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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. Modifying its Options Trade-Related Transaction Charges and Changing its Firm Transaction Fee

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Start Preamble January 5, 2001

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 16, 2000, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange.[3] The Commission is publishing this notice to solicit comments on the proposed rule change, as amended.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend its Schedule of Rates and Charges to create a new fee category in the transactions portion of the “PCX Options: Trade-Related Charges.” The new fee category will be entitled “Broker-Dealer.” [4] The PCX also seeks to change the fees charged for firm transactions.

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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 Section 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 to amend its Schedule of Rates and Charges to create a new fee category in the transactions portion of the “PCX Options: Trade-Related Charges.” The new fee category will be entitled “Broker-Dealer.” The PCX also seeks to change the fees charged for firm transactions.

Currently, the PCX Schedule of Rates and Charges contains tow categorized of transactions under its options trade related charges. These categories include market maker transactions and firm transactions. The market maker charge is $0.21 per contract. The firm charge consists of $0.85 per contract side where the premium is less than $1.00 per contract and a $0.115 per contract side where the premium is $1.00 or more per contract. This fee structure does not address those instances where a broker/dealer processes a transaction through a customer account of the market maker or through a firm account created through a JBO arrangement with a clearing firm. In these situations the broker/dealer pays no transaction fees (customer account) or pays the applicable firm fee.

The Exchange now proposes to modify its Schedule of Rates and Charges. First, the Exchange proposes to change its options trade-related transaction charges by creating a new category entitled “Broker-Dealer.” The PCX believes that this modification is needed in order to create a billing category for broker-dealer activity that does not fall within the structure of the Schedule of Rates and Charges. This new category will cover transaction and comparison charges incurred by broker-dealer activity originating both on and off the PCX floor. This new fee consists of $0.19 per contract transaction charge and $0.05 per contract comparison charge. The fee will apply to broker-dealers who are routing orders through firm or customer accounts carried by member clearing firms. The broker-dealer fee does not apply to certain firm/proprietary orders that are included within the firm transaction charge.

The PCX believes that the propsed fee isreasonable. The Exchange alsorepresents that it is comparable to fees charged by the Phlx.[5] Like the broker-dealer charge applied by the Phlx, the PCX's proposed broker-dealer fee applies to ordersfor any account in which the holder of a beneficial interest is a broker-dealer or person associated with or employed by a broker-dealer, including JBO accounts.[6]

The Exchange also propooses tochange its firm transaction fee. The firm transaction fee applies to member firm proprietary trades that have a customer of that firm on the contra side of the transaction. The simplify billing, the Exchange proposes tochange the rate to a revenue neutral rate of $0.100 per contract regardless of premium size.

2. Statutory Basis

The Exchange believes that 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) [8] in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities.

B. Self-Regulatory Organization's Statement on Burden on Competition

The PCX 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

The Exchange did not solicit or receive comments on the proposed rule change.

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

The proposed rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,[9] and Rule 19b-4(f)(2) thereunder,[10] in that it establishes 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.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, 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. 20549-0609. 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 at the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to the File No. SR-PCX-00-38 and should be submitted by February 6, 2001.

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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[11]

Margaret H. McFarland,

Deputy Secretary.

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Footnotes

3.  The Exchange filed its proposed rule change on November 16, 2000. On December 15, 2000, however, the Exchange filed Amendment No. 1, which clarified that the proposed fee is comparable to the fee charged by the Philadelphia Stock Exchange, Inc. (“Phlx”). See Letter from Hassan Abedi, Attorney, Regulatory Policy, PCX, to Susie Cho, Attorney, Division of Market Regulation (“Division”), Commission (December 15, 2000).

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4.  The term “Broker-Dealer” as used in this rule filing will include transactions in which a market maker is trading for a customer account, any trade for a joint back officer (“JBO”) account, all trades for a firms account, except trades in which the firm is trading with its own customer on contra side.

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5.  See Securities Exchange Act Release No. 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000).

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9.  15 U.S.C. 78s(b)(3)(A)(ii).

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[FR Doc. 01-1153 Filed 1-12-01; 8:45 am]

BILLING CODE 8010-01-M