[Federal Register Volume 70, Number 113 (Tuesday, June 14, 2005)]
[Notices]
[Pages 34511-34513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-11680]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51795; File No. SR-PCX-2005-67]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing of Proposed Rule Change Relating to Exchange Fees and Charges

June 7, 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 6, 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 the PCX. 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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[[Page 34512]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PCX, through its wholly-owned subsidiary PCX Equities, Inc. 
(``PCXE''), proposes to amend its Schedule of Fees and Charges in order 
to modify the list of eligible strategies that apply to Option Strategy 
Executions retroactive to January 1, 2005. The text of the proposed 
rule change is available on the PCX's Web site (http://www.pacificex.com), at the 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, the PCX 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 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
    In a separate rule filing, SR-PCX-2005-65,\3\ the PCX proposed to 
modify the list of strategies presently included in the fee that 
applies to Option Strategy Executions to add two strategies: (1) short 
interest spreads and (2) merger spreads. That rule filing is 
prospective. The purpose of this rule filing is to make one of these 
same changes retroactive to January 1, 2005.
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    \3\ See Securities Exchange Act Release No. 51787 (June 6, 
2005).
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    In SR-PCX-2005-65, the PCX added to its strategy fee cap 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.\4\
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    \4\ In SR-PCX-2005-65, the PCX also added merger spreads to the 
strategy fee cap rule, but PCX is not seeking to make that change 
retroactive and so merger spreads are not a part of this filing.
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    Because the short stock interest spread 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 PCX seeks to make this fee change retroactive because short 
stock interest spreads have been executed by customers of the PCX with 
the understanding, based on conversations with Exchange staff, that 
these strategies were included in a group of strategies that already 
qualified for reduced rates and fees under the previously approved 
Option Strategy Execution rate plan. The PCX is applying to make this 
fee change retroactive to January 1, 2005 so that the Exchange may make 
adjustments to the accounts of all customers that may have executed 
short interest spreads from that date forward based on their 
understanding that the fees for such transactions were capped. The 
Exchange believes that by retroactively lowering these fees, the 
Exchange will not only be correcting customers accounts for previously 
executed trades but will be able to continue to attract liquidity by 
accommodating these transactions.
2. Statutory Basis
    The Exchange 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)(4) of the Act,\6\ in particular, in that it 
provides for the equitable allocation of dues, fees, and other charges 
among its members.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    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 Exchange consents, the Commission will:
    A. By order approve such proposed 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-2005-67 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-0609.
    All submissions should refer to File Number SR-PCX-2005-67. 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, Station Place, 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-2005-67 and should be 
submitted on or before July 5, 2005.


[[Page 34513]]


    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 05-11680 Filed 6-13-05; 8:45 am]
BILLING CODE 8010-01-P