[Federal Register Volume 62, Number 137 (Thursday, July 17, 1997)]
[Notices]
[Pages 38335-38336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18764]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38830; File No. SR-PCX-97-26]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Public Exchange, Inc. 
Relating to the Member Surcharge in Arbitration Proceedings

July 10, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 27, 1997, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') 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.\3\ 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. Sec. 78s(b)(1) (1988).
    \2\ 17 CFR 240.19b-4 (1991).
    \3\ This proposed rule change replaces SR-PCX-97-20, which has 
been withdrawn. Letter from Rosemary A. MacGuinness, Director of 
Arbitration, PCX, to Ivette Lopez, Assistant Director, SEC, dated 
June 26, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange submits this proposed rule change to amend Rule 12.32 
of the Rules of the Board of Governors of the Exchange relating to the 
member surcharge in arbitration proceedings. Additions are italicized; 
deletions are bracketed.

Member Surcharge

    Rule 12.32(a) Each member, member organization, or associated 
person who is named a party to an arbitration proceeding, whether in 
a Claim, Counterclaim, Third-Party Claim, or Crossclaim shall be 
assessed a [$200] non-refundable surcharge pursuant to the schedule 
in Rule 12.32(c) when the Arbitration Department perfects service of 
the claim naming the member, member organization or associated 
person on any party to the proceeding. For each associated person 
who is named, the surcharge shall be assessed against the member(s) 
or member organization(s) which employed the associated person at 
the time of the events which gave rise to the dispute, claim or 
controversy. No member or member organization shall be assessed more 
than a single surcharge in any arbitration proceeding. The surcharge 
shall not be subject to reimbursement under Rule 12.31.
    (b) For purposes of this Rule, service is perfected when the 
Arbitration Department properly serves the Respondent(s) to the 
arbitration proceeding under Rule 12.13(c).
    (c) Schedule of Surcharge Rates:

------------------------------------------------------------------------
                      Amount in dispute                        Surcharge
------------------------------------------------------------------------
$.01-$10,000................................................        $100
$10,000.01-$50,000..........................................         200
$50,000.01-$100,000.........................................         300
$100,000.01-$500,000........................................         350
Over $500,000...............................................         500
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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

    In 1994, the PCX added Rule 12.32 which required any member named 
as a party to an arbitration proceeding to be assessed a non-
refundable, flat $200 surcharge. The surcharge was instituted to help 
offset the increased resourcing needs resulting from a number of 
factors, including case growth, more complex cases being filed and 
arbitrator training. The flat surcharge currently applies to all cases 
regardless of the dollar amount in controversy. As a result, a member 
against whom a $500 claim had been filed would be required

[[Page 38336]]

to pay the same $200 fee as a member against whom a $3,000,000 claim 
had been filed. Typically, however, a claim for a greater dollar amount 
expends greater administrative resources and requires a greater 
expenditure of staff time to process the case, manage the case record 
and database and provide information on the arbitration service to the 
customer. In other words, there is generally a correlation between the 
dollar amount of the claim and the amount of resources the PCX is 
required to expend to bring the claim to a conclusion. The proposed 
surcharge is designed to reflect this relationship between the dollar 
amount of the claim brought against the member and the expenditure of 
PCX resources. As a result, the PCX proposes to replace the flat 
surcharge of $200 in Rule 12.32 with a graduated surcharge based on the 
amount of the claim. Under the proposed surcharge, members against whom 
claims of $10,000 or less are filed would pay a $100 fee, as opposed to 
a $200 fee. Claims between $10,000 and $50,000 would require a $200 
fee, claims between $50,000 and $100,000 would require a $300 fee, 
claims between $100,000 and $500,000 would require a $350 fee and 
claims over $500,000 would require a $500 fee.
    PCX believes that the proposed rule change is consistent with the 
provisions of Section 6(b)(4) of the Act which require that the rules 
of the Exchange provide for the equitable allocation of reasonable 
dues, fees and other charges among members in that the proposed rule 
fairly adjusts the surcharge on members for new cases to more closely 
reflect the costs associated with resolving controversies involving 
varying amounts in dispute.

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 Exchange has designated this proposal as establishing or 
changing a due, fee or other charge under Section 19(b)(3)(A) of the 
Act \4\ and subparagraph (e) of the Rule 19b-4,\5\ which renders the 
proposed rule change effective on June 27, 1997, the date of receipt of 
this filing by the Commission.
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    \4\ 15 U.S.C. Sec. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(e).
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    At any time within sixty 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written date, views, and 
arguments concerning the foregoing. People making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Room. Copies of the filing will also 
be available for inspection and copying at the PCX's principal offices. 
All submissions should refer to File No. SR-PCX-97-26 and should be 
submitted by August 7, 1997.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-18764 Filed 7-16-97; 8:45 am]
BILLING CODE 8010-01-M