[Federal Register Volume 63, Number 90 (Monday, May 11, 1998)]
[Notices]
[Pages 25891-25893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12351]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39945; File No. SR-PCX-98-08]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.,
Relating to Assessment for New Facilities
May 1, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ on February 9, 1998, the
Pacific Exchange, Inc. (``PCX'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'' or ``SEC'') a
proposed rule change SR-PCX-98-08. The proposed rule change is
described
[[Page 25892]]
in Items I, II and III below, which Items have been prepared by the
self-regulatory organization. The proposed rule change was originally
submitted by the Exchange with a request for Commission action pursuant
to Section 19(b)(2) of the Act.\3\ The proposed rule change was
published for comment in the Federal Register on March 11, 1998.\4\ No
comments were received on the proposal.
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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).
\4\ Securities Exchange Act Release No. 39719 (March 4, 1998),
63 FR 29719 (March 11, 1998).
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During the initial comment period for the proposal, on March 19,
1998, the Exchange filed a letter amendment, Amendment No. 1 to the
filing,\5\ which requested that the Commission act upon the filing
pursuant to its authority under Section 19(b)(3)(A) of the Act and
subparagraph (e) of Rule 19b-4 thereunder.\6\ because the filing
establishes a due, fee, or other charge of the Exchange, in accordance
with Section 19(b)(3)(A) of the Act and subparagraph (3) of Rule 19b-4
thereunder, the proposed rule change became immediately effective upon
the Exchange's filing of Amendment No. 1. The Commission is therefore
publishing this release to provide public notice of Amendment No. 1 to
File No. SR-PCX-98-08 and the immediate effectiveness of the proposed
rule change.
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\5\ See letter from Michael D. Pierson, Senior Attorney, PCX to
Sarrita Cypress, Office of Market Supervision, SEC, dated March 19,
1998.
\6\ 15 U.S.C. 78s(b)(3)(A) and 17 CFR 240.19b-4(e)
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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 assess the owners of each of the 552
Exchange memberships in order to provide an equity base for financing
land and new facilities for the Exchange. These facilities will include
new trading floors, technology facilities, office space and equipment.
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
1. Purpose
The Exchange is proposing to assess the owners of each of its 552
memberships $36,000, to be paid by each membership owner in monthly
installments of $1,000. The installments are payable on a monthly basis
and may not be paid in advance. The purpose of the assessment is to
provide an equity base to finance land and facilities to house the
Exchange's new trading floors, technology facilities, associated office
space and equipment. The Exchange intends to treat funds from the
assessment as a contribution to capital that will be segregated from
PCX operating funds.
The Exchange expects that the cost of the facilities will greatly
exceed the amount to be raised by this assessment. In that regard, the
Exchange intends to arrange additional financing for its new
facilities. The amount raised by the assessment will serve as an equity
base that will aid in the process of obtaining additional financing.
The Exchange's new facilities will consolidate the Exchange's San
Francisco administrative and operational facilities into a single
location, will include a larger options trading floor and an
appropriately designed equities trading facility that will better serve
the trading of equity securities and option contracts, and will provide
office space for members and member organizations, including clearing
firms. The need for new facilities is based upon the Exchange's current
growth rate and its need to provide effective services to its
membership. The move will also allow the Exchange to increase the
operational efficiency and improve the services it provides to the
investing public.
The Exchange recognizes that the current industry trend towards
electronic trading will affect the Exchange's future needs for trading
floor space, particularly in the trading of equity securities. But with
regard to the trading of options contracts, the Exchange believes that
it will still need a significantly larger trading floor because the
Exchange anticipates that electronic options trading will operate in
tandem with the current open outcry floor market. The Exchange also
notes that its need to move to new facilities is due in part to the
continuing growth of its options business in recent years. The move
will also fulfill the Exchange's need to operate in facilities with
enhanced emergency power and business recovery systems. The Exchange
notes that it previously imposed an assessment on its membership in
1988 and 1984.\7\
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\7\ In 1988, the Exchange imposed an interim monthly assessment
on each of its 551 regular memberships, consisting of two parts: a
flat fee of $600 per month and supplemental activity charge, applied
differently for Equities and Options Members, averaging $600 per
month per Member. The assessment was imposed in order for the
Exchange to meet its operational, technology, and facilities needs.
See Securities Exchange Act Release No. 25617 (April 26, 1988), 53
FR 15761 (May 3, 1988). In 1984, the Exchange imposed a special fee
of $6,000 on the 503 memberships outstanding as of December 15,
1983, for an aggregate assessment of approximately $3 million. The
purpose of the assessment was to raise financing for contemplated
facilities improvements to the Los Angeles and San Francisco Equity
Floors and the San Francisco Options Floor. See Securities Exchange
Act Release No. 20550 (January 11, 1984), 49 FR 2178 (January 18,
1984) [order approving File No. SR-PSE-83-24, which was submitted
pursuant to Section 19(b)(3)(A) of the Exchange Act].
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The Exchange is currently studying ways in which it might provide
future benefits (such as a rebate of the proposed assessment, if
permitted in the future by financial circumstances) to the seat holders
who pay some or all of the assessment. The Exchange will also require
PCX seat owners and their lessees, if any, to specify in an addendum to
their leases whether rent under those leases will be increased to
reflect the assessment and whether any potential benefits ultimately
returned to seat owners with respect to the assessment will, in turn,
be paid of transferred by the seat owner to the lessee.
2. Statutory Basis
The proposal is consistent with Section 6(b) \8\ of the Act, in
general, and Section 6(b)(4),\9\ in particular, in that it provides for
the equitable allocation of reasonable dues, fees or other charges
among its members.
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\8\ 15 U.S.C. 78f(b).
\9\ 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
Written comments on the proposed rule change were neither solicited
nor received.\10\
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\10\ The Commission notes that, although the Exchange did not
formally request comments on the rule filing from members, it did
hold a series of meetings to apprise members of the proposed project
to finance land and facilities to house the Exchange. Subsequent to
those meetings, the Exchange received a petition signed by
approximately 165 Options Floor Members opposing the proposed new
Exchange facilities and assessment plan. A copy of the petition has
been filed with the Commission as Exhibit A to the Rule 19b-4 filing
for the proposed rule change.
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[[Page 25893]]
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The foregoing rule change establishes a due, fee, or other charge
imposed by the Exchange and, therefore, has become effective pursuant
to Section 19(b)(3)(A) of the Act and subparagraphs (e) of Rule 19b-4
thereunder.\11\ At any time within 60 days of the filing of Amendment
No. 1 to 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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\11\ 15 U.S.C. 78s(b)(3)(A) and 17 CFR 19b-4(e).
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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, NW., Washington, DC 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, NW., Washington,
DC 20540. 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-98-08 and should be submitted by June 1, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12351 Filed 5-8-98; 8:45 am]
BILLING CODE 8010-01-M
