[Federal Register Volume 67, Number 92 (Monday, May 13, 2002)]
[Notices]
[Pages 32075-32076]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11890]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45872; File No. SR-PCX-2002-21]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to the Reduction of a Surcharge Fee for the Automatic 
Execution of Broker-Dealer Orders

May 3, 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 April 11, 2002, the Pacific Exchange, Inc. (``Exchange'' or ``PCX'') 
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 PCX. 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.
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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 modify its Schedule of Fees and Charges by 
reducing the surcharge fee for the automatic execution of broker-dealer 
orders from $0.45 to $0.20.
    The text of the proposed rule change is available at the 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 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 PCX 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

I. Purpose
    The Exchange is proposing to reduce the per contract surcharge fee 
for all broker-dealer orders \3\ executed via the Exchange's automatic 
execution system (``Auto-Ex''). The current $0.45 per contract 
surcharge fee for the automatic execution of broker-dealer orders was 
filed for immediate effectiveness on February 4, 2002.\4\ After review 
of the surcharge, the Exchange believes that a reduction of the fee 
would encourage participation in the program and that the reduction is 
reasonable and appropriate.
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    \3\ A broker-dealer order is an order for the account of a 
registered broker-dealer.
    \4\ See Securities Exchange Act Release No. 45662 (March 27, 
2002), 67 FR 16786 (April 8, 2002) (SR-PCX-2002-10).
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    On November 6, 2001, the Commission approved a PCX rule change 
proposal to amend PCX Rule 6.87(b) to permit broker-dealer orders to be 
executed on Auto-Ex.\5\ The amendments to PCX Rule 6.87(b) were 
implemented on an issue-by-issue basis, subject to the approval of the 
Options Floor Trading Committee.\6\
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    \5\ See Securities Exchange Act Release No. 45032 (November 6, 
2001), 66 FR 57145 (November 14, 2001) (SR-PCX-2000-05) (approving 
portion of proposal that allowed for orders for the account of 
broker-dealers to be executed on Auto-Ex on an issue-by-issue 
basis).
    \6\ Id.
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    The Exchange proposes to reduce the per contract surcharge on all 
trades executed pursuant to the proposed rule change from a $0.45 to 
$0.20. The Exchange represents that, under the proposal, all trades 
executed via Auto-Ex on behalf of broker-dealers will be uniformly 
assessed the fee. The Exchange also represents that the surcharge for 
automatic execution of broker-dealer orders will only be charged to 
member firms. The Exchange asserts that these firms will be assessed 
the fee monthly. The Exchange represents that bills will be issued to 
these firms approximately five days after the end of each trade month. 
The Exchange asserts that the surcharge will not apply to non-members.
    The Exchange represents that amended PCX Rule 6.87(b) extends the 
benefits of automatic execution to broker-dealers.\7\ The Exchange 
asserts that such change provides instant execution without the need 
for a floor broker. The Exchange represents that the fast turnaround 
time minimizes the possibility that the market will move away from the 
prevailing quote. The Exchange asserts that broker-dealers who want to 
access the PCX's markets, but who do not want to pay the surcharge, can 
send their orders to the PCX for manual execution by Floor Brokers. The 
Exchange believes, however, that the benefits of automatic execution 
outweigh the burden of paying the surcharge.
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    \7\ The Exchange represents that, previously, these benefits 
were only available to public customers.
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    The Exchange represents that broker-dealer orders that are 
automatically executed on Auto-Ex are not subject to brokerage fees 
that would otherwise be imposed by PCX members. The Exchange believes 
that the floor brokerage fees on broker-dealer order executions are 
generally comparable to the proposed surcharge amount. The Exchange 
represents that broker-dealer orders routed to Floor Broker Hand Held 
Terminals are not subject to the surcharge. The Exchange asserts that 
the surcharge is in addition to existing fees.
    The Exchange represents that the fee will recoup costs associated 
with developing the new feature allowing automatic execution of broker-
dealer orders in designated option issues. The Exchange asserts that 
the costs required to allow its Pacific Options Exchange Trading System 
(``POETS'') to accept and execute these orders included an extensive 
system design change, programming and testing, and that billing 
programming was also required. The Exchange believes the fee is 
reasonable. The Exchange proposes that the reduction in the surcharge 
become effective on April 15, 2002.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6 of the Act,\8\ in general, and with Section 6(b)(4) of the 
Act,\9\ in particular, in that it provides for the equitable allocation

[[Page 32076]]

of reasonable dues, fees, and other charges among its members.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The PCX 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 proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes or changes a due, fee, or 
other charge. At any time within 60 days of April 11, 2002, 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ 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 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 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-2002-21 and should 
be submitted by June 3, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-11890 Filed 5-10-02; 8:45 am]
BILLING CODE 8010-01-P