[Federal Register Volume 67, Number 11 (Wednesday, January 16, 2002)]
[Notices]
[Pages 2266-2267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1101]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45262; File No. SR-PCX-2001-47]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change, Amendment No. 1, and Amendment 
No. 2 Thereto by the Pacific Exchange, Inc. Establishing a New Exchange 
Fee Based on the Number of Order Cancellation Routed Through the 
Exchange's Member Firm Interface

January 9, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on November 27, 2001, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. On December 13, 2001, the PCX submitted Amendment No. 1 to 
the proposed rule change.\3\ On December 26, 2001, the PCX submitted 
Amendment No. 2 to the proposed rule change.\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, 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 Cindy L. Sink, Senior Attorney, PCX, to 
Nancy J. Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated December 12, 2001 (``Amendment No. 
1''). In Amendment No. 1, the PCX amended note 2 to the PCX Fee 
Schedule entitled ``Options: Trade-Related Charges'' to clarify that 
the fee will be assessed when the total number of orders an 
executing clearing member cancels through the PCX Member Firm 
Interface (``MFI'') in a particular month exceeds the total number 
of orders that member executes through the MFI in that same month.
    \4\ See letter from Cindy L. Sink, Senior Attorney, PCX, to 
Nancy J. Sanow, Assistant Director, Division, Commission, dated 
December 21, 2001 (``Amendment No. 2''). In Amendment No. 2, the PCX 
clarified the purpose of the proposed rule change. For purposes of 
calculating the 60-day period, within which the Commission may 
summarily abrogate the proposed rule change under section 
19(b)(3)(C) of the Act, the Commission considers that period to 
commence on December 26, 2001, the date the PCX filed Amendment No. 
2. See 15 U.S.C. 78s(b)(3)(C).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX proposes to establish a new fee based upon the number of 
order cancellations that are routed through the MFI.
    The text of the proposed rule change, as amended, is available at 
the Office of

[[Page 2267]]

the Secretary, PCX 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 PCX included statements 
concerning the purpose of and basis for the proposed rule change, as 
amended, 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 Exchange is proposing to establish a fee to deal with various 
operational problems and costs resulting from the practice of 
immediately following orders routed through the Exchange's automated 
MFI with a cancel request. Since these orders frequently come in large 
numbers, components, of the MFI, such as the Floor Broker Hand Held 
Terminals (``HHTs''), can very quickly become backlogged, which 
increases Exchange costs and adversely impacts public customers, their 
clearing firms, and Lead Market Makers by making the execution of other 
customer orders less timely. A high volume of cancellations sent 
through the MFI to HHTs or to the Exchange's Limit Order Book also 
increases Exchange costs by requiring the Exchange to spend increased 
amounts on systems and other hardware to process increased order 
traffic flow.\5\
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    \5\ This sentence was clarified to reflect a telephone 
converation between Cindy L. Sink, Senior Attorney, PCX, and Gordon 
Fuller, Counsel to the Assistant Director and Frank N. Genco, 
Attorney, Division, Commission, (January 3, 2002).
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    Under the proposed fee, the executing Clearing Member would be 
charged $1.00 for every order that it cancels through the MFI in any 
month where the total number of cancellations sent by the executing 
Clearing Member exceeds the total number of orders that same firm 
executed through the MFI in that same month. This fee will not apply to 
executing Clearing Members that cancel fewer than 500 orders through 
the MFI in a given month. The Exchange believes that the fee will help 
ease backlogs on the MFI and particularly HHTs.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act,\6\ in general, and section 6(b)(4) of the Act,\7\ in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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, as 
amended, will impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited nor received.

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

    The foregoing proposed rule change, as amended, has become 
effective pursuant to section 19(b)(3)(A)(ii) of the Act \8\ and 
subparagraph (f)(2) of Rule 19b-4 \9\ thereunder, because it 
establishes or changes a due, fee, or other charge.\10\ At any time 
within 60 days of December 26, 2001, the Commission may summarily 
abrogate such proposed rule change, as amended, 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.\11\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
    \10\ The Exchange's proposed rule change is substantially 
similar to a fee instituted by the Chicago Board Options Exchange, 
Inc., which became immediately effective on July 27, 2001, and a fee 
instituted by the American Stock Exchange LLC, which became 
immediately effective on November 27, 2001. See Securities Exchange 
Act Release Nos. 44607 (July 27, 2001), 66 FR 40757 (August 3, 
2001), (Notice of Filing and Immediate Effectiveness, SR-CBOE-2001-
40); and 45110 (November 27, 2001), 66 FR 63080 (December 4, 2001), 
(Notice of Filing and Immediate Effectiveness, SR-Amex-2001-90).
    \11\ See 15 U.S.C. 78(b)(3)(C).
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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, NW., Washington, 
DC 20549-0609. Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change, as 
amended, that are filed with the Commission, and all written 
communications relating to the proposed rule change, as amended, 
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. 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-2001-47 and should 
be submitted by February 6, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Margaret H. McFarland,
Deputy Secretary.
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    \12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 02-1101 Filed 1-15-02; 8:45 am]
BILLING CODE 8010-01-M