Document ID: SEC-2006-0111-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Pacific Exchange, Inc.
Posted Date: 2006-01-30T05:00Z

[Federal Register: January 30, 2006 (Volume 71, Number 19)]
[Notices]               
[Page 4955-4956]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ja06-112]                         

[[Page 4955]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53165; File No. SR-PCX-2005-136]

 
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change and 
Amendment No. 1 Thereto Relating to Exchange Fees and Charges

January 20, 2006.
    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 December 30, 2005, the Pacific Exchange, Inc. (``Exchange'' or 
``PCX'') 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. On January 
18, 2006, the PCX filed Amendment No. 1 to the proposed rule change.\3\ 
The PCX has designated this proposal as establishing or changing a due, 
fee, or other charge imposed by a self-regulatory organization pursuant 
to Section 19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(2) 
thereunder,\5\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the PCX made non-substantive changes to 
the text of the proposed rule change and made clarifying changes to 
the purpose section.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PCX proposes to amend its Schedule of Fees and Charges for 
option contracts. The text of the proposed rule change is available on 
the PCX Web site, (http://www.archipelago.com), at the PCX's principal 

office, 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 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 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
    The PCX charges transaction fees associated with all option 
contracts that are executed on the Exchange. Presently there are four 
categories of transaction fees included in the PCX Schedule of Rates 
and Charges: Customer, Firm, Broker/Dealer, and Market Maker. The 
current Firm transaction fee applies to OTP Firm \6\ proprietary trades 
that have a customer of that firm on the contra side of the 
transaction. The Exchange offers this rate as an incentive to OTP Firms 
to direct their customer orders to PCX for execution. In the past, 
these transactions were brokered between an OTP Firm's proprietary 
trading account, which was an off-floor account, and the account of a 
customer of the same OTP Firm. Market Makers did not historically 
participate in these types of trades. With the changes in the structure 
of how OTP Firms conduct their business, many OTP Firms now have market 
making entities on the PCX. At present, the Exchange does not apply the 
Firm transaction fee to PCX Market Makers that transact with customers 
of that Market Maker's OTP Firm. The Exchange proposes to expand the 
application of the Firm transaction fee to PCX market maker accounts. 
In order to be consistent, the PCX proposes to apply the Firm 
transaction fee to all trades between an OTP Firm and a customer of the 
same OTP Firm, no matter what proprietary account the Firm uses to 
effect the trade. The Firm transaction fee will be assessed to market 
maker accounts in lieu of, not in addition to, the Market Maker fee 
presently charged. This will in effect offer a lower rate for market 
maker transactions when a Market Maker is trading with a customer of 
the Market Maker's OTP Firm. The Firm fee will apply only to accounts 
of Market Makers associated with OTP Holders or OTP Firms of the PCX.
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    \6\ An OTP Firm is defined in PCX Rule 1(r) as ``a sole 
proprietorship, partnership, corporation, limited liability company 
or other organization in good standing who holds an OTP or upon whom 
an individual OTP Holder has conferred trading privileges on the 
Exchange's Trading Facilities * * *''
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    Many OTP Firms operate as Market Makers on the PCX and, as such, 
trade with customers of their OTP Firm. By applying the Firm 
transaction fee to all transactions, including market maker accounts, 
involving an OTP Firm's customers, the PCX hopes to attract additional 
order flow, which in turn should create additional liquidity providing 
better markets for all trading participants. The Exchange intends to 
make the new fee effective as of January 3, 2006.
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) of the Act \8\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members. OTP Holders and OTP Firms 
are considered ``members'' of the Exchange under the Act.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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

    The Exchange has neither solicited nor received 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) of the Act \9\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\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.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
    \11\ The effective date of the original proposed rule change is 
December 30, 2005, and the effective date of Amendment No. 1 is 
January 18, 2006. For purposes of calculating the 60-day period 
within which the Commission may summarily abrogate the proposed rule 
change, as amended, under Section 19(b)(3)(C) of the Act, the 
Commission considers the period to commence on January 18, 2006, the 
date on which the PCX submitted Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).

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[[Page 4956]]

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 rule-comments@sec.gov. Please include 

File Number SR-PCX-2005-136 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-PCX-2005-136. 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 Room. Copies of the filing 
also will be available for inspection and copying at the principal 
office of the PCX. 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-
2005-136 and should be submitted on or before February 21, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-1088 Filed 1-27-06; 8:45 am]

BILLING CODE 8010-01-P