[Federal Register: April 2, 2003 (Volume 68, Number 63)]
[Notices]
[Page 16109-16110]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap03-176]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47577; File No. SR-PCX-2003-03]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. To
Amend the Regulatory Fees Portion of Its Schedule of Fees and Charges
To Add a Designated Options Examining Authority Fee for Member Firms
That Conduct a Public Options Business
March 26, 2003.
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 February 3, 2003, 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 Exchange. On
February 28, 2003, the Exchange filed Amendment No. 1 to the proposed
rule change.\3\ On March 24, 2003, the Exchange filed Amendment No. 2
to the proposed rule change.\4\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced the original Form 19b-4 in its
entirety.
\4\ See letter from Tania J. Cho, Attorney, Regulatory Policy,
PCX, to Katherine England, Assistant Director, Division of Market
Regulation, Commission, dated March 21, 2003. Amendment No. 2 made
non-substantive, editorial changes to the proposed rule text to
clarify application of the new fee.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PCX is proposing to amend the regulatory fees portion of its
Schedule of Fees and Charges to add a Designated Options Examining
Authority (``DOEA'') fee for member firms that conduct a public options
business.
[[Page 16110]]
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 Exchange 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. The Exchange 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 the
Statutory Basis for, the Proposed Rule Change
(1) Purpose
The Exchange is proposing to make the following modification to its
Schedule of Fees and Charges in order to recover costs associated with
conducting options sales practice examinations of its member firms that
conduct public options business. The current regulatory fees schedule
includes a Designated Examining Authority (``DEA'') fee of $2000 per
month for each member organization for which the Exchange is the DEA.
Due to recent developments in DOEA examinations, the Exchange proposes
to add a $2000 per month DOEA fee \5\ to apply to firms that conduct a
public options business. The new fee would be applicable only to
members and member firms for which the Exchange is the DOEA.
---------------------------------------------------------------------------
\5\ To avoid duplicative billing, the DOEA fee charged to a
member firm that conducts public options business will not apply if
the Exchange is the DEA for such member firm.
---------------------------------------------------------------------------
In 1983, the Options Self-Regulatory Council (``OSRC'') submitted
to the SEC an agreement allocating regulatory responsibilities with
respect to common members. The purpose of the agreement was to reduce
regulatory responsibility duplication for options-related sales
practice matters and to designate the following self-regulatory
organizations (``SROs'') as DOEAs: The American Stock Exchange, the
Chicago Board Options Exchange, NASD, and the New York Stock Exchange.
Since establishing this agreement, the DOEAs have been conducting
options sales practice examinations on behalf of applicable
participants. Due to the increase in costs associated with conducting
such examinations, the OSRC has proposed a means to allow for an
allocation of regulatory costs incurred in fulfilling obligations under
the agreement among all current and future DOEA and non-DOEA
participants. As such, the OSRC has proposed to allocate a portion of
the costs borne by the SROs based on the percentage of their overall
expense pool.
As an alternative, the Exchange proposes to develop an examination
program to review member firms that conduct public options business in-
house. As a newly designated DOEA,\6\ the Exchange would develop an
examination program to review options sales practices as they relate to
the public (e.g., advertising, sales literature, risk disclosures,
approval of new accounts and risk tolerances for individuals) for
member firms that are assigned to it by the OSRC. By conducting the
options sales practice examinations in-house, the Exchange would be
able to pass these expenses directly to the firms that require an
examination. In the absence of any PCX initiative, the Exchange will be
allocated a certain portion of the DOEA costs borne by other SROs,
which would increase the Exchange's overhead without cost recovery.
Thus, the Exchange's proposal for in-house examinations would allow for
recovery of the regulatory costs in a fair and equitable manner.
---------------------------------------------------------------------------
\6\ The Exchange has been designated as a DOEA as of January 1,
2003.
---------------------------------------------------------------------------
(2) Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) \7\ of the Act in general and section 6(b)(4) \8\ of
the Act, in particular, because it provides for the equitable
allocation of reasonable dues, fees and other charges among its
members.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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 foregoing rule change, which establishes or changes a due, fee
or other charge imposed by the Exchange, has become effective pursuant
to section 19(b)(3)(A) \9\ of the Act and subparagraph (f)(2) of Rule
19b-4 thereunder.\10\ 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 the furtherance of the purposes of the Act. For purposes
of calculating the 60-day abrogation period, the Commission considers
the proposed rule change to have been filed on February 28, 2003, when
Amendment No. 1 was filed.\11\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(2).
\11\ See notes 3 and 4, supra.
---------------------------------------------------------------------------
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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
PCX. All submissions should refer to File No. SR-PCX-2003-03 and should
be submitted by April 23, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-7935 Filed 4-1-03; 8:45 am]
BILLING CODE 8010-01-P