[Federal Register Volume 67, Number 242 (Tuesday, December 17, 2002)]
[Notices]
[Pages 77309-77310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31654]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46982; File No. SR-PCX-2002-70]


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

December 11, 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 November 15, 2002, the Pacific Exchange, Inc. (``PCX'') filed with 
the Securities and Exchange Commission the proposed rule change as 
described in Items I, II and III below, which the PCX has prepared. The 
Commission is

[[Page 77310]]

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\ 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, through its wholly owned subsidiary PCX Equities, Inc. 
(``PCXE''), proposes to amend its fee schedule for services provided to 
ETP Holders and Sponsored Participants (collectively ``Users'') on the 
Archipelago Exchange (``ArcaEx''), the equities trading facility of 
PCXE. Specifically, the PCX proposes to (1) increase the per share 
transaction fee for odd-lot orders in listed securities that are routed 
away via ArcaEx and executed by another market center; and (2) increase 
the transaction credit for Market Makers who provide liquidity in 
exchange-listed American Depositary Receipts (``ADRs''). 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 had 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 the statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Routing Service Fee
    The PCX currently charges all Users a transaction fee of $0.004 per 
share for any unfilled or residual portion of an odd-lot order in a 
listed security, including exchange-traded funds (``ETFs''), that is 
routed away via ArcaEx and executed by another market center or 
participant. The PCX proposes to increase this transaction fee to $0.03 
per share to conform to the current fee of $0.03 per share that is 
applied to odd-lot orders executed on ArcaEx. The PCX notes that odd-
lot orders that are created as a result of a partial fill of a round 
lot that are subsequently routed away and executed on another market 
will continue to be subject to the $0.004 per-share fee applicable to 
round lot orders. The PCX believes that this fee is reasonable and is 
structured to allocate fairly the costs of operating the ArcaEx 
facility.
2. Market Maker Transaction Credit
    The PCX is proposing to increase the level of the transaction 
credit paid to market makers who provide liquidity in exchange-listed 
American Depositary Receipts (``ADRs''). Currently, market makers who 
enter ``Q Orders'' \3\ in exchange-listed ADRs that are subsequently 
executed against incoming marketable orders earn a credit of $0.0015 
per share. The PCX proposes to increase the level of the transaction 
credit for ADRs from $0.0015 to $0.002 per share.\4\ The increased 
credit of $0.002 is the same amount that is currently applied to orders 
that provide liquidity in ETFs.\5\ The PCX states that this credit is 
intended to create additional incentives to market makers to provide 
liquidity in ADRs that are traded on the ArcaEx facility.
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    \3\ Q Orders are limit orders that are submitted to ArcaEx by a 
market maker in those securities in which the market maker is 
registered to trade. See PCXE Rule 7.31(k).
    \4\ The current $0.02 per share credit that is provided to any 
market maker that executes against an odd-lot order in the Odd Lot 
Tracking Order Process will remain in effect.
    \5\ The increased credit of $0.002 parallels a recent change to 
the User Transaction Credit for certain transactions in ADRs. See 
Securities Exchange Act Release No. 46784 (November 7, 2002), 67 FR 
69283 (November 15, 2002) (SR-PCX-2002-68).
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    The PCX believes that the proposal is consistent with section 6(b) 
of the Act,\6\ particularly section 6(b)(4) of the Act,\7\ in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members.
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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 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

    The PCX 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) of the Act \8\ and Rule 19b-4 (f) thereunder \9\ because it 
changes a PCX fee. At any time within 60 days after the filing of the 
proposed rule change, the Commission may summarily abrogate the rule 
change if it appears to the Commission that that 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f).
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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 in Washington, DC. Copies of the 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-2002-70 and should 
be submitted by January 7, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-31654 Filed 12-16-02; 8:45 am]
BILLING CODE 8010-01-P