[Federal Register: November 15, 2004 (Volume 69, Number 219)]
[Notices]
[Page 65668-65670]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no04-118]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50643; File No. SR-PCX-2004-98]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To
Extend Until 1:15 (Pacific Time) the Core Trading Session and Change
the Closing Auction Time for Certain ETFs
November 5, 2004.
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 12, 2004, the Pacific Exchange, Inc. (``PCX'' or
``Exchange'') filed with 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 November
3, 2004, the PCX filed Amendment No. 1 to the proposed rule change.\3\
The Exchange proposed the rule change under section 19(b)(3)(A) of the
Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders it effective
upon filing.\6\ 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 Mai Shiver, Director, Regulatory Policy,
PCX, to Nancy Sanow, Assistant Director, Division of Market
Regulation, Commission, dated November 2, 2004 (``Amendment No.
1''). Amendment No. 1 replaced and superseded the original filing in
its entirety.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
\6\ For purpose of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
section 19(b)(3)(C) of the Act, the Commission considers that period
to commence on November 3, 2004, the date that the PCX filed
Amendment No. 1.
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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 Core Trading Session rule (PCXE Rule
7.34(a)(2)) and its Closing Auction rule (PCXE 7.35) as they apply to
certain Exchange Traded Funds (``ETFs'').
The text of the proposed rule change, as amended, is below.
Proposed new language is in italics; proposed deletions are in
brackets.
* * * * *
Rule 7.34 Trading Sessions
(a) (1) No change.
(2) Core Trading Session. The Core Trading Session shall begin for
each security at 6:30:00 am (Pacific Time) or at the conclusion of the
Market Order Auction, whichever comes later, and conclude at 1:00:00 pm
(Pacific Time).
(A) The Core Trading Session for the Exchange Traded Funds, defined
in PCXE Rules 5.1(b)(13), 5.2(j)(3), and 8.100, shall conclude at
1:15:00 pm (Pacific Time) unless otherwise determined by the
Corporation.
(3) No change.
(b)-(f) No change.
Rule 7.35 Auctions
(a)-(d) No change.
(e) (1)-(3) No change.
(A)-(C) No change.
(D) Notwithstanding other provisions of PCXE Rule 7.35(e):
i. The Closing Auction for the Exchange Traded Funds defined in
PCXE Rules 5.1(b)(13), 5.2(j)(3), and
[[Page 65669]]
8.100 and determination of the Closing Auction Price as defined in PCXE
Rule 7.35(e)(3) will commence at 1:15 p.m. (Pacific Time) unless
otherwise determined by the Corporation.
ii. Between 1:13 p.m. (Pacific Time) and the conclusion of the
Closing Auction, Market-On-Close and Limit-On-Close Orders for the
Exchange Traded Funds defined in PCXE Rules 5.1(b)(13), 5.2(j)(3), and
8.100 may not be cancelled.
iii. Between 1:13 pm (Pacific Time) and the conclusion of the
Closing Auction, Market-on-Close Orders and Limit-on-Close Orders for
the Exchange Traded Funds defined in PCXE Rules 5.1(b)(13), 5.2(j)(3),
and 8.100 may not be entered on the same side as the Imbalance. Market-
on-Close Orders and Limit-on-Close Orders for these Exchange Traded
Funds that create equilibrium and thereafter convert the Imbalance from
a buy to a sell (or convert the Imbalance from a sell to a buy)
Imbalance will be rejected.
* * * * *
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 Exchange 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 Exchange 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 its
Archipelago Exchange (``ArcaEx'') facility, the PCX is proposing to
include certain ETFs \7\ in its Closing Auction process \8\ and to
delay the commencement of the Closing Auction and the conclusion of the
Core Trading Session \9\ for these ETFs. Currently the Closing Auction
commences at the end of regular trading hours \10\ for all securities
on ArcaEx other than ETFs. Unlike other securities in which regular
trading hours cease at 1 p.m. (Pacific time), ETFs generally trade on
other exchanges until 1:15 p.m. (Pacific time). Accordingly, the
Exchange seeks to modify its Closing Auction start time for the ETFs
defined in PCXE Rules 5.1(b)(13), 5.2(j)(3), and 8.100 to 1:15 p.m.
(Pacific Time) unless otherwise determined. Consistently, the Exchange
seeks to change the conclusion of the Core Trading Session for this
same group of ETFs to 1:15:00 pm (Pacific Time) to coincide with the
time of the closing session.
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\7\ The three ETFs that the Exchange seeks to include in this
proposal are all subject to the delayed closing auction commencement
time on the American Stock Exchange (``Amex''), and are as follows:
Unit Investment Trusts as defined in PCXE Rule 5.1(b)(13) (Amex Rule
1, Commentary .03); Investment Company Units as defined in PCXE Rule
5.2(j)(3) (Amex Rule 1000A, Commentary .02(f)--known as Index Fund
Shares); and Portfolio Depositary Receipts (``PDRs'') as defined in
the PCXE Rule 8.100 (Amex Rule 1000, Commentary .02).
\8\ See PCXE Rule 7.35(e).
\9\ See PCXE Rule 7.34(a)(2).
\10\ PCXE Rule 7.35(e) specifies that the Closing Auction occurs
at 1 p.m. (Pacific time).
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In conjunction with modifying the Closing Auction start time, the
PCX seeks to modify the timing of the determination of the Closing
Auction Price as described in PCXE Rule 7.35(e)(3) to 1:15 p.m.
(Pacific time) for these ETFs. In addition, the Exchange seeks to
modify the freeze period for entering Market-on-Close and Limit-on-
Close Orders for the Closing Auction as defined in PCXE Rule
7.35(e)(2)(iii) to 1:13 p.m. (Pacific time) for these ETFs in order to
limit the freeze period to two minutes before the Closing Auction, as
is the case for the Closing Auctions for other securities. All other
Closing Auction times described in PCXE Rule 7.35(e) will remain
unchanged. For example, the dissemination of the Indicative Match Price
\11\ and Imbalances \12\ associated with the Closing Auction for these
ETFs as described in PCXE Rule 7.35(e)(1) will commence at 12 p.m.
(Pacific time) and end upon the conclusion of the Closing Auction.
Similarly, the determination of re-opening after trading halts as
described in PCXE Rule 7.35(f) for these ETFs will be consistent with
other securities traded on ArcaEx.
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\11\ See PCXE Rule 1.1(r).
\12\ See PCXE Rule 1.1(q).
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The PCX believes that implementing these rules to affect
commencement times for the Closing Auctions and conclusion times for
Core Trading Sessions for certain ETFs will provide investors and ETP
Holders \13\ with greater opportunities for executing ETF orders at the
close and will result in the Closing Auction being priced for such
securities within the range of prices then found at the end of the
day's regular trading session.
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\13\ See PCXE Rule 1.1(n).
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2. Statutory Basis
The Exchange 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) of the Act,\15\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
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 to and perfect
the mechanism of a free and open market and a national market system.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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B. 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
PCX has designated that the proposed rule change as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act
\16\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\17\ The Exchange
has stated that the foregoing rule change: (1) Does not significantly
affect the protection of investors or the public interest; (2) does not
impose any significant burden on competition; and (3) by its terms does
not become operative for 30 days after the date of this filing, or such
shorter time as the Commission may designate, if consistent with the
protection of investors and the public interest.\18\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ Rule 19b-4(f)(6)(iii) under the Act also requires that a
self-regulatory organization provide the Commission with written
notice of its intent to file a proposed rule change, along with a
brief description and text of the proposed rule change, at least
five days prior to the date of filing the proposed rule change. The
Exchange complied with this requirement.
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The PCX has requested that the Commission waive the 30-day
operative delay. The Commission believes that
[[Page 65670]]
PCX's proposal does not raise any new regulatory issues because the
Commission previously has approved trading of the same ETFs until 4:15
p.m. (eastern time) on the Amex.\19\ Therefore, the Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. The Commission hereby
waives the 30-day operative delay.
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\19\ Securities Act Release No. 30394 (February 21, 1992), 57 FR
7409 (March 2, 1992) (SR-Amex-90-06) (approving the trading of Unit
Investment Trusts); Securities Act Release No. 36947 (March 8,
1996), 61 FR 10606 (March 14, 1996) (SR-Amex-95-43) (approving the
trading of Index Fund Shares); Securities Act Release No. 31591
(December 11, 1992), 57 FR 60253 (December 18, 1992) (SR-Amex-92-18)
(approving the trading of PDRs).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the rule change if it
appears to the Commission that the action is necessary or appropriate
in the public interest, for the protection of investors, or would
otherwise further the purposes of the Act.\20\
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\20\ See supra note 6.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-PCX-2004-98 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File No. SR-PCX-2004-98. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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, 450 Fifth Street,
NW., Washington, DC 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the PCX. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-PCX-2004-98 and should be
submitted on or before December 6, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3158 Filed 11-12-04; 8:45 am]
BILLING CODE 8010-01-P