[Federal Register: October 4, 2005 (Volume 70, Number 191)]
[Notices]
[Page 57916-57918]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04oc05-110]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52513; File No. SR-PCX-2005-106]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Rescinding
Pilot Rules Relating to the Waiver of the California Ethics Standards
for Neutral Arbitrators in Contractual Arbitration and Section 1281.92
of the California Code of Civil Procedure
September 27, 2005.
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 20, 2005, the Pacific Exchange, Inc. (``PCX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by PCX. PCX has designated
this proposal as ``non-controversial'' pursuant to Section
19(b)(3)(A)(iii) of the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposed rule change effective immediately upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
PCX is proposing to amend the PCX Options and PCX Equities, Inc.
(``PCXE'') arbitration rules to rescind the pilot rules (the ``Pilot
Rules'') relating to the waiver of the California Ethics Standards for
Neutral Arbitrators in Contractual Arbitration (the ``California
Standards'') and the waiver of California Code of Civil Procedure
Section 1281.92 (``CCCP Claims''). The text of the proposed rule change
is available on the PCX's Web site (http://www.pacificex.com), at the
PCX's Office
[[Page 57917]]
of the Secretary, and at the Commission's Public Reference Room.
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 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
The purpose of the proposed rule change is to rescind the Pilot
Rules relating to the waiver of the California Standards and the CCCP
Claims.
Effective July 1, 2002, the California Judicial Council adopted the
California Standards,\5\ which contain extensive disclosure and
disqualification requirements for arbitrators. The California Standards
imposed disclosure and disqualification requirements on arbitrators
that conflict with the disclosure requirements of the PCX and PCXE.
Because PCX and PCXE could not administer its arbitration program in
accordance with its own rules and comply with the new California
Standards at the same time, the PCX initially suspended the appointment
of arbitrators.
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\5\ California Rules of Court, Division VI of the Appendix.
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In November 2002, PCX implemented the Pilot Rules providing that if
parties to an arbitration who are customers (or, in certain
circumstances, associated persons) waived application of the California
Standards to their arbitration proceeding, then the firm would be
required to waive the application of the California Standards. Under
such a waiver, the arbitration proceeds under existing PCX and PCXE
rules, which already contains extensive disclosure requirements and
provisions for challenging arbitrators with potential conflicts of
interest. PCX will decline jurisdiction and dismiss and refund fees
paid to PCX and PCXE by the parties for any arbitration claims in which
any of the parties to arbitration fails to sign the applicable waivers.
On March 1, 2005, the United States Court of Appeals for the Ninth
Circuit issued its decision in Credit Suisse First Boston Corp. v.
Grunwald.\6\ The Ninth Circuit held that the Exchange Act preempts
application of the California Standards. On May 23, 2005, the Supreme
Court of California also held that the Act preempts application of the
California Standards.\7\
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\6\ 400 F.3d 1119 (9th Cir. 2005).
\7\ Jevne v. The Superior Court of Los Angeles County, S121532
(CA Sup. Ct. May 23, 2005).
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PCX has determined that the Pilot Rules should be rescinded prior
to its expiration as they are no longer necessary. Specifically with
the recent decisions in Grunwald and Jevne, both the Ninth Circuit and
the California Supreme Court have found that the Act preempts the
application of the California Standards. Consequently, the PCX believes
that it can once again appoint arbitrators without requiring a waiver
of the California Standards.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\8\ in general, and Section 6(b)(5) of the Act,\9\ in
particular, in that it is designed to promote just and equitable
principles of trade by ensuring that Options Trading Permits Holders,
Options Trading Permits Firms, Exchange Trading Permits Holders and the
public have a fair and impartial forum for the resolution of their
disputes.
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\8\ 15 U.S.C. 78s(b).
\9\ 15 U.S.C. 78s(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
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6)
thereunder \11\ because the proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest. As required under
Rule 19b-4(f)(6)(iii),\12\ the PCX provided the Commission with written
notice of PCX's intent to file the proposed rule change along with a
brief description and text of the proposed rule change, at least five
business days prior to the filing date of the proposed rule change.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative for 30 days after the date of its filing.\13\
However Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate
a shorter time if such action is consistent with the protection
investors and the public interest. The PCX has requested that the
Commission waive the 30-day operative delay so that the proposed rule
change will become immediately effective upon filing. The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest.\15\ For these reasons,
the Commission designates that the proposed rule change has become
effective and operative immediately.
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\13\ Id.
\14\ Id.
\15\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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
Filed No. SR-PCX-2005-106 on the subject line.
[[Page 57918]]
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File No. SR-PCX-2005-106. 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. 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-2005-106 and should be submitted on or before October
25, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-19773 Filed 10-3-05; 8:45 am]
BILLING CODE 8010-01-P