[Federal Register Volume 63, Number 41 (Tuesday, March 3, 1998)]
[Notices]
[Pages 10420-10421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5400]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39695; File No. SR-PCX-98-09]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc., 
Relating to Elimination of Transaction Fees and Recording and 
Comparison Fees in AMEX Issues, Waiver of Independent Broker Charge, 
and Badge Replacement Fee

February 24, 1998.
    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 13, 1998,\3\ 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. 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.
    \3\ The Exchange previously filed a substantially similar 
proposed rule change in File No. SR-PCX-98-07 (filed January 29, 
1998). The Exchange withdrew that filing on February 13, 1998. See 
Letter from Michael Pierson, Senior Attorney, PCX, to Karl Varner, 
Attorney, Division of Market Regulation (``Division''), Commission, 
dated February 12, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX is proposing to make the following changes to its fee 
structure: (1) To eliminate its transaction fees and its recording and 
comparison fees for transactions in equity issues listed on the 
American Stock Exchange (``AMEX'') and traded on the PCX; (2) to waive 
its current Independent Broker Charge of $0.02 per option contract 
executed by Independent Floor Brokers \4\ on the Options Trading Floor; 
and (3) to establish a badge replacement fee of $100 for Options Floor 
Members and employees of Member Firms.
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    \4\ The Exchange defines an ``Independent Floor Broker'' as a 
Floor Member who executes orders primarily for Market Makers and 
other Floor Brokers.
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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 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 PCX 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 PCX is proposing to make three changes to its current fee 
structure, as listed below:
    (a) Elimination of Transaction Fees and Recording and Comparison 
Fees in AMEX Issues. The exchange is proposing to eliminate its 
transaction fees \5\ and its recording and comparison fees \6\ for 
transactions in equity issues listed on the AMEX and traded at the PCX. 
Initially, the Exchange will accomplish this by applying a credit to 
all Member Firms based on their pro rata share of volume in AMEX-listed 
equity issues. Accordingly if 10 percent of a Member Firm's monthly 
share volume is conducted in AMEX-listed equity issues, the Exchange 
would credit that Member Firm 10 percent of its transaction fees and 
its recording and

[[Page 10421]]

comparison fees for the trade month.\7\ After the Exchange has adjusted 
each member's account to reflect the reconciliation, then members will 
no longer be required to pay transaction fees and recording and 
comparison fees associated with transactions in AMEX-listed issues.\8\ 
The changes to the transaction fee schedule and the recording and 
comparison fee schedule will be effective as of the January 1998 trade 
month.
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    \5\ The Exchange calculates transaction fees using an 
incremental scale based on a member's cumulative billable trade 
value per month, ranging from a rate of $0.13 per $1000 of trade 
value for the member's first $50 million of monthly business, down 
to a rate of $0.01 per $1000 of trade value for the member's monthly 
business above $800 million. Those rates are subject to a discount 
for automated trades, and block trades of 5000 or more shares are 
subject to a minimum charge of $15 per trade side and a maximum 
charge of $75 per trade side. A member's aggregate monthly 
transaction charges are subject to a cap of $0.45 per 100 shares.
    \6\ The Exchange charges equity recording and comparison fees of 
$0.05 per 100 shares, with a maximum of $10 per trade side.
    \7\ The Exchange currently cannot match a member's transactions 
in AMEX-listed securities with the exact amount of the associated 
transaction fees. To determine the transaction fee credit, the 
Exchange initially will calculate the blended per share transaction 
fee rate for all of a member's equity transactions in a trade month, 
and multiply that blended rate by the total volume of AMEX-listed 
shares the member transacted that month. Once the Exchange is able 
to exactly match transactions with the associated credits, the 
Exchange will reconcile prior discrepancies between the fees and the 
credits associated with transactions in AMEX-listed shares. The 
Exchange anticipates that it will reconcile such prior discrepancies 
no later than April 1, 1998.
    \8\ See Telephone conversation between Michael Pierson, PCX, and 
Joshua Kans, Attorney, Division, Commission February 23, 1998.
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    The fee change is intended to make the Exchange more competitive by 
reducing the costs incurred by customers in executing transactions on 
the Exchange, thus making the Exchange a more cost-effective market 
center to which to send order flow.
    (b) Waiver of Independent Broker Charge. The Exchange currently 
charges Independent Floor Brokers a fee of $0.02 per option contract 
executed by the Independent Floor Broker. The Exchange is proposing to 
waive its current Independent Broker Charge until further notice.\9\ 
The changes to the Independent Broker Charge will be effective as of 
the January 1998 trade month.
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    \9\ Before reinstating the Independent Broker Charge, the 
Exchange would be required to submit a proposed rule change to the 
Commission.
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    The Exchange is waiving this charge to help offset the high cost 
that Independent Floor Brokers incur while conducting business on the 
Options Floor. The Exchange notes that Independent Floor Brokers 
perform an important function on the Options Floor, particularly when a 
large influx of orders needs to be executed. The fee change will help 
stabilize the number of Independent Floor Brokers on the Options Floor.
    (c) Options Floor Badge Replacement Fee. The Exchange is proposing 
to establish an Options Floor Badge Replacement Fee of $100. Currently, 
all Options Floor Members and all employees of Member Firms who need to 
enter the Options Trading Floor are provided, for an initial issuance 
fee of $30, a floor security badge. The badge includes a photograph of 
the Member or employee of a Member Firm. The badge also includes an 
electronic code that allows the holder to pass through the turnstiles 
leading to the Options Floor. The Exchange is proposing to establish a 
one-time replacement fee of $100 for these badges. The fee is designed 
to cover the Exchange's cost of replacing lost, stolen or damaged 
badges.
(2) Statutory Basis
    These proposals are consistent with Section 6(b) of the Act,\10\ in 
general, and Section 6(b)(4),\11\ in particular, in that they are 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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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

    The foregoing rule change establishes or changes a due, fee, or 
other charge imposed by the Exchange, and, therefore, has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and 
subparagraph (e)(2) of Rule 19b-4 \13\ thereunder. At any time within 
60 days of the filing of such 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(e)(2).
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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.\14\ Persons 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.
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    \14\ In reviewing these rules, the Commission has considered the 
proposed rule change's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
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    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-98-09 and should be submitted by March 24, 
1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-5400 Filed 3-2-98; 8:45 am]
BILLING CODE 8010-01-M