[Federal Register Volume 70, Number 112 (Monday, June 13, 2005)]
[Notices]
[Pages 34174-34175]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3052]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51787; File No. SR-PCX-2005-65]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change and 
Amendment No. 1 Thereto Relating to Exchange Fees and Charges

June 6, 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 May 2, 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 May 13, 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\ Amendment No. 1 made a minor clarifying change to the 
proposal.
    \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 list of eligible strategies that apply to Option Strategy 
Executions. The text of the proposed rule change, as amended, 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, as 
amended, 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
    The purpose of this proposed rule change, as amended, is to modify 
the list of strategies presently included in the fee that applies to 
Option Strategy Executions. The PCX proposes to add two strategies. The 
first is a strategy used to capture short stock interest. The ``short 
stock interest spread'' is defined as a spread that uses two deep in 
the money put options followed by the exercise of the resulting long 
position of the same class in order to establish a short stock interest 
arbitrage position. The second strategy is used when there is corporate 
merger activity in an underlying issue. A ``merger spread'' is defined 
as a transaction executed pursuant to a merger spread strategy 
involving the simultaneous purchase and sale of options of the same 
class and expiration date, but with different strike prices followed by 
the exercise of the resulting long option position. Merger Spreads are 
executed prior to the date that shareholders of record are required to 
elect their respective form of consideration, i.e. cash or stock. 
Because the referenced Options Strategy Transactions are generally 
executed by professionals whose profit margins are generally narrow, 
the Exchange proposes to cap the transaction fees associated with such 
executions at $1,000 per strategy execution with a monthly cap of 
$50,000 per initiating firm. The Exchange believes that by keeping fees 
low, the Exchange would be able to attract liquidity by accommodating 
these transactions.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\6\

[[Page 34175]]

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 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\ The effective date of the original proposed rule change is 
May 2, 2005 and the effective date of the amendment is May 13, 2005. 
For purposes of calculating the 60-day period within which the 
Commission may summarily abrogate the proposed rule change, as 
amended, under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on May 13, 2005, the date on which 
PCX submitted Amendment No. 1. 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 Number SR-PCX-2005-65 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-PCX-2005-65. 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, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-0609. 
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-2005-65 and should be submitted on 
or before July 5, 2005.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3052 Filed 6-10-05; 8:45 am]
BILLING CODE 8010-01-P