[Federal Register Volume 68, Number 63 (Wednesday, April 2, 2003)]
[Notices]
[Pages 16109-16110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7935]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47577; File No. SR-PCX-2003-03]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To 
Amend the Regulatory Fees Portion of Its Schedule of Fees and Charges 
To Add a Designated Options Examining Authority Fee for Member Firms 
That Conduct a Public Options Business

March 26, 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 February 3, 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 
February 28, 2003, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ On March 24, 2003, the Exchange filed Amendment No. 2 
to the proposed rule change.\4\ 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\ Amendment No. 1 replaced the original Form 19b-4 in its 
entirety.
    \4\ See letter from Tania J. Cho, Attorney, Regulatory Policy, 
PCX, to Katherine England, Assistant Director, Division of Market 
Regulation, Commission, dated March 21, 2003. Amendment No. 2 made 
non-substantive, editorial changes to the proposed rule text to 
clarify application of the new fee.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PCX is proposing to amend the regulatory fees portion of its 
Schedule of Fees and Charges to add a Designated Options Examining 
Authority (``DOEA'') fee for member firms that conduct a public options 
business.

[[Page 16110]]

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. The Exchange 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 the 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    The Exchange is proposing to make the following modification to its 
Schedule of Fees and Charges in order to recover costs associated with 
conducting options sales practice examinations of its member firms that 
conduct public options business. The current regulatory fees schedule 
includes a Designated Examining Authority (``DEA'') fee of $2000 per 
month for each member organization for which the Exchange is the DEA. 
Due to recent developments in DOEA examinations, the Exchange proposes 
to add a $2000 per month DOEA fee \5\ to apply to firms that conduct a 
public options business. The new fee would be applicable only to 
members and member firms for which the Exchange is the DOEA.
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    \5\ To avoid duplicative billing, the DOEA fee charged to a 
member firm that conducts public options business will not apply if 
the Exchange is the DEA for such member firm.
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    In 1983, the Options Self-Regulatory Council (``OSRC'') submitted 
to the SEC an agreement allocating regulatory responsibilities with 
respect to common members. The purpose of the agreement was to reduce 
regulatory responsibility duplication for options-related sales 
practice matters and to designate the following self-regulatory 
organizations (``SROs'') as DOEAs: The American Stock Exchange, the 
Chicago Board Options Exchange, NASD, and the New York Stock Exchange. 
Since establishing this agreement, the DOEAs have been conducting 
options sales practice examinations on behalf of applicable 
participants. Due to the increase in costs associated with conducting 
such examinations, the OSRC has proposed a means to allow for an 
allocation of regulatory costs incurred in fulfilling obligations under 
the agreement among all current and future DOEA and non-DOEA 
participants. As such, the OSRC has proposed to allocate a portion of 
the costs borne by the SROs based on the percentage of their overall 
expense pool.
    As an alternative, the Exchange proposes to develop an examination 
program to review member firms that conduct public options business in-
house. As a newly designated DOEA,\6\ the Exchange would develop an 
examination program to review options sales practices as they relate to 
the public (e.g., advertising, sales literature, risk disclosures, 
approval of new accounts and risk tolerances for individuals) for 
member firms that are assigned to it by the OSRC. By conducting the 
options sales practice examinations in-house, the Exchange would be 
able to pass these expenses directly to the firms that require an 
examination. In the absence of any PCX initiative, the Exchange will be 
allocated a certain portion of the DOEA costs borne by other SROs, 
which would increase the Exchange's overhead without cost recovery. 
Thus, the Exchange's proposal for in-house examinations would allow for 
recovery of the regulatory costs in a fair and equitable manner.
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    \6\ The Exchange has been designated as a DOEA as of January 1, 
2003.
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(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) \7\ of the Act in general and section 6(b)(4) \8\ of 
the Act, in particular, because 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 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 foregoing rule change, which establishes or changes a due, fee 
or other charge imposed by the Exchange, has become effective pursuant 
to section 19(b)(3)(A) \9\ of the Act and subparagraph (f)(2) of Rule 
19b-4 thereunder.\10\ At any time within 60 days of the filing of such 
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 the furtherance of the purposes of the Act. For purposes 
of calculating the 60-day abrogation period, the Commission considers 
the proposed rule change to have been filed on February 28, 2003, when 
Amendment No. 1 was filed.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
    \11\ See notes 3 and 4, supra.
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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 will also be 
available for inspection and copying at the principal office of the 
PCX. All submissions should refer to File No. SR-PCX-2003-03 and should 
be submitted by April 23, 2003.

    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. 03-7935 Filed 4-1-03; 8:45 am]
BILLING CODE 8010-01-P