[Federal Register Volume 68, Number 107 (Wednesday, June 4, 2003)]
[Notices]
[Page 33556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-13937]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47940; File No. SR-Phlx-2002-77]


Self-Regulatory Organizations; The Philadelphia Stock Exchange, 
Incorporated; Order Granting Approval to Proposed Rule Change and 
Amendment No. 1 Thereto to Adopt a Specialist Revenue Sharing Program 
for Trades in the Nasdaq-100 Index Tracking Stock

May 29, 2003.
    On December 16, 2002, The Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ a proposed rule change to 
adopt a Specialist Revenue Sharing Program for trades in the Nasdaq-100 
Index Tracking Stock SM (``QQQ''). The Phlx amended the 
proposed rule change on February 28, 2003.\2\ The proposed rule change, 
as amended, was published for notice and comment in the Federal 
Register on March 13, 2003.\3\ The Commission received one comment on 
the proposal.\4\ On May 14, 2003, the Phlx responded to the NYSE 
Letter.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ See letter from Cynthia K. Hoekstra, Counsel, Phlx, to Nancy 
J. Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated February 27, 2003 (``Amendment No. 1''). In 
Amendment No. 1, the Exchange filed a Form 19b-4, which replaced the 
original filing in its entirety.
    \3\ See Securities Exchange Act Release No. 47456 (March 6, 
2003), 68 FR 12138.
    \4\ See April 3, 2003 letter from Darla C. Stuckey, Corporate 
Secretary, New York Stock Exchange, Inc. (``NYSE''), to Jonathan G. 
Katz, Secretary, Commission (``NYSE Letter''). The NYSE Letter asked 
the Commission to institute disapproval proceedings and to also 
eliminate all market data rebate programs in both the equities and 
options markets. Because the NYSE Letter does not specifically 
address the Phlx proposed rule change, the Commission has not 
included a full summary of comments in this Order. The NYSE Letter 
is available for review in the Public Reference Room at the 
Commission.
    \5\ See May 14, 2003, letter from Edith Hallahan, Deputy General 
Counsel, Phlx, to Jonathan G. Katz, Secretary, Commission (``Phlx 
Response Letter''). The Phlx Response Letter is available for review 
in the Public Reference Room at the Commission.
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    The Exchange proposes a Specialist Revenue Sharing Program in which 
it would share with the QQQ specialist unit a portion of the revenues 
that the Exchange receives under the Consolidated Tape Association 
(``CTA'') Plan attributable to the QQQ (which is reported on Tape 
B).\6\ The Exchange proposes to apply its program as of November 1, 
2002.
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    \6\ This proposal applies only to QQQ and to no other Tape B 
security, nor any Tape A security.
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    As set forth in its July 2, 2002 Order of Summary Abrogation 
(``Abrogation Order''),\7\ the Commission will continue to examine the 
issues surrounding market data fees, the distribution of market data 
rebates, and the impact of market data revenue sharing programs on both 
the accuracy of market data and on the regulatory functions of self-
regulatory organizations. The Phlx has proposed to operate market data 
revenue sharing program that is similar to existing programs at other 
self-regulatory organizations.\8\ Thus, the Commission believes it is 
reasonable to allow the Phlx to operate a market data revenue sharing 
program as outlined in the proposal.
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    \7\ Securities Exchange Act Release No. 46159 (July 2, 2002), 67 
FR 45775 (July 10, 2002)(File Nos. SR-NASD-2002-61, SR-NASD-2002-68, 
SR-CSE-2002-06, and SR-PCX-2002-37)(Order of Summary Abrogation).
    \8\ See e.g., Securities Exchange Act Release Nos. 41238 (March 
31, 1999), 64 FR 17204 (April 8, 1999)(SR-CSE-99-03), 46911 
(November 26, 2002), 67 FR 72251 (December 4, 2002)(SR-BSE-2002-10), 
and 46938 (December 3, 2002), 67 FR 72993 (December 9, 2003)(SR-
NASD-2002-149).
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    Thus, the Commission finds that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \9\ 
and, in particular, the requirements of section 6 of the Act \10\ and 
the rules and regulations thereunder. The Commission finds specifically 
that the proposed rule change is consistent with section 6(b)(5) of the 
Act,\11\ in that it is designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating securities transactions, and to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system.
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    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5)
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    The decision to allow the Phlx to establish the market data revenue 
sharing program described in this proposed rule change, however, is 
narrowly drawn, and should not be construed as resolving the issues 
raised in the Abrogation Order, and does not suggest what, if any, 
future actions the Commission may take with regard to market data 
revenue sharing programs.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Phlx-2002-77), as amended, 
be, and it hereby is, approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-13937 Filed 6-3-03; 8:45 am]
BILLING CODE 8010-01-P