[Federal Register Volume 64, Number 202 (Wednesday, October 20, 1999)]
[Notices]
[Pages 56562-56564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27366]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41994; File No. SR-PCX-99-34]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to Market Maker Charges and Book Charges
October 8, 1999.
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 August 27, 1999, 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. On September 28, 1999, the PCX submitted to the Commission
Amendment No. 1 to the proposed rule change.\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. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Robert Pacileo, Staff Attorney, Regulatory
Affairs, PCX to Michael Walinskas, Associated Director, Division of
Market Regulation, Commission, dated September 27, 1999 (``Amendment
No. 1''). Amendment No. 1 clarifies the operation of the market
maker and book charges affected by the proposed rule change. Because
Amendment No. 1 is substantive the Commission deems the date of the
filing to be September 28, 1999, the date the amendment was filed
with the Commission.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The PCX proposes to change its Schedule of Fees and Charges for
Exchanges services by increasing Market Maker transaction charges and
eliminating Book Execution, Book Staff Entry and Lead Market Maker
(``LMM'') Book Program Staffing charges. The text of the proposed rule
change is attached as Exhibit A and is available at the Exchange and at
the Commission.
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
1. Purpose
The PCX proposes to make the following changes to its Schedule of
Fees and Charges for PCX services:
a. Market Maker Transaction Fee. The PCX currently charges Market
Makers a transaction fee of $0.15 per contract side for equity and
index options. The PCX proposes to increase this fee to $0.185 per
contract side to offset the loss in revenues anticipated to result from
the proposed elimination of the fees set forth in ``b,'' ``c,'' and
``d'' below.
b. Book Execution Fee. The PCX charges executing brokers a Book
Execution Fee of $0.20 per contract side and an Accommodation/
Liquidation Transaction Fee of $0.10 per contract side.\4\ The Book
Execution Fee is assessed each time an order in the Book is executed;
the Accommodation/Liquidation Fee is charged for so-called ``cabinet''
trades in which the premium is less than \1/16\.\5\ The PCX proposes to
eliminate its Book Execution and Accommodation/Liquidation Transaction
Fees.
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\4\ The executing broker may pass the fee on to its customer, or
may absorb the fee itself, depending on the broker's contractual
relationship with its customers. Telephone conservation between
Robert Pacileo, Staff Attorney, Regulatory Affairs, PCX, and Gordon
Fuller, Special Counsel, and Marla Chidsey, Law Clerk, Division of
Market Regulation, Commission (October 7, 1999).
\5\ Telephone conservation between Robert Pacileo, Staff
Attorney, Regulatory Affairs, PCX, and Gordon Fuller, Special
Counsel, and Marla Chidsey, Law Clerk, Division of Market
Regulation, Commission (September 9, 1999).
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c. Book Staff Entry Fee. The PCX charges its executing brokers a
Book Staff Entry Fee, applied to orders manually entered onto the Book
by PCX staff, of $0.50 per entry.\6\ The PCX now proposes to eliminate
this Fee.
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\6\ As with the Book Execution and Accommodation/Liquidation
Fees discussed above, the executing broker may pass on the Book
Staff Entry Fee to its customers. Supra note 4.
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[[Page 56563]]
d. LMM Book Program Staffing Charges. The PCX charges its Lead
Market Makers (``LMM'') for options contracts entered into the Book.
Each LMM is charged $0.05 per Book contract for the first 15,000
contracts, $0.10 for 15,001 to 30,000 Book contracts, $0.15 for the
30,001 to 55,000 Book contracts, and $0.10 for all Book contracts over
55,000. These charges are applied to the monthly total of all Book
contracts in all options issues collectively traded by an LMM under the
program. The PCX proposes to eliminate its Book Program Staffing
Charges.
The PCX proposes these fee changes for several reasons. First, the
PCX seeks to reduce charges consistent with the elimination of Book
Execution and Book Staff Entry Fees currently paid by executing
brokers.\7\ Second, the elimination of Book Execution and Book Staff
Entry Fees is intended to attract order flow to the PCX and make its
rate schedule more competitive. Finally, the elimination of LMM Book
Program Staffing Charges is consistent with the elimination of the Book
Execution and Book Staff Entry Fees. PCX market makers will pay an
increased transaction fee to enable PCX to recoup revenues lost through
elimination of the three Book fees.\8\
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\7\ Supra notes 4 and 6.
\8\ Id.
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2. Statutory Basis
The Exchange represents that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(4),\10\ in particular, because it provides
for other equitable allocation of reasonable dues, fees and other
charges among its members and issuers and other persons using its
facilities.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange represents that it 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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The foregoing rule change has become immediately effective pursuant
to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) under the
Act \12\ because:
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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(i) It does not significantly affect the protection of investors
or the public interest;
(ii) It does not impose any significant burden on competition;
and
(iii) By its terms, it does not become operative for 30 days
after the date of the filing, or such shorter time as the Commission
may designate if consistent with the protection of investors and the
public interest: provided that the self-regulatory organization has
given the Commission written notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date
of filing of the proposed rule change, or such shorter time as
designated by the Commission.
In this regard, the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least five
business days before the date of the filing, as required by Rule 19b-
4(f)(6). \13\
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\13\ Id.
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the proposed 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.\14\
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\14\ In reviewing this proposal, the Commission has considered
the proposal's impact on efficiency, competition and capital
formation. 15 U.S.C. 78c(f).
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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, as amended, 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. 20549-0609. 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. 20549-0609. 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-99-34 and
should be submitted by November 10, 1999.
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.
Exhibit A
Text of the Proposed Rule Change: \16\
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\16\ New text is in italics. Deleted text is in brackets.
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PCX Options: Trade-Related Charges
Transactions
Customer $0.12 per contract side
Market Maker [$0.15 per contract side] $0.185 per contract side
Firm
$0.085 per contract side where the premium is less than $1 per
contract
$0.115 per contract side where the premium is $1 or more per
contract
* * * * *
[Book Execution Fee $0.20 per contract side
Charge for accommodation/liquidation transactions is $0.10 per
contract.
Charge applies to book executions only and is in addition to the
manual transaction charges listed above; market and marketable limit
orders transacted through POETS do not receive this charge.]
* * * * *
[Book Staff Entry $0.50 per entry (paid upon partial or full
execution)
Charge applies to orders manually entered onto book; orders booked
electronically via POETS do not receive this charge.]
* * * * *
[LMM Book Program Staffing charge
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Charge per Maximum
LMM monthly book contracts book charge per
contract rate tier
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First 15,000.................................. $0.05 $750
Next 15,000................................... 0.10 1,500
Next 25,000................................... 0.15 3,750
All contracts above 55,000.................... 0.10 (**)
[[Page 56564]]
Book staffing charge is applied to the monthly total of all book
contracts in all option issues collectively traded by an LMM under the
program.]
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* Pacific Options Exchange Trading system
** No maximum.
[FR Doc. 99-27366 Filed 10-19-99; 8:45 am]
BILLING CODE 8010-01-M