[Federal Register Volume 67, Number 51 (Friday, March 15, 2002)]
[Notices]
[Pages 11739-11740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6261]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45533; File No. SR-SCCP-2002-02]


Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to the Extension of Its Pilot Program To 
Implement Its Existing Fee Schedule for Electronic Communications 
Networks

March 11, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 17, 2002, the 
Stock Clearing Corporation of Philadelphia (``SCCP'') 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 primarily by SCCP. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change extends SCCP's pilot program for an 
additional one year period thereby continuing to implement the existing 
SCCP fee waivers for SCCP participants for trades executed on the 
Philadelphia Stock Exchange, Inc. (``Phlx'') for Electronic 
Communications Networks (``ECNs'').\2\ The current pilot program 
expired on January 23, 2002.
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    \2\ ECNs shall mean any electronic system that widely 
disseminates to third parties orders entered therein by an Exchange 
market maker or over-the-counter (``OTC'') market maker and permits 
such orders to be executed against in whole or in part except that 
the term ECN shall not include: any system that crosses multiple 
orders at one or more specified times at a specified price set by 
the ECN, algorithm, or by any derivative pricing mechanism and does 
not allow orders to be crossed or executed against directly by 
participants outside of such times or any system operated by or on 
behalf of an OTC market maker or exchange market maker that executes 
customer orders primarily against the account of such market maker 
as principal other than riskless principal.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule

    In its filing with the Commission, SCCP included statements 
concerning the purpose of and statutory basis for the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. SCCP has prepared summaries, set forth in 
sections (A), (B), and (C) below, of the most significant aspects of 
such statements.\3\
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    \3\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    SCCP previously filed with the Commission a proposed rule change to 
adopt a fee schedule for ECNs.\4\ Pursuant to that proposed rule 
change, SCCP waived certain dues, fees, and charges, including trade 
recording fees, value fees, and treasury transaction charges but not 
account fees, research fees, computer transmission/tape charges, or 
miscellaneous charges on its fee schedule.\5\ The fee schedule was to 
operate as a pilot program for one year. It was intended that after the 
initial pilot period, the ECN would be eligible for the SCCP fee 
schedule rates for ECNs only if the ECN achieved certain average daily 
equity volume on the Phlx.\6\ At this time, SCCP proposes to continue 
to implement the existing fee schedule for ECNs, as described above, 
without imposing volume requirements.
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    \4\ Securities Exchange Act Release No. 45145 (December 10, 
2001), 66 FR 65017 (December 17, 2001) (SR-SCCP-2001-01).
    \5\ Certain provisions of the SCCP fee schedule do not apply to 
ECNs because they apply to specialists and/or relate to margin 
financing, such as specialist discount, margin account interest, P&L 
statement charges and buy-ins.
    \6\ The average daily equity volume requirements on the Phlx 
were initially at least 5,000 trades and 5,000,000 shares in the 
twelfth month after the ECN first became subject to the ECN fee 
schedule.
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    This rule change affects ECN trades not related to such ECN acting 
as a Phlx specialist or floor broker. Thus, an ECN may incur specialist 
or floor brokerage transaction fees if it acts in that capacity. 
Currently, no ECN operates from Phlx's equity trading floor as a floor 
broker or specialist unit. If, however, an ECN did operate from the 
Phlx equity trading floor, it could be subject to various SCCP fees 
respecting

[[Page 11740]]

its non-ECN floor operation.\7\ In addition, an ECN's transactions as a 
floor broker would be subject to the applicable SCCP fee as would any 
ECN's specialist trades. Even if the ECN is acting as a floor broker or 
specialist with respect to some trades, those trades for which it is 
not acting as a floor broker or specialist, but rather as an ECN, would 
be subject only to the monthly and not other transaction charges.
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    \7\ For example, an ECN acting as a specialist would be subject 
to the trade recording fee for specialist trades matching with PACE 
trades.
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    The proposed rule change extends SCCP's existing fee schedule for 
ECNs for an additional one year period in order to have the opportunity 
to fully review and evaluate the overall structure of the ECN program, 
including whether to impose volume threshold requirements.
    SCCP believes that its current ECN fee schedule provides 
competitive fees with appropriate incentives thus proving a reasonable 
method to attract large order flow providers such as ECNs to Phlx and 
SCCP. Additional order flow should enhance liquidity and improve 
Phlx's, and therefore SCCP's, competitive position in equity trading 
and clearing.
    SCCP believes that its proposal to extend its current pilot program 
for one year, thereby continuing to implement the existing SCCP fee 
waivers described above for ECNs, is consistent with section 
17A(b)(3)(D) of the Act \8\ because it provides for the equitable 
allocation of reasonable dues, fees, and other charges. SCCP believes 
that structuring this fee for ECNs is appropriate, as ECNs are unique 
in their role as order flow providers to Phlx. Specifically, SCCP 
points out that ECNs operate a unique electronic agency business 
similar to a securities exchange as opposed to directly executing 
orders for their own customers as principal or agent.
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    \8\ 15 U.S.C. 78q-1(b)(3)(D).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    SCCP 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

    No written comments were either solicited or received.

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

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by SCCP, it has become effective pursuant 
to section 19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-4(f)(2) 
thereunder.\10\ At any time within sixty days of 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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 Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at SCCP. All submissions should refer to the 
File No. SR-SCCP-2002-02 and should be submitted by April 5, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-6261 Filed 3-14-02; 8:45 am]
BILLING CODE 8010-01-P