Document ID: SEC-2005-0415-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Pacific Exchange, Inc.
Posted Date: 2005-12-20T05:00Z

[Federal Register: December 20, 2005 (Volume 70, Number 243)]
[Notices]               
[Page 75525-75526]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de05-98]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52935; File No. SR-PCX-2005-127]

 
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Exchange Fees and Charges

December 9, 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 25, 2005, 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. PCX has 
designated this proposal as one 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 \3\ and Rule 19b-4(f)(2) 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 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).
    \4\ 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

    PCX proposes to amend its Schedule of Fees and Charges in order to 
include a provision that deals with royalty, or license fees, that are 
passed on to market participants on options trades that are part of an 
Option Strategy Execution.
    The text of the proposed rule change is available on the Exchange's 
Internet Web site (http://www.pacificex.com), at the Exchange'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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    PCX is proposing this change to the PCX Schedule of Rates and 
Charges so that the Exchange may continue to pass on the full amount of 
any royalty or license fees to trade participants, even when total 
transaction fees are capped in association with a defined Options 
Strategy Execution. PCX has established a cap on the transaction fees 
it charges to market participants that engage in certain strategy 
executions, as defined in the PCX Schedule of Fees and Charges. PCX 
represents that the cap was established because the referenced Options 
Strategy Executions are generally large volume trades done by 
professionals whose profit margins are generally narrow. The Exchange 
caps the transaction fees associated with such executions at $1,000 per 
strategy execution, with a monthly cap of $50,000 per initiating firm.
    Certain classes of options listed on PCX have as their underlying 
issue licensed products that carry a royalty fee on every contract 
traded. These fees are assessed by the issuing agency, and are not 
Exchange transaction fees. License fees, or royalty fees, that are 
charged to the Exchange are passed on to the actual participants 
executing the trade. Even though some of the fees are passed on, the 
fee cap would prevent PCX from recovering these fees in their entirety 
if they were to be included as transaction fees. If royalty fees are 
included as transaction fees, PCX would face the possibility of having 
to pay out substantial fees while the fee cap would limit the amount 
the Exchange would be able to pass on to trade participants. Because of 
the negative financial implications to the Exchange, PCX will not 
include license or royalty fees, which are passed on to trade 
participants in connection with trades that are done as part of an 
Options Strategy Execution, as part of the transaction fees counting 
towards both the $1,000 per trade transaction fee cap and the $50,000 
per month fee cap.
2. Statutory Basis
    The Exchange believes that proposal is consistent with Section 6(b) 
of the Act,\5\ in general, and Section 6(b)(4) \6\ in particular, in 
that it provides for the equitable allocation of dues, fees, and other 
charges among its members.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act \7\ and

[[Page 75526]]

Rule 19b-4(f)(2) \8\ thereunder 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 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(f)(2).
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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. 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 No. SR-PCX-2005-127 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-PCX-2005-127. 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 Commissions 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 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-2005-127 
and should be submitted on or before January 10, 2006.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7524 Filed 12-19-05; 8:45 am]

BILLING CODE 8010-01-P