[Federal Register Volume 68, Number 214 (Wednesday, November 5, 2003)]
[Notices]
[Pages 62646-62648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27853]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48697; File No. SR-PCX-2003-58]


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

October 24, 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 October 14, 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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[[Page 62647]]

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 
eliminating its Order Cancellation Fee. 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
[ORDER CANCELLATION $1.00 per MFI order canceled
    Except as provided herein, the fee 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).]
* * * * *

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\ 
Recently, the Exchange modified the Fee to exclude invalid orders (the 
option has already expired and the Exchange has purged it from its 
system); orders with an invalid symbol (a symbol that does not refer to 
a valid option traded on the Exchange); or orders with an invalid 
series (a series that is not recognized or traded by the Exchange).\4\ 
However, despite this modification, the Exchange is still required to 
include certain orders, such as partial executions with a partial 
cancellation or a cancel of the balance and partially executed or 
cancel requests on expired orders in its definition of ``cancelled 
orders.'' The Exchange notes that the primary purpose of the Fee was to 
rectify the problem of participants immediately canceling orders and 
thereby gaming the system. It was not intended to preclude participants 
from making reasoned business decisions that may result in a cancel 
order.\5\ For this reason, the Exchange no longer believes that the 
Order Cancellation Fee is the appropriate vehicle to remedy the concern 
of excessive cancels. It therefore seeks to eliminate it from its 
Schedule of Fees and Charges.
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    \3\ See Securities Exchange Act Release No. 45262 (January 9, 
2002), 67 FR 2266 (January 16, 2002) (Notice of Filing and Immediate 
Effectiveness of SR-PCX-2001-47).
    \4\ See Securities Exchange Act Release No. 48031 (June 13, 
2003), 68 FR 37189 (June 23, 2003) (Notice of Filing and Immediate 
Effectiveness of SR-PCX-2003-25).
    \5\ Specifically, PCX represents that a Clearing Member may 
enter an order into MFI that is partially executed on the Exchange, 
leaving an unexecuted residual portion of the order in the Clearing 
Member's system. The Clearing Member must submit a cancel request to 
delete the unexecuted residual portion of the order from its system. 
In such situations, PCX does not believe the Clearing Member should 
be subject to the Order Cancellation Fee (assuming the threshold 
test for imposing the fee is met), because the Clearing Member is 
making a reasoned business decision that results in a cancel 
request. Telephone conversation between Mai Shiver, Senior Attorney, 
Regulatory Policy, PCX and Gordon Fuller, Counsel to the Assistant 
Director, and Elizabeth MacDonald, Attorney, Division of Market 
Regulation, SEC, October 20, 2003.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act,\6\ in general, and section 6(b)(4) of the Act,\7\ in 
particular, in that it provides for the equitable allocation of 
reasonable fees among its members.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 \8\ and subparagraph (f)(2) of Rule 19b-4\9\ 
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.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
    \10\ 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-2003-58 and should 
be submitted by November 26, 2003.


[[Page 62648]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-27853 Filed 11-4-03; 8:45 am]
BILLING CODE 8010-01-P