[Federal Register Volume 66, Number 164 (Thursday, August 23, 2001)]
[Notices]
[Pages 44393-44394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-21307]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44716; File No. SR-PHLX-2001-73]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc., To Suspend Imposition of its Payment for Order Flow Fee

August 16, 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 August 2, 2001, the Philadelphia Stock Exchange, Inc. (``Phlx'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items, I, II, and III, below, 
which Items the Phlx has prepared. 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.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to suspend imposition of its $1.00 payment for 
order flow fee beginning with contracts settling on or after August 1, 
2001.\3\ The text of the proposed rule change is available at the 
principal offices of the Phlx and at the Commission.
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    \3\ The Phlx would continue to provide Phlx specialists and 
order flow providers with reports regarding the quality of execution 
of options orders, and specialists or specialist units would 
continue to be governed by the books and records requirements of 
Phlx Rule 760. See Securities Exchange Act Release Nos. 43436 
(October 11, 2000), 65 FR 63281 (October 23, 2000) (SR-Phlx-00-83) 
and 44405 (June 11, 2001), 66 FR 32859 (June 18, 2001) (SR-Phlx-
2001-08).
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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 Phlx included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it had received. The text of these statements 
may be examined at the places specified in Item IV below. The Phlx 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

    The purpose of the proposed rule change is to suspend imposition of 
the Phlx's payment for order flow fee for contracts settling on or 
after August 1, 2001.
    In August 2000, the Phlx imposed a $1.00 per contract fee on 
transactions by Phlx specialists and Registered Options Traders 
(``ROTs'') in the top 120 options traded on the Phlx.\4\ The payment 
for order flow fee did not apply to index or currency options. In 
addition, transactions between: (1) A specialist and an ROT; (2) an ROT 
and an ROT; (3) a specialist and a firm; (4) an ROT and a firm; (5) a 
specialist and a broker-dealer; and (6) an ROT and a broker-dealer were 
excepted from the $1.00 fee.\5\
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    \4\ The Phlx defines a top 120 option as one of the 120 most 
actively traded equity options in terms of the total number of 
contracts that are traded nationally based on volume reflected by 
the Options Clearing Corporation. The Phlx recalculates the top 120 
options every six months. For the period from April 2, 2001 through 
June 30, 2001, when options on the Nasdaq-100 Trust (trading under 
the symbol QQQ) were added to the program, there were 121 options on 
the Phlx's list. See Securities Exchange Act Release No. 44237 
(April 30, 2001), 66 FR 23308 (May 8, 2001) (SR-Phlx-2001-43).
    \5\ See Securities Exchange Act Release Nos. 43177 (August 18, 
2000), 65 FR 51889 (August 25, 2000) (SR-Phlx-00-77); 43480 (October 
25, 2000), 65 FR 66275 (Nov. 3, 2000) (SR-Phlx-00-86 and SR-Phlx-00-
87); and 43481 (Oct. 25, 2000), 65 FR 66277 (November 3, 2000) (SR-
Phlx-00-88 and SR-Phlx-00-89).
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    The Phlx believes that its proposal to suspend imposition of the 
fee is consistent with Section 6(b) of the Act \6\ and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act \7\ in that it is an 
equitable allocation of reasonable fees among the Phlx's members. The 
Phlx notes that, although it is suspending the imposition of its 
payment for order flow fee, members may continue to negotiate their own 
private arrangements with order flow providers to attract options 
orders to the Phlx.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that the proposed rule change will impose 
any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Phlx neither solicited nor received any written comments with 
respect to the proposal.

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

    The Phlx has designated the foregoing proposed rule change as a fee 
change pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(2) thereunder,\9\ and therefore the proposal has become effective 
upon filing with the Commission. At any time within 60 days after the 
filing of 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2).
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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 20549-0609. 
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 
Phlx. All submissions should refer to File No. SR-Phlx-2001-73 and 
should be submitted by September 13, 2001.


[[Page 44394]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 01-21307 Filed 8-22-01; 8:45 am]
BILLING CODE 8010-01-M