[Federal Register Volume 67, Number 144 (Friday, July 26, 2002)]
[Notices]
[Pages 48962-48963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18973]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46239; File No. SR-PCX-2002-38]


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

July 19, 2002.
    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 June 28, 2002, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``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 Exchange proposes to amend its Schedule of Fees and Charges by 
changing the following fees for options: Regulatory fees (FOCUS filing 
fee, Registered Representative fee, and Designated Examining Authority 
(``DEA'') fee) and Floor and Market Maker fees (floor brokerage fees, 
telephone fees, the options surcharge, and the LMM shortfall fee). In 
addition, the Exchange, through its wholly-owned subsidiary PCX 
Equities, Inc. (``PCXE'' or ``Corporation'') proposes to amend its 
Schedule of Fees and Charges to change its Regulatory fees (Focus 
filing fee, Registered Representative fee, and DEA fee) applicable to 
ETP Holders and Sponsored Participants that access the Archipelago 
Exchange (``ArcaEx'') trading facility.
    The text of the rule change is available at the Office of the 
Secretary of 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 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

1. Purpose
    The Exchange proposes to make the following changes to its Schedule 
of Fees and Charges.
a. Regulatory Fees
i. FOCUS Filing Fee
    The Exchange proposes to increase rates for Financial and 
Operational Combined Uniform Single Report (``FOCUS report'') filers 
from $25 to $100 per year. Pursuant to Commission rules, all broker-
dealers for which the Exchange serves as the DEA are required to file 
FOCUS reports with the Exchange either monthly, quarterly or annually. 
The proposed fee increase is designed to offset the internal staff 
costs associated with processing hard-copy FOCUS report filings, 
including the cost of re-typing the report and reconciling any 
differences. The proposed fee applies to both options and equities.
ii. Registered Representative Fee
    The Exchange currently charges a $50 annual fee for new 
applications, maintenance and transfer of registration status for each 
Registered Representative and each Registered Options Principal whose 
firm is a Member Firm of the Exchange. The Exchange proposes to 
increase the fee to $55 for options and equities. The Exchange believes 
this fee change is warranted based upon the Exchange's

[[Page 48963]]

increased costs relating to its regulatory oversight and enforcement 
program.
iii. DEA Fees
    The Exchange proposes to increase its DEA fee to $250 per quarter 
for firms that do not engage in a public business. The Exchange will 
apply the fee to options and equities in order to offset actual costs 
incurred in performing its DEA function. The Exchange will not apply 
the fee to ``off floor'' trading firms that currently pay a $2,000 per 
month examination fee or to Member Organizations that can demonstrate 
that at least 25% of their income, as reflected on the most recently 
submitted FOCUS report, was derived from on-floor activities.
b. Floor and Market Maker Fees
i. Floor Brokerage Fees
    The Exchange proposes to implement a fixed $500 monthly options 
floor brokerage fee. This new fee is intended to recover the cost of 
providing facilities and services for floor brokers on the Exchange.
ii. Telephone Fees
    The proposal would increase telephone charges from $60 to $95 a 
month per telephone turret. The rate increase is necessary because the 
current rates that the Exchange charges for use of its telephone system 
does not cover the cost necessary to support the system and does not 
account for cost of dedicated staff to sustain the system. Moreover, 
the rate increase is intended to recover the Exchange's cost of 
replacing handsets. Finally, due to firm consolidation on the floor, 
there has been an increase in uncovered overhead cost that must be 
redistributed to the Members and Member Organizations.
iii. Options Surcharge
    The Exchange proposes to increase the Options Surcharge Fee from 
2.5% to 5.0%. This charge is intended to recover the Exchange's 
expenses in providing facilities and services to its Members.
iv. LMM Shortfall Fee
    The Exchange proposes to increase the current Shortfall Fee 
threshold from 10% to 12% of the total national market share in an 
option issue. The fee is assessed at a rate of $0.35 on the shortfall 
amount for the top 120 issues (ranked by national volume) that do not 
meet the market share threshold.\3\ This fee change is intended to 
recover the Exchange's expenses in providing facilities and services to 
its members. The Exchange proposes to change only the amounts of the 
fees that are included in the proposed Schedule of Rates.
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    \3\ See Securities Exchange Act Release No. 45351 (January 29, 
2002), 67 FR 5631 (February 6, 2002).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act, in general, and section 6(b)(4) of the Act,\4\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its members.
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    \4\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The PCX believes that the proposed rule change does not 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by the Exchange, the proposed rule change 
has become effective pursuant to section 19(b)(3)(A) of the Act \5\ and 
Rule 19b-4(f)(2) \6\ thereunder. At any time within 60 days of the 
filing of 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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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 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 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
ISE. All submissions should refer to File No. SR-PCX-2002-38 and should 
be submitted by August 16, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority. \7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-18973 Filed 7-25-02; 8:45 am]
BILLING CODE 8010-01-P