# Self-Regulatory Organizations; Pacific Exchange, Inc.; Order Granting Approval to Proposed Rule Change Relating to Synchronization of Member Organization Business Clocks
On June 18, 2001, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [^1] and Rule 19b-4 thereunder, [^2] a proposed rule change requiring all PCX member organization business clocks, used for purposes of recording order or trade data to the Exchange, to be synchronized to a single time designated by the PCX, and that member organizations adopt those procedures as may be necessary to maintain such synchronization during each trading day.
[^1] 15 U.S.C. 78s(b)(1).
[^2] 17 CFR 240.19b-4.
The proposed rule change was published for comment in the * Federal Register * on October 18, 2001. [^3] The Commission received no comments on the proposal.
[^3]*See* Securities Exchange Act Release No. 44922 (October 11, 2001), 66 FR 52954.
The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange [^4] and, in particular, the requirements of Section 6 of the Act [^5] and the rules and regulations thereunder. The Commission finds specifically that the proposed rule change is consistent with Section 6(b)(5) [^6] 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 regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, and in general, to protect investors and the public interest.
[^4] In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
[^5] 15 U.S.C. 78f.
[^6] 15 U.S.C. 78f(b)(5).
The Commission notes that it has previously supported a move toward industry-wide synchronization of clocks. [^7] The Commission further notes that the PCX has the regulatory responsibility to design and implement an audit trail sufficient to enable the Exchange to reconstruct markets promptly, conduct efficient surveillance, and enforce its rules. [^8] The Commission believes that the reliability and usefulness of the Exchange's audit trail information should be enhanced by the synchronization of its member organizations' business clocks. In addition, synchronization will be important in evaluating members' compliance with the rules of the Exchange and the Act, including best execution obligations, firm quote rules, and prohibitions on frontrunning customer orders.
[^7]*See* Securities Exchange Act Release No. 39279 (March 6, 1998), 63 FR 12559 (March 13, 1998) (File No. SR-NASD-97-56) (Order approving the National Association of Securities Dealers' proposed audit trail system).
[^8]*See* In the Matter of Certain Activities of Options Exchanges, Securities Exchange Act Release No. 37538 (September 11, 2000), Administrative Proceeding File No. 3-10282.
*It Is Therefore Ordered,* pursuant to Section 19(b)(2) of the Act, [^9] that the proposed rule change (File No. SR-PCX-2001-24) be, and it hereby is, approved.
[^9] 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority. [^10]
[^10] 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.