[Federal Register Volume 63, Number 56 (Tuesday, March 24, 1998)]
[Notices]
[Pages 14162-14163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7593]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39764; File No. SR-PCX-98-03]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to a Change in the Lead Market Marker Staffing Charges
March 16, 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 January 26, 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.\3\ 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\ On March 12, 1998, PCX submitted Amendment No. 1, which made
a technical correction and clarification to the filing. See Letter
from Michael D. Pierson, Senior Attorney, Regulatory Policy, PCX, to
Marie Ito, Special Counsel, Division of Market Regulation,
Commission, dated March 11, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The PCX is proposing to modify its staffing charge that is
currently applicable to Lead Market Makers (``LMMs'') who participate
in the Exchange's LMM Book Pilot Program. The text of the proposed rule
change is attached as Exhibit A.
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
On October 11, 1996, the Commission approved an Exchange proposal
to adopt the LMM Book Pilot Program under which a limited number of
LMMs would be permitted to assume operational responsibility for the
options public limit order book (``Book'') in a limited number of
issues (``LMM Book Pilot Program'' or ``Program'').\4\ On October 28,
1996, the Commission approved an Exchange proposal to establish a
staffing charge to LMMs who participate in the LMM Book Pilot
Program.\5\ This charge is currently set at $0.50 per contract for each
contract executed by the Book under the LMM Book Pilot Program, subject
to a minimum monthly charge of $200 and a maximum monthly charge of
$16,000.
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\4\ See Exchange Act Release No. 37810 (October 11, 1996), 61 FR
54481 (October 18, 1996).
\5\ See Exchange Act Release No. 37874 (October 28, 1996), 61 FR
56597 (November 1, 1996).
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The Exchange is now proposing to eliminate the current staffing
charge and to replace it with a tiered rate structure. As with the
existing staffing charge, the new charge will apply individually to
each LMM who is participating in the Program. It will also continue to
apply to all option contracts executed by the Book per month in all
option issues collectively traded by an LMM under the Program. The new
rates are as follows. For up to and including the first 15,000 option
contracts executed by the Book in Program issues traded by an LMM per
trade month, the charge will be $0.10 per contract. For the next tier,
covering from 15,001 to 30,000 contracts, the charge will be $0.20 per
contract. For the next tier, covering from 30,001 to 55,000 contracts,
the charge will be $0.30 per contract. For the final tier, covering all
contracts over 55,000 contracts, the charge will be $0.20 per contract.
For example, assume an LMM trades five option issues under the
Program, and during the month of December, the Book executed a total of
25,000 contracts in those five issues. The Exchange would assess the
LMM a staffing charge of $1,500 for contracts executed under the first
tier (15,000 x $0.10), plus $2,000 for contracts executed under the
second tier (10,000 x $0.20), for a total staffing charge for
December of $3,500.
The staffing charge is intended to cover the Exchange's cost of
providing staff to assist the LMM in operating the Book. The Exchange
is modifying the current charge in order to encourage additional LMMs
to participate in the LMM Book Pilot Program.\6\ By expanding
participation in the program, the Exchange will improve its competitive
posture by giving its LMM participants the ability to lower transaction
costs to the customer and thus to heighten competition with other
options exchanges for order flow in issues included in the Program.
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\6\ Under the terms of the LMM Book Pilot Program, no more than
nine LMMs are permitted to participate in the program. Currently,
there are three LMMs participating in the program.
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The proposal is consistent with Section 6(b) of the Act, in general
and Section 6(b)(4), in particular, in that it is designed to provide
for the equitable allocation of reasonable dues, fees and other charges
among Exchange members.
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 pursuant to Section
19(b)(3) of the Act and subparagraph (e) of Rule 19b-4 thereunder
because it constitutes 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.
[[Page 14163]]
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-98-03 and should be submitted by April 14,
1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
Exhibit A--Pacific Exchange, Inc.
Additions are italicized; deletions are bracketed.
Schedule of Fees and Charges for Exchange Services
* * * * *
PSE Options: Trade-Related Charges
* * * * *
Book Execution Charge
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Charge per contract
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11th contract and
Premium 1st 10 contracts above
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No change...................... No change......... No change.
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This charge does not apply to option contracts that are subject
to the LMM Book Pilot Program.
LMM Book [Pilot]
Program Staffing Charge
[$0.50 per contract, subject to a minimum monthly charge of $200 and
a maximum monthly charge of $16,000.]
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Charge per
LMM monthly book contracts book Maximum charge per rate tier
contract
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First 15,000.................................. $0.10 $1,500.00.
Next 15,000................................... 0.20 $3,000.00.
Next 25,000................................... 0.30 $7,500.00
All contracts above 55,000.................... 0.20 No maximum.
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Book staffing charge is applied to the monthly total of all book
contracts in all option issues collectively traded by an LMM under
the program.
[FR Doc. 98-7593 Filed 3-23-98; 8:45 am]
BILLING CODE 8010-01-M
