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Federal Register / Vol. 70, No.

205 / Tuesday, October 25, 2005 / Notices 61675

SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s Section 31 requires that national


COMMISSION Statement of the Purpose of, and securities exchanges pay a fee based on
Statutory Basis for, the Proposed Rule the aggregate dollar amount of sales of
[Release No. 34–52634; File No. SR–PCX– Change securities transacted on the exchange.
2005–111] Given the specific language of Section
1. Purpose 31, the Commission in the Adopting
Self-Regulatory Organizations; Pacific Section 31 of the Act 3 requires each Release for Rules 31 and 31T advised
Exchange, Inc.; Notice of Filing and national securities exchange to pay the that the current methodology for
Order Granting Accelerated Approval Commission a fee based on the aggregate treating sales of securities that occur
dollar amount of certain sales of through ITS 7 was no longer appropriate
to Proposed Rule Change To Establish
and that ‘‘it would be simpler and more
Certain Fees With Respect to securities (‘‘covered sales’’). Rules 31
transparent for each covered [self-
Transactions Executed Through the and 31T, adopted by the Commission in
regulatory organization (‘‘SRO’’)] to
Intermarket Trading System June 2004,4 established procedures for
report all covered sales that occur on its
the calculation and collection of Section
October 19, 2005. market.’’ The Commission further
31 fees on such covered sales. Rule 31
stated:
Pursuant to Section 19(b)(1) of the requires each national securities The Commission acknowledges that a
Securities Exchange Act of 1934 exchange that owes Section 31 fees to covered SRO on which a covered sale occurs
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 submit a completed Form R31 to the as a result of an incoming ITS order may not
notice is hereby given that on October Commission each month, beginning be able to collect funds to pay the Section 31
with July 2004. Rule 31T required each fee from one of its own members. However,
4, 2005, the Pacific Exchange, Inc. Section 31 does not address the manner or
(‘‘PCX’’ or ‘‘Exchange’’) filed with the exchange to submit a completed Form
R31 for each of the months September extent to which covered SROs may seek to
Securities and Exchange Commission recover the amounts that they pay pursuant
2003 to June 2004, inclusive. Each to Section 31 from their members. Covered
(‘‘Commission’’ or ‘‘SEC’’) the proposed
national securities exchange must report SROs may wish to devise new arrangements
rule change as described in Items I and
its covered sales volume based on the for passing fees between themselves so that
II below, which Items have been
data from a designated clearing agency, the funds are collected from the covered SRO
prepared by the PCX. The Commission when available. The designated clearing that originated the ITS order.8
is publishing this notice to solicit agency for covered sales of equity The Commission further noted that
comments on the proposed rule change securities is the National Securities any such arrangements devised by the
from interested persons, and is Clearing Corporation (‘‘NSCC’’). These SROs would have to be established
approving the proposal on an covered sales are reported in Part I of pursuant to Section 19(b) of the Act and
accelerated basis. Form R31, and each exchange is Rule 19b–4 thereunder.
I. Self-Regulatory Organization’s required to ‘‘provide in Part I only the A subcommittee of the ITS Operating
Statement of the Terms of Substance of data supplied to it by a designated Committee 9 (‘‘Subcommittee’’) has had
the Proposed Rule Change clearing agency.’’ 5 The data supplied by discussions in order to devise new
NSCC for the period September 2003 arrangements for passing fees between
The Exchange proposes to enter into through August 2004 did not accurately the ITS participants that (1) were
arrangements with other national reflect the aggregate dollar value of the collected from their members for the
securities exchanges to pass certain fees covered sales occurring on each months of September 2003 through
they have collected from members for exchange to permit reports to be made August 2004; and (2) are being collected
transactions executed on another in accordance with new Rules 31 and from their members beginning in
exchange through the Intermarket 31T. In particular, the data NSCC September 2004 and continuing. This
Trading System (‘‘ITS’’). This proposal reported to each national securities proposed rule change is being submitted
exchange included non-covered sales by the PCX with the understanding that
does not require changes to PCX rule
data for sales originating on one the other exchanges participating in the
text.
exchange and executed on another proposed arrangement devised by the
II. Self-Regulatory Organization’s exchange through the ITS.6 subcommittee will be submitting
Statement of the Purpose of, and substantially similar rule change
Statutory Basis for, the Proposed Rule 3 15 U.S.C. 78ee. proposals.10
4 See Securities Exchange Act Release No. 49928
Change
(June 28, 2004), 69 FR 41060 (July 7, 2004) 7 In the Adopting Release, the Commission

In its filing with the Commission, the (‘‘Adopting Release’’). described the current methodology: ‘‘SRO A sends
5 17 CFR 240.31(b)(5). an ITS commitment to a member of SRO B to sell
Exchange included statements 6 As a result of this and other inaccuracies in the a security, and the commitment is executed on SRO
concerning the purpose of, and basis for, data reported by NSCC, the national securities B. Under existing arrangements, SRO A pays the
the proposed rule change and discussed exchanges were unable to report accurate Section 31 fee arising from this trade and passes the
information on Form R31, unless they made fee to its member that initiated the trade. * * *
any comments it received on the [T]he SROs devised this system because SRO B
adjustments to the NSCC data based on data other
proposed rule change. The text of these than that provided by NSCC. On October 6, 2004, does not have the ability to require members of SRO
statements may be examined at the the Commission’s Division of Market Regulation A to reimburse it for the cost of its Section 31 fees.’’
(‘‘Division’’) issued a ‘‘no-action’’ letter advising Adopting Release, 69 FR at 41067.
places specified in Item III below. The 8 Id.
exchanges for whom NSCC acts as a designated
Exchange has prepared summaries, set clearing agency under Rule 31, that the Division 9 The ITS participants are American Stock
forth in Sections A, B, and C below, of staff would not recommend that the Commission Exchange LLC, Boston Stock Exchange, Chicago
the most significant aspects of such take enforcement action if a national securities Board Options Exchange, CHX, National
exchange adjusts the data provided by NSCC to Association of Securities Dealers (‘‘NASD’’),
statements. accurately reflect covered sales occurring on the National Stock Exchange, New York Stock
national securities exchange. See letter from Robert Exchange (‘‘NYSE’’), PCX, and Philadelphia Stock
L.D. Colby, Deputy Director, Division, Commission Exchange.
to Ellen J. Neely, Senior Vice President and General 10 NASD has determined not to participate in the
1 15 U.S.C. 78s(b)(1). Counsel, Chicago Stock Exchange, Inc. (‘‘CHX’’), arrangement for passing fees between exchanges
2 17 CFR 240.19b–4. dated October 6, 2004. Continued

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61676 Federal Register / Vol. 70, No. 205 / Tuesday, October 25, 2005 / Notices

Pursuant to the new arrangement transactions.11 The ISIS data is sorted by designed to promote just and equitable
being proposed, each ITS participant originating market center (i.e., the principles of trade, to prevent
exchange determines whether it has sender of an ITS commitment) and fraudulent and manipulative acts and
received and executed more in dollar receiving market center (i.e., the market practices, and, in general, to protect
value of covered sales than it has center that executes the ITS investors and the public interest. In
originated and sent to each other ITS commitment). Using this data, each ITS addition, the Exchange believes that the
participant exchange. For example, for participant exchange can determine on proposed rule change is consistent with
the historical period, September 2003 a monthly basis the dollar value of all the provisions of Section 6(b)(4) of the
through August 2004, SRO A sent ITS executed commitments sent to and Act,14 which requires that the rules of
commitments for covered sales whose received from another ITS participant an exchange provide for the equitable
dollar value was $150 million to SRO B exchange. allocation of reasonable dues, fees, and
for execution. SRO A collected fees from At its meeting on February 23, 2005, other charges among its members and
its members to fund its Section 31 the Subcommittee asked the Securities issuers and other persons using its
obligation for those covered sales Industry Automation Corporation facilities.
executed on SRO B. SRO B, as the (‘‘SIAC’’) to determine the time and
executing market center, is obligated to B. Self-Regulatory Organization’s
expense involved for SIAC to use the
pay the Section 31 fee to the SEC. Statement on Burden on Competition
ITS database that it maintains to provide
During the same period, SRO B sent ITS reports of the aggregate dollar value of The Exchange does not believe that
commitments for covered sales whose buy and sell transactions occurring the proposed rule change will impose
dollar value was $210 million to SRO A. through ITS to the ITS participants. On any burden on competition that is not
SRO B collected fees from its members March 15, 2005, representatives of the necessary or appropriate in furtherance
for those covered sales executed on SRO Subcommittee authorized SIAC to of the purposes of the Act.
A. SRO A, as the executing market develop new reports. SIAC is in the C. Self-Regulatory Organization’s
center, is obligated to pay the Section 31 process of developing these reports and Statement on Comments on the
fee to the SEC. Since SRO A executed expects to complete testing by August Proposed Rule Change Received From
a greater dollar value of covered sales 31, 2005. Once SIAC can provide this Members, Participants or Others
from SRO B than it sent to SRO B, the data, it will no longer be necessary for
proposed arrangement requires SRO A ISIS data to be used. The new reports No written comments were solicited
to determine the amount of the fees provided by SIAC will be used by ITS or received with respect to the proposed
collected by SRO B from its members participants in connection with rule change.
based on the aggregate dollar value of determining which ITS participant III. Solicitation of Comments
covered sales from SRO B and executed exchange will pay the fee for
on SRO A through ITS commitments. transactions occurring through ITS and Interested persons are invited to
When invoicing SRO B, SRO A will which ITS participant exchange has submit written data, views, and
deduct the amount of the fee it owes to collected the fee from its members. arguments concerning the foregoing,
SRO B (i.e., the fee amount based on The PCX believes that the proposed including whether the proposed rule
SRO A’s $210 million in aggregate arrangement is a fair and efficient means change is consistent with the Act.
covered sales less the fee amount based for passing fees collected at one ITS Comments may be submitted by any of
on SRO B’s $150 million in aggregate participant exchange based upon the following methods:
covered sales) and will invoice only for executions of covered sales occurring at Electronic Comments
the difference of $60 million. another ITS participant exchange. The
Once the fees have been invoiced and • Use the Commission’s Internet
PCX acknowledges that the legal duty to comment form (http://www.sec.gov/
paid for the historical period, the ITS report and pay the Section 31 fee
participant exchanges plan to use the rules/sro.shtml); or
remains with the ITS participant on • Send an e-mail to rule-
same arrangement for the period which the sale was in fact transacted.
beginning September 2004 and comments@sec.gov. Please include File
continuing. It is anticipated that the 2. Statutory Basis Number SR–PCX–2005–111 on the
invoicing process will occur twice subject line.
This proposal would establish a
yearly to coincide with the March 15 process for SROs to enter into Paper Comments
and September 30 payment schedule for arrangements to pass fees they have
Section 31 fees set forth in the Act. • Send paper comments in triplicate
collected from members for transactions to Jonathan G. Katz, Secretary,
To implement this proposed executed on another SRO through ITS.
arrangement, an ITS participant Securities and Exchange Commission,
For these reasons, the Exchange believes Station Place, 100 F Street, NE.,
exchange will require access to the that the proposed rule change is
aggregate dollar value of buy and sell Washington, DC 20549–9303.
consistent with the Act and the rules All submissions should refer to File
transactions occurring through ITS. and regulations thereunder that are
Under the proposed arrangement for Number SR–PCX–2005–111. This file
applicable to a national securities number should be included on the
fees collected for the months of exchange and, in particular, the
September 2003 through August 2004, subject line if e-mail is used. To help the
requirements of Section 6(b) of the Commission process and review your
an ITS participant exchange may choose Act.12 Specifically, the Exchange
to use data obtained from the Inter- comments more efficiently, please use
believes the proposed rule change is only one method. The Commission will
market Surveillance Information System consistent with the requirements of
(‘‘ISIS’’) or data that provides post all comments on the Commission’s
Section 6(b)(5) of the Act,13 in that it is Internet Web site (http://www.sec.gov/
comparable information that includes
aggregate dollar value of ITS 11 The NYSE has made available to the ITS
rules/sro.shtml). Copies of the
participants spreadsheets for each month in the submission, all subsequent
although they participated in many of the period using the ISIS data. amendments, all written statements
12 15 U.S.C. 78f(b).
conference calls regarding the proposed
arrangement. 13 15 U.S.C. 78f(b)(5). 14 15 U.S.C. 78f(b)(4).

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Federal Register / Vol. 70, No. 205 / Tuesday, October 25, 2005 / Notices 61677

with respect to the proposed rule the ITS commitment away will continue (1) A 4.1 percent cost-of-living
change that are filed with the to collect a fee from the broker-dealer increase in Social Security benefits
Commission, and all written that placed the sell order. Then, with under title II of the Social Security Act
communications relating to the respect to each ITS participant (the Act), effective for December 2005;
proposed rule change between the exchange, the exchange will determine (2) An increase in the Federal
Commission and any person, other than whether it is a net sender or net receiver Supplemental Security Income (SSI)
those that may be withheld from the of ITS trades and send fees to or accept monthly benefit amounts under title
public in accordance with the fees from each other exchange XVI of the Act for 2006 to $603 for an
provisions of 5 U.S.C. 552, will be accordingly. The Commission believes eligible individual, $904 for an eligible
available for inspection and copying in this is an equitable manner for the individual with an eligible spouse, and
the Commission’s Public Reference exchanges to obtain funds to pay their $302 for an essential person;
Room. Copies of such filing also will be Section 31 fees on covered sales (3) The student earned income
available for inspection and copying at resulting from ITS trades. exclusion to be $1,460 per month in
the principal office of the PCX. All Under Section 19(b)(2) of the Act,18 2006 but not more than $5,910 in all of
comments received will be posted the Commission may not approve any 2006;
without change; the Commission does proposed rule change prior to the (4) The dollar fee limit for services
not edit personal identifying thirtieth day after the date of performed as a representative payee to
information from submissions. You publication of the notice of filing be $33 per month ($64 per month in the
should submit only information that thereof, unless the Commission finds case of a beneficiary who is disabled
you wish to make available publicly. All good cause for so doing. The and has an alcoholism or drug addiction
submissions should refer to File Commission hereby finds good cause for condition that leaves him or her
Number SR–PCX–2005–111 and should approving the proposed rule change incapable of managing benefits) in 2006;
be submitted on or before November 15, prior to the thirtieth day after (5) The national average wage index
2005. publishing notice of filing thereof in the for 2004 to be $35,648.55;
Federal Register. In this case, the (6) The Old-Age, Survivors, and
IV. Commission’s Findings and Order Commission does not believe a
Granting Accelerated Approval of a Disability Insurance (OASDI)
comment period is necessary because all contribution and benefit base to be
Proposed Rule Change of the parties affected by the proposed $94,200 for remuneration paid in 2006
After careful consideration, the fee—the other ITS participant and self-employment income earned in
Commission finds that the proposed exchanges—have already consented to taxable years beginning in 2006;
rule change is consistent with the Act and will adopt the same fee (7) The monthly exempt amounts
and the rules and regulations arrangement.19 under the Social Security retirement
thereunder applicable to a national For the reasons set forth above, the
earnings test for taxable years ending in
securities exchange.15 In particular, the Commission finds good cause to
calendar year 2006 to be $1,040 and
Commission believes that the proposal accelerate approval of the proposed rule
$2,770;
is consistent with Section 6(b)(4) of the change pursuant to Section 19(b)(2) of
(8) The dollar amounts (‘‘bend
Act,16 which requires that the rules of the Act.20
points’’) used in the primary insurance
an exchange provide for the equitable V. Conclusion amount benefit formula for workers who
allocation of reasonable dues, fees, and become eligible for benefits, or who die
other charges among its members and It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,21 that the before becoming eligible, in 2006 to be
issuers and other persons using its $656 and $3,955;
facilities. National securities exchanges proposed rule change (SR–PCX–2005–
111) is hereby approved on an (9) The dollar amounts (‘‘bend
obtain funds to pay their Section 31 fees points’’) used in the formula for
to the Commission by charging fees to accelerated basis.
computing maximum family benefits for
broker-dealers who generate the covered For the Commission, by the Division of
Market Regulation, pursuant to delegated
workers who become eligible for
sales on which Section 31 fees are benefits, or who die before becoming
based. An exchange can obtain most of authority.22
Jonathan G. Katz, eligible, in 2006 to be $838, $1,210, and
these funds by imposing a fee on one of $1,578;
its members whenever the member is on Secretary.
(10) The amount of taxable earnings a
the sell side of a transaction. However, [FR Doc. E5–5891 Filed 10–24–05; 8:45 am]
person must have to be credited with a
when the exchange accepts an ITS BILLING CODE 8010–01–P
quarter of coverage in 2006 to be $970;
commitment to buy, the ultimate seller (11) The ‘‘old-law’’ contribution and
is a party on another market. The benefit base to be $69,900 for 2006;
exchange lacks the ability to pass a fee SOCIAL SECURITY ADMINISTRATION (12) The monthly amount deemed to
to that seller directly, because the seller constitute substantial gainful activity for
may not be a member of the exchange. Office of the Commissioner; Cost-of-
statutorily blind individuals in 2006 to
Under the proposed arrangement, which Living Increase and Other
be $1,450, and the corresponding
the Commission understands will be Determinations for 2006
amount for non-blind disabled persons
adopted by each of the ITS participant AGENCY: Social Security Administration. to be $860;
exchanges,17 the exchange that routed (13) The earnings threshold
ACTION: Notice.
15 In approving this proposal, the Commission has
establishing a month as a part of a trial
SUMMARY: The Commissioner has work period to be $620 for 2006; and
considered its impact on efficiency, competition, determined—
and capital formation. See 15 U.S.C. 78c(f). (14) Coverage thresholds for 2006 to
16 15 U.S.C. 78f(b)(4). be $1,500 for domestic workers and
18 15 U.S.C. 78s(b)(2).
17 See letter from George W. Mann, Jr., Executive
19 See
$1,300 for election workers.
Vice President and General Counsel, BSE, and supra note 17.
20 Id. FOR FURTHER INFORMATION CONTACT:
Chairman, Subcommittee, to Michael Gaw,
Assistant Director, Division, Commission, dated 21 Id. Jeffrey L. Kunkel, Office of the Chief
September 29, 2005. 22 17 CFR 200.30–3(a)(12). Actuary, Social Security

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