04-6106. Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. Relating to Time for Entering Orders Eligible for the Closing Auction

March 12, 2004.

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 March 3, 2004, the Pacific Exchange, Inc. (“PCX” or “Exchange”), through its wholly-owned subsidiary PCX Equities, Inc. (“PCXE”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the PCX. The PCX filed the proposal pursuant to Section 19(b)(3)(A) under the Act,^[3] and Rule 19b-4(f)(6) thereunder,^[4] which renders the proposal effective upon filing with the Commission.^[5] 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 PCX proposes to amend paragraph (d)(2)(B) of PCXE Rule 7.34, “Trading Sessions,” to permit Users to enter Market-on-Close Orders (“MOC Orders”),^[6] Limit-on-Close Orders (“LOC Orders”),^[7] and Limited Price Orders beginning at 6:30 a.m. (Pacific Time) rather than 4:30 a.m. (Pacific Time). The text of the proposed rule change appears below. Deletions are in brackets; additions are italicized.

Trading Sessions

Rule 7.34(a)-(c)—No change.

(d)Orders Permitted in Each Session.

(1)—No change.

(A)-(H)—No change.

(2) During the Core Trading Session:

(A)—No change.

(B) Users may enter Market-on-Close Orders, Limit-on-Close Orders, and Limited Price Orders beginning at [4]6:30 am (Pacific Time) and concluding at 1:00 pm (Pacific Time) for inclusion in the Closing Auction, except as provided in Rule 7.35(e)(2). Market-on-Close Orders and Limit-on-Close Orders are eligible for execution only during the Closing Auction. Market Orders are not eligible for execution in the Closing Auction.

(C)—No change.

(3)—No change.

(e)-(f)—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, 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 PCX, through its wholly-owned subsidiary PCXE, proposes to amend its rules governing the Archipelago Exchange (“ArcaEx”), the equities trading facility of PCXE, to modify the time for entering Closing Auction-eligible orders. The PCX notes that the Commission recently approved a PCX proposal that established a beginning time of 4:30 a.m. (Pacific Time) for entering MOC Orders, LOC Orders, and Limited Price Orders for inclusion in ArcaEx's Closing Auction.^[8] As part of its efforts to enhance ease of participation on ArcaEx, the PCX seeks to delay the beginning time for entering such orders from 4:30 a.m. (Pacific Time) to 6:30 a.m. (Pacific Time).

According to the PCX, the Core Trading Session begins at 6:30 a.m. (Pacific Time). The PCX believes that Users may be confused by the current rule because an order could be eligible for the Closing Auction at a time when the PCX is still accepting orders eligible for the Opening Auction.^[9] The PCX believes that delaying the beginning time for entering Closing Auction-eligible orders to coincide with the Core Trading Session will alleviate any confusion that Users may have regarding the nature of their orders.

2. Statutory Basis

The PCX believes that the proposal is consistent with Section 6(b) of the Act,^[10] in general, and Section 6(b)(5) of the Act,^[11] in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system and to protect investors and the public interest. In addition, the PCX believes that the proposed rule change is consistent with Section 11A(a)(1)(B) of the Act,^[12] which states the Congressional finding that new data processing and communications techniques create the opportunity for more efficient and effective market operations.

(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 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

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 has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act ^[13] and subparagraph (f)(6) of Rule 19b-4 thereunder.^[14] Because the foregoing 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 designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. As required under Rule 19b-4(f)(6)(iii), the PCX provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to filing the proposal with the Commission or such shorter period as designated by the Commission.

A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The PCX has requested that the Commission waive the 30-day operative delay specified in Rule 19b-4(f)(6). In this regard, the PCX states that it believes that the proposal does not raise new regulatory issues and that it will eliminate confusion regarding Closing Auctions. The PCX also believes that its request to waive the 30-day operative delay is consistent with the protection of investors and the public interest and that good cause exists, including the PCX's need to maintain competition and efficiency.

The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the proposed rule change is designed to minimize potential confusion regarding the entry of MOC Orders, LOC Orders, and Limited Price Orders for inclusion in the Closing Auction by delaying the time for entering such orders until 6:30 a.m. (Pacific Time).^[15] In this regard, the Commission notes that the PCX believes that its current rule may confuse Users because it permits the entry of orders eligible for the Closing Auction at a time when the PCX is still accepting orders eligible for the Opening Auction.^[16] The Commission believes that the proposal appears to be reasonably designed to help to address this concern by permitting the entry of orders eligible for the Closing Auction beginning at 6:30 a.m. (Pacific Time) rather than 4:30 a.m. (Pacific Time). For this reason, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, and the Commission designates the proposal to be operative upon filing with the Commission.

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 it 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. Comments may also be submitted electronically at the following e-mail address: [e-mail]. All comment letters should refer to File No. SR-PCX-2004-14. The 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, comments should be sent in hardcopy or by e-mail but not by both methods. 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 will also be available for inspection and copying at the principal office of the PCX. All submissions should refer to File No. SR-PCX-2004-14 and should be submitted by April 8, 2004.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[17]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  15 U.S.C. 78s(b)(3)(A).

4.  17 CFR 240.19b-4(f)(6).

5.  The PCX has asked the Commission to waive the 30-day operative delay. See Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii).

6.  PCXE Rule 7.31(dd) defines a Market-on-Close Order as a “Market Order that is to be executed only during the Closing Auction.”

7.  PCXE Rule 7.31(ee) defines a Limit-on-Close Order as a “Limited Price Order that is to be executed only during the Closing Auction.”

8.  See Securities Exchange Act Release No. 48883 (December 4, 2003), 68 FR 69748 (December 15, 2003) (order approving File No. SR-PCX-2003-24).

9.  The PCX accepts orders eligible for the Opening Auction from 5 a.m. (Pacific Time) until 6:30 a.m. (Pacific Time). Telephone conversation between Mai Shiver, Acting Director/Senior Counsel, PCX, and Yvonne Fraticelli, Special Counsel, Division of Market Regulation, Commission, on March 11, 2004.

10.  15 U.S.C. 78f(b).

11.  15 U.S.C. 78f(b)(5).

12.  15 U.S.C. 78k-1(a)(1)(B).

13.  15 U.S.C. 78s(b)(3)(A).

14.  17 CFR 240.19b-4(f)(6).

15.  For 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).

16.  The PCX accepts orders eligible for the Opening Auction from 5:00 a.m. (Pacific Time) until 6:30 a.m. (Pacific Time). See note 9, supra.

17.  17 CFR 200.30-3(a)(12).