and Rule 19b-4(f)(6) thereunder,[4] which renders the proposal effective 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

The Exchange, through its wholly owned subsidiary PCX Equities, Inc. (“PCXE”), proposes to amend its rules governing the Archipelago Exchange, the equities trading facility of PCXE, by amending the definition of “Primary Only Order” (“PO Order”) to permit ETP Holders and Sponsored Participants [5] on the Archipelago Exchange to enter such orders at times other than just prior to the primary market opening. Under the proposal, PO Orders may be entered until a cut-off time determined from time to time by the PCXE. Below is the text of the proposed rule change. New text is in italics, while deletions appear in [brackets].

* * * * *

PCX Equities, Inc.

Rule 7

Equities Trading

Orders and Modifiers

Rule 7.31(a)-(w)—No change.

(x) Primary Only Order (PO Order). For exchange-listed securities only, a market order that is to be routed as a market[-on-open] order to the primary market [for participation in the primary market opening or re-opening process]. Such PO Orders may be entered until a cut-off time as determined from time to time by the Corporation.

(1)-(2)—No change.

* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, 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 Archipelago Exchange (“ArcaEx”) commenced operations on March 22, 2002, replacing the PCXE's traditional trading floor facilities. As part of its continuing review of the system's functionality and rules, the Exchange proposes to amend the definition of a PO Order to permit ETP Holders and Sponsored Participants (collectively “Users”) on ArcaEx to enter such orders at times other than just prior to the primary market opening. Under the proposal, PO Orders may be entered until a cut-off time determined from time to time by the Exchange.

As defined in Rule 7.31(x), a PO Order is a market order, for exchange-listed securities only, that is to be routed as a market-on-open order to the designated primary market for participation in the primary market opening or re-opening process. A PO Order bypasses the order execution processes of the ArcaEx Book and is routed directly to the designated primary market. Currently, a PO Order entered for participation in the primary market opening must be entered before 6:28 a.m. (Pacific Time). The Exchange proposes to modify the definition of a PO Order so they may be entered at times other than just prior to the primary market opening.

The proposed rule change is intended to provide Users with more flexibility as to when they may route PO Orders to the designated primary market. The Exchange believes that by expanding the time during which PO Orders may be entered, Users will have the ability to use other markets other than ArcaEx as an alternative order destination when it suits the User's investment needs. Accordingly, the Exchange believes that the proposed rule change promotes a more efficient and effective market operation, and enhances the investment choices available to Users in the handling of their orders.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with section 6(b) [6] of the Act, in general, and furthers the objectives of section 6(b)(5),[7] in particular, 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 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 Exchange has designated the foregoing rule change as effecting a change that: (1) Does not significantly Start Printed Page 63723affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) by its terms does not become operative for 30 days from the date of filing. In addition, the Exchange provided the Commission with written notice of its intent to file the proposed rule change at least five days prior to the filing date. Accordingly, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act [8] and Rule 19b-4(f)(6) thereunder.[9] 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.

PCX has also requested that the Commission waive the 30-day waiting period so that the proposed rule change may become operative immediately. The proposed Primary Only Order, as amended, promotes a more efficient and effective market operation, and enhances the investment choices available to Users in the handling of their orders. The Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day waiting period.[10] For these reasons, the Commission designates the proposal as operative immediately.

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 such filing will also be available for inspection and copying at the principal office of the PCX. All submissions should refer to File No. PCX-2002-58 and should be submitted by November 5, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[11]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

5.  A “Sponsored Participant” means “a person which has entered into a sponsorship arrangement with a Sponsoring ETP Holder pursuant to [PCXE] Rule 7.29.” See PCXE Rule 1.1(tt).

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10.  For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

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[FR Doc. 02-26155 Filed 10-11-02; 8:45 am]

BILLING CODE 8010-01-P