

[Federal Register: March 6, 2006 (Volume 71, Number 43)]
[Notices]               
[Page 11280]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06mr06-81]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53384; File No. SR-PCX-2005-135]

 
Self-Regulatory Organizations; Pacific Exchange, Inc.; Order 
Approving Proposed Rule Change Relating to Exposure of Orders in the 
PCX Plus Crossing Mechanism

February 27, 2006.
    On December 22, 2005, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ to reduce the exposure period in the Crossing Mechanism 
of the PCX Plus System (``PCX Plus'' or ``System'') from 10 seconds to 
3 seconds. The proposed rule change was published for comment in the 
Federal Register on January 23, 2006.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 53133 (January 17, 
2006), 71 FR 3598.
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    PCX rules provide that a PCX Broker may not facilitate orders or 
cross two orders, using the System's Crossing Mechanism, unless it 
enters into the System the terms of each order that is to be included 
as part of a Cross Order,\4\ pursuant to PCX Rule 6.76(c)(2)(A). Both 
facilitation crosses and non-facilitation crosses are executed in the 
same manner in PCX Plus. Upon entry into PCX Plus, the System will 
evaluate the terms of the Cross Order and, after accepting the Cross 
Order, will execute the cross in accordance with PCX Rule 
6.76(c)(2)(B). Among other conditions, Rule 6.76(c)(2)(B) currently 
requires a 10-second exposure period in which OTP Holders and OTP Firms 
may enter orders to trade against the side of the Cross Order that has 
been designated as the Exposed Order.\5\ The Exchange proposes to 
shorten the duration of this exposure period, as set forth in PCX Rule 
6.76(c)(2)(B)(i)(a) and PCX Rule 6.76(c)(2)(B)(ii)(b),\6\ from 10 
seconds to 3 seconds. The Exchange represents that all market 
participants on the PCX utilize electronic trading systems that monitor 
all updates to the PCX market, including changes resulting from orders 
being entered into the Crossing Mechanism, and can automatically 
respond based upon pre-set parameters.
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    \4\ See PCX Rule 6.76(c)(1)(A), which defines ``Cross Order'' 
for the purposes of PCX Rule 6.76(c) as ``two orders with 
instructions to match the identified buy-side with the identified 
sell-side at a specified price (the ``Cross Price'').''
    \5\ See PCX Rule 6.76(c)(1)(D), which defines ``Exposed Order'' 
as follows: ``the buy or sell side of a Cross Order that has been 
designated by a PCX Broker as the side to be exposed to the market 
and that is eligible for execution against all trading interest. 
Public Customer orders will always be deemed to be the Exposed Order 
in a Cross Order. In the case of a Cross Order involving a non-
customer on both the buy side and sell side, the PCX Broker must 
designate one side of the Cross Order as the Exposed Order.''
    \6\ PCX Rules 6.76(c)(2)(B)(i) and 6.76(c)(2)(B)(ii) govern the 
execution of Cross Orders when the Cross Price is between the Best 
Bid and Offer (``BBO'') and when it is at the BBO, respectively.
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    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6(b) of the 
Act \7\ and the rules and regulations thereunder applicable to a 
national securities exchange,\8\ and in particular with Section 6(b)(5) 
of the Act.\9\ The Commission believes that, in the electronic 
environment of PCX Plus, reducing the exposure period to 3 seconds 
could facilitate the prompt execution of orders, while providing 
participants in PCX Plus with an adequate opportunity to compete for 
those orders.
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    \7\ 15 U.S.C. 78f(b).
    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-PCX-2005-135) is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-3113 Filed 3-3-06; 8:45 am]

BILLING CODE 8010-01-P
