[Federal Register Volume 68, Number 81 (Monday, April 28, 2003)]
[Notices]
[Pages 22446-22447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10377]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47715; File No. SR-Phlx-2003-26]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. To Amend Its Broker-Dealer Transaction Fee for Equity 
Option Transactions

April 22, 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 April 11, 2003, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') 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 by the Exchange. 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 Exchange proposes to amend its schedule of dues, fees and 
charges to decrease the broker-dealer transaction fee for ``block'' 
equity option transactions as follows: Broker/Dealer \3\ (non-AUTO-X)
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    \3\ This charge applies to members for transactions, received 
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. This includes transactions for the account of a 
Register Options Trader (``ROT'') entered from off-floor.

Up to 2,000 contracts--$.35 per contract
Between 2001 and 3,000 contracts--$.25 per contract (for all contracts)
Residual above 3,000 contracts--$.20 per contract above 3,000 contracts 
(with the first 3,000 contracts charged $.25 per contract)

    This fee will be applied per transaction (not per month).\4\ The 
Exchange proposes to implement this fee on transactions settling on or 
after April 11, 2003.\5\ Footnote 10 of the Exchange's fee schedule is 
also being amended to change the term ``orders'' to ``transactions.'' 
All other equity option transaction charges will remain unchanged.
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    \4\ Member organizations may need to file a form with the 
Exchange to identify eligible block trades.
    \5\ This fee will 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. See 
Securities Exchange Act Release No. 44292 (May 11, 2001), 66 FR 
27715 (May 28, 2001)(SR-Phlx-2002-32).
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    The text of the proposed rule change is available upon request from 
the Office of the Secretary, the Commission, and the Exchange.

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 Exchange included statements

[[Page 22447]]

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 Exchange 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
    Currently, the Exchange imposes a flat $0.35 per contract for 
broker-dealer transactions not executed via the AUTO-X feature of 
AUTOM,\6\ the Exchange's automated options trading system. The intent 
of the present fee change is to add breakpoints above which the per 
contract charge for broker-dealer transactions will be reduced, thereby 
potentially attracting additional options business to the Exchange, 
particularly large transactions. For example, under the proposal (i) a 
transaction of 1,700 contracts will be charged $0.35 per contract, (ii) 
a transaction of 2,500 contracts will be charged $0.25 per contract for 
all contracts, and (iii) a transaction of 3,500 option contracts will 
be charged $0.25 for each of the first 3,000 contracts and $0.20 for 
each of the remaining 500 contracts.\7\ Footnote 10 of the Exchange's 
fee schedule is also being amended to change the term ``orders'' to 
``transactions.''
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    \6\ AUTOM is the Exchange's electronic order delivery, routing, 
execution and reporting system, which provides for the automatic 
entry and routing of equity option and index option orders to the 
Exchange trading floor. Orders delivered through AUTOM may be 
executed manually, or certain orders are eligible for AUTOM's 
automatic execution feature, AUTO-X. Equity option and index option 
specialists are required by the Exchange to participate in AUTOM and 
its features and enhancements. Option orders entered by Exchange 
members into AUTOM are routed to the appropriate specialist unit on 
the Exchange trading floor. See Exchange Rule 1080.
    \7\ Of course, the contra-side to a transaction may also be 
subject to transaction and other charges.
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    The purpose of the proposed rule change is to generate additional 
revenue for the Exchange by attracting additional order flow through 
lowering the cost of executing certain large block equity option 
transactions. The proposed rule change should also make the Exchange's 
fees for trading equity option contracts on the Phlx more competitive 
with other options exchanges.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\8\ in general, and furthers the 
objectives of section 6(b)(4) of the Act,\9\ in particular, in that it 
is an equitable allocation of reasonable dues, fees, and other charges 
among Exchange members. The Exchange believes the proposal is 
reasonable and equitable because it decreases transaction costs for 
broker-dealers executing equity options transactions on the Exchange.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 foregoing rule change establishes or changes a due, fee, or 
charge imposed by the Exchange and, therefore, has become effective 
upon filing pursuant to section 19(b)(3)(A)(ii) of the Act \10\ and 
rule 19b-4(f)(2) thereunder.\11\ 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 purpose of 
the Act.
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    \10\ 15 U.S.C. 78(s)(b)(3)(A)(ii).
    \11\ 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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-Phlx-2003-26 and 
should be submitted by May 19, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-10377 Filed 4-25-03; 8:45 am]
BILLING CODE 8010-01-P