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DOCUMENT ID: [Release No. 34-48894; File No. SR-PCX-2003-42]

NOTICE: NOTICES

ACTION: Self-regulatory organizations; proposed rule changes:

SUBJECT CATEGORY: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. To Amend its Rules Governing the Execution of Complex Orders Involving Options and Single Stock Futures

DOCUMENT SUMMARY: December 8, 2003.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on August 15, 2003, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule
[[Page 70329]]
change as described in items I, II and III below, which items have been substantially prepared by the PCX. On November 14, 2003, the PCX filed 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.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See letter from Mai Sharif Shiver, Senior Attorney, Regulatory Policy, PCX, to Nancy J. Sanow, Assistant Director, Division of Market Regulation, Commission, dated November 13, 2003 (``Amendment No. 1'') (replacing the form 19b4 in its entirety). In Amendment No. 1, the Exchange, in part, clarified the margin requirements for members, requiring members who effect SSF/option order transactions to elect to be bound by the initial and maintenance margin requirements of either the Chicago Board Options Exchange (``CBOE'') or the New York Stock Exchange (``NYSE''), as those rules may be in effect from time to time. In addition, the Exchange amended the filing to make it immediately effective. For purposes of calculating the 60day abrogation period, the Commission considers the period to have commenced on November 14, 2003, the date the PCX filed Amendment No. 1. In addition, the Exchange made a technical correction to its rule text and amended its discussion of its change to its proposed rule 6.62. Telephone conversation between Mai Sharif Shiver, Senior Attorney, Regulatory Policy, PCX, and Elizabeth MacDonald, Attorney, Division of Market Regulation, Commission, December 8, 2003.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The PCX proposes to amend its rules governing the execution of complex orders involving options and single stock futures (``SSF''). The text of the proposed rule change is set forth below. Proposed new language is in italics; proposed deletions are in [brackets]. * * * * *
Rules of the Board of Governors
Rule 6
Options Trading
``Crossing'' Orders and Stock/Option, SSF/Option Orders

Rule 6.47(a)(e)No change.
(f) Stock/Option and SSF/Option Orders.
(1) When a stock/option or SSF/option order is taken to a crowd for execution, the stock transaction or SSF transaction must be effected prior to the option transaction pursuant to Rule 6.47, Commentary .04. The following procedure applies to all executions of stock/option and SSF/option orders: After an agreement with other members of the crowd has been reached as to the terms of the transaction, the option order tickets must be written up and time stamped. However, the order tickets should not be turned in to the Order Book Official at this time. The members shall attempt to immediately effect the transaction in the underlying or related security or SSF. If the stock or SSF transaction cannot be executed immediately or is effected at a price other than the agreedupon price, the members shall not be held to the option transaction. If the stock or SSF transaction is effected at the agreed upon price, then all the members who participated in the option transaction shall be held to their agreedupon price. At the time the stock or SSF transaction is effected, the option trade tickets should be given to the Order Book Official.
(2) SSF/Option Orders Margin Requirements
(a) Any Member or Member Organization must elect to be bound by the initial and maintenance margin requirements of either the Chicago Board of Options Exchange or the New York Stock Exchange as the same may be in effect from time to time;
(b) Such election shall be made in writing by a notice filed with the Exchange.
(c) Upon the filing of such election, a Member will be bound to comply with the margin rules of the Chicago Board of Options Exchange or the New York Stock Exchange, as applicable, as though such rules were part of these rules.

Commentary:
.01.06No change.
Certain Types of Orders Defined

Rule 6.62(a)(i)No change.
(j) Combination orders [with noequity options legs]. One or more legs of a combination order may be to purchase or sell a stated number of units of another security.
(1) Stock/option order. A stock/option order is an order to buy or sell a stated number of units of an underlying stock or a [related] security convertible into the underlying stock (``convertible security'') coupled with either (A)[(i)] the purchase or sale of option contract(s) [of the same series] on the opposite side of the market representing either the same number of units of the underlying stock or convertible security or the number of units of the underlying stock necessary to create a delta neutral position; [or related security] or (B)[(ii)] the purchase [and] or sale of an equal number of put and call option contracts, each having the same exercise price, expiration date and each representing the same number of units of [the underlying or related security,] stock as, and on the opposite side of the market from, the stock or convertible security portion of the order. [representing in aggregate twice the number of units of the underlying or related security.]
(2) Single Stock Future (``SSF'')/Option Order. An SSF/option order is an order to buy or sell a stated number of units of a single stock future or a security convertible into a single stock future (``convertible SSF'') coupled with either (A) the purchase or sale of option contract(s) on the opposite side of the market representing either the same number of units of stock underlying the single stock future or convertible SSF, or the number of units of stock underlying the single stock future or convertible SSF necessary to create a delta neutral position; or (B) the purchase or sale of an equal number of put and call option contracts, each having the same exercise price, expiration date, and each representing the same number of units of underlying stock, as and on the opposite side of the market from, the stock underlying the single stock future or convertible SSF portion of the order.

Priority and Order Allocation Procedures

Rule 6.75. Except as provided by Rule 6.76 below, the following rules of priority shall be observed with respect to bids and offers: (a)(d)No change.
(e) Notwithstanding anything in paragraphs (a) and (b) to the contrary, when a member holding a spread order, a straddle order, or a combination order and bidding or offering on the basis of a total credit or debit for the order has determined that the order may not be executed by a combination of transactions with or within the bids and offers displayed by the Order Book Official or other members, in procedures determined by the Options Floor Trading Committee, then the order may be executed as a spread, straddle, or combination at the total credit or debit with one or more members without giving priority to bids or offers for the individual option series of the Order Book Official or of other members at the post that are no better than the bids or offers comprising such total credit or debit. Under the circumstances described above, a stock/option or SSF/option order has priority over the bids and offers of members in the trading crowd but not over the bids and offers of the Order Book Official.
(f)(h)No change.

Commentary:
.01.04No change.
Transactions Off the Exchange

Rule 6.78 (a)(f)No change.

Commentary:
.01.02No change.
.03 To the extent applicable, all other Exchange rules, including Rule 6.49, Solicited Transactions, will apply to the
[[Page 70330]]
transfer procedure set forth in subsections (d) through (f). The following Rules do not apply to transfer procedures: 6.71 (Meaning of Premium Bids and Offers); 6.74 (Bids and Offers in Relation to Units of Trading); 6.75 (Priority of Bids and Offers); 6.76 (Priority of Split Price Transactions); 6.47 (``Crossing'' Orders and Stock/Option, SSF/ Option Orders); and 7.9 (Meaning of Premium Bids and Offers, Index Options).
.04No change.
* * * * *
II. SelfRegulatory 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 Exchange prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

PCX Rule 6.47(f) governs the execution process for complex orders including stock/option orders. The Exchange is proposing to amend this rule to authorize the execution of complex orders involving options and SSFs. The proposed procedures for the execution of SSF/option orders are virtually identical to the existing stock/option procedure and would permit members to enter SSF/option orders. As with stock/option orders, the option leg of the transaction would have priority over the bids (offers) of members at the same price in the trading crowd but not over bids (offers) in the limit order book.

When an SSF/option order is represented in the crowd for execution, the SSF transaction must be effected prior to the option leg of the trade pursuant to PCX Rule 6.47, Commentary .04. As with stock/option orders, if the parties are unable to execute the SSF leg of the transaction due to a change in market conditions, then they could cancel the option leg of the transaction. If the stock or SSF transaction is effected at the agreedupon price, then all the members who participated in the option transaction shall be held to their agreedupon price. At the time the stock or SSF transaction is effected, the option trade tickets should be given to the Order Book Official.

The Exchange also seeks to add a margin requirement as proposed PCX Rule 6.47(f)(2) that would require a Member or Member Organization who effects SSF/option order transactions to elect to be bound by the initial and maintenance margin requirements of either the CBOE or the NYSE as those rules may be in effect from time to time. The Member or Member Organization will be required to make its election in writing and file the same to the Exchange's Financial and Operational Compliance Department. Upon filing of the election, the Member or Member Organization will be bound to comply with the margin rules of the CBOE or the NYSE, as applicable, as though such rules were incorporated into the Exchange's rules.\4\
\4\ This proposal is substantially similar to Rule 1202 of the International Securities Exchange (``ISE'').

The Exchange also seeks to amend its Rule 6.62 that defines certain types of orders. Specifically, the Exchange seeks to modify PCX Rule 6.62(j) (Combination Orders) in order to: (i) Add a definition for SSF/ option order types and (ii) modify the definition of stock/option order that correlates with the new proposed SSF definition. The Exchange proposes new PCX Rule 6.62(j)(2) in order to define a SSF/option order as an order to buy or sell a stated number of units of a single stock future or a security convertible into a SSF \5\ coupled with either: (A) the purchase or sale of option contracts on the opposite side of the market representing the same number of units of stock underlying the SSF or convertible SSF or the number of units of stock underlying the SSF or convertible SSF necessary to create a delta neutral position, or (B) the purchase or sale of an equal number of put and call option contracts each having the same exercise price, expiration date, and representing the same number of units of underlying stock as, and on the opposite side of, the market from the stock underlying the single stock future or convertible SSF portion of the order. The proposed definition is identical to that used by the ISE.\6\ \5\ To the extent that ``a security convertible into a SSF'' means an option on a SSF, the Commission notes that trading of such products has not yet been approved by the Commission and the Commodity Futures Trading Commission. Nothing in this notice should be interpreted as granting such approval.

\6\ See ISE Rule 722.

The Exchange also seeks to modify PCX Rule 6.62(j)(1) in order to amend its existing definition of stock/option order so that its provisions are parallel to its newly proposed definition for SSF/option orders and identical to the definition used by ISE Rule 722.

The Exchange proposes to amend PCX Rule 6.75 regarding priority and order allocation procedures in order to clarify that in addition to stock/option orders, SSF/option orders will also have priority over the bids and offers of members in the trading crowd but not over bids and offers of the Order Book Official.

The Exchange proposes to amend PCX Rule 6.78, Commentary .03 regarding transactions off of the Exchange in order to clarify that SSF will be included as a component of the rules that do not apply to transfer procedures off the floor as set forth in subsections (d) through (f) of PCX Rule 6.78.

2. Statutory Basis

The PCX believes that the rule change is consistent with section 6(b) of the Act in general \7\ and section 6(b)(5) of the Act in particular.\8\ The Exchange believes that the proposed rule change is intended to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange also believes that making additional complex orders involving options and SSFs available to investors will offer investors new trading opportunities on the Exchange and enhance the Exchange's competitive position. \7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory Organization's Statement on Burden on Competition

The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing proposed rule change, as amended, does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on
[[Page 70331]]
competition; (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if the proposal is consistent with the protection of investors and the public interest; and the Exchange has given the Commission written notice of its intention to file the proposed rule change at least five business days prior to filing, or such shorter time as designated by the Commission, it has become effective pursuant to section 19(b)(3)(A) of the Act \9\ and Rule 19b4(f)(6)\10\ thereunder. At any time within 60 days of the filing of the 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.\11\
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b4(f)(6).
\11\ For purposes of calculating the 60day abrogation period, the Commission considers the period to have commenced on November 14, 2003, the date the PCX filed Amendment No. 1.

The PCX has requested the Commission to waive the 30day operative delay. The Commission has decided to waive the 30 day operative delay. The Commission believes such waiver is consistent with the protection of investors and the public interest. The Commission notes that PCX's proposal is substantially similar to ISE's rules.\12\ For these reasons, the Commission designates the proposal to be effective and operative upon filing of Amendment No. 1 with the Commission. \12\ For purposes of accelerating the operative date of the proposal, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(3)(f).

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the amended proposal 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 205490609. Comments may also be submitted electronically at the following email address: rulecomments@sec.gov. All comment letters should refer to File No. SRPCX200342. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, comments should be sent in hard copy or by email, 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. SRPCX200342 and should be submitted by January 7, 2004.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\13\
\13\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 0331072 Filed 121603; 8:45 am]
BILLING CODE 801001P

SUMMARY: Pacific Exchange, Inc.,

DOCUMENT BODY 2: December 8, 2003.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on August 15, 2003, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule
[[Page 70329]]
change as described in items I, II and III below, which items have been substantially prepared by the PCX. On November 14, 2003, the PCX filed 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.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See letter from Mai Sharif Shiver, Senior Attorney, Regulatory Policy, PCX, to Nancy J. Sanow, Assistant Director, Division of Market Regulation, Commission, dated November 13, 2003 (``Amendment No. 1'') (replacing the form 19b4 in its entirety). In Amendment No. 1, the Exchange, in part, clarified the margin requirements for members, requiring members who effect SSF/option order transactions to elect to be bound by the initial and maintenance margin requirements of either the Chicago Board Options Exchange (``CBOE'') or the New York Stock Exchange (``NYSE''), as those rules may be in effect from time to time. In addition, the Exchange amended the filing to make it immediately effective. For purposes of calculating the 60day abrogation period, the Commission considers the period to have commenced on November 14, 2003, the date the PCX filed Amendment No. 1. In addition, the Exchange made a technical correction to its rule text and amended its discussion of its change to its proposed rule 6.62. Telephone conversation between Mai Sharif Shiver, Senior Attorney, Regulatory Policy, PCX, and Elizabeth MacDonald, Attorney, Division of Market Regulation, Commission, December 8, 2003.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The PCX proposes to amend its rules governing the execution of complex orders involving options and single stock futures (``SSF''). The text of the proposed rule change is set forth below. Proposed new language is in italics; proposed deletions are in [brackets]. * * * * *
Rules of the Board of Governors
Rule 6
Options Trading
``Crossing'' Orders and Stock/Option, SSF/Option Orders

Rule 6.47(a)(e)No change.
(f) Stock/Option and SSF/Option Orders.
(1) When a stock/option or SSF/option order is taken to a crowd for execution, the stock transaction or SSF transaction must be effected prior to the option transaction pursuant to Rule 6.47, Commentary .04. The following procedure applies to all executions of stock/option and SSF/option orders: After an agreement with other members of the crowd has been reached as to the terms of the transaction, the option order tickets must be written up and time stamped. However, the order tickets should not be turned in to the Order Book Official at this time. The members shall attempt to immediately effect the transaction in the underlying or related security or SSF. If the stock or SSF transaction cannot be executed immediately or is effected at a price other than the agreedupon price, the members shall not be held to the option transaction. If the stock or SSF transaction is effected at the agreed upon price, then all the members who participated in the option transaction shall be held to their agreedupon price. At the time the stock or SSF transaction is effected, the option trade tickets should be given to the Order Book Official.
(2) SSF/Option Orders Margin Requirements
(a) Any Member or Member Organization must elect to be bound by the initial and maintenance margin requirements of either the Chicago Board of Options Exchange or the New York Stock Exchange as the same may be in effect from time to time;
(b) Such election shall be made in writing by a notice filed with the Exchange.
(c) Upon the filing of such election, a Member will be bound to comply with the margin rules of the Chicago Board of Options Exchange or the New York Stock Exchange, as applicable, as though such rules were part of these rules.

Commentary:
.01.06No change.
Certain Types of Orders Defined

Rule 6.62(a)(i)No change.
(j) Combination orders [with noequity options legs]. One or more legs of a combination order may be to purchase or sell a stated number of units of another security.
(1) Stock/option order. A stock/option order is an order to buy or sell a stated number of units of an underlying stock or a [related] security convertible into the underlying stock (``convertible security'') coupled with either (A)[(i)] the purchase or sale of option contract(s) [of the same series] on the opposite side of the market representing either the same number of units of the underlying stock or convertible security or the number of units of the underlying stock necessary to create a delta neutral position; [or related security] or (B)[(ii)] the purchase [and] or sale of an equal number of put and call option contracts, each having the same exercise price, expiration date and each representing the same number of units of [the underlying or related security,] stock as, and on the opposite side of the market from, the stock or convertible security portion of the order. [representing in aggregate twice the number of units of the underlying or related security.]
(2) Single Stock Future (``SSF'')/Option Order. An SSF/option order is an order to buy or sell a stated number of units of a single stock future or a security convertible into a single stock future (``convertible SSF'') coupled with either (A) the purchase or sale of option contract(s) on the opposite side of the market representing either the same number of units of stock underlying the single stock future or convertible SSF, or the number of units of stock underlying the single stock future or convertible SSF necessary to create a delta neutral position; or (B) the purchase or sale of an equal number of put and call option contracts, each having the same exercise price, expiration date, and each representing the same number of units of underlying stock, as and on the opposite side of the market from, the stock underlying the single stock future or convertible SSF portion of the order.

Priority and Order Allocation Procedures

Rule 6.75. Except as provided by Rule 6.76 below, the following rules of priority shall be observed with respect to bids and offers: (a)(d)No change.
(e) Notwithstanding anything in paragraphs (a) and (b) to the contrary, when a member holding a spread order, a straddle order, or a combination order and bidding or offering on the basis of a total credit or debit for the order has determined that the order may not be executed by a combination of transactions with or within the bids and offers displayed by the Order Book Official or other members, in procedures determined by the Options Floor Trading Committee, then the order may be executed as a spread, straddle, or combination at the total credit or debit with one or more members without giving priority to bids or offers for the individual option series of the Order Book Official or of other members at the post that are no better than the bids or offers comprising such total credit or debit. Under the circumstances described above, a stock/option or SSF/option order has priority over the bids and offers of members in the trading crowd but not over the bids and offers of the Order Book Official.
(f)(h)No change.

Commentary:
.01.04No change.
Transactions Off the Exchange

Rule 6.78 (a)(f)No change.

Commentary:
.01.02No change.
.03 To the extent applicable, all other Exchange rules, including Rule 6.49, Solicited Transactions, will apply to the
[[Page 70330]]
transfer procedure set forth in subsections (d) through (f). The following Rules do not apply to transfer procedures: 6.71 (Meaning of Premium Bids and Offers); 6.74 (Bids and Offers in Relation to Units of Trading); 6.75 (Priority of Bids and Offers); 6.76 (Priority of Split Price Transactions); 6.47 (``Crossing'' Orders and Stock/Option, SSF/ Option Orders); and 7.9 (Meaning of Premium Bids and Offers, Index Options).
.04No change.
* * * * *
II. SelfRegulatory 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 Exchange prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

PCX Rule 6.47(f) governs the execution process for complex orders including stock/option orders. The Exchange is proposing to amend this rule to authorize the execution of complex orders involving options and SSFs. The proposed procedures for the execution of SSF/option orders are virtually identical to the existing stock/option procedure and would permit members to enter SSF/option orders. As with stock/option orders, the option leg of the transaction would have priority over the bids (offers) of members at the same price in the trading crowd but not over bids (offers) in the limit order book.

When an SSF/option order is represented in the crowd for execution, the SSF transaction must be effected prior to the option leg of the trade pursuant to PCX Rule 6.47, Commentary .04. As with stock/option orders, if the parties are unable to execute the SSF leg of the transaction due to a change in market conditions, then they could cancel the option leg of the transaction. If the stock or SSF transaction is effected at the agreedupon price, then all the members who participated in the option transaction shall be held to their agreedupon price. At the time the stock or SSF transaction is effected, the option trade tickets should be given to the Order Book Official.

The Exchange also seeks to add a margin requirement as proposed PCX Rule 6.47(f)(2) that would require a Member or Member Organization who effects SSF/option order transactions to elect to be bound by the initial and maintenance margin requirements of either the CBOE or the NYSE as those rules may be in effect from time to time. The Member or Member Organization will be required to make its election in writing and file the same to the Exchange's Financial and Operational Compliance Department. Upon filing of the election, the Member or Member Organization will be bound to comply with the margin rules of the CBOE or the NYSE, as applicable, as though such rules were incorporated into the Exchange's rules.\4\
\4\ This proposal is substantially similar to Rule 1202 of the International Securities Exchange (``ISE'').

The Exchange also seeks to amend its Rule 6.62 that defines certain types of orders. Specifically, the Exchange seeks to modify PCX Rule 6.62(j) (Combination Orders) in order to: (i) Add a definition for SSF/ option order types and (ii) modify the definition of stock/option order that correlates with the new proposed SSF definition. The Exchange proposes new PCX Rule 6.62(j)(2) in order to define a SSF/option order as an order to buy or sell a stated number of units of a single stock future or a security convertible into a SSF \5\ coupled with either: (A) the purchase or sale of option contracts on the opposite side of the market representing the same number of units of stock underlying the SSF or convertible SSF or the number of units of stock underlying the SSF or convertible SSF necessary to create a delta neutral position, or (B) the purchase or sale of an equal number of put and call option contracts each having the same exercise price, expiration date, and representing the same number of units of underlying stock as, and on the opposite side of, the market from the stock underlying the single stock future or convertible SSF portion of the order. The proposed definition is identical to that used by the ISE.\6\ \5\ To the extent that ``a security convertible into a SSF'' means an option on a SSF, the Commission notes that trading of such products has not yet been approved by the Commission and the Commodity Futures Trading Commission. Nothing in this notice should be interpreted as granting such approval.

\6\ See ISE Rule 722.

The Exchange also seeks to modify PCX Rule 6.62(j)(1) in order to amend its existing definition of stock/option order so that its provisions are parallel to its newly proposed definition for SSF/option orders and identical to the definition used by ISE Rule 722.

The Exchange proposes to amend PCX Rule 6.75 regarding priority and order allocation procedures in order to clarify that in addition to stock/option orders, SSF/option orders will also have priority over the bids and offers of members in the trading crowd but not over bids and offers of the Order Book Official.

The Exchange proposes to amend PCX Rule 6.78, Commentary .03 regarding transactions off of the Exchange in order to clarify that SSF will be included as a component of the rules that do not apply to transfer procedures off the floor as set forth in subsections (d) through (f) of PCX Rule 6.78.

2. Statutory Basis

The PCX believes that the rule change is consistent with section 6(b) of the Act in general \7\ and section 6(b)(5) of the Act in particular.\8\ The Exchange believes that the proposed rule change is intended to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange also believes that making additional complex orders involving options and SSFs available to investors will offer investors new trading opportunities on the Exchange and enhance the Exchange's competitive position. \7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory Organization's Statement on Burden on Competition

The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing proposed rule change, as amended, does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on
[[Page 70331]]
competition; (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if the proposal is consistent with the protection of investors and the public interest; and the Exchange has given the Commission written notice of its intention to file the proposed rule change at least five business days prior to filing, or such shorter time as designated by the Commission, it has become effective pursuant to section 19(b)(3)(A) of the Act \9\ and Rule 19b4(f)(6)\10\ thereunder. At any time within 60 days of the filing of the 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.\11\
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b4(f)(6).
\11\ For purposes of calculating the 60day abrogation period, the Commission considers the period to have commenced on November 14, 2003, the date the PCX filed Amendment No. 1.

The PCX has requested the Commission to waive the 30day operative delay. The Commission has decided to waive the 30 day operative delay. The Commission believes such waiver is consistent with the protection of investors and the public interest. The Commission notes that PCX's proposal is substantially similar to ISE's rules.\12\ For these reasons, the Commission designates the proposal to be effective and operative upon filing of Amendment No. 1 with the Commission. \12\ For purposes of accelerating the operative date of the proposal, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(3)(f).

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the amended proposal 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 205490609. Comments may also be submitted electronically at the following email address: rulecomments@sec.gov. All comment letters should refer to File No. SRPCX200342. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, comments should be sent in hard copy or by email, 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. SRPCX200342 and should be submitted by January 7, 2004.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\13\
\13\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 0331072 Filed 121603; 8:45 am]
BILLING CODE 801001P