[Federal Register Volume 64, Number 24 (Friday, February 5, 1999)]
[Notices]
[Pages 5848-5849]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2734]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40994; File No. SR-PCX-98-63]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to the OptiMark System and Stop Orders
January 28, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 24, 1998, 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 the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange is proposing to amend Rules 5.8(j) and 5.32(a) to
clarify the responsibilities of PCX members regarding the handling of
stop orders relative to executions resulting from the PCX Application
of the OptiMark System.
The text of the proposed rule change is available at the Office of
the Secretary, PCX and at the Commission.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rules 5.8(j) and 5.32(a) to clarify
the responsibilities of PCX members regarding the handling of stop
orders relative to executions resulting from the PCX Application of the
OptiMark System. The proposed amendments clarify that all round-lot
stop orders in dually-traded securities that are afforded primary
market protection (``PMP'') will not be elected and executed based on
transactions that emanate from the OptiMark System. The Exchange
believes that the proposed rule change will clarify the treatment of
stop orders under PCX's rules, thereby promoting a more effective and
orderly market operation.
The Exchange proposes changes to Rules 5.8(j) and 5.32(a) for the
following reasons:
First, stop orders are not eligible for entry as profiles in the
OptiMark System. Consequently, a specialist or floor broker cannot
interact with the trade results that are generated from a single call
cycle in order to comply with the execution requirements for stop
orders (prints resulting from an OptiMark call cycle occur in an
uninterrupted batch).
Second, a stop order is contingent on its election and execution
occurring in a continuous sequence of trades in an auction market.
OptiMark is a call market in which executions occur on a periodic basis
and, as a result, it is not conducive to the election and execution of
such orders.
Third, since an OptiMark match cycle generates trades at a range of
prices, the election of a stop order by including OptiMark prints may
result in a customer receiving an unfavorable execution, particularly
if the traditional primary market (New York Stock Exchange (``NYSE'')
or American Stock Exchange (``AMEX'')) would not reach the election
price.
Fourth, given PCX technology in the current trading environment,
the Specialists are unable to distinguish between OptiMark and non-
OptiMark prints that occur on the PCX.
Finally, the proposal is consistent with the interpretation of PCX
Rule 5.8(j) in that stop orders have, in practice, been elected and
executed based on transactions emanated from the primary markets (NYSE
and AMEX).
2. Statutory Basis
The Exchange represents that the proposed rule change is consistent
with Section 6(b) \2\ of the Act in general and further objectives of
Section 6(b)(5) \3\ in particular, because it is designed to promote
just and equitable principles of trade, to facilitate transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system, and to protect
investors and the public interest.\4\
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\2\ 15 U.S.C. 78f(b).
\3\ 15 U.S.C. 78f(b)(5).
\4\ In reviewing this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has 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 foregoing rule change constitutes a stated policy, practice or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule of the Exchange and therefore, has
become effective pursuant to Section 19(b)(3)(A)(i) of the Act \5\ and
subparagraph (e)(1) of Rule 19b-4 thereunder.\6\
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\5\ 15 U.S.C. 78s(b)(3)(A)(i).
\6\ 17 CFR 240.19b-4(e)(1).
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At any time within 60 days of the filing of the 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.
[[Page 5849]]
Persons making written submissions should file six copies thereof with
the Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549. 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 at the Commission's Public
Reference Room. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
submissions should refer to File No. SR-PCX-98-63 and should be
submitted by February 26, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200,30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2734 Filed 2-4-99; 8:45 am]
BILLING CODE 8010-01-M
