

[Federal Register: January 12, 2006 (Volume 71, Number 8)]
[Notices]               
[Page 2100-2101]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja06-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53052; File No. SR-PCX-2004-46]

 
Self-Regulatory Organizations; Order Approving Proposed Rule 
Change, and Amendment No. 1 Thereto, by the Pacific Exchange, Inc. 
Relating to Modifying the Market Imbalance Calculation for the Opening 
and Market Order Auctions on the Archipelago Exchange

January 5, 2006.
    On May 14, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly-owned subsidiary PCX Equities, Inc. 
(``PCXE'') submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to modify the practices that the Exchange employs 
with respect to the calculation of the Market Imbalance during the 
Market Order Auction \3\ and Closing Auction \4\ conducted on the 
Archipelago Exchange (``ArcaEx''), the equity trading facility of the 
Exchange. On May 24, 2004, the PCX submitted Amendment No. 1 to the 
proposed rule change.\5\ The Federal Register published the proposed 
rule change, as amended, for comment on June 3, 2004.\6\ The Commission 
received no comments on the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See PCXE Rule 7.35(c).
    \4\ See PCXE Rule 7.35(e).
    \5\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
    \6\ Securities Exchange Act Release No. 49773 (May 26, 2004), 69 
FR 31440.
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    The Exchange proposes to modify PCXE Rule 1.1(q) for the purpose of 
modifying the ArcaEx calculation of the Market Imbalance. Currently, 
the ``Market Imbalance'' is defined as the imbalance of any remaining 
Market Orders \7\ that are not matched for execution during the Market 
Order Auction \8\ and the imbalance of any remaining Market-on-Close 
(``MOC'') Orders that are not matched for execution during the Closing 
Auction.\9\ As such, all eligible Market Orders, MOC Orders,\10\ Limit 
Orders,\11\ and Limit-on-Close (``LOC'') Orders \12\ that are eligible 
for execution in the applicable auction against Market Orders or MOC 
Orders are taken into consideration when calculating the Market 
Imbalance for the Market Order Auction and Closing Auction. The 
Exchange proposes to modify the Market Imbalance calculation for both 
the Market Order Auction and the Closing Auction so that it will only 
take into consideration Market Orders (for the Market Order Auction) 
and MOC Orders (for the Closing Auction) in determining the Market 
Imbalance.
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    \7\ PCXE Rule 7.31(a).
    \8\ PCXE Rule 7.35(c).
    \9\ PCXE Rule 7.35(e).
    \10\ PCXE Rule 7.31(dd).
    \11\ PCXE Rule 7.31(b).
    \12\ PCXE Rule 7.31(ee).
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    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder that are applicable to a 
national securities exchange.\13\ In particular, the Commission 
believes that the proposed rule change is consistent with Section 6(b) 
of the Act,\14\ in general, and furthers the objectives of Section 
6(b)(5),\15\ in particular, because it is designed to promote just and 
equitable principles of

[[Page 2101]]

trade, to foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, and to remove impediments and 
perfect the mechanisms of a free and open market and to protect 
investors and the public interest.
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    \13\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange represents that the modified Market Imbalance 
calculation will provide Users \16\ with more information about the 
number of Market Orders and MOC Orders available for execution on the 
side of the market with an excess number of such orders during the 
applicable auction. The Commission believes that the Exchange's 
proposal is reasonably designed to promote transparency of the 
available Market Orders and MOC Orders that have been submitted to 
participate in the applicable auction. The Commission also believes 
that the proposed rule change, as amended, appears to be reasonably 
designed to promote competition among Users seeking to execute against 
Market Orders and MOC Orders, which are executed before marketable 
Limit Orders and LOC orders during the Market Order Auction and Closing 
Auction, respectively.
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    \16\ See PCXE Rule 1.1(yy) for the definition of ``User.''
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change, as amended, (SR-PCX-2004-46) 
be, and it hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
Nancy M. Morris,
Secretary.
[FR Doc. E6-194 Filed 1-11-06; 8:45 am]

BILLING CODE 8010-01-P
