[Federal Register Volume 63, Number 53 (Thursday, March 19, 1998)]
[Notices]
[Pages 13440-13441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7068]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39745; File No. SR-PCX-98-11]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to the Exchange's Specialist Post Fee Waiver Program

March 12, 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 19, 1998, 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 self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange is proposing to adopt a fee waiver program for certain 
new specialist firms on the Exchange. The text of the proposed rule 
change is set forth in Exhibit A to the filing.

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 self-regulatory organization 
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 self-regulatory organization 
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

Purpose
    The Exchange is proposing to adopt a Specialist Post Fee Waiver 
Program (the ``Program'') in order to provide short-term cost relief to 
new specialist firms that agree to operate a specialist post, and to 
existing specialist firms that agree to operate an additional 
specialist post, on the Equity Floors of the Exchange. The Program is 
intended to provide financial incentives to encourage specialist firms 
to operate specialist posts and to encourage those firms to bring new 
equity order flow to the Exchange. Any specialist firm that provides 
new backing of a specialist post, after the effective date of the 
Program, would be eligible to participate in the Program. Fees for 
posts already being operated by a specialist firm are not affected by 
this waiver Program.
    The terms of the Program are as follows: First, if a specialist 
assumes new financial responsibility for a specialist post after the 
effective date of the Program, that specialist firm's fixed specialist 
fees for the post taken over will be waived for three months.\3\ 
Second, once the three months of the fee waiver have been earned, all 
of the fees previously waived under the Program will be reinstated. 
Third, once the previously waived fees are reinstated, the specialist 
firm will be eligible to

[[Page 13441]]

earn additional fee credits for three months based upon monthly trading 
volume at the specialist post taken over. The proposed schedule is set 
forth below. These fee credits are intended to serve as incentives for 
specialist firms to bring new equity order flow to the Exchange.
---------------------------------------------------------------------------

    \3\ The specialist fees that will be waived include: Exchange 
Member Dues, the Floor Privilege Fee, the Specialist Facility Fee, 
the Specialist Systems Fee, Workstation Fees, the Market Data Fee, 
the Card Access Fee, the Pacific Clearing Corporation (``PCC'') Post 
Cashiering Fee and the PCC Post Clearing Fee. Some of the fees 
waived will vary based on the number of staff the firm has on the 
floor and the services the firm uses. Consequently, the actual 
dollar amount of waived fees will vary slightly by firm. Generally, 
waived fees will average $7,330 per month.

----------------------------------------------------------------------------------------------------------------
                                                                          Post fee credit              Est'd    
                                                                 --------------------------------    effective  
                   Monthly post trading volume                                                     monthly post 
                                                                      Percent         Amount            fee     
----------------------------------------------------------------------------------------------------------------
4 million shares or more........................................              85          $6,230          $1,100
3 to less than 4 million shares.................................              50           3,665           3,665
2 to less than 3 million shares.................................              25           1,830           5,500
Less than 2 million shares......................................               0               0           7,330
----------------------------------------------------------------------------------------------------------------

    Fourth, a specialist firm is eligible to earn the fee credits 
provided above for three trade months. Fifth, if a specialist firm 
begins operating a specialist post under the Program during the course 
of a trade month, the Exchange will stagger the issuance of part of the 
fee waiver until after the passage of time in which fee credits may be 
earned. This will allow the Exchange to avoid crediting a specialist 
firm an amount that exceeds its fixed fees during any given trade 
month. Thus, for example, if a firm begins operating a post on February 
15, the prorated fixed fees for February (i.e., from February 15 to the 
end of February) will be waived, as will the fixed fees for March and 
April. The firm will then be eligible to earn fee credits during the 
months of May, June and July. Then, in August, the Exchange will 
provide a fee waiver equal to the amount not previously waived in 
February (i.e., the portion equal to the fees for the first half of 
February). Finally, once a specialist firm has participated in the 
Program for six full months, the Exchange will no longer apply fee 
waivers and fee credits, and the specialist firm will be subject to 
regular specialist post fees for the post taken over.
Basis
    The proposal is consistent with Section 6(b) of the Act \4\ in 
general, and Section 6(b)(4),\5\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees and 
other charges among members.\6\
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ The Commission notes that the filing may raise questions 
concerning payment for order flow. To the extent that it does raise 
such issues, exchange members should consider any associated 
disclosure obligations, namely pursuant to Rules 10b-10 and 11Ac1-3 
under the Act, 17 CFR 240.10b-10 and 17 CFR 240.11Ac1-3, 
respectively.
---------------------------------------------------------------------------

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 has become effective immediately pursuant 
to Section 19(b)(3)(A)(ii) \7\ of the Act and subparagraph (e)(2) of 
Rule 19b-4 thereunder \8\ because it constitute or changes a due, fee, 
or other charge imposed by the Exchange. 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.\9\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(e)(2).
    \9\ In reviewing the proposal, the Commission has considered the 
proposal's impact on efficiency, competition, and capital formation. 
See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, 
D.C. 20549. 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-98-11 and should be submitted by April 9, 
1998.

    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.
[FR Doc. 98-7068 Filed 3-18-98; 8:45 am]
BILLING CODE 8010-01-M