[Federal Register: March 3, 2006 (Volume 71, Number 42)]
[Notices]
[Page 11008-11010]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03mr06-106]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53376; File No. SR-PCX-2006-12]
Self-Regulatory Organizations; Pacific Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change Relating to Clearly Erroneous
Executions
February 27, 2006.
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 February 23, 2006, the Pacific Stock 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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PCX proposes to amend PCX Equities, Inc. (``PCXE'') Rule
7.10(e) pertaining to clearly erroneous executions of securities issued
in initial public offerings. The text of the proposed rule change is
set forth below.\3\ Brackets indicate deletions; italics indicates new
text.
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\3\ The Exchange inadvertently indicated that the title of PCXE
Rule 7.10 was new text. The Commission corrected this technical
error in the text of the proposed rule change.
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* * * * *
Rules of the PCX Equities, Inc.
Rule 7
Rule 7.10
Clearly Erroneous Executions
(a)-(d) No Change.
(e) Trade Nullification and Price Adjustments for UTP Securities
that are Subject of Initial Public Offerings (``IPOs''). Pursuant to
SEC Rule 12f-2, as amended, the Corporation may extend unlisted trading
privileges to a security that is the subject of an initial public
offering when at least one transaction in
[[Page 11009]]
the subject security has been effected on the national securities
exchange or association upon which the security is listed and the
transaction has been reported pursuant to an effective transaction
reporting plan. A clearly erroneous error [will] may be deemed to have
occurred in the opening transaction of the subject security if the
execution price of the opening transaction on the Corporation is the
lesser of $1.00 or 10% away from the opening price on the listing
exchange or association. In such circumstances, the Officer shall
declare the opening transaction null and void or adjust the transaction
price to the opening price on the listing exchange or association.
Clearly erroneous executions of subsequent transactions of the subject
security will be reviewed in the same manner as the procedure set forth
in (c)(1). Absent extraordinary circumstances, any such action of the
Officer pursuant to this subsection (e) shall be taken in a timely
fashion, generally within thirty (30) minutes of the detection of the
erroneous transaction. Each party involved in the transaction shall be
notified as soon as practicable by the Corporation, and the party
aggrieved by the action may appeal such action to the PCXE CRO in
accordance with the provisions of subsection (c)(2)-(4) above.
* * * * *
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 purpose of the proposed rule change is to revise the procedures
for trade nullifications (``busts'') and price adjustments
(``adjusts'') for securities issued in initial public offerings
(``IPOs'') from an automatic to a discretionary basis. Given the unique
nature of IPOs, public customers have an expectation that the opening
of the security will be orderly and that the pricing will be reasonable
for the listing company. Opening execution prices transacted on the
primary listed exchange (and other market centers) represent the price
of the stock in the secondary market, which may not necessarily reflect
the IPO pricing disseminated prior to the start of secondary market
trading by the underwriters/syndicates. According to the Exchange,
there may be varying first prices in a security that is issued in an
IPO because market centers may have different prices at the same
second.
Due to the possibility of varying prices at the same second in a
security issued in an IPO, PCXE staff reviews the openings of IPOs on
ArcaEx on a best efforts basis. The review of IPO opening prices
utilizes criteria that also are used to judge erroneous executions
during the pre-core, core and post-core sessions. IPO trades are
evaluated for uniformity with the primary listed exchange as well as
with other market centers' prices. Currently, initial trades on ArcaEx
that are executed at prices more than $1.00 from the primary listed
exchange's opening price are automatically busted or adjusted to the
primary listed exchange's opening price.
Under the proposed rule, PCXE staff would have the discretion to
bust or adjust initial trades that are executed more than $1.00 from
the primary listed exchange's opening price. The Exchange believes that
the change from automatic to discretionary adjustments or busts is
necessary because often the primary exchange lists the IPO at multiple
first prices. Many times, but not always, the first price is not
indicative of the actual price of the IPO and thus the PCXE staff must
review all of the first prices to determine if the trade at issue has
to be adjusted or busted.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \4\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \5\ in particular, because 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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\4\ 15 U.S.C. 78f(b).
\5\ 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 Exchange 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 is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form at http://www.sec.gov/rules/sro.shtml.
; or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-PCX-2006-12 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090
.All submissions should refer to File Number SR-PCX-2006-12. 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
[[Page 11010]]
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 Section. Copies of such filing also will 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 Number SR-PCX-2006-12 and should be
submitted on or before March 24, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-3030 Filed 3-2-06; 8:45 am]
BILLING CODE 8010-01-P