[Federal Register Volume 68, Number 120 (Monday, June 23, 2003)]
[Notices]
[Pages 37189-37190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15715]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48031; File No. SR-PCX-2003-25]


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

June 13, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on May 30, 2003, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. 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 is proposing to amend its Schedule of Fees and Charges by 
modifying its Order Cancellation Fees. The text of the proposed rule 
change is set forth below. Proposed new language is in italics; 
proposed deletions are in [brackets].
* * * * *

Schedule of Fees and Charges for Exchange Services

PCX OPTIONS: TRADE-RELATED CHARGES
    Transactions: No change.
    Order Cancellation: $1.00 per MFI order canceled.
    Except as provided herein, the fee [O]only applies to orders 
canceled through the MFI in any month where the total number of orders 
canceled through the MFI by the executing Clearing Member exceeds the 
total number of orders that same firm executed through the MFI in that 
same month. This fee does not apply to executing Clearing Members 
canceling less than 500 orders through the MFI in a month. The MFI fee 
will also not apply to cancel requests on invalid orders (the option 
has already expired and the Exchange has purged it from its system); 
invalid symbols (a symbol that does not refer to a valid option traded 
on the Exchange); or invalid series (a series that is not recognized by 
or traded on the Exchange).

[[Page 37190]]

    Ticket Data Entry: No change.
    On-Line Comparison: No change.
    LMM Book Operation Credit: No change.
* * * * *

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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange has established an Order Cancellation Fee in order to 
address operational problems and costs resulting from the practice of 
market participants canceling orders immediately after they place such 
orders through the Exchange's Member Firm Interface (``MFI'').\3\ While 
the fee was intended to temper activity among trading participants who 
immediately cancel orders without routing significant order flow to the 
Exchange, it was not intended to penalize Member Firms that, due to 
their systems formulas, must cancel orders that are deemed invalid and 
which they are not able to fill. Thus, if a Member Firm sends in an 
order that is not eligible for execution because it is an invalid order 
(the option has already expired and the Exchange has purged it from its 
system); has an invalid symbol (a symbol that does not refer to a valid 
option traded on the Exchange); or refers to an invalid series (a 
series that is not recognized or traded by the Exchange); such order 
will be rejected from the Exchange's system and the Member Firm will 
have to enter a cancel request in order to remove the ineligible order 
from its internal systems. These types of cancels are not the type of 
cancels that the Exchange's MFI Cancellation Fee was intended to, or 
should, redress. In order to ensure that this fee continues to mitigate 
excessive cancellations while not disadvantaging Member Firms that 
provide cancel requests for ineligible orders, the Exchange proposes to 
modify its MFI cancellation selection criteria to exclude cancels on 
invalid orders, invalid series or invalid symbols from the 
applicability of the MFI Cancellation Fee. The Exchange believes that 
this proposed modification to its Schedule of Fees continues to fulfill 
the stated purpose of the MFI Cancellation Fee.
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    \3\ See Securities Act Release No. 45262 (January 9, 2002), 67 
FR 2266 (January 16, 2002) (SR-PCX-2001-47).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act,\4\ in general, and section 6(b)(4) of the Act,\5\ in 
particular, in that it provides for the equitable allocation of 
reasonable fees among its members.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \6\ and subparagraph (f)(2) of Rule 19b-4 
\7\ thereunder because it changes a fee imposed by the PCX. 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 furtherance 
of the purposes of the Act.\8\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(f)(2).
    \8\ See 15 U.S.C. 78(b)(3)(C).
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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-2003-25 and should 
be submitted by July 14, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15715 Filed 6-20-03; 8:45 am]
BILLING CODE 8010-01-P