[Federal Register Volume 68, Number 137 (Thursday, July 17, 2003)]
[Notices]
[Pages 42449-42450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18128]



[[Page 42449]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48158; File No. SR-PCX-2003-17]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. 
Relating to the Exchange's Rules Under the Minor Rule Plan

July 10, 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 April 15, 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 June 6, 2003, the PCX 
filed Amendment No. 1 to the proposed rule change. The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change was submitted in response to the Order 
Instituting Public Administrative Proceedings Pursuant to section 
19(h)(1) of the Act, Making Findings and Imposing Remedial 
Sanctions.\3\ Pursuant to the Order, the Exchange filed a proposed rule 
change to adopt new Sanctioning Guidelines for order handling rules 
which included late trade reporting.\4\ At that time, the Exchange 
stated that it intended to amend its Minor Rule Plan (``MRP'') to 
increase the sanctions for late trade reporting violations. The 
Exchange believes that an increase in sanctions is necessary to deter 
violations of its trade reporting rule. Accordingly, the PCX is 
proposing to amend the Recommended Fine Schedule (``RFS'') of the MRP 
in order to increase the fines for Late Trade Reporting violations 
pursuant to PCX Rule 6.69(a). The text of the proposed rule change is 
below. Proposed new language is italicized; proposed deletions are in 
brackets.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 43268 (September 11, 
2000) (File No. 3-10282).
    \4\ See Securities Exchange Act Release No. 45416 (February 7, 
2002), 67 FR 6777.
---------------------------------------------------------------------------

* * * * *
Minor Rule Plan
Rule 10.13
    (a)-(j)--No change.
(k)(i) Minor Rule Plan: Recommended Fine Schedule
    1-37--No change.
    38. Late reporting of trades without reasonable justification or 
excuse (Rule 6.69(a)).

1st Violation $[100] 250
2nd Violation $[250] 500
3rd Violation $[500] 1,000

* * * * *

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 proposes to amend the RFS (PCX Rule 10.13(k)(i)(38)) 
of the MRP in order to increase the fines for Late Trade Reporting 
violations. PCX Rule 6.69(a) states that all members and member 
organizations, who are required to report trades either directly to the 
Options Price Reporting Authority (``OPRA'') or to another party 
responsible for reporting trades to OPRA, shall report the transaction 
immediately upon execution, which means no later than 90 seconds 
following execution of the trade.
    The purpose of the proposed rule change is based on the following: 
first, the PCX believes that the current fines are inconsistent with 
the vast majority of fines that are subject to the MRP. Second, the PCX 
believes that an increase in the current fines will more adequately 
sanction and deter violations of late trade reporting. Under the 
proposed increase, late trade reporting will be fined $250 for a first 
violation, $500 for a second, and $1,000 for a third, calculated on a 
two-year basis.
    The Exchange believes that the adoption of the proposed rule change 
will serve to significantly strengthen the ability of the Exchange to 
carry out its oversight responsibilities as a self-regulatory 
organization. The rule should also aid the Exchange in carrying out its 
surveillance and enforcement functions. Under the proposed rule change, 
the Enforcement Department would continue to exercise its discretion 
under PCX Rule 10.13(f) and take cases out of the MRP to pursue them as 
formal disciplinary matters if the facts or circumstances warrant such 
action.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act,\5\ in general, and section 6(b)(5) of the Act,\6\ in 
particular, in that it will promote just and equitable principles of 
trade; facilitate transactions in securities, remove impediments to and 
perfect the mechanisms of a free and open market and a national market 
system; and protect investors and the public interest. The Exchange 
believes that the proposal is also consistent with section 6(b)(6) of 
the Act,\7\ which requires that members and persons associated with 
members be appropriately disciplined for violations of Exchange rules.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

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 Exchange consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 42450]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 
number SR-PCX-2003-17 and should be submitted by August 7, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-18128 Filed 7-16-03; 8:45 am]
BILLING CODE 8010-01-P