[Federal Register Volume 64, Number 62 (Thursday, April 1, 1999)]
[Notices]
[Pages 15856-15857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8062]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41212; File No. SR-PCX-99-03]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.,
Relating to Fee Schedule Changes
March 24, 1999.
Pursuant to Section 19(b) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 11, 1999, 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. On March
4, 1999, the Exchange filed as amendment (``Amendment No. 1'') to the
proposed rule change.\3\ In Amendment No. 1, the Exchange designated
the portion of the proposed rule change dealing with customer
transaction charges as constituting a ``non-controversial'' rule change
under Rule 19b-4(f)(6) under the Act,\4\ which renders the part of the
proposal effective upon receipt of this filing by the Commission.\5\
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\ See letter from Robert P. Pacileo, Staff Attorney,
Regulatory Policy, PCX, to Michael A. Walinskas, Deputy Associate
Director, Division of Market Regulation (``Division''), Commission,
dated March 3, 1999. The Commission received a draft of the proposed
amendment on February 26, 1999, which the Commission has accepted as
a pre-filing pursuant to Rule 19b-4(f)(6).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ The Exchange has represented that the proposed rule change
will not: (i) Significantly affect the protection of investors or
the public interest; (ii) impose any significant burden on
competition; and (iii) become operative for 30 days after the date
of this filing, unless otherwise accelerated by the Commission. The
Exchange also has provided at least five business days notice to the
Commission of its intent to file this proposed rule change, as
required by Rule 19b-4(f)(6) under the Act. See note 3 above. Also,
in a telephone conversation on February 26, 1999, between Robert P.
Pacileo, Staff Attorney, Regulatory Policy, PCX, and David
Sieradzki, Special Counsel, and Joseph Morra, Attorney, Division,
SEC, the Exchange requested that the Commission waive the 30-day
waiting period under Rule 19b-4(f)(6) for the portion of the filing
relating to customer fees.
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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 change its Schedule of Fees and
Charges for Exchange Services as discussed below. The text of the
proposed rule change is available at the Office of the Secretary, PCX,
and at the Commission.
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
The Exchange proposes four changes to its Schedule of Fees an
Charges for Exchange Services by reducing its customer transaction
charges, increasing its Market Maker transaction charges and fees,
reducing its LMM Book transaction charges, and increasing its Member
dues.
Customer Charges. Currently, for manual transactions, the Exchange
charges its customers $0.15 per contract side for premiums less than
one dollar and $0.35 per contract side for premiums one dollar or
greater. For block transactions with premiums one dollar or greater,
the Exchange charges its customers $0.35 per contract for the first
four hundred contracts of a block trade and $0.25 per contract for all
contracts over four hundred. The Exchange charges its customers $0.30
per contract side for Pacific Options Exchange Trading System
(``POETS'') transactions, with a minimum charge of $0.35 per trade.
Also, the Exchange charges a Book execution fee of $0.45 per contract
side for all customer Book executions. To simplify rates and reduce
costs for customers, the Exchange proposes to reduce transaction
charges for customers to $0.12 per contract side, which will apply to
all manual transactions (including block transactions) and POETS
automated transactions. Further, the Exchange proposes to reduce Book
execution fees to $0.20 per contract side for all Book transactions,
except accommodation/liquidation transactions,\6\ which remain
unchanged. The Exchange proposes to make these changes in an effort to
remain competitive, attract customer order-flow, and reduce customer
costs.
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\6\ An accommodation/liquidation transaction is a book-executed
transaction for a premium less than \1/16\th. Telephone conversation
between Robert P. Pacileo, Staff Attorney, Regulatory Policy, PCX,
and Joseph Morra, Attorney, Division, SEC, on March 23, 1999.
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Market Maker Charges. The current transaction charges for Market
Makers are $0.095 per contract site for equity options, $0.11 per
contract side for index options, and $0.085 per contract side for POETS
transactions. Also, the Exchange currently charges a monthly Market
Maker fee of $660, which is applied to all Market Makers after a six-
month initial waiver person. The Exchange proposes to increase
transaction charges for Market Makers to $0.15 per contract side for
all manual and POETS transactions. In addition,
[[Page 15857]]
the Exchange proposes to increase Market Maker fees to $1,750 per month
per Market Maker, and proposes to eliminate the initial six-month
waiver period. The Exchange proposes these changes to offset revenues
lost from customer rate reductions.
LMM Book Charges. The Exchange charges each Lead Market Maker
(``LMM'') $0.10 per Book contract for the first 15,000 contracts, $0.20
for 15,001 to 30,000 Book contracts, $0.30 for 30,001 to 55,000 Book
contracts, and $0.20 for all Book contracts over 55,000. These charges
are applied to the monthly total of all Book contracts in all options
issues collectively traded by an LMM under the program. The Exchange
proposes to reduce its per Book contract rates to $0.05 per Book
contract for the first 15,000 contracts, $0.10 for 15,001 to 30,000
Book contracts, $0.15 for 30,001 to 55,000 Book contracts, and $0.10
for all Book contracts over 55,000. The Exchange proposes these fee
changes to reduce charges consistent with the reduction in Book
execution fees for customers. In addition, the fee reduction is
intended to attract LMMs to participate in the LMM Book Program.
Member dues. Currently, monthly dues for Exchange Members are $250.
The Exchange proposes to increase its monthly Member dues to $750 per
month to maintain a revenue base for the operations of the Exchange.
2. Basis
The Exchange believes 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, because it provides for
the equitable allocation of reasonable dues, fees and other charges
among its Members and issuers and other persons using its
facilities.\9\
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
\9\ In reviewing this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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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 proposed rule change relating to membership fees, transaction
charges for Market Makers, LMM Book charges, Market Maker fees, and
member dues became effective upon filing pursuant to Section
19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of Rule 19b-4
thereunder.\11\
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\10\ 15 U.S.C. 78f(b)(3)(A)(ii).
\11\ 17 CFR 240.19b-4(f)(2).
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The portion of the proposed rule regarding customer transaction
charges have been filed by the Exchange as a ``non-controversial'' rule
change pursuant to Section 19(b)(3)(A)(ii) of the Act \12\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\ Consequently, because
the Exchange represents that the foregoing proposed rule change with
respect to customer transaction changes: (1) does not significantly
affect the protection of investors or the public interest; (2) does not
impose any significant burden on competition; and because the Exchange
provided the Commission with written notice of its intent to file the
proposed rule change at least five days prior to the filing date, it
has become effective pursuant to Section 19(b)(3)(A) of the Act and
Rule 19b-4(f)(6) thereunder. The Commission finds good cause to permit
the proposed rule change relating to customer fees to become operative
prior to thirty days from the date of filing \14\ because the
Commission believes that those portions reducing the fees may increase
competition between the options exchanges.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ The Exchange requested that the Commission waive the 30-day
operative period under Rule 19b-4(f)(6) regarding the provision
relating to customer fees. See footnote 5.
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IV. Solicitation of Comments
Interested personal are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal 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, DC 20549-0609. 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 will also be
available for inspection and copying at the principal office of the
PCX. All submissions should refer to File No. SR-PCX-99-03, and should
be submitted by April 22, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-8062 Filed 3-31-99; 8:45 am]
BILLING CODE 8010-01-M
