[Federal Register Volume 68, Number 60 (Friday, March 28, 2003)]
[Notices]
[Pages 15257-15258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7400]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47560; File No. SR-PCX-2003-08]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. 
Relating to Exchange Fees and Charges

March 21, 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 March 11, 2003, 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 Exchange. On March 21, 2003, PCX 
submitted Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 217 CFR 240.19b-4.
    \3\ See letter from Mai Shiver, Senior Attorney, Regulatory 
Policy, PCX, to Nancy J. Sanow, Assistant Director, Division of 
Market Regulation, Commission, dated March 18, 2003 (``Amendment No. 
1''). In Amendment No. 1, PCX added a statement to footnote number 
one of its Schedule of Fees and Charges for Exchange Services 
limiting the revised linkage fees to a one-year pilot program ending 
January 31, 2004; and to change the name of the transaction fee from 
``PCX Market Maker'' to ``Market Maker.''
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    PCX proposes to amend its Schedule of Fees and Charges For Exchange 
Services in order to state that executions resulting from orders routed 
to the Exchange through the options intermarket linkage (``Linkage 
Orders''), other than satisfaction orders, will be subject to the same 
billing treatment as other fees related to broker-dealer executions. 
The Exchange intends to implement this fee on a one-year pilot basis 
retroactive to January 31, 2003. The text of the proposed fee schedule 
is below. Proposed language is italicized; deleted language is in 
brackets.
* * * * *

           Schedule of Fees and Charges for Exchange Services
   PCX Options: Trade-Related
             Charges
Transactions:
    Customer....................  $0.00 per contract side
    [PCX] Market Maker..........  $0.21 per contract side
    Firm........................  $0.10 per contract side for customer
                                   facilitation
    Broker/Dealer...............  $0.21 per contract side
Ticket Data Entry...............  $0.25 per firm trade
                                  $0.50 per market maker trade
On-Line Comparison..............  $0.05 per contract for firm, broker/
                                   dealer, and market maker executions
                                  No on-line comparison charge is
                                   assessed on customer executions.
Broker Dealer Auto-Ex Surcharge.  $0.20 per contract
Linkage Fees \1\................  $0.21 per transaction per contract
                                   side
                                  $0.05 comparison fee
Order Cancellation..............  $1.00 per MFI order canceled [\1\]2
Only applies to orders cancelled through the MFI in any month where the
 total number of orders cancelled through the MFI exceeds the total
 number of orders that same firm executed through the MFI in that same
 month.
     Volume Discount Program
 


449,000 or lower................  No reduction
450,000 to 474,999..............  $0.01
475,000 to 499,999..............  $0.02
500,000 to 524,999..............  $0.03
525,000 or higher...............  $0.04
Marketing Charge................  Rates Variable--See separate schedule
    Cap on Marketing Charge         $200 per trade
 
1. Executions resulting from Linkage Orders, other than satisfaction
  orders, will be subject to this fee. This fee is applicable through an
  Exchange Pilot Program and will expire on January 31, 2004.
[1]2. Only applies to orders cancelled through the MFI in any month
  where the total number of orders cancelled through the MFI exceeds the
  total number of orders that same firm executed through the MFI in that
  same month.


[[Page 15258]]

* * * * *

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 Exchange 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. 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
    On July 28, 2000, the Commission approved a national market system 
plan for the purpose of creating and operating an options intermarket 
linkage (``Linkage Plan'' or ``Plan'')\4\ which linkage now includes 
participation by the five option exchanges (``Participant 
Exchanges'')\5\ The Exchange proposed to adopt new rules relating to 
the operation of the options intermarket linkage on September 26, 2002 
and filed an amendment to the proposal on January 30, 2003. The 
Commission approved the PCX's proposed rules on January 31, 2003.\6\ 
Along with all of the Participant Exchanges, the Exchange launched 
Phase I of the options intermarket linkage on January 31, 2003.
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    \4\ See Securities Exchange Act Release No. 43086 (July 28, 
2000), 65 FR 48023 (August 4, 2000).
    \5\ See Securities Exchange Act Release Nos. 43086 (July 28, 
2000), 65 FR 48023 (August 4, 2000); 43573 (November 16, 2000), 65 
FR 70851 (November 28, 2000); and 43574 (November 16, 2000), 65 FR 
70850 (November 28, 2000).
    \6\ See Securities Exchange Act Release No. 47295, 68 FR 6242 
(February 6, 2003).
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    In connection with the launch of the options intermarket linkage, 
the Exchange seeks to include in its Schedule of Fees and Charges For 
Exchange Services a provision that applies to linkage fees stating that 
executions resulting from Linkage Orders will be subject to the same 
billing treatment as other broker-dealer executions. Accordingly, with 
respect to either a Principal Acting as Agent (``P/A'') Linkage Order 
or a Principal Linkage Order that is routed to the Exchange from other 
market centers, existing transaction fees and on-line comparison fees 
will apply equally to such Linkage Orders. This proposal specifies that 
existing PCX fees will not apply to Satisfaction Orders (which result 
after a trade-through \7\). The Exchange proposes these linkage fees as 
a pilot that will be effective for one year from January 31, 2003 until 
January 31, 2004.
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    \7\ Trade-throughs occur when broker-dealers execute customer 
orders on one exchange at prices inferior to another exchange's 
disseminated quote.
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    The Exchange also seeks to make a conforming change to its Schedule 
of Fees and Charges in order to change the name of the transaction fee 
from ``PCX Market Maker'' to ``Market Maker.'' The Exchange represents 
that it previously sought to make a distinction between PCX Market 
Maker fees and non-PCX Market Maker fees. After further consideration, 
the Exchange chose to abandon any distinction and removed the non-PCX 
Market Maker item from its proposal. In doing so, it did not eliminate 
the term ``PCX'' from the Market Maker transaction fees as it should 
have and seeks to do so here.
    The Exchange does not seek to make any other changes to its 
Schedule of Fees and Fees and Charges.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act,\8\ in general, and section 6(b)(4),\9\ in particular, 
in that it provides for the equitable allocation of dues, fees and 
other charges among its members and other persons using its facilities 
for the purpose of executing P/A Linkage Orders or Principal Linkage 
Orders that are routed to the Exchange from other market centers.
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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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Exchange requests that the Commission allow the Exchange to 
apply the rate retroactively as of January 31, 2003, the effective date 
of permanent linkage.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the amended 
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 No. SR-PCX-2003-08 and should 
be submitted by April 18, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Margaret H. McFarland,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 03-7400 Filed 3-27-03; 8:45 am]
BILLING CODE 8010-01-P