[Federal Register Volume 67, Number 99 (Wednesday, May 22, 2002)]
[Notices]
[Pages 36060-36062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-12806]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45942; File No. SR-Phlx-2002-32]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Various Option Fees

May 16, 2002.
    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 May 1, 2002, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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 
Phlx. 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 amend its schedule of dues, fees, and charges 
for its equity option transaction charges in the following three ways: 
(1) To reinstate a $.08 per contract Firm/Proprietary Facilitation 
Transaction charge,\3\ (2) to increase the Firm/

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Proprietary charge \4\ from $.08 to $.15 per contract, and (3) to 
increase the Broker/Dealer charge \5\ from $.25 to $.30 per contract.
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    \3\ A facilitation transaction occurs when a Floor Broker holds 
an options order for a public customer and a contra-side order for 
the same option series and, after providing an opportunity for all 
persons in the trading crowd to participate in the transaction, 
executes both orders as a facilitation cross. See Securities 
Exchange Act Release No. 44893 (October 2, 2001), 66 FR 51485 
(October 9, 2001) (eliminating Firm/Proprietary Facilitation 
Transaction charge); Phlx Rule 1064.
    \4\ The Firm/Proprietary charge applies to members for orders 
for the proprietary account of any member or non-member broker/
dealer that derives more than 35 percent of its annual, gross 
revenues from commissions and principal transactions with customers. 
See Securities Exchange Act Release No. 43558 (November 14, 2000), 
65 FR 69984 (November 21, 2000) (adopting Firm/Proprietary charge).
    \5\ The Broker/Dealer equity option transaction charge is 
applied to members for orders, entered from other than the floor of 
the Exchange, for any account (i) in which the holder of beneficial 
interest is a member or non-member broker-dealer or (ii) in which 
the holder of beneficial interest is a person associated with or 
employed by a member or non-member broker-dealer. See Securities 
Exchange Act Release Nos. 45185 (December 21, 2001), 66 FR 67614 
(December 31, 2001) (SR-Phlx-2001-113) (increasing Broker/Dealer 
equity option transaction charge from $.20 to $.25) and 43558 
(November 14, 2000), 65 FR 69984 (November 21, 2000) (adopting 
Broker/Dealer equity option transaction charge).
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    All three charges continue to be eligible for the monthly credit of 
up to $1,000 to be applied against certain fees, dues and charges and 
other amounts owed to the Exchange by certain members.\6\
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    \6\ See Securities Exchange Act Release No. 44292 (May 11, 
2001), 66 FR 27715 (May 18, 2001) (adopting monthly credit).
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    The proposed amended fees will be implemented for transactions 
settling on May 1, 2002 and thereafter.

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 received on the proposed rule change. 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

1. Purpose
    The Exchange proposes to amend its schedule of dues, fees and 
charges for its equity option transaction charges in the following 
three ways: to reinstate the Firm/Proprietary Facilitation Transaction 
charge, to increase the Firm/Proprietary charge, and to increase the 
Broker/Dealer charge. The purpose of the proposed rule change is to 
generate additional revenue.
    The Exchange does not currently impose any Firm/Proprietary 
Facilitation Transaction charge on Floor Brokers that hold an options 
order for a public customer and a contra-side order for the same option 
series and, after providing an opportunity for all persons in the 
trading crowd to participate in the transaction, execute both orders as 
a facilitation cross. A Floor Broker engaging in a facilitation 
transaction must announce that he/she holds an order subject to 
facilitation prior to the execution, and must mark the floor ticket for 
the public customer's order with a legible ``F.'' The Exchange proposes 
to reinstate this charge, which it eliminated in 2001, at $.08 per 
contract.\7\
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    \7\ See Securities Exchange Act Release No. 44893 (October 2, 
2001), 66 FR 51485 (October 9, 2001).
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    Currently, the Exchange imposes an $.08 per contract Firm/
Proprietary Transaction charge on members for orders for the 
proprietary account of any member or non-member broker-dealer that 
derives more than 35 percent of its annual, gross revenues from 
commissions and principal transactions with customers. Firms are 
required to verify this amount to the Exchange by certifying that they 
have reached this threshold and by submitting a copy of their annual 
report that was prepared in accordance with Generally Accepted 
Accounting Principles.\8\ The Exchange proposes to increase this charge 
to $.15 per contract.
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    \8\ See Securities Exchange Act Release No. 43558 (November 14, 
2000), 65 FR 69984 (November 21, 2000).
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    Currently, the Exchange imposes a $.25 per contract Broker/Dealer 
equity option transaction charge on members for orders entered from 
other than the floor of the Exchange, for any account where the holder 
of beneficial interest is a member or non-member broker-dealer, or 
where the holder of beneficial interest is a person associated with or 
employed by a member or non-member broker-dealer.\9\ This includes 
broker/dealer orders for the account of a Registered Options Trader 
(``ROT'') entered from off-floor.\10\ The Exchange proposes to increase 
this charge to $.30 per contract.
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    \9\ Recently, the Exchange began accepting broker-dealer orders 
over its Automated Options Market System (``AUTOM''). See Securities 
Exchange Act Release No. 45758 (April 15, 2002), 67 FR 19610 (April 
22, 2002).
    \10\ See Securities Exchange Act Release Nos. 45185 (December 
21, 2001), 66 FR 67614 (December 31, 2001) and 43558 (November 14, 
2000), 65 FR 69984 (November 21, 2000).
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
dues, fees and charges is consistent with Section 6(b) of the Act,\11\ 
in general, and furthers the objectives of Section 6(b)(4) of the 
Act,\12\ in particular, because it is an equitable allocation of 
reasonable charges among the Exchange's members. The proposal to amend 
the three charges is intended to generate additional revenue and the 
Exchange believes the proposal is reasonable and proper.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 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

    The Exchange has designated the proposed rule change as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \13\ and Rule 
19b-4(f)(2) thereunder.\14\ Accordingly, the proposal will take effect 
upon filing with the Commission. At any time within 60 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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

[[Page 36062]]

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-2002-32 and should be submitted by June 12, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-12806 Filed 5-21-02; 8:45 am]
BILLING CODE 8010-01-P