[Federal Register Volume 70, Number 106 (Friday, June 3, 2005)]
[Notices]
[Pages 32690-32692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2832]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51727; File No. SR-PCX-2005-51]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change and 
Amendment No. 1 Thereto Relating to Revisions to the Series 4 
Examination Program

May 24, 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 April 12, 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 has designated the proposed rule 
change as one constituting a stated policy, practice, or interpretation 
with respect to the meaning, administration, or enforcement of an 
existing rule of PCX pursuant to section 19(b)(3)(A)(i) of the Act \3\ 
and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Exchange filed Amendment 
No. 1 to the proposed rule change on May 16, 2005.\5\ 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\ 15 U.S.C. 78s(b)(3)(A)(i).
    \1\ 17 CFR 240.19b-4(f)(1).
    \5\ In Amendment No. 1, PCX provided a new statutory basis for 
the proposed rule change and made technical corrections to the 
proposed rule change. PCX also included a copy of a Commission 
letter regarding procedures for filing qualification exams. See 
letter from Belinda Blaine, Associate Director, Division of Market 
Regulation Commission, to Alden S. Adkins, Senior Vice President & 
General Counsel, NASD Regulation, Inc., dated July 24, 2000. 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 the period 
to commence on May 16, 2005, the date on which the Exchange filed 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of section 19(b)(1) of the Act,\6\ the 
Exchange is filing with the Commission revisions to the study outline 
and selection specifications for the Limited Principal--Registered 
Options (Series 4) examination (``Series 4 Examination'').

[[Page 32691]]

The proposed revisions update the material to reflect changes to the 
laws, rules, and regulations covered by the Series 4 Examination. PCX 
is not proposing any textual changes to its rules.
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    \6\ 15 U.S.C. 78(b)(1).
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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, 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. 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
    Pursuant to section 6(c)(3) of the Act,\7\ which allows PCX to 
examine and verify the standards of training, experience, and 
competence for persons associated with PCX Options Trading Permit 
(``OTP'') Holders or OTP Firms, PCX has developed examinations, and 
requires satisfaction of examinations developed by other self-
regulatory organizations (``SROs''), that are designed to establish 
that persons associated with PCX OTP Holders or OTP Firms have attained 
specified levels of competence and knowledge. PCX periodically reviews 
the content of examinations to determine whether revisions are 
necessary or appropriate in view of changes pertaining to the subject 
matter covered by the examinations.
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    \7\ 15 U.S.C. 78f(c)(3).
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    PCX Rule 9.18 states that no OTP Firm or OTP Holder shall be 
approved to transact business with the public in options contracts, 
unless those persons associated with the OTP Firm or OTP Holder who are 
designated as Options Principals or who are designated as Registered 
Representatives have been approved by and registered with the Exchange. 
The Series 4 Examination, an industry-wide examination, qualifies an 
individual to function as an Options Principal. The Series 4 
Examination tests a candidate's knowledge of options trading generally, 
the PCX's rules applicable to trading of options contracts, and the 
rules of registered clearing agencies for options. The Series 4 
Examination covers, among other things, equity options, foreign 
currency options, index options, and options on government and 
mortgage-backed securities.
    The Series 4 Examination is shared by PCX and the following SROs: 
The American Stock Exchange LLC, the Chicago Board Options Exchange, 
Incorporated, the National Association of Securities Dealers, Inc., the 
New York Stock Exchange, Inc., and the Philadelphia Stock Exchange, 
Inc.
    A committee of industry representatives, together with the staff of 
PCX and the SROs referenced above, recently undertook a periodic review 
of the Series 4 Examination. As a result of this review and as part of 
an ongoing effort to align the Series 4 Examination more closely to the 
supervisory duties of a Series 4 principal, PCX is proposing to modify 
the content of the Series 4 Examination to track the functional 
workflow of a Series 4 principal. More specifically, PCX is proposing 
to revise the main section headings and the number of questions on each 
section of the Series 4 study outline as follows: Options Investment 
Strategies, decreased from 35 to 34 questions; Supervision of Sales 
Activities and Trading Practices, increased from 71 to 75 questions; 
and Supervision of Employees, Business Conduct and Recordkeeping and 
Reporting Requirements, decreased from 19 to 16 questions. PCX is 
further proposing revisions to the study outline to reflect the new 
Commission short sale requirements. The revised Series 4 Examination 
continues to cover the areas of knowledge required to supervise options 
activities.
    PCX is proposing similar changes to the corresponding sections of 
the Series 4 Examination selection specifications and question bank. 
The number of questions on the Series 4 Examination will remain at 125, 
and candidates will have three hours to complete the exam. Also, each 
candidate must correctly answer 70 percent of the questions to receive 
a passing grade.
2. Statutory Basis
    PCX believes that the proposed rule change is consistent with 
section 6(b) of the Act,\8\ in general, and furthers the objectives of 
section 6(b)(1) \9\ in particular, in that it is designed to enforce 
compliance by OTP Holders and OTP Firms and persons associated with the 
rules of the Exchange.
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    \8\ 15 U.S.C. 78f(
    \9\ 15 U.S.C. 78f(b)(1).
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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)(i) of the Act\10\ and Rule 19b--(f)(1) thereunder,\11\ in 
that the proposed rule change constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule of PCX.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(i).
    \11\ 17 U.S.C. 240.19b-4(f)(1).
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    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.

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-2005-51 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-2005-51. This file 
number should be included on the subject line if e-mail is used. To 
help the

[[Page 32692]]

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 at the 
principal office of 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 the File 
Number SR-PCX-2005-51 and should be submitted on or before June 24, 
2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2832 Filed 6-2-05; 8:45 am]
BILLING CODE 8010-01-P