[Federal Register: October 16, 2003 (Volume 68, Number 200)]
[Notices]
[Page 59661-59663]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16oc03-136]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48603; File No. SR-PCX-2003-48]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto, by the Pacific Exchange, Inc.
Relating to the Establishment of a New Total Order Imbalance Indicator
October 8, 2003.
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 September 22, 2003, the Pacific Exchange, Inc. (``PCX'') submitted
to the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the PCX. On September 30, 2003, the PCX submitted
Amendment No. 1 to the proposed rule change.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Peter D. Bloom, Managing Director,
Regulatory Policy, PCX, to Nancy J. Sanow, Assistant Director,
Division of Market Regulation, Commission, dated September 29, 2003
(``Amendment No. 1''). In Amendment No. 1, the PCX submitted a new
Form 19b-4, which replaced the original filing in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PCX through its wholly owned subsidiary PCX Equities, Inc.
(``PCXE''), proposes to amend its rules governing the Archipelago
Exchange facility (``ArcaEx''), the equities trading facility of PCXE,
by: (1) amending PCXE Rule 1.1(q) to add the definition of Total
Imbalance and Market Imbalance; and (2) amending PCXE Rule 7.35 to add
a new Total Imbalance indicator to its Market Order Auction and Trading
Halt Auction display.
The text of the proposed rule change, as amended, is below.
Proposed additions are in italics.
* * * * *
PCX Equities, Inc.
Rule 1--Definitions
Rule 1.1--(No change).
(a)-(p)--(No change).
(q) For the purposes of the Opening Auction, the Market Order
Auction and the Trading Halt Auction, as the case may be[,]:
(1) the term ``Imbalance'' shall mean the number of buy or sell
shares that [can not] cannot be matched with other shares at the
Indicative Match Price at any given time.
(A) the term ``Total Imbalance'' shall mean the net Imbalance of
buy (sell) orders at the Indicative Match Price for all orders that are
eligible for execution during the applicable auction.
(B) the term ``Market Imbalance'' shall mean the imbalance of any
remaining buy (sell) Market Orders that are not matched for execution
during the applicable auction.
(r)-(aaa)--No change.
* * * * *
Rule 7--Equities Trading
Opening Session Auctions
Rule 7.35 (No change).
(a)-(b)--(No change.)
(c) Market Order Auction.
(1) Publication of Indicative Match Price and Imbalances
(A) Beginning at 5:00 am (Pacific Time), and updated real-time
thereafter, [various times thereafter as determined from time to time
by the Corporation,] the Indicative Match Price of the Market Order
Auction and the volume of Market and Limit orders available to trade at
such price, and the Market and Total Imbalance associated with the
Market Order Auction, if any, shall be published via electronic means
[as determined from time to time by the Corporation. If such a price
does not exist (i.e., there is an Imbalance of market orders), the
Archipelago Exchange shall indicate via electronic means that an
Indicative Match Price does not exist]. Market orders shall be included
for purposes of calculating the Total Imbalance and Market Imbalance.
Limit orders shall only be included in the Total Imbalance
calculations.
Example 1:
(1) Market order to buy 5000 shares;
(2) Auction-Only Limit Order to sell 1000 at 50;
(3) Limit order to sell 1000 at 50.50; and
(4) Limit order to sell 500 at 50.75.
The Archipelago Exchange will publish an Indicative Match Price of
50.75, a volume of 2500 shares, a buy Market Imbalance of 2500 shares,
and a Total Imbalance of 2500 shares.
Example 2:
(1) Market order to buy 3000 shares;
(2) Market order to sell 1000 shares;
(3) Limit order to sell 1000 shares at 41.00; and
(4) Limit order to sell 1000 shares at 41.25.
The Archipelago Exchange will publish an Indicative Match Price of
[[Page 59662]]
41.25 and a match volume of 3000 shares and will not publish an
Imbalance.
(B) If an Indicative Match Price does not exist, the Archipelago
Exchange shall indicate via electronic means that an Indicative Match
Price does not exist. [Beginning at 5:00 am (Pacific Time), and various
times thereafter as determined from time to time by the Corporation,
the market order Imbalance associated with the Market Order Auction, if
any, shall be published via electronic means as determined from time to
time by the Corporation.]
(C) If the difference between the Indicative Match Price and the
closing price of the previous trading day's normal market hours, as
determined by the Consolidated Tape, is equal to or greater than a pre-
determined amount, as determined from time to time by the Corporation,
the Archipelago Exchange will assign a ``SIG'' designator to such
Indicative Match Price and publish such designator via electronic means
as determined from time to time by the Corporation.
[Example:
(1) Market order to buy 5000 shares;
(2) Auction-Only Limit Order to sell 1000 at 50;
(3) Limit order to sell 1000 at 50.50; and
(4) Limit order to sell 500 at 50.75.
The Archipelago Exchange will publish an Indicative Match Price of
50.75, a volume of 2500 shares, and a buy Imbalance of 2500 shares.]
[Example:
(1) Market order to buy 3000 shares;
(2) Market order to sell 1000;
(3) Limit order to sell 1000 at 41.00; and
(4) Limit order to sell 1000 at 41.25.
The Archipelago Exchange will publish an Indicative Match Price of
41.25 and a volume of 3000 shares and will not publish an Imbalance.]
(2)-(3)--(No change).
(d) Re-Opening After Trading Halts. To re-open trading in a
security following a trading halt in that security, the Archipelago
Exchange shall conduct a Trading Halt Auction, as described below:
(1)--(No change).
(2) Publication of Indicative Match Price and Imbalances.
(A) Immediately after trading is halted in a security, and updated
real-time thereafter [various times thereafter as determined from time
to time by the Corporation], the Indicative Match Price of the Trading
Halt Auction and the volume available to trade at such price, shall be
published via electronic means [as determined from time to time by the
Corporation]. If such a price does not exist [(i.e., there is an
Imbalance of market orders)], the Archipelago Exchange shall indicate
via electronic means that an Indicative Match Price does not exist.
(B) Immediately after trading is halted in a security, and [various
times thereafter as determined from time to time by the Corporation]
updated real-time thereafter, the [m]Market [order] and Total Imbalance
associated with the Trading Halt Auction, if any, shall be published
via electronic means [as determined from time to time by the
Corporation]. Market orders shall be included for purposes of
calculating the Total Imbalance and Market Imbalance. Limit orders
shall only be included in the Total Imbalance calculations.
(C)--(No change).
(3)-(6)--(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 had 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
As part of its continuing efforts to enhance participation on
ArcaEx, the PCX is proposing to add a new imbalance indicator to its
Market Order Auction and Trading Halt Auction display to reflect the
total net imbalance of market and limit orders at the indicative match
price. This imbalance indicator will be in addition to the already
existing market imbalance indicator that displays the imbalance of
unmatched market orders. The PCX believes that the display of the new
total imbalance indicator will provide ETP Holders and Sponsored
Participants (collectively ``Users'') with more information regarding
auction imbalances. Furthermore, the PCX proposes to add the terms
``Total Imbalance'' and ``Market Imbalance'' to PCXE Rule 1.1(q). The
PCX is also proposing to amend PCXE Rule 7.35(c) and (d) to clarify
that the published Total Imbalance or Market Imbalance (if any exist)
may contain market and/or limit orders.
Currently, PCXE Rule 1.1(q) refers to the term ``Imbalance.'' The
PCX proposes to amend PCXE Rule 1.1(q) to define the terms ``Total
Imbalance'' and ``Market Imbalance'' for clarity. Total Imbalance shall
mean the net imbalance of buy (sell) orders at the Indicative Match
Price for all orders that are eligible for execution during the
applicable auction. The term ``Market Imbalance'' shall mean the
imbalance of any remaining buy (sell) Market Orders that are not
matched for execution during the applicable auction.
The PCXE's current rules governing the publication of imbalances
associated with its Market Order Auction and Trading Halt Auction are
set forth in PCXE Rule 7.35. The PCX now proposes to add to PCXE Rule
7.35(c) and (d) a Total Imbalance indicator. The current rule only
refers to publishing a Market Imbalance. In order to provide more
information about the auction imbalance during the Market Order Auction
and Trading Halt Auction, the PCX proposes to also publish the Total
Imbalance, if any exists, to reflect the fact that the total size of
the order imbalance includes both market and limit orders. The
dissemination of this new imbalance indicator does not impact the
operation of the existing Market Order Auction or Trading Halt Auction
processes as described in PCXE Rule 7.35(c) and (d), respectively.
The PCX believes that the dissemination of the aforementioned
imbalance indicators would provide Users with additional information
with which to make trading decisions during the auction process.
Accordingly, this would facilitate enhanced order interaction and
foster price competition. The PCX believes that the proposed rule
change, as amended, would provide a more efficient and effective market
operation, and would enhance the information available to investors.
2. Statutory Basis
The PCX believes that the proposed rule change, as amended, is
consistent with Section 6(b) \4\ of the Act, in general, and further
the objectives of Section 6(b)(5),\5\ in particular, because it is
designed to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments and perfect
[[Page 59663]]
the mechanisms of a free and open market and to protect investors and
the public interest. In addition, the PCX believes that the proposed
rule change, as amended, is consistent with provisions of Section
11A(a)(1)(B) of the Act,\6\ which states that new data processing and
communications techniques create an opportunity for more efficient and
effective market operations.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ 15 U.S.C. 78k(a)(1)(B).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The PCX does not believe that the proposed rule change, as amended,
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 concerning
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication 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 PCX consents, the Commission will:
(A) by order approve such proposed rule change, as amended; or
(B) institute proceedings to determine whether the proposed rule
change, as amended, should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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. 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 in the Commission's Public Reference Room.
Copies of such filings will also be available for inspection and
copying at the principal office of the PCX. All submissions should
refer to File No. SR-PCX-2003-48 and should be submitted by November 6,
2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-26100 Filed 10-15-03; 8:45 am]
BILLING CODE 8010-01-P