[Federal Register Volume 69, Number 239 (Tuesday, December 14, 2004)]
[Notices]
[Pages 74558-74559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3633]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50818; File No. SR-PCX-2004-96]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing of Proposed Rule Change and Amendment No. 1 Thereto To Amend PCX 
Equities, Inc. Rule 4.5 To Require All Financial/Operations Principals 
of PCXE ETP Firms To Successfully Complete the Series 27 Examination 
and All Compliance Supervisors of PCXE ETP Firms To Successfully 
Complete the Series 24 Examination

December 7, 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 October 20, 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'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the PCXE. On December 
6, 2004, PCXE filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    PCXE is proposing to amend PCXE Rule 4.5 to require all financial/
operations principals of PCXE ETP Firms to successfully complete the 
National Association of Securities Dealers, Inc.'s (``NASD'') Financial 
and Operations Principal Examination (``Series 27 Examination'') and to 
add PCXE Rule 6.18(d) to require all compliance supervisors of PCXE ETP 
Firms to successfully complete the NASD's General Securities Principal 
Examination (``Series 24 Examination''). The text of the proposed rule 
change is below. Proposed new language is in italics.
    Rule 4.5. Unless the Corporation determines otherwise, every ETP 
Holder, except as otherwise provided in Rule 4.7, shall file with the 
Corporation the reports prescribed by this Section. Each ETP Holder 
subject to Exchange Act Rule 15c3-1 shall designate a Financial/
Operations Principal. The duties of a Financial/Operations Principal 
shall include taking appropriate actions to assure that the ETP Holder 
complies with applicable financial and operational requirements under 
the Rules and the Exchange Act, including but not limited to those 
requirements relating to the submission of financial reports and the 
maintenance of books and records. Each Financial/Operations Principal 
is required to successfully complete the Financial and Operations 
Principal Examination (Series 27 Exam). Each Financial/Operations 
Principal designated by an ETP Holder shall be registered in that 
capacity with the Corporation in a form and manner prescribed by the 
Corporation. A Financial/Operations Principal of an ETP Holder may be a 
full-time employee of the ETP Holder or, with the prior written 
approval of the Corporation, may be a part-time employee or independent 
contractor of the ETP Holder. All ETP Holders shall be in compliance 
with this Rule by March 31, 2005.
    Rule 4.5(a)-(e)--No Change.
* * * * *
    Rule 6.18(a)-(c)--No Change.
    (d) Each individual not associated with an ETP Holder and in the 
case of an ETP Holder, the person (or persons) designated to direct 
day-to-day compliance activity (such as the Compliance Officer, Partner 
or Director) and each other person at the ETP Holder directly 
supervising ten or more persons engaged in compliance activity should 
have overall knowledge of the securities laws and Exchange rules and 
must pass the General Securities Principal Examination (Series 24) and, 
if the ETP Holder does business with the public, the General Securities 
Sales Supervisor Qualification Examination (Series 9/10). Where good 
cause is shown, the Corporation, at its discretion, may waive all or a 
portion of the examination requirements. The Corporation may give 
consideration to the scope of the ETP Holder's activity, to previous 
related employment, and to examination requirements of other self-
regulatory organizations. In such cases, the Corporation must be 
satisfied that the person is qualified for the position. All ETP 
Holders shall be in compliance with this Rule by March 31, 2005.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, PCXE included statements 
concerning the purpose of and basis for its proposed rule change and 
discussed any comments it received on the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
PCXE 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
    PCXE is proposing to amend PCXE Rule 4.5 to require all financial/
operations principals of PCXE ETP Firms to successfully complete the 
Series 27 Examination. PCXE believes that requiring these individuals 
to successfully complete the Series 27 Examination will ensure that 
those individuals who prepare the financial statements for PCXE ETP 
Firms will be sufficiently qualified to prepare such statements. In 
addition, PCXE is proposing to add PCXE Rule 6.18(d) to require all 
compliance supervisors of PCXE ETP Firms to successfully complete the 
Series 24 Examination. PCX believes that requiring these individuals to 
successfully complete the Series 24 Examination will ensure that those 
who are supervising equities trading are sufficiently qualified. As 
part of proposed Rule 6.18(d), PCXE may waive all or a portion of the 
Series 24 Examination requirements. In evaluating whether to grant a 
full or partial waiver from the examination requirements, PCXE will 
review a number of factors including but not limited to the 
individual's industry experience, education, previous registration 
history with the Exchange and other examinations taken by the 
individual that may be acceptable substitutes in conjunction with 
securities industry experience.
    These changes will bring the PCXE qualifications to perform such 
functions up to date with the requirements of other self-regulatory 
organizations.\4\
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    \4\ The proposed rule change is based on the Chicago Board 
Options Exchange's Rule 3.6A(a) and the New York Stock Exchange's 
Rule 342.
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2. Statutory Basis
    PCXE 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) of the Act \6\ in particular, because it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and

[[Page 74559]]

equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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-2004-96 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-2004-96. 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 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-2004-96 and should be submitted on or before January 
4, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E4-3633 Filed 12-13-04; 8:45 am]
BILLING CODE 8010-01-P