[Federal Register Volume 70, Number 174 (Friday, September 9, 2005)]
[Notices]
[Pages 53706-53707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4928]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52371; File No. SR-PCX-2005-68]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Order 
Approving Proposed Rule Change and Amendment No. 1 Thereto To Modify 
Rate Schedule Retroactively To January 1, 2002 To Cap the Fees on 
Multiple Options Issues Transfers

August 31, 2005.
    On May 13, 2005, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to modify its rate schedule retroactively to 
January 1, 2002 to cap the fees on multiple options issues transfers. 
The Exchange amended the proposal on July 1, 2005.\3\ The proposed rule 
change, as amended, was published for notice and comment in the Federal 
Register on July 27, 2005.\4\ The Commission did not receive comments 
on the proposal. This order approves the proposed rule change, as 
amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original 
proposal.
    \4\ See Securities Exchange Act Release No. 52090 (July 20, 
2005), 70 FR 43492.
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    PCX proposes to cap the fees on multiple options issues transfers. 
Currently, PCX charges a Lead Market Maker (``LMM'') that has been 
allocated an options issue $1,000 per issue if the LMM transfers the 
options issue to another LMM.\5\ PCX originally adopted the fee to help 
offset its administrative and technological costs related to 
transferring an options issue. While PCX believes it is still accurate 
to charge $1,000 for the transfer of one issue, when multiple issues 
are transferred as part of a single transaction, the overall costs of 
PCX associated with the transfer may be reduced. When multiple issues 
are transferred as part of a single transaction, PCX believes that 
charging the full $1,000 on every transferred issue with no limit to 
the total charges is not the original intent of the transfer fee.
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    \5\ According to PCX, options issue transfers are conducted in 
accordance with PCX Transfer of Issues Guidelines. See PCX 
Regulatory Information Bulletin RBO-03-09 (August 11, 2003).
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    PCX proposes to continue charging $1,000 per issue transferred, but 
cap the fee at $15,000 for the first one hundred issues transferred, 
and $5,000 for every one hundred (or any part of) additional issues 
transferred. To qualify for the rate cap, all transfers must be deemed 
to be part of a single transaction and meet the PCX Transfer of Issues 
Guidelines. The new fee cap would allow PCX to more accurately assess 
an LMM the technological and administrative costs associated with the 
transfer of allocated issues. PCX proposes to make this fee effective 
retroactive to January 1, 2002, the date the transfer fee was first 
effective, so that it would have the ability to make any adjustments it 
deems necessary to allow previous charges to properly reflect the true 
intent of the transfer fee. Further, PCX represented that it would 
review all past transfers to determine if any adjustments are warranted 
pursuant to the proposed rate schedule.
    After careful review of the proposed rule change, as amended, the 
Commission finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\6\ Specifically, the 
Commission believes that the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\7\ in that it provides for the equitable

[[Page 53707]]

allocation of reasonable dues, fees, and other charges among the 
Exchange's members. The Commission believes that the proposal should 
allow the Exchange to more accurately charge LMMs the Exchange's true 
costs when multiple options issues are transferred. Further, the 
Commission believes that by making the proposal retroactive to January 
1, 2002, the Exchange could make adjustments to past transfers in 
accordance with the original intent of the fee.
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    \6\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(4).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-PCX-2005-68) and Amendment 
No. 1 are approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-4928 Filed 9-8-05; 8:45 am]
BILLING CODE 8010-01-P