[Federal Register Volume 70, Number 33 (Friday, February 18, 2005)]
[Notices]
[Pages 8416-8417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-660]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51195; File No. SR-PCX-2005-12]


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

February 11, 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 January 28, 2005, 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 PCX. PCX submitted 
Amendment No. 1 to the proposal on February 11, 2005.\3\ The Exchange 
filed this proposal pursuant to Section 19(b)(3)(A) of the Act,\4\ and 
Rule 19b-4(f)(2) thereunder,\5\ which renders the proposal effective 
upon filing with the Commission. 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\ In Amendment No. 1, the Exchange clarified that it will 
round up to the next multiple of ten to determine an OTP Holder's 
fee to access the Actant quoting software for a particular month 
should an OTP Holder quote less than its full allotment of ten 
options issues. The Exchange also clarified that it proposes to 
impose a $0.95 per contract marketing fee for the Nasdaq-100 
Tracking Stock (``QQQQ'') options, a $0.05 per contract Royalty Fee 
for QQQQ options, and will retain the $0.05 per contract Royalty Fee 
for QQQQ options as a means to help pay for the $0.10 Royalty Fee 
incurred by the Exchange on each QQQQ options traded at PCX.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(2).
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 I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    PCX proposes to amend its Schedule of Fees and Charges in order to 
modify the fee that applies to each OTP Holder that access the 
Exchange's server capacity to use the Actant quoting software employed 
in PCX Plus, and to amend the provisions for the handling of options on 
the QQQQ under the Exchange's marketing fee program. The text of the 
proposed rule change is available on PCX's Web site (http://www.pacificex.com), at PCX's Office of the Secretary, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, 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, as 
amended. The text of these statements may be examined at the places 
specified in Item IV below. 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
Actant Quoting Software
    The purpose of this proposed rule change is to modify the fee for 
those OTP Holders that wish to access the Exchange's server capacity to 
use the Actant quoting software employed in PCX Plus. Actant is a 
third-party vendor with whom the Exchange has contracted to provide 
quoting software to be employed in PCX Plus. Since, according to PCX, 
it would be prohibitively expensive for small OTP Holders to purchase 
their own servers, the Exchange will create a server bank from which 
each OTP Holder could lease capacity. This would facilitate 
participation on PCX Plus by smaller OTP Holders that might not have 
the expertise, capital, or staff to acquire and maintain the servers 
needed to support the quoting software. The Exchange currently charges 
$100 per month to each OTP Holder who accesses the Exchange's server 
capacity in order to use the Actant software.
    The Exchange is proposing to modify the current fee from $100 per 
month for each OTP Holder who accesses the Exchange's server capacity 
in order to use the Actant software to $100 per month for each ten 
option issues an OTP Holder quotes through the Exchange's server 
capacity to use the Actant quoting software. The Exchange notes that it 
will not prorate the fee should an OTP Holder quote less than its full 
allotment of ten options issues. For purposes of billing, the Exchange 
will round up to the next multiple of ten to determine an OTP Holder's 
fee for a particular month. Under the proposed fee structure, an OTP 
Holder quoting 8 issues during a month would be charged $100, an OTP 
Holder quoting 32 issues would be charged $400 a month, and an OTP 
Holder quoting 115 issues would be charged $1,200 a month. The Exchange 
represents that the change is necessary because the costs associated 
with providing the server bank to use Actant software are directly 
related to the number of issues being quoted, not the number of users.
QQQQ
    The Exchange is proposing to amend its Schedule of Fees and Charges 
in order to modify the provisions for the handling of options on QQQQ 
under the Exchange's marketing fee program. The Exchange is currently 
imposing a $1.00 per contract marketing fee for the QQQQ options. The 
Exchange makes the funds available to Lead Market Makers (``LMMs'') for 
their use in attracting orders. The Exchange does not retain any of the 
money collected as marketing fees. Any fees collected that are not used 
by the LMMs are rebated to the market makers. In addition, the Exchange 
currently incurs a Royalty Fee of $0.10 for every QQQQ option traded at 
PCX. At this time the Exchange is absorbing 100% of the cost for the 
Royalty Fee. To help offset some of the costs incurred by the Exchange 
without adding additional costs to PCX Market Makers, the Exchange 
proposes to impose a $0.95 per contract marketing fee for the QQQQ 
options and a $0.05 per contract Royalty Fee for QQQQ options. Under 
this proposal, the Exchange will retain the $0.05 per contract Royalty 
Fee for QQQQ options as a means to help pay for the $0.10 Royalty Fee 
incurred on each QQQQ

[[Page 8417]]

options traded at PCX. In addition, the Exchange is proposing to 
exclude trades of QQQQ from the existing cap on marketing fees. This 
change is necessary to help the Exchange remain competitive in its 
trading of QQQQ options.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act,\6\ in general, and furthers 
the objectives of section 6(b)(4) of the Act,\7\ in particular, in that 
it provides for the equitable allocation of dues, fees, and other 
charges 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, as 
amended, 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, as amended, were 
neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change, as amended, has become effective 
pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and subparagraph 
(f)(2) of Rule 19b-4 thereunder,\9\ because it is concerned solely with 
the administration 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 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. 78s(b)(3)(C). For purposes of calculating the 
60-day abrogation period, the Commission considers the period to 
commence on February 11, 2005, the date PCX filed Amendment No. 1.
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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 Number SR-PCX-2005-12 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-2005-12. 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 
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-
2005-12 and should be submitted on or before March 11, 2005.

    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. E5-660 Filed 2-17-05; 8:45 am]
BILLING CODE 8010-01-P