[Federal Register Volume 68, Number 17 (Monday, January 27, 2003)]
[Notices]
[Pages 3925-3926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1713]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47207; File No. SR-PCX-2002-79]


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 To Increase the User Transaction 
Credit for Certain Transactions in Listed Securities and To Increase 
the Transaction Fee for Certain Transactions in Listed Securities

January 16, 2003.
    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 December 31, 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 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, through its wholly owned subsidiary PCX Equities, Inc. 
(``PCXE''), proposes to amend its fee schedule to increase the 
transaction credit for ETP Holders \3\ and Sponsored Participants \4\ 
who provide liquidity in listed securities that are traded on the 
Archipelago Exchange (``ArcaEx''), the equities trading facility of 
PCXE. The PCX also proposes to raise the transaction fee for orders 
that take liquidity from the ArcaEx Book.\5\ The text of the proposed 
rule change is available at the PCX and at the Commission.
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    \3\ See PCXE rule 1.1(n).
    \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).
    \5\ ArcaEx maintains an electronic file of orders, called the 
ArcaEx Book, through which orders are displayed and matched. The 
ArcaEx Book is divided into four components, called processes: the 
Directed Order Process, the Display Order Process, the Working Order 
Process, and the Tracking Order Process. See PCXE rules 7.36 and 
7.37 for a detailed description of these order execution processes.
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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 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. Purpose
    The purpose of the proposed rule change is to amend the PCX's fee 
schedule by increasing the level of the transaction credit paid to ETP 
Holders and Sponsored Participants (collectively ``Users'') who provide 
liquidity in exchange-listed securities that are traded on ArcaEx. 
Currently, Users earn a credit of $0.001 per share for providing 
liquidity in listed securities by entering resting limit orders that 
are subsequently executed against incoming marketable orders in the 
ArcaEx book. The PCX proposes to increase the level of the transaction 
credit for listed securities from $0.001 to $0.002 per share. The 
increased credit of $0.002 is the same amount that is currently applied 
to orders that provide liquidity in Exchange-Traded Funds (``ETFs'') 
and American Depository Receipts (``ADRs''). The PCX intends for this 
credit to create additional incentives to Users to provide liquidity in 
listed securities that are traded on the ArcaEx facility.
    In addition, the PCX proposes to raise the transaction fee for 
orders that take liquidity from the ArcaEx Book. Currently, Users who 
take liquidity from the ArcaEx Book are charged $0.002 per share. The 
PCX proposes to increase the level of the transaction fee for listed 
securities from $0.002 to $0.003 per share, which would bring the fee 
to the same level as currently applied to orders in ETFs.\6\
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    \6\ The PCX notes that the following items continue to be 
excluded from this fee: (1) Directed Orders, regardless of account 
type, that are matched within the Directed Order Process; (2) 
Directed Orders for the account of a retail public customer that are 
executed partially or in their entirety via the Directed Order, 
Display Order, Working Order, and Tracking Order processes (however, 
any unfilled or residual portion of a retail customer's order that 
is routed away and executed by another market center or participant 
will incur this transaction fee); (3) orders executed in the Opening 
Auction and the Market Order Auction; (4) Cross Orders; (5) 
commitments received through ITS; and (6) participants in the Nasdaq 
UTP Plan that transmit orders via telephone.
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2. Basis
    The PCX believes that the proposal is consistent with section 6(b) 
of the Act,\7\ particularly section 6(b)(4) of the Act,\8\ in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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

    Because the PCX had designated the foregoing rule change proposal 
as a fee filing, it has become effective upon filing pursuant to 
section 19(b)(3)(A) of the Act \9\ and rule 19b-4(f) thereunder.\10\ 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 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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

[[Page 3926]]

the Commission's Public Reference Room. 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-2002-79 and should 
be submitted by February 18, 2003.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-1713 Filed 1-24-03; 8:45 am]
BILLING CODE 8010-01-P