[Federal Register: November 5, 2003 (Volume 68, Number 214)]
[Notices]
[Page 62646-62648]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05no03-143]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48697; File No. SR-PCX-2003-58]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to Exchange Fees and Charges
October 24, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4\2\ thereunder, notice is hereby given that
on October 14, 2003, the Pacific Exchange, Inc. (``PCX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the
Exchange. 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 62647]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PCX is proposing to amend its Schedule of Fees and Charges by
eliminating its Order Cancellation Fee. The text of the proposed rule
change is set forth below. Proposed new language is in italics;
proposed deletions are in [brackets].
* * * * *
SCHEDULE OF FEES AND CHARGES FOR EXCHANGE SERVICES
PCX OPTIONS: TRADE-RELATED CHARGES
[ORDER CANCELLATION $1.00 per MFI order canceled
Except as provided herein, the fee only applies to orders canceled
through the MFI in any month where the total number of orders canceled
through the MFI by the executing Clearing Member exceeds the total
number of orders that same firm executed through the MFI in that same
month. This fee does not apply to executing Clearing Members canceling
less than 500 orders through the MFI in a month. The MFI fee will also
not apply to cancel requests on invalid orders (the option has already
expired and the Exchange has purged it from its system); invalid
symbols (a symbol that does not refer to a valid option traded on the
Exchange); or invalid series (a series that is not recognized by or
traded on the Exchange).]
* * * * *
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 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange has established an Order Cancellation Fee in order to
address operational problems and costs resulting from the practice of
market participants canceling orders immediately after they place such
orders through the Exchange's Member Firm Interface (``MFI'').\3\
Recently, the Exchange modified the Fee to exclude invalid orders (the
option has already expired and the Exchange has purged it from its
system); orders with an invalid symbol (a symbol that does not refer to
a valid option traded on the Exchange); or orders with an invalid
series (a series that is not recognized or traded by the Exchange).\4\
However, despite this modification, the Exchange is still required to
include certain orders, such as partial executions with a partial
cancellation or a cancel of the balance and partially executed or
cancel requests on expired orders in its definition of ``cancelled
orders.'' The Exchange notes that the primary purpose of the Fee was to
rectify the problem of participants immediately canceling orders and
thereby gaming the system. It was not intended to preclude participants
from making reasoned business decisions that may result in a cancel
order.\5\ For this reason, the Exchange no longer believes that the
Order Cancellation Fee is the appropriate vehicle to remedy the concern
of excessive cancels. It therefore seeks to eliminate it from its
Schedule of Fees and Charges.
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\3\ See Securities Exchange Act Release No. 45262 (January 9,
2002), 67 FR 2266 (January 16, 2002) (Notice of Filing and Immediate
Effectiveness of SR-PCX-2001-47).
\4\ See Securities Exchange Act Release No. 48031 (June 13,
2003), 68 FR 37189 (June 23, 2003) (Notice of Filing and Immediate
Effectiveness of SR-PCX-2003-25).
\5\ Specifically, PCX represents that a Clearing Member may
enter an order into MFI that is partially executed on the Exchange,
leaving an unexecuted residual portion of the order in the Clearing
Member's system. The Clearing Member must submit a cancel request to
delete the unexecuted residual portion of the order from its system.
In such situations, PCX does not believe the Clearing Member should
be subject to the Order Cancellation Fee (assuming the threshold
test for imposing the fee is met), because the Clearing Member is
making a reasoned business decision that results in a cancel
request. Telephone conversation between Mai Shiver, Senior Attorney,
Regulatory Policy, PCX and Gordon Fuller, Counsel to the Assistant
Director, and Elizabeth MacDonald, Attorney, Division of Market
Regulation, SEC, October 20, 2003.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with section
6(b) of the Act,\6\ in general, and section 6(b)(4) of the Act,\7\ in
particular, in that it provides for the equitable allocation of
reasonable fees 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 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 has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of Rule 19b-4\9\
thereunder because it changes a fee imposed by the PCX. 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\ See 15 U.S.C. 78(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 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-2003-58 and should
be submitted by November 26, 2003.
[[Page 62648]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-27853 Filed 11-4-03; 8:45 am]
BILLING CODE 8010-01-P