regulatory organizations; proposed rule changes: Pacific Exchange, Inc.,
[Federal Register: January 25, 2000 (Volume 65, Number 16)]
[Notices]
[Page 4008-4010]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ja00-85]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42349; File No. SR-PCX-99-37]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Pacific Exchange, Inc. Authorizing the PCX ITS Coordinator to Accept Inbound Commitments on Behalf of Other PCX Specialists
January 19, 2000.
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 October 5, 1999, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') filedwith the Securities and Exchange Commission (``Commission'' or ``SEC'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. PCX submitted an amendment on November 2, 1999 (``Amendment No. 1''),\3\ and an amendment on December 7, 1999 (``Amendment No. 2'').\4\ The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\1\ 5 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Michael Pierson, Director, Regulatory Policy, PCX, to Marla Chidsey, Law Clerk, Division of Market Regulation, Commission, dated November 1, 1999. Amendment No. 1 clarifies whether the ITS coordinator must still confirm with other PCX specialists, executions made on behalf of those other PCX specialists, before executions occur.
\4\ See Letter from Michael Pierson, Director, Regulatory Policy, PCX, to Marla Chidsey, Law Clerk, Division of Market Regulation, Commission, dated December 6, 1999. Amendment No. 2 adds Rule 5.20(a)(xi) defining the term ``PCX Coordinating Specialist'' as the specialist responsible for coordinating the acceptance of inbound ITS commitments.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The PCX is proposing to adopt a new rule to allow the ITS Coordinator \5\ in a given equity issue to accept ITS
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commitments on behalf of other specialists in that issue.
\5\ The Commission would like to clarify that the term ``ITS Coordinator'' is used interchangeably with the term ``PCX Coordinating Specialist'' as defined in new Rule 5.20(a)(xi).
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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.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
At the PCX, there are generally two registered specialists per equity issue traded on the Exchange.\6\ However, there is only one specialist per issue who acts as the ITS Coordinator. The ITS Coordinator is generally responsible for coordinating acceptance of incoming ITS commitments among the specialists in a particular stock. The PCX expects that there will continue to be only one ITS Coordinator per stock after the Exchange expands the number of specialists per issue.
\6\ The PCX expects that there will be more than one specialist per stock when its competing specialist program is implemented. See Exchange Act Release No. 41327 (April 22, 1999), 64 FR 23370 (April 30, 1999).
Currently, any PCX specialist may send an outbound ITS commitment to another market center without that ITS Coordinator's assistance. A PCX specialist who is not an ITS Coordinator may also receive inbound ITS commitments without the involvement of the ITS Coordinator, as long as the ITS Coordinator is not designated to participate in the trade as a result of the inbound commitment.\7\ However, if an inbound commitment involves more than one PCX specialist as the contra side, then the ITS Coordinator is required to coordinate the execution of the commitment among the PCX participants verbally.
\7\ The ITS Coordinator need not coordinate the commitment if he or she is not quoting at the price of the inbound commitment and is not representing an order at that price.
The current PCX rules do not expressly authorize the ITS Coordinator to accept ITS commitments on behalf of other specialists. The ITS Coordinator needs to obtain the verbal consent of the other specialist before accepting an inbound commitment on behalf of that other specialist. The PCX is now proposing to provide the ITS Coordinator with the express authority to accept ITS commitments on behalf of other specialists. The Exchange believes that this rule change is necessary in order to assure that there will be no delays in the acceptance of inbound ITS commitments, where there is more than one specialist quoting at the price of the inbound commitment.\8\
\8\ Priority and parity rules will not be affected by the proposed rule change. Telephone conversation between Michael Pierson, Director, Regulatory Policy, PCX, and Christine Richardson, Attorney, and Marla Chidsey, Attorney, Division of Market Regulation, Commission (January 18, 2000).
For example, assume Specialist A and Specialist B (PCX specialists) are both bidding $20 (the national best bid) for 500 shares of XYZ stock. If the PCX receives an inbound ITS commitment to sell 1,000 shares of stock, and if Specialist A is the ITS Coordinator, then Specialist A will confirm with Specialist B that 500 shares of XYZ may be accepted by Specialist A on Specialist B's behalf. The proposed rule change would allow Specialist A to accept the 500 shares on Specialist B's behalf, on the ground that Specialist B's bid for 500 shares is still outstanding at the time that Specialist A receives the inbound commitment for 1,000 shares. Whenever an inbound ITS commitment is received on the PCX, the specialists whose quotes prompted the inbound commitment will be notified by a ``shadow'' message that the inbound commitment has been received on the PCX.\9\
\9\ See also Amendment No. 1.
Specifically, the PCX is proposing to adopt new Rule 5.20, Commentary .04, which will provide that in the case of the assignment of an ITS stock to more than one PCX Registered Specialist, the PCX Coordinating Specialist or PCX Registered Specialist at whose ITS station an ITS commitment to trade is received is authorized to accept such commitment at the PCX bid or offer price, if still available (or at a better price if available), and up to the size of the PCX bid or offer without the need to communicate with other PCX members. 2. Basis
The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act,\10\ in general, and furthers the objectives of Section 6(b)(5),\11\ in particular, in that it is designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to promote just and equitable principles of trade and to protect investors and the public interest.
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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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.
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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.
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Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self- regulatory organization consents, the Commission will:
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by order approve such proposed rule change, or
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institute proceedings to determine whether the proposed rule change should be disapproved.
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Solicitation of Comments
Interested persons are invited to submit written data, views and arguments concerning the foregoing including whether the proposed rule is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filedwith 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. SR-PCX-99-37 and should be submitted by February 15, 2000.
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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\12\
\12\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 00-1736Filed1-24-00; 8:45 am]
BILLING CODE 8010-01-M
