[Federal Register Volume 70, Number 23 (Friday, February 4, 2005)]
[Notices]
[Pages 6063-6065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-434]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51102; File No. SR-PCX-2004-118]


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 Arbitration Fees

January 28, 2005.
    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 December 2, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. On January 28, 2005, the Exchange filed Amendment No. 1 to 
the proposed rule change. 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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    PCX is proposing to amend the PCX Options and PCX Equities, Inc. 
arbitration fees (``Options Fees'' and ``PCXE Fees,'' respectively) 
with respect to fees that only affect OTP Holders and OTP Firms \3\ and 
ETP Holders.\4\ The text of the proposed rule change is available on 
the PCX Web site (http://www.pacificex.com/legal/docs/prf/2004/SR-PCX-2004-118.pdf), at the principal office of the PCX, and in the 
Commission's Public Reference Room.
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    \3\ See PCX Rule 1(q)-(r).
    \4\ See PCXE Rule 1(n).
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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 Exchange included statements 
concerning the purpose of and basis for 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

Purpose
    The Exchange proposes to amend its arbitration fees with respect to 
OTP Holders and Firms and ETP Holders to increase and, in some 
instances, add arbitration-related fees. The proposed amendments are 
based on the National Association of Securities Dealers' (``NASD's'') 
arbitration fees.
    The Exchange's arbitration program offers a comparable level of 
service to that of the NASD and is one of the competing forums for 
securities arbitration. The Exchange sought to amend its fees in 
2002,\5\ but due to the

[[Page 6064]]

uncertainty of arbitration programs in California, the Exchange 
withdrew the filing and retained its then-current fee structure. As a 
result, the Exchange's arbitration fees remain deficient as compared to 
the fees that other self-regulatory organizations charge for 
arbitration. Thus, the Exchange proposes to modify its fees with 
respect to OTP Holders and OTP Firms and ETP Holders in order to bring 
its fees in line with competing forums as well as recover costs 
associated with the PCX arbitration program.
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    \5\ See SR-PCX-2002-45.
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1. OTP Firm or OTP Holder Controversies/ETP Controversies
    The Exchange proposes to amend the fee schedules applicable to 
``OTP Firm or OTP Holder Controversies'' under PCX Rule 12.31 for the 
Options Fees and ``ETP Holder Controversies'' under PCXE Rule 12.32 for 
the PCXE Fees. These fee schedules apply to cases that are between OTP 
Holders and Firms or associated persons thereof, or between ETP Holders 
or associated persons thereof. The Exchange proposes to modify the 
required fee for the Amount in Dispute, Filing Fee, Simplified (No 
Hearing) Fee, and the Hearing Session Deposit. These fee modifications 
are identical to the current fees imposed at the NASD.\6\
2. Pre-Hearing and Hearing Process Fees
    The Exchange proposes new PCX Rule 12.33 and new PCXE Rule 12.32(k) 
to adopt pre-hearing and hearing process fees that mirror the fees 
charged by the NASD.\7\ The Exchange proposes that each OTP Holder, OTP 
Firm, or ETP Holder that is a party to an arbitration proceeding in 
which more than $25,000 is in dispute pay a non-refundable pre-hearing 
process fee of $750, due at the time the parties are sent notification 
of the arbitration panel. Thereafter, a non-refundable hearing process 
fee will be due when the parties are notified of the date and location 
of the first hearing session in accordance with the proposed hearing 
process fee schedule. If an associated person of an OTP Holder, OTP 
Firm or ETP Holder is a party, the OTP Holder, OTP Firm, or the ETP 
Holder that employed the associated person at the time of the events 
which gave rise to the dispute, claim or controversy will be charged 
the process fees, even if the OTP Holder, OTP Firm, or ETP Holder is 
not a party.
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    \6\ See NASD Rule 10205(k).
    \7\ See NASD Rule 10333(b).
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    These processing fees will bring revenue to the Exchange and 
compensate the Exchange at an earlier stage of the arbitration process. 
The processing fees are particularly important because much of the time 
and money spent by the Exchange to administer cases is required during 
the first months of the arbitration process.
3. Surcharge
    The Exchange proposes to amend PCX Rule 12.32(c) and PCXE Rule 
12.33(c) in order to modify the OTP Holder/OTP Firm Surcharge and ETP 
Holder Surcharge, respectively. The surcharge will continue to be based 
on the amount in dispute. The Exchange proposes to amend PCX Rule 
12.32(a) and PCXE Rule 12.33(a) to provide that these surcharges may be 
refundable in an arbitration filed by a customer if the arbitration 
panel: (1) Denies all of the customer's claims against the OTP Holder, 
OTP Firm, ETP Holder, or associated person, and (2) allocates all forum 
fees assessed pursuant to PCX Rule 12.31 or PCXE Rule 12.32 against the 
customer. The Director may also refund or cancel the OTP Holder/OTP 
Firm Surcharge or the ETP Holder Surcharge in other extraordinary 
circumstances. The Exchange believes it is appropriate to modify the 
surcharge in order to bring the surcharge up to date and ensure 
sufficient cost recovery associated with the PCX arbitration program.
Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) \8\ of the Act, in general, and Section 6(b)(4) \9\ of the Act, in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among the Exchange's OTP 
Holders, OTP Firms, ETP Holders, and other persons using the Exchange's 
facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A) \10\ of the Act and subparagraph (f) of Rule 19b-4 
thereunder,\11\ because the proposed rule change establishes or changes 
a due, fee, or other charge applicable only to a member of the 
Exchange. 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 purpose of the Act.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
    \12\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers that period 
to commence on January 28, 2005, the date on which the Exchange 
filed Amendment No. 1 to the proposed rule change. See 15 U.S.C. 
78s(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, as amended, 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 No. SR-PCX-2004-118 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-2004-118. 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

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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, 450 Fifth Street, NW., Washington, 
DC 20549-0609. Copies of such filing will also 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 No. SR-PCX-2004-118 and should be 
submitted on or before February 25, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E5-434 Filed 2-3-05; 8:45 am]
BILLING CODE 8010-01-P