67786 Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices

5 15 U.S.C. 78f(b).

6 15 U.S.C. 78f(b)(6).

7 In approving this rule change, the Commission

has considered the proposal’s impact on efficiency,

competition, and capital formation, consistent with

Section 3(f) of the Act. 15 U.S.C. 78c(f).

8 15 U.S.C. 78s(b)(2).

9 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 15 U.S.C. 78s(b)(3)(A)(ii).

4Telephone conversation between Hassan Abedi,

Attorney, Regulatory Policy, PCX, and Terri Evans,

Special Counsel, Division of Market Regulation,

SEC, on November 1, 2000 (clarifying that the

increased fee also applies to registered options

principals).

jurisdiction of the EBCC to include the

enforcement of rules and regulations

relating to trading, order, decorum,

health, safety, and welfare on the

trading floors. Currently, Article IV,

Section 9(b) of the PCX Constitution,

states that ‘‘[t]he jurisdiction of [the

EBCC] shall not extend to the

enforcement of rules and regulations of

the Floor Trading Committees relating

to trading, order, decorum, health,

safety, and welfare on the trading floors,

or to hearings held by and sanctions

imposed by such committees relating to

such matters.’’ Currently, the rules and

regulations governing trading, order,

decorum, health, safety, and welfare are

within the exclusive jurisdiction of the

Floor Trading Committees (‘‘FTCs’’).

The Exchange proposes to delete the

above-quoted section from the PCX

Constitution, and grant the EBCC and

FTCs concurrent jurisdiction over the

enforcement of these rules and

regulations.

Under the proposal, the EBCC will be

the primary disciplinary committee at

the Exchange and the FTCs will retain

jurisdiction to hear certain disciplinary

matters, if necessary. An FTC rather

than the EBCC may hear a case if it

involves technical issues. For example,

an FTC may act as the disciplinary

committee if a ‘‘Marking the Close’’

trading violation occurs. That is, an

incident that involves a market maker

changing his quotes at the close to not

accurately reflect the market in order to

improve the market maker’s position. In

such a case, the Exchange believes

having the expertise of Floor Officials

would be appropriate.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

Section 6(b) 5 of the Act, in general, and

furthers the objectives of Section

6(b)(6),6 in particular, in that it is

designed to assure that Exchange

members and persons associated with

Exchange members are appropriately

disciplined for violations of the Act, the

rules and regulations thereunder, and

the rules of the Exchange.

The Commission believes that it is

appropriate for the EBCC to have

jurisdiction over disciplinary matters

arising from the floor because it is less

likely that the members of the EBCC

will have personal knowledge of

relevant incidents or a Floor Official

ruling relating to the incident. The

Commission believes that this will assist

in creating a more objective disciplinary

process at the PCX. Further, the

proposed rule change will centralize

disciplinary actions in one committee at

the Exchange. The Commission believes

that having one primary disciplinary

committee responsible for hearing

complaints will better assure

consistency in the decisions rendered.

However, the Commission also

believes that it is appropriate for the

Exchange to allow the FTC to retain

jurisdiction to hear those disciplinary

matters that require specialized

knowledge of the trading rules. The

Commission understands many of the

trading rules involve complex issues

which require a high level of expertise

to fully comprehend, and evaluate in a

meaningful way.

The Commission believes that the

Exchange’s proposal to grant the EBCC

and FTCs concurrent jurisdiction over

disciplinary proceedings relating to

trading, order, decorum, health, safety,

and welfare on the trading floors, with

the EBCC being the primary committee

responsible, will result in consistent,

independent decision-making.

Moreover, the proposal will also ensure

that matters involving complex and

technical issues are handled by

committees appropriately skilled to

understand them and render fair

decisions.

IV. Conclusion

For all of the aforementioned reasons,

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.7

It is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,8 that the

proposed rule change (SR–PCX–00–12)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28946 Filed 11–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43510; File No. SR–PCX–

00–41]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

Changes to Schedule of Rates and

Charges

November 3, 2000.

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 October

16, 2000, the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the Exchange. The

Exchange has designated this proposal

as one establishing or changing a due,

fee or other charge imposed by the

Exchange under section 19(b0(3)(A)(ii)

of the Act,3 which renders the proposal

effective upon filing with the

Commission. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested person.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

PCX is proposing to amend its

schedule of rates and charges in order

to eliminate credits for book executions,

to increase registered representative

options principal 4 fees, and to establish

examination, registration and annual

fees for off-floor trading firms and their

traders. The text of the proposed change

to the PCX fee schedule is available at

the Exchange and at the Commission.

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

Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices 67787

5See Securities Exchange Act Release No. 43020.

(July 10, 2000) 65 FR 44558 (July 18, 2000).

6See Securities Exchange Act Release No. 43497

(March 6, 2000), 65 FR 14005 (March 15, 2000);

Securities Exchange Act Release No. 42562 (March

22, 2000), 65 FR 16445 (March 28, 2000); Securities

Exchange Act Release No. 43074 (July 26, 2000), 65

FR 47529 (August 2, 2000); Securities Exchange Act

Release No. 43014 (July 6, 2000), 65 FR 43388 (July

13, 2000); Securities Exchange Act Release No.

43257 (September 6, 2000), 65 FR 55665 (September

14, 2000); and Securities Exchange Act Release No.

43279 (September 11, 2000), 65 FR 56606

(September 19, 2000).

7 15 U.S.C. 78(f)(b).

8 15 U.S.C. 78f(b)(4).

9 15 U.S.C. 78s(b)(3)(A)(ii).

10 17 CFR 240.19b–4(f)(2).

11 17 CFR 200.30–3(a)(12).

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

Currently, the PCX Schedule of Rates

and Charges credits order flow

providers $.10 per contract on all book

executions, which can be used to offset

other PCX charges. In addition, the PCX

charges an annual fee of $25 to all

registered representatives and registered

options principals for maintenance, new

applications, or transfer of registration

status. This fee supports the costs

related to regulatory oversight and

enforcement within the equities and

options communities. Finally, the PCX

does not charge a Designated Examining

Authority (‘‘DEA’’) fee for its off-floor

traders.

The Exchange now proposes to

modify its Schedule of Rates and

Charges. First, the Exchange proposes to

eliminate the $.10 credit provided to

order flow providers. In its original

filing with the Commission the

Exchange stated that this credit was

needed in order to attract order flow and

enable it to remain competitive.5 Based

upon its experience with this credit, the

PCX believes that providing a credit for

book activity does not create a

meaningful incentive for attracting order

flow.

Second, the Exchange proposes to

increase its registered representative

and registered options principal fee by

$10 to $35 for annual maintenance, new

applications, and transfers. The

Exchange believes that this addition is

warranted due to increased costs related

to regulatory oversight and enforcement.

Finally, the Exchange proposes to add

DEA fees for off-floor trading firms and

its traders. Currently the PCX is the DEA

for 162 firms. Of these 162 firms, 15

conduct extensive off-floor trading

businesses. In the past, the PCX has

outsourced the examinations of these 15

firms. The PCX intends to conduct these

examinations in the future. The

Exchange believes that, based upon its

business model, the number of off-floor

trading firms for which it will serve as

DEA will increase substantially in the

near future. Therefore, the Exchange is

seeking to establish DEA fees that will

allow for recovery of costs associated

with these types of examinations. The

Exchange proposes to require all current

and future off-floor traders to pay an

initial registration fee of $75 per trader

and an annual fee thereafter of $250 per

trader. The Exchange is also proposing

to charge a $2,000 per month

Examination Fee to be paid by member

organizations for which the Exchange is

the DEA. An Exemption from these fees

will be granted to any member operating

from the PCX trading floor that has

demonstrated that at least 25% of its

income, as reflected on the most

recently submitted FOCUS Report, was

derived from on-floor activities. These

fees will help to offset costs associated

with providing examination services to

off-floor trading firms. These include

costs related to advising firms on

financial reporting requirements and

compliance with PCX and SEC rules.

There are also extensive travel costs and

initial set-up costs related to such offfloor firms. These fees are consistent

with the fee structures established by

other Exchange.6

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 7 in general, and

furthers the objectives of section

6(b)(4) 8 in particular, in that it provides

for the equitable allocation of reasonable

dues, fees, and other charges among its

members and other persons using its

facilities.

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

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

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 9 and

subparagraph (f)(2) of Rule 19b–4,10

because it establishes or changes a due,

fee, or other charge imposed by 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.

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 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–00–41 and should be

submitted by December 4, 2000.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority. 11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28947 Filed 11–9–00; 8:45 am]

BILLING CODE 8010–01–M