[Federal Register Volume 65, Number 219 (Monday, November 13, 2000)]
[Notices]
[Pages 67786-67787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28947]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43510; File No. SR-PCX-00-41]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to Changes to Schedule of Rates and Charges

November 3, 2000.
    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 October 16, 2000, 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 Exchange has designated this proposal as one establishing 
or changing a due, fee or other charge imposed by the Exchange under 
section 19(b0(3)(A)(ii) of the Act,\3\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested person.
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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)(3)(A)(ii).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    PCX is proposing to amend its schedule of rates and charges in 
order to eliminate credits for book executions, to increase registered 
representative options principal \4\ fees, and to establish 
examination, registration and annual fees for off-floor trading firms 
and their traders. The text of the proposed change to the PCX fee 
schedule is available at the Exchange and at the Commission.
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    \4\ Telephone conversation between Hassan Abedi, Attorney, 
Regulatory Policy, PCX, and Terri Evans, Special Counsel, Division 
of Market Regulation, SEC, on November 1, 2000 (clarifying that the 
increased fee also applies to registered options principals).
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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

[[Page 67787]]

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
    Currently, the PCX Schedule of Rates and Charges credits order flow 
providers $.10 per contract on all book executions, which can be used 
to offset other PCX charges. In addition, the PCX charges an annual fee 
of $25 to all registered representatives and registered options 
principals for maintenance, new applications, or transfer of 
registration status. This fee supports the costs related to regulatory 
oversight and enforcement within the equities and options communities. 
Finally, the PCX does not charge a Designated Examining Authority 
(``DEA'') fee for its off-floor traders.
    The Exchange now proposes to modify its Schedule of Rates and 
Charges. First, the Exchange proposes to eliminate the $.10 credit 
provided to order flow providers. In its original filing with the 
Commission the Exchange stated that this credit was needed in order to 
attract order flow and enable it to remain competitive.\5\ Based upon 
its experience with this credit, the PCX believes that providing a 
credit for book activity does not create a meaningful incentive for 
attracting order flow.
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    \5\ See Securities Exchange Act Release No. 43020. (July 10, 
2000) 65 FR 44558 (July 18, 2000).
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    Second, the Exchange proposes to increase its registered 
representative and registered options principal fee by $10 to $35 for 
annual maintenance, new applications, and transfers. The Exchange 
believes that this addition is warranted due to increased costs related 
to regulatory oversight and enforcement.
    Finally, the Exchange proposes to add DEA fees for off-floor 
trading firms and its traders. Currently the PCX is the DEA for 162 
firms. Of these 162 firms, 15 conduct extensive off-floor trading 
businesses. In the past, the PCX has outsourced the examinations of 
these 15 firms. The PCX intends to conduct these examinations in the 
future. The Exchange believes that, based upon its business model, the 
number of off-floor trading firms for which it will serve as DEA will 
increase substantially in the near future. Therefore, the Exchange is 
seeking to establish DEA fees that will allow for recovery of costs 
associated with these types of examinations. The Exchange proposes to 
require all current and future off-floor traders to pay an initial 
registration fee of $75 per trader and an annual fee thereafter of $250 
per trader. The Exchange is also proposing to charge a $2,000 per month 
Examination Fee to be paid by member organizations for which the 
Exchange is the DEA. An Exemption from these fees will be granted to 
any member operating from the PCX trading floor that has demonstrated 
that at least 25% of its income, as reflected on the most recently 
submitted FOCUS Report, was derived from on-floor activities. These 
fees will help to offset costs associated with providing examination 
services to off-floor trading firms. These include costs related to 
advising firms on financial reporting requirements and compliance with 
PCX and SEC rules. There are also extensive travel costs and initial 
set-up costs related to such off-floor firms. These fees are consistent 
with the fee structures established by other Exchange.\6\
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    \6\ See Securities Exchange Act Release No. 43497 (March 6, 
2000), 65 FR 14005 (March 15, 2000); Securities Exchange Act Release 
No. 42562 (March 22, 2000), 65 FR 16445 (March 28, 2000); Securities 
Exchange Act Release No. 43074 (July 26, 2000), 65 FR 47529 (August 
2, 2000); Securities Exchange Act Release No. 43014 (July 6, 2000), 
65 FR 43388 (July 13, 2000); Securities Exchange Act Release No. 
43257 (September 6, 2000), 65 FR 55665 (September 14, 2000); and 
Securities Exchange Act Release No. 43279 (September 11, 2000), 65 
FR 56606 (September 19, 2000).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general, and furthers the 
objectives of section 6(b)(4) \8\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among its members and other persons using its facilities.
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    \7\ 15 U.S.C. 78(f)(b).
    \8\ 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

    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 effective pursuant to section 
19(b)(3)(A)(ii) of the Act \9\ and subparagraph (f)(2) of Rule 19b-
4,\10\ because it establishes 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. 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-00-41 and should 
be submitted by December 4, 2000.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority. \11\
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    \11\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-28947 Filed 11-9-00; 8:45 am]
BILLING CODE 8010-01-M