[Federal Register: February 25, 2004 (Volume 69, Number 37)]
[Notices]
[Page 8719-8720]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25fe04-135]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49276; File No. SR-PCX-2003-70]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. To
Amend PCXE Rule 7.40 To Provide for the Dissemination of a Closing
Price and Closing Volume
February 19, 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 December 22, 2003, the Pacific Exchange, Inc. (``PCX'' or
``Exchange''), through its wholly owned subsidiary PCX Equities, Inc.
(``PCXE''), filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. On February 12, 2004, the Exchange 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\ On February 12, 2004, the Exchange filed a Form 19b-4, which
replaced the original filing in its entirety (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify PCXE Rule 7.40 to provide for the
dissemination of a Closing Price. The text of the proposed rule change
appears below. Proposed new language is in italics. Proposed deletions
are in brackets.
* * * * *
Rule 7.40, Trade Execution and Reporting
Rule 7.40. Executions occurring as a result of orders matched
against the Arca Book shall be reported by the Corporation to an
appropriate consolidated transaction reporting system. Executions
occurring as a result of orders routed away from the Archipelago
Exchange shall be reported to an appropriate consolidated transaction
reporting system by the relevant reporting market center. The
Archipelago Exchange shall promptly notify Users of all executions of
their orders as soon as such executions take place.
(1.) Reporting Opening and Closing Prices
(a)--Reserved
(b) Dissemination of Closing Price and Volume
At the conclusion of the Closing Auction, the Archipelago Exchange
will publish a Closing Price and volume pursuant to the following:
(i) If a Closing Auction occurs, the Closing Price will be the
Closing Auction Price with volume executed at the Closing Auction
Price; or
(ii) If no Closing Auction occurs, the Closing Price will be the
volume weighted average price (``VWAP'') based on transactions reported
to a consolidated transaction reporting system during the last two
minutes of the Core Trading Session and the associated volume reported
to a consolidated transaction reporting system during that time period;
or
(iii) If there are no transactions reported to a consolidated
transaction reporting system during the last two minutes of the Core
Trading Session, the Closing Price will be the last trade price as
reported to a consolidated transaction reporting system during the
trading day and the volume reported to a consolidated transaction
reporting system associated with that trade; or
(iv) If there are no trades reported to a consolidated transaction
reporting system during the trading day, the Closing Price and volume
will be that of the most recent trading day's close for that particular
security.
* * * * *
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
The Exchange proposes to amend PCXE Rule 7.40 relating to Trade
Execution and Reporting to provide for the dissemination of a Closing
Price and closing volume. This proposal would allow the Archipelago
Exchange (``ArcaEx'') facility to calculate and report a Closing Price
for both over-the-counter (``OTC'') and exchange-listed securities
traded on ArcaEx to the Consolidated Tape and provide Equity Trading
Permit (``ETP'') Holders and other consumers of market data with
additional information about the market close.
The Commission recently approved amendments to PCXE rules regarding
Closing Auctions (PCXE Rule 7.35(e))\4\ that describe ArcaEx's Closing
Auction process. The ArcaEx Closing Auction incorporates a Closing
Auction Price and volume based on the Indicative Match Price, Market
Imbalance and Total Imbalance relative to the Closing Auction. The
Commission noted that publishing this information may provide market
participants with an additional source of closing price information for
Nasdaq and exchange-listed securities in addition to the information
disseminated by markets, which should enhance intermarket competition
by enabling market participants to assess and compare pricing among
different markets.\5\ The proposed change to PCXE Rule 7.40(1)(b)(i)
clarifies that in the case where there is a Closing Auction in either
OTC or exchange-listed securities,\6\ the Closing Price and volume will
be the Closing Auction Price and the associated volume executed at that
price.
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\4\ See Securities Exchange Act Release No. 48883 (December 4,
2003), 68 FR 69748 (December 15, 2003) (SR-PCX-2003-24).
\5\ See id.
\6\ The Exchange intends to implement the Closing Auction
functionality previously approved by the Commission under SR-PCX-
2003-24 in OTC securities initially and will follow with
implementation of the Closing Auction functionality in exchange-
listed securities at a later date. Id.
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Where there is no Closing Auction pursuant to PCXE Rule 7.35(e),
the Exchange proposes to base the Closing Price for OTC and exchange-
listed securities on a consolidated volume weighted average price
(``VWAP'') based on transactions reported to a
[[Page 8720]]
consolidated transaction reporting system \7\ during the last two
minutes of the Core Trading Session and the associated volume reported
to a consolidated transaction reporting system during that time period.
The Exchange believes that this will serve to provide a market wide
Closing Price and an accurate indication of the Closing Price to
investors. If there are no consolidated trades reported during the last
two minutes of the Core Trading Session, the Exchange proposes that the
Closing Price and volume will be the last consolidated price reported
during the trading day. In the event there are no consolidated trades
reported during the trading day, the Exchange proposes to establish the
Closing Price and volume as that of the most recent trading day's
Closing Price and volume. Consistently, the Exchange will set the
closing volume as the volume associated with the trades in each of the
stated scenarios above.
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\7\ Consolidated transaction reporting system refers to the UTDF
data feed pursuant to the OTC/UTP Plan with respect to OTC
securities and the Network A and Network B tickers pursuant to the
CTA Plan with respect to exchange-listed securities.
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To provide investors and users of the Closing Price data with
transparency and clarity on the calculation of the Closing Price, the
Exchange will provide a thorough description of the Closing Price
calculation including the source of data used in determining the
Closing Price in a notice to members that will be disseminated via the
ArcaEx Web site, http://www.archipelago.com. Furthermore, the Closing Price
will be disseminated via the Consolidated Tape utilizing a trade
modifier \8\ to indicate the Closing Price and volume.
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\8\ For OTC securities, the Exchange will utilize a ``.M''
modifier to indicate the Closing Price which is currently available
for OTC/UTP participants. The Exchange will work with the OTC/UTP
Committee to develop an additional modifier that will be used to
indicate the Closing Price when it is based on consolidated data
rather than the ArcaEx Closing Auction. This modifier will be
disseminated in addition to ``.M'' upon receiving approval from the
OTC/UTP Committee. In addition, given that there is currently no
modifier in use to indicate the Closing Price in exchange-listed
securities, the Exchange will work with the CTA Committee and
Securities Industry Automation Corporation (``SIAC'') to establish
an appropriate modifier to signify the Closing Price in exchange-
listed securities and an additional modifier to use when the Closing
Price is based on exchange-listed consolidated data rather than the
ArcaEx Closing Auction.
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The Exchange believes that providing investors with an accurate
representation of the market close is of critical importance. The
Nasdaq Stock Market, Inc.\9\ received approval to implement an official
closing price in Nasdaq-listed securities. Moreover, Standard & Poors
(``S&P'') recently announced plans to utilize the American Stock
Exchange, LLC closing price for twelve Nasdaq-listed stocks in the S&P
500. The Exchange believes that its proposed Closing Price calculation
would provide a competitive alternative to other markets' closing price
calculations.
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\9\ See Securities Exchange Act Release No. 47517 (March 18,
2003), 68 FR 14446 (March 25, 2003) (SR-NASD-2002-158).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)\10\ of the Act, in general, and furthers the
objectives of Section 6(b)(5),\11\ 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 the
mechanisms of a free and open market and to protect investors and the
public interest.
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\10\ 15 U.S.C. 78f(b).
\11\ 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
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 self-regulatory organization consents, the Commission will:
A. By order approve the proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change 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. In particular, the
Commission solicits comment on whether the Exchange should take any
further steps to disclose to market participants when the Closing Price
is based on transactions that occur on other exchanges or markets.
Persons making written submissions should file six copies thereof with
the Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW., Washington, DC 20549-0609. Comments may also be submitted
electronically at the following e-mail address: rule-comments@sec.gov.
All comment letters should refer to File No. SR-PCX-2003-70. 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,
comments should be sent in hard copy or by e-mail but not by both
methods. 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 submissions should refer to File No.
SR-PCX-2003-70 and should be submitted by March 17, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4119 Filed 2-24-04; 8:45 am]
BILLING CODE 8010-01-P