[Federal Register Volume 63, Number 53 (Thursday, March 19, 1998)]
[Notices]
[Pages 13440-13441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7068]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39745; File No. SR-PCX-98-11]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to the Exchange's Specialist Post Fee Waiver Program
March 12, 1998.
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 February 19, 1998, 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 self-
regulatory organization. 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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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange is proposing to adopt a fee waiver program for certain
new specialist firms on the Exchange. The text of the proposed rule
change is set forth in Exhibit A to the filing.
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 self-regulatory organization
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 self-regulatory organization
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
Purpose
The Exchange is proposing to adopt a Specialist Post Fee Waiver
Program (the ``Program'') in order to provide short-term cost relief to
new specialist firms that agree to operate a specialist post, and to
existing specialist firms that agree to operate an additional
specialist post, on the Equity Floors of the Exchange. The Program is
intended to provide financial incentives to encourage specialist firms
to operate specialist posts and to encourage those firms to bring new
equity order flow to the Exchange. Any specialist firm that provides
new backing of a specialist post, after the effective date of the
Program, would be eligible to participate in the Program. Fees for
posts already being operated by a specialist firm are not affected by
this waiver Program.
The terms of the Program are as follows: First, if a specialist
assumes new financial responsibility for a specialist post after the
effective date of the Program, that specialist firm's fixed specialist
fees for the post taken over will be waived for three months.\3\
Second, once the three months of the fee waiver have been earned, all
of the fees previously waived under the Program will be reinstated.
Third, once the previously waived fees are reinstated, the specialist
firm will be eligible to
[[Page 13441]]
earn additional fee credits for three months based upon monthly trading
volume at the specialist post taken over. The proposed schedule is set
forth below. These fee credits are intended to serve as incentives for
specialist firms to bring new equity order flow to the Exchange.
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\3\ The specialist fees that will be waived include: Exchange
Member Dues, the Floor Privilege Fee, the Specialist Facility Fee,
the Specialist Systems Fee, Workstation Fees, the Market Data Fee,
the Card Access Fee, the Pacific Clearing Corporation (``PCC'') Post
Cashiering Fee and the PCC Post Clearing Fee. Some of the fees
waived will vary based on the number of staff the firm has on the
floor and the services the firm uses. Consequently, the actual
dollar amount of waived fees will vary slightly by firm. Generally,
waived fees will average $7,330 per month.
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Post fee credit Est'd
-------------------------------- effective
Monthly post trading volume monthly post
Percent Amount fee
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4 million shares or more........................................ 85 $6,230 $1,100
3 to less than 4 million shares................................. 50 3,665 3,665
2 to less than 3 million shares................................. 25 1,830 5,500
Less than 2 million shares...................................... 0 0 7,330
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Fourth, a specialist firm is eligible to earn the fee credits
provided above for three trade months. Fifth, if a specialist firm
begins operating a specialist post under the Program during the course
of a trade month, the Exchange will stagger the issuance of part of the
fee waiver until after the passage of time in which fee credits may be
earned. This will allow the Exchange to avoid crediting a specialist
firm an amount that exceeds its fixed fees during any given trade
month. Thus, for example, if a firm begins operating a post on February
15, the prorated fixed fees for February (i.e., from February 15 to the
end of February) will be waived, as will the fixed fees for March and
April. The firm will then be eligible to earn fee credits during the
months of May, June and July. Then, in August, the Exchange will
provide a fee waiver equal to the amount not previously waived in
February (i.e., the portion equal to the fees for the first half of
February). Finally, once a specialist firm has participated in the
Program for six full months, the Exchange will no longer apply fee
waivers and fee credits, and the specialist firm will be subject to
regular specialist post fees for the post taken over.
Basis
The proposal is consistent with Section 6(b) of the Act \4\ in
general, and Section 6(b)(4),\5\ in particular, in that it is designed
to provide for the equitable allocation of reasonable dues, fees and
other charges among members.\6\
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
\6\ The Commission notes that the filing may raise questions
concerning payment for order flow. To the extent that it does raise
such issues, exchange members should consider any associated
disclosure obligations, namely pursuant to Rules 10b-10 and 11Ac1-3
under the Act, 17 CFR 240.10b-10 and 17 CFR 240.11Ac1-3,
respectively.
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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 immediately pursuant
to Section 19(b)(3)(A)(ii) \7\ of the Act and subparagraph (e)(2) of
Rule 19b-4 thereunder \8\ because it constitute 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.\9\
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\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
\8\ 17 CFR 240.19b-4(e)(2).
\9\ In reviewing the proposal, the Commission has considered the
proposal's impact on efficiency, competition, and capital formation.
See 15 U.S.C. 78c(f).
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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, N.W., Washington, D.C. 20549.
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, 450 Fifth Street, N.W., Washington,
D.C. 20549. 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-98-11 and should be submitted by April 9,
1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-7068 Filed 3-18-98; 8:45 am]
BILLING CODE 8010-01-M
