[Federal Register Volume 68, Number 45 (Friday, March 7, 2003)]
[Notices]
[Pages 11168-11169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5424]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47424; File No. SR-Phlx-2003-04]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to the Payment for Order Flow Fees for the Top 
120 Options

February 28, 2003.
    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 January 28, 2003, the Philadelphia Stock Exchange, Inc. 
(``Phlx'') filed with the Securities and Exchange Commission the 
proposed rule change as described in items I, II, and III below, which 
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 establish its options payment for order flow 
fees imposed on the transactions of Phlx Registered Options Traders 
(``ROTs'') for the period from February through April 2003, for the top 
120 options based on volume statistics from October, November, and 
December 2002,\3\ as set forth on the ROT Equity Option Payment for 
Order Flow Charges Schedule. The Phlx intends to implement the fees for 
trades settling on February 1, 2003, through April 30, 2003. The rate 
levels have remained unchanged: the top-ranked option is charged a fee 
of $1.00 per contract, the next 49 options are charged a fee of $0.50 
per contract, and the fee for the remaining options in the top 120 is 
set at $0.00.
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    \3\ The Phlx's payment for order flow fee is assessed on ROTs on 
the top 120 most actively traded equity options in terms of the 
total number of contracts that are traded nationally, based on 
volume statistics provided by the Options Clearing Corporation. The 
measuring periods for the top 120 options are calculated every three 
months. For example, for the period from February through April 
2003, the measuring period for the top 120 options is based on 
volume statistics from October, November and December 2002. For the 
period from May through July 2003, the measuring period for the top 
120 options will be based on volume statistics from January, 
February and March 2003. This cycle is scheduled to continue every 
three months, with a separate proposed rule change filed for each 
three-month period.
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    The Phlx's ROT Equity Option Payment for Order Flow Charges 
Schedule is available at the Phlx and at the Commission.

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 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

    The Phlx recently filed with the Commission to reinstate its 
payment for order flow program.\4\ Pursuant to the Phlx's current 
program, Phlx ROTs are assessed a payment for order flow fee on the top 
120 most actively traded equity options, on a per-contract, per-options 
issue basis, as set forth on Phlx's ROT Equity Option Payment for Order 
Flow Charges Schedule, subject to certain exceptions.\5\
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    \4\ See Securities Exchange Act Release No. 47090 (December 23, 
2002), 68 FR 141 (January 2, 2003) (SR-Phlx-2002-75).
    \5\ The payment for order flow fee does not apply to 
transactions between: (1) A ROT and a specialist; (2) a ROT and a 
ROT; (3) a ROT and a firm; and (4) a ROT and a broker-dealer. 
Indeed, because the primary focus of the program is to attract order 
flow from customers, the payment for order flow fee is not imposed 
on the above-specified transactions. Also, the payment for order 
flow fee does not apply to index or foreign currency options.
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1. Purpose
    The purpose of the proposed rule change is to establish the payment 
for order flow fees for trades settling on or after February 1, 2003, 
through April 30, 2003, for the applicable top 120 options. The Phlx 
will file with the Commission a proposed rule change to address changes 
to the Phlx's fee schedule for subsequent time periods. No other 
changes to the Phlx's payment for order flow program are being made at 
this time.
2. Statutory Basis
    The Phlx believes that its proposal to amend its schedule of dues, 
fees and charges is consistent with section 6(b) of the Act \6\ and in 
particular furthers the objectives of section 6(b)(4) of the Act \7\ in 
that it is an equitable allocation of reasonable fees among Phlx 
members.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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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 or received written comments with 
respect to the proposed rule change.

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to section 19(b)(3)(A)(ii) of the Act \8\ and rule 19b-
4(f)(2) thereunder.\9\ Accordingly, the proposal will take effect upon 
filing with the Commission. At any time within 60 days after the filing 
of the proposed rule change, the Commission may summarily abrogate the 
rule change if it appears to the Commission that the 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. 78(s)(b)(3)(A)(ii).
    \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

[[Page 11169]]

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 the 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-2003-04 and should be 
submitted by March 28, 2003.
    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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-5424 Filed 3-6-03; 8:45 am]
BILLING CODE 8010-01-P