Document ID: SEC-2005-0379-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Pacific Exchange, Inc.
Posted Date: 2005-12-14T05:00Z

[Federal Register: December 14, 2005 (Volume 70, Number 239)]
[Notices]               
[Page 74080-74082]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de05-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52920; File No. SR-PCX-2005-112]

 
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change and 
Amendment No. 1 Thereto Relating to Revisions to the Series 4 
Examination Program

December 7, 2005.
    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 November 3, 2005, 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 PCX. On 
November 22, 2005, PCX filed Amendment No. 1 to the proposed rule 
change. PCX has designated the proposed rule change as constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization pursuant to Section 19(b)(3)(A)(i) of the Act 
\3\ and Rule 19b-4(f)(1) thereunder,\4\ 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\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    PCX is filing revisions to the study outline and selection 
specifications for the Limited Principal--Registered Options (Series 4) 
examination program. The proposed revisions update the material to 
reflect changes to the laws, rules, and regulations covered by the 
examination, as well as modify the content of the examination program 
to track more closely the functional workflow of a Series 4 limited 
principal. PCX is not proposing any textual changes to the PCX Rules. 
The revisions that PCX is submitting with this filing supersede all 
prior revisions to the Series 4 examination program submitted by PCX.
    The revised study outline is available on PCX's Web site (http://www.pacificex.com
), at PCX, and at the Commission. However, PCX has 

omitted the Series 4 selection specifications from this filing and has 
submitted the specifications under separate cover to the Commission 
with a request for confidential treatment pursuant to Rule 24b-2 under 
the Act.\5\
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    \5\ 17 CFR 240.24b-2.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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. PCX has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

[[Page 74081]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Pursuant to Section 6(c)(3) of the Act,\6\ which allows PCX to 
examine and verify the standards of training, experience, and 
competence for persons associated with PCX Options Trading Permit 
(``OTP'') Holders or OTP Firms, PCX has developed examinations, and 
requires satisfaction of examinations developed by other SROs, that are 
designed to establish that persons associated with PCX OTP Holders or 
OTP Firms have attained specified levels of competence and knowledge. 
PCX periodically reviews the content of examinations to determine 
whether revisions are necessary or appropriate in view of changes 
pertaining to the subject matter covered by the examinations.
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    \6\ 15 U.S.C. 78f(c)(3).
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    PCX Rule 9.18 states that no OTP Firm or OTP Holder shall be 
approved to transact business with the public in options contracts, 
unless those persons associated with the OTP Firm or OTP Holder who are 
designated as Options Principals or who are designated as Registered 
Representatives have been approved by and registered with the Exchange. 
The Series 4 examination, an industry-wide examination, qualifies an 
individual to function as a Registered Options and Security Futures 
Principal, but only for purposes of supervising an OTP Holder's or OTP 
Firm's options activities.\7\ The Series 4 examination tests a 
candidate's knowledge of options trading generally, the industry rules 
applicable to trading of option contracts, and the rules of registered 
clearing agencies for options. The Series 4 examination covers, among 
other things, equity options, foreign currency options, index options, 
and options on government and mortgage-backed securities.
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    \7\ A Registered Options and Security Futures Principal also 
must complete a firm-element continuing education program that 
addresses security futures and a principal's responsibilities for 
security futures before such person can supervise security futures 
activities.
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    The Series 4 examination program is shared by PCX and the following 
SROs: the American Stock Exchange LLC, the Chicago Board Options 
Exchange, Inc., the New York Stock Exchange, Inc., the National 
Association of Securities Dealers, Inc., and the Philadelphia Stock 
Exchange, Inc.
    A committee of industry representatives, together with the staff of 
the PCX and the other SROs, recently undertook a periodic review of the 
Series 4 examination program. As a result of this review and as part of 
an ongoing effort to align the examination more closely to the 
supervisory duties of a Series 4 limited principal, PCX is proposing to 
modify the content of the examination to track the functional workflow 
of a Series 4 limited principal. More specifically, PCX is proposing to 
revise the main section headings and the number of questions on each 
section of the Series 4 study outline as follows: Options Investment 
Strategies, decreased from 35 to 34 questions; Supervision of Sales 
Activities and Trading Practices, increased from 71 to 75 questions; 
and Supervision of Employees, Business Conduct, and Recordkeeping and 
Reporting Requirements, decreased from 19 to 16 questions. PCX is 
further proposing revisions to the study outline to reflect the SEC 
short sale requirements. The revised examination continues to cover the 
areas of knowledge required to supervise options activities.
    PCX is proposing these changes to the entire content of the Series 
4 examination, including the selection specifications and question 
bank. The number of questions on the Series 4 examination will remain 
at 125, and candidates will continue to have three hours to complete 
the exam. Also, each question will continue to count one point, and 
each candidate must correctly answer 70 percent of the questions to 
receive a passing grade.
2. Statutory Basis
    PCX believes that the proposed revisions to the Series 4 
examination program are consistent with Section 6(b) of the Act,\8\ in 
general, and further the objectives of Section 6(b)(1) \9\ in 
particular, in that it is designed to enforce compliance by OTP Holders 
and OTP Firms and persons associated with the rules of the Exchange.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    PCX does not believe that the proposed rule change, as amended, 
will result in 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 were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change, as amended, has become effective pursuant 
to Section 19(b)(3)(A)(i) of the Act\10\ and Rule 19b-4(f)(1) 
thereunder,\11\ in that the proposed rule change constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization. PCX will announce the implementation date in a 
Rule Adoption Notice to be published no later than 7 days after Notice 
of this filing.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(i).
    \11\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of the 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.\12\
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    \12\ The effective date of the original proposed rule is 
November 3, 2005. The effective date of Amendment No. 1 is November 
22, 2005. For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on November 22, 2005, the date on which PCX submitted 
Amendment No. 1. See 15 U.S.C. 78s(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, as amended, 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-2005-112 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-PCX-2005-112. 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

[[Page 74082]]

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 such 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-2005-112 and should be 
submitted on or before January 4, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7330 Filed 12-13-05; 8:45 am]

BILLING CODE 8010-01-P