[Federal Register Volume 67, Number 152 (Wednesday, August 7, 2002)]
[Notices]
[Pages 51314-51315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19940]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46293; File No. SR-PCX-2002-42]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To 
Adopt a Tape Revenue Sharing Program for Certain Transactions on the 
Exchange in Tape B Securities

August 1, 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 July 10, 2002, the Pacific Exchange, Inc. (``PCX'' or ``Exchange''), 
through its wholly owned subsidiary PCX Equities, Inc. (``PCXE''), 
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 Exchange. The Exchange has designated 
this proposal as one establishing or changing a due, fee, or other 
charge imposed by the CHX under section 19(b)(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 persons.
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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

    The Exchange proposes to modify its fee schedule for services 
provided to ETP Holders and Sponsored Participants \4\ on the 
Archipelago Exchange, the equities trading facility of PCXE. The text 
of the proposed rule change is below. Proposed additions are in 
italics.
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    \4\ A ``Sponsored Participant'' means ``a person which has 
entered into a sponsorship arrangement with a Sponsoring ETP Holder 
pursuant to [PCXE] Rule 7.29.'' See PCXE Rule 1.1(tt).

           Schedule of Fees and Charges for Exchange Services
------------------------------------------------------------------------
 
------------------------------------------------------------------------
 
*                  *                  *                  *
                  *                  *                  *
Archipelago Exchange: Other
 Fees and Charges
Market Data Revenue Sharing
 Credit
  Liquidity Provider Credit..  50% tape revenue credit per qualifying
                                trade (applicable to limit orders that
                                are residing in the Book and that
                                execute against inbound marketable
                                orders in Tape B securities).
  Directed Order.............  50% tape revenue credit per qualifying
                                trade (applicable to any market maker
                                that executes against a Directed Order
                                in a Tape B security within the Directed
                                Order Process, as defined in PCXE Rule
                                7.37(a)).
  Cross Order................  50% tape revenue credit per qualifying
                                trade (applicable to any Cross Order, as
                                defined in PCXE Rule 7.31(s), where the
                                ETP Holder or Sponsored Participant
                                represents all of one side of the
                                transaction and all or a portion of the
                                other side in a Tape B security.
 
*                  *                  *                  *
                  *                  *                  *
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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 PCX included statements 
concerning the purpose of and basis for its proposal and discussed any 
comments it received regarding the proposal. 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 amend its fees charged to ETP Holders and 
Sponsored Participants (collectively ``Users'') that access the 
Archipelago Exchange (``ArcaEx'') trading facility by adopting a 
mechanism for sharing with Users market data revenue derived from 
transactions in Tape B securities.\5\
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    \5\ Tape B securities include: (a) securities that are listed 
for trading on the American Stock Exchange; and (b) certain other 
securities that are deemed to be eligible for such listing.
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    The Exchange proposes to share a portion of its gross revenues 
derived from market data fees (i.e., tape revenue) with (i) any User 
that provides liquidity in a Tape B security by entering a resting 
limit order into the ArcaEx Book that is then executed against an 
incoming marketable order within the Display Order, Working Order, or 
Tracking Order processes; (ii) any Market Maker that executes against a 
Directed Order in a Tape B security within the Directed Order Process; 
\6\ and (iii) any User that represents all of one side and all or a 
portion of the other side of a Cross Order \7\ execution in a Tape B 
security (individually, ``Qualifying Transaction'' and

[[Page 51315]]

collectively, ``Qualifying Transactions''). Under the proposal, any 
User that meets the requirements stated above will receive a 50 percent 
(50%) tape revenue credit per Qualifying Transaction that is reported 
over the Consolidated Tape Association's Tape B Network.
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    \6\ The Directed Order Process is the first step in the ArcaEx 
execution algorithm. Through this Process, Users may direct an order 
to a Market Maker with whom they have a relationship and the Market 
Maker may execute the order. To access this process, the User must 
submit a Directed Order, which is a market or limit order to buy or 
sell that has been directed to the particular market maker by the 
User. See PCXE Rule 7.37(a) (description of ``Directed Order 
Process'').
    \7\ A Cross Order is defined as a two-sided order with 
instructions to match the identified buy-side with the identified 
sell-side at a specified price (the cross price), subject to price 
improvement requirements. See PCXE Rule 7.31(s).
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    The proposed tape revenue credit is intended to create additional 
incentives to participants to provide liquidity on the ArcaEx facility.
2. Statutory Basis
    The Exchange believes the proposal is consistent with the 
requirements of section 6(b) of the Act,\8\ in general, and furthers 
the objectives of section 6(b)(4),\9\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its members.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

    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 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 
thereunder,\11\ because it establishes or changes a due, fee, or other 
charge. 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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 proposal 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 number SR-PCX-2002-42 and should be 
submitted by August 28, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-19940 Filed 8-6-02; 8:45 am]
BILLING CODE 8010-01-P