[Federal Register Volume 63, Number 90 (Monday, May 11, 1998)]
[Notices]
[Pages 25891-25893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12351]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39945; File No. SR-PCX-98-08]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc., 
Relating to Assessment for New Facilities

May 1, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ on February 9, 1998, the 
Pacific Exchange, Inc. (``PCX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') a 
proposed rule change SR-PCX-98-08. The proposed rule change is 
described

[[Page 25892]]

in Items I, II and III below, which Items have been prepared by the 
self-regulatory organization. The proposed rule change was originally 
submitted by the Exchange with a request for Commission action pursuant 
to Section 19(b)(2) of the Act.\3\ The proposed rule change was 
published for comment in the Federal Register on March 11, 1998.\4\ No 
comments were received on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b).
    \4\ Securities Exchange Act Release No. 39719 (March 4, 1998), 
63 FR 29719 (March 11, 1998).
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    During the initial comment period for the proposal, on March 19, 
1998, the Exchange filed a letter amendment, Amendment No. 1 to the 
filing,\5\ which requested that the Commission act upon the filing 
pursuant to its authority under Section 19(b)(3)(A) of the Act and 
subparagraph (e) of Rule 19b-4 thereunder.\6\ because the filing 
establishes a due, fee, or other charge of the Exchange, in accordance 
with Section 19(b)(3)(A) of the Act and subparagraph (3) of Rule 19b-4 
thereunder, the proposed rule change became immediately effective upon 
the Exchange's filing of Amendment No. 1. The Commission is therefore 
publishing this release to provide public notice of Amendment No. 1 to 
File No. SR-PCX-98-08 and the immediate effectiveness of the proposed 
rule change.
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    \5\ See letter from Michael D. Pierson, Senior Attorney, PCX to 
Sarrita Cypress, Office of Market Supervision, SEC, dated March 19, 
1998.
    \6\ 15 U.S.C. 78s(b)(3)(A) and 17 CFR 240.19b-4(e)
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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 assess the owners of each of the 552 
Exchange memberships in order to provide an equity base for financing 
land and new facilities for the Exchange. These facilities will include 
new trading floors, technology facilities, office space and equipment.

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

1. Purpose
    The Exchange is proposing to assess the owners of each of its 552 
memberships $36,000, to be paid by each membership owner in monthly 
installments of $1,000. The installments are payable on a monthly basis 
and may not be paid in advance. The purpose of the assessment is to 
provide an equity base to finance land and facilities to house the 
Exchange's new trading floors, technology facilities, associated office 
space and equipment. The Exchange intends to treat funds from the 
assessment as a contribution to capital that will be segregated from 
PCX operating funds.
    The Exchange expects that the cost of the facilities will greatly 
exceed the amount to be raised by this assessment. In that regard, the 
Exchange intends to arrange additional financing for its new 
facilities. The amount raised by the assessment will serve as an equity 
base that will aid in the process of obtaining additional financing.
    The Exchange's new facilities will consolidate the Exchange's San 
Francisco administrative and operational facilities into a single 
location, will include a larger options trading floor and an 
appropriately designed equities trading facility that will better serve 
the trading of equity securities and option contracts, and will provide 
office space for members and member organizations, including clearing 
firms. The need for new facilities is based upon the Exchange's current 
growth rate and its need to provide effective services to its 
membership. The move will also allow the Exchange to increase the 
operational efficiency and improve the services it provides to the 
investing public.
    The Exchange recognizes that the current industry trend towards 
electronic trading will affect the Exchange's future needs for trading 
floor space, particularly in the trading of equity securities. But with 
regard to the trading of options contracts, the Exchange believes that 
it will still need a significantly larger trading floor because the 
Exchange anticipates that electronic options trading will operate in 
tandem with the current open outcry floor market. The Exchange also 
notes that its need to move to new facilities is due in part to the 
continuing growth of its options business in recent years. The move 
will also fulfill the Exchange's need to operate in facilities with 
enhanced emergency power and business recovery systems. The Exchange 
notes that it previously imposed an assessment on its membership in 
1988 and 1984.\7\
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    \7\ In 1988, the Exchange imposed an interim monthly assessment 
on each of its 551 regular memberships, consisting of two parts: a 
flat fee of $600 per month and supplemental activity charge, applied 
differently for Equities and Options Members, averaging $600 per 
month per Member. The assessment was imposed in order for the 
Exchange to meet its operational, technology, and facilities needs. 
See Securities Exchange Act Release No. 25617 (April 26, 1988), 53 
FR 15761 (May 3, 1988). In 1984, the Exchange imposed a special fee 
of $6,000 on the 503 memberships outstanding as of December 15, 
1983, for an aggregate assessment of approximately $3 million. The 
purpose of the assessment was to raise financing for contemplated 
facilities improvements to the Los Angeles and San Francisco Equity 
Floors and the San Francisco Options Floor. See Securities Exchange 
Act Release No. 20550 (January 11, 1984), 49 FR 2178 (January 18, 
1984) [order approving File No. SR-PSE-83-24, which was submitted 
pursuant to Section 19(b)(3)(A) of the Exchange Act].
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    The Exchange is currently studying ways in which it might provide 
future benefits (such as a rebate of the proposed assessment, if 
permitted in the future by financial circumstances) to the seat holders 
who pay some or all of the assessment. The Exchange will also require 
PCX seat owners and their lessees, if any, to specify in an addendum to 
their leases whether rent under those leases will be increased to 
reflect the assessment and whether any potential benefits ultimately 
returned to seat owners with respect to the assessment will, in turn, 
be paid of transferred by the seat owner to the lessee.
2. Statutory Basis
    The proposal is consistent with Section 6(b) \8\ of the Act, in 
general, and Section 6(b)(4),\9\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees or other charges 
among its members.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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.\10\
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    \10\ The Commission notes that, although the Exchange did not 
formally request comments on the rule filing from members, it did 
hold a series of meetings to apprise members of the proposed project 
to finance land and facilities to house the Exchange. Subsequent to 
those meetings, the Exchange received a petition signed by 
approximately 165 Options Floor Members opposing the proposed new 
Exchange facilities and assessment plan. A copy of the petition has 
been filed with the Commission as Exhibit A to the Rule 19b-4 filing 
for the proposed rule change.

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[[Page 25893]]

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The foregoing rule change establishes 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 and subparagraphs (e) of Rule 19b-4 
thereunder.\11\ At any time within 60 days of the filing of Amendment 
No. 1 to 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A) and 17 CFR 19b-4(e).
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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. 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, NW., Washington, 
DC 20540. 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-98-08 and should be submitted by June 1, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12351 Filed 5-8-98; 8:45 am]
BILLING CODE 8010-01-M