[Federal Register Volume 69, Number 168 (Tuesday, August 31, 2004)]
[Notices]
[Pages 53126-53128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-1978]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50231; File No. SR-PCX-2004-70]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc. Relating to the PCX Equities, 
Inc.'s Ability To Waive an Examination Requirement for an ETP Applicant

August 23, 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 August 4, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly-owned subsidiary PCX Equities, Inc. 
(``PCXE''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the PCX. 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\ 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 adopt a rule permitting the Exchange to 
waive the examination requirement for an Equity Trading Permit 
(``ETP'') applicant if the applicant can show that an appropriate basis 
exists for waiving this requirement. The text of the proposed rule 
change is as follows:
    New text is italicized; deleted text is in [brackets].

Rules of PCX Equities, Inc.

Rule 2
Equity Trading Permits
Denial of or Conditions to ETPs
    Rule 2.4(b) (1-9)--No change.
    (10) does not successfully complete [such written proficiency] 
examinations as required by the Corporation to [enable it to examine 
and] verify the applicant's qualifications to function in [one or more 
of the] capacities covered by the application [applied for];
Series 7 Requirement
    (A) Traders of ETP Holders for which the Corporation is the 
Designated Examining Authority (``DEA'') must successfully complete the 
Series 7 Examination. [General Securities Registered Representative 
Examination (Test Series 7), if the primary business of the ETP Holder 
involves the trading of securities that is unrelated to the performance 
of the functions of a registered Market Maker. Unless required to 
complete the Series 7 under Rule 7.21(b)(2), the following are exempt 
from the requirement to successfully complete the Series 7 
Examination:] ETP Holders [who are] performing the function of a 
registered Market Maker [(]pursuant to Rule 7.21(b)(2)[)] are exempt 
from this requirement.
    For purposes of this Rule:
    (i) The term ``trader'' means a person (a) Who is directly or 
indirectly compensated by an ETP Holder, or who is any other associated 
person of an ETP Holder and (b) who trades, makes trading decisions 
with respect to, or otherwise engages in the proprietary or agency 
trading of securities. [; and
    (ii) The term ``primary business'' means greater than 50% of the 
ETP Holder's business.
    (B) Each ETP Holder for which the Corporation is the DEA must 
complete, on an annual basis, and on a form prescribed by the 
Corporation, a written attestation as to whether the ETP Holder's 
primary business is conducted in the performance of the function of a 
registered Market Maker (pursuant to Rule 7).]
    [(C)] (B) The requirement to complete the Series 7 Examination will 
apply to current traders of ETP Holders that meet the criteria of 
subsection (A), above, as well as to future traders of ETP Holders that 
meet the criteria of subsection (A), above, at a later date. Traders of 
ETP Holders that meet the criteria of subsection (A), above, at the 
time of SEC approval of this Rule, must successfully complete the 
Series 7 Examination within six months of notification by the 
Corporation.
    Rule 2.4(b) (11-13)--No change.
    (c) The Corporation may waive or modify a required examination for 
any Trader who has been a member of a self regulatory organization 
within six months of applying for trading privileges under an ETP if 
appropriate basis for an exemption from a required examination exists 
based on the following standards of evidence regarding an applicant's 
qualifications: [for any applicant if, within two years of the date of 
such applicant applied to the Corporation for an ETP, such applicant 
has successfully completed a comparable examination administered by a 
self-regulatory organization or the Securities and Exchange 
Commission.]
    (1) length and quality of securities industry experience or 
professional experience in investment related fields;
    (2) specific registration requested by the applicant and type of 
business to be conducted in relation to the applicant's experience;
    (3) previous registration history with the Corporation and nature 
of any pre-existing regulatory matters; and
    (4) other examinations (e.g. Series 1 Examination) taken by the 
applicant that may be acceptable substitutes in conjunction with 
securities industry experience.
    Within fifteen calendar days after the Corporation reviews a 
request for a waiver of the examination requirement, the Corporation 
shall provide the applicant with a written determination of whether the 
waiver was granted or denied. If the Corporation denies the request for 
a waiver, the notice shall include a statement with the reasons for the 
denial. An applicant whose request for a waiver is denied may appeal 
the decision of the Corporation in accordance with the terms and 
conditions of Rule 10.13.
    Rule 2.4(d-f)--No change.
* * * * *

[[Page 53127]]

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 Purpose

    The Exchange is proposing to amend PCXE Rule 2.4(b)-(c) to allow 
the Exchange to waive the examination requirement for an ETP applicant 
if the Exchange believes the applicant is qualified based upon the 
applicant's industry experience, the type of registration requested, 
the previous history of the applicant with the PCX and any other 
examinations the applicant has successfully completed that may be 
considered acceptable substitutes. The Exchange is also proposing to 
make certain technical changes to PCXE Rule 2.4(b)(10) so that the Rule 
for ETP applicants is similar to the existing rule for individuals who 
apply for an Options Trading Permit (``OTP''). The Exchange believes 
that the proposed changes will bring the PCX examination requirements 
up to date and make the PCX's requirements similar to those at other 
SROs.\3\ The Exchange notes that the proposed waiver is similar to one 
recently approved by the Commission for individuals who apply for an 
OTP at the PCX.\4\
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    \3\ See Philadelphia Stock Exchange Rule 620(a) and (b), the 
American Stock Exchange Rule 353, and the Boston Stock Exchange Rule 
Chapter 15, Section (1)(b)(3).
    \4\ See Securities Exchange Act Release No. 49922 (June 28, 
2004), 69 FR 40701 (July 6, 2004).
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Basis

    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Section 6(b)(5),\6\ in particular, because it is designed 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments and perfect the 
mechanisms of a free and open market and to protect investors and the 
public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78(b)(5).
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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) of the Act,\7\ and subparagraph (f)(6) of Rule 19b-4,\8\ 
thereunder because it does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) become operative for 30 days from the date on 
which it was filed, or such shorter time as the Commission may 
designate. At any time within 60 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    The PCX has requested that the Commission waive the 30-day 
operative delay so that the proposed rule change will become 
immediately effective upon filing. The Commission believes waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest. The Commission believes that accelerating the 
operative date will permit the Exchange to implement the changes to its 
examination requirements without undue delay. The Commission notes that 
it previously approved a similar proposed rule change for options 
trading on PCX and therefore the instant proposed rule change should 
not raise any new regulatory issues.\9\ Accordingly, the Commission 
designates the proposal to be effective and operative upon filing with 
the Commission.\10\
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    \9\ See Securities Exchange Act Release No. 49922 (June 28, 
2004), 69 FR 40701 (July 6, 2004) (SR-PCX-2003-51).
    \10\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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. 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-2004-70 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 No. SR-PCX-2004-70. 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 Section, 450 Fifth Street, 
NW., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the PCX. 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-2004-70 and should be 
submitted on or before September 21, 2004.


[[Page 53128]]


    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E4-1978 Filed 8-30-04; 8:45 am]
BILLING CODE 8010-01-P