[Federal Register Volume 63, Number 135 (Wednesday, July 15, 1998)]
[Notices]
[Pages 38222-38223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18843]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40182; File No. SR-PCX-98-12]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Order
Approving Proposed Rule Change Relating to the Treatment of PMP Orders
Generated Through the Matching of Profiles by the PCX Application of
the OptiMark System
July 9, 1998.
I. Introduction
On March 2, 1998, the Pacific Exchange (``PCX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'' or
``SEC'') the proposed rule change pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and
Rule 19b-4 thereunder,\2\ to amend its interpretation of Rule 5.32(a)
``PMP-Only'' of its Rules of Board of Governors so that it will clarify
how PMP orders will be treated when generated from the matching of
Profiles through the PCX Application of the OptiMark System (``PCX
Application'').\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1) (1982).
\2\ 17 CFR 240.19b-4 (1991).
\3\ For a description of the PCX Application of the OptiMark
System, see Securities Exchange Act Release No. 39086 (Sept. 17,
1997), 62 FR 50036 (Sept. 24, 1997) (Commission order granting
approval for the PCX Application).
---------------------------------------------------------------------------
Notice of the proposed rule change was published in the Federal
Register.\4\ The Commission received no comment letters in response to
the notice of the proposed rule change.
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release No. 39818 (Mar. 30, 1998),
63 FR 17252 (Apr. 8, 1998).
---------------------------------------------------------------------------
II. Description of the Proposal
PCX has proposed to amend its interpretation of Rule 5.32(a) ``PMP-
Only'' of its Rules of Board of Governors so that it will clarify how
PMP orders will be treated when generated from the matching of Profiles
through the PCX Application. A new commentary has been added to Rule
5.32(a).
PCX will modify the interpretation of its Rule 5.32(a) so that
executions resulting from the operation of the PCX Application would be
considered as a part of the ``primary market'' for the purposes of
execution of orders marked ``PMP.'' The purpose of the proposed
interpretation of the rule is to respond to the SEC staff's request to
clarify the meaning of Rule 5.32(a) ``PMP Only.'' Through the addition
of proposed Commentary .01, Rule 5.32(a) would be interpreted as
meaning that during regular ``primary'' market trading hours, an order
specifically marked ``PMP'' would receive primary market protection,
which would include not only the traditional primary markets (e.g., New
York markets) but also matches resulting from the PCX Application.
Accordingly, executions resulting from the PCX Application may trigger
the execution of an order marked ``PMP Only,'' even if the primary
markets have not traded at that price. Similarly, a PMP order reflected
into the PCX Application as a Profile, which is matched in the PCX
Application and results in an execution, would require that such PMP
limit order be filled, even if the price is out of range from an
otherwise existing ``primary'' market, however defined. This would then
be consistent with the overall premise that under no circumstance can a
specialist accept an execution arising out of orders generated from a
cycle of the PCX Application, without also executing any eligible
booked orders that were put in the book before the cycle began.
III. Discussion
The Commission believes that proposed rule change is consistent
with the provisions of Section 6(b)(5) of the Exchange Act, which
provides, among other things, that the rules of an exchange be designed
to promote just and equitable principles of trade and to protect
investors and the public interest, and not designed to permit unfair
discrimination between customers, issuers, brokers or dealers. The
Commission believes that by including PMP orders in the PCX
Application, and giving those orders not only traditional primary
market protection, but also the potentially improved pricing that may
result from inclusion in the PCX Application, the PCX is seeking to
protect the interests of investors and to promote just and equitable
principles of trade, while striving to prevent unfair discrimination
between customers, brokers, and dealers. This effort should also help
to remove impediments to, and perfect the mechanism of, a free and open
market, consistent with the purpose of Section 6(b)(5) of the Act.
In addition, the Commission believes that the proposed rule change
is consistent with the provisions of Section 11A(a)(1)(B) of the
Exchange Act, which states that new data processing and communications
techniques create the opportunity for more efficient and effective
market operations. By employing the facility of the PCX Application, an
advanced data processing and communications system, to process PMP
orders and to give potentially improved pricing to those orders or
otherwise to fill more
[[Page 38223]]
expeditiously PMP limit orders, the PCX is furthering the purposes of
Section 11A(a)(1)(B) of the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\5\ that the proposed rule change (SR-PCX-98-12) is approved.
\5\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
---------------------------------------------------------------------------
\6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18843 Filed 7-14-98; 8:45 am]
BILLING CODE 8010-01-M
