[Federal Register Volume 69, Number 111 (Wednesday, June 9, 2004)]
[Notices]
[Pages 32391-32392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13024]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49802; File No. SR-PCX-2004-31]


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

June 3, 2004.
    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 14, 2004, 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 PCX. The proposed rule change has been 
filed by PCX as establishing or changing a due, fee, or other charge 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. On May 21, 2004, the Exchange filed Amendment No. 1 to 
the proposal.\5\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
    \5\ See Letter from Mai S. Shiver, Acting Director/Senior 
Counsel, PCX, to Nancy J. Sanow, Assistant Director, Division of 
Market Regulation, Commission, dated May 19, 2004. In Amendment No. 
1, the Exchange revised the purpose section of the proposed rule 
change and the rule text to clarify that the Order Cancellation fee 
applies to a Clearing Member who electronically cancels orders on 
behalf of its customers or on its own behalf when it self-clears, 
when the conditions specified in the rule are satisfied. Amendment 
No. 1 supersedes and replaces the text of the proposed rule change 
in its entirety.
---------------------------------------------------------------------------

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

    PCX is proposing to amend its Schedule of Fees and Charges by 
reinstating an Order Cancellation fee. The text of the proposed rule 
change is available at the Exchange and at the Commission.

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 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
    The Exchange represents that it previously established the Order 
Cancellation fee to address operational problems and costs resulting 
from the practice of market participants canceling orders immediately 
after they route those orders electronically to the PCX.\6\ The 
Exchange states that, while the Order Cancellation fee was intended to 
temper activity among trading participants who immediately cancelled 
orders without routing significant order flow to the Exchange, as 
applied, it had the unintended effect of penalizing Clearing Members 
because the Exchange did not have the methodology to correlate the 
cancellation of an order with the correspondent activity of a specific 
Clearing Member. On May 30, 2003, the Exchange filed a proposed rule 
change that repealed the Order Cancellation fee then in effect,\7\ 
despite the fact that operational problems and costs resulting from the 
practice of market participants canceling orders immediately after they 
place such orders continued to be problematic.
---------------------------------------------------------------------------

    \6\ 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).
    \7\ 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).
---------------------------------------------------------------------------

    The Exchange represents that it has effected technological 
enhancements to its billing system and is now able to ascertain the 
identity of the Clearing Member's customer who cancels orders. The 
Exchange states that this enhancement allows the Exchange to evaluate 
order cancellations beyond the aggregate cancellations cleared through 
a Clearing Member, thus providing the Clearing Members a vehicle for 
passing through any resulting charges to their customers. Therefore, 
the Exchange seeks to reinstate the Order Cancellation fee at $1.00 per 
electronically routed order cancelled and apply the fee to a Clearing 
Member who electronically cancels orders on behalf of its customers or 
on its own behalf when it self-clears in any month where both of the 
following conditions are satisfied: (i) The total number of orders 
canceled for any customer or for itself equals or exceeds 500 
contracts; and (ii) the ratio of such canceled orders to executed 
orders equals or exceeds two to one. The Exchange represents that it 
will continue to bill the Clearing Member, but the Clearing Member will 
have the opportunity to pass the fee along to its customers.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act, in general, and section 6(b)(4) of the Act, in 
particular, in that it provides for the equitable allocation of 
reasonable fees among its members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose

[[Page 32392]]

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 upon filing pursuant 
to section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-4(f)(2) 
thereunder,\9\ because it establishes a fee to be imposed by the 
Exchange. At any time within sixty days of the filing of the 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\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
    \10\ For purposes of calculating the sixty-day abrogation 
period, the Commission considers the period to have begun on May 21, 
2004, the date on which PCX filed Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
---------------------------------------------------------------------------

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. Comments may be submitted by any of 
the following methods:
    Electronic comments:
     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-PCX-2004-31 on the subject line.
    Paper comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-PCX-2004-31. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-PCX-2004-31 and should be submitted on or before June 
30, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-13024 Filed 6-8-04; 8:45 am]
BILLING CODE 8010-01-P