[Federal Register Volume 68, Number 107 (Wednesday, June 4, 2003)]
[Notices]
[Pages 33558-33559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-13939]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47924; File No. SR-SCCP-2002-06]


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

May 23, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 30, 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 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 expires on January 23, 
2003.\3\
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    \2\ ECN 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.
    \3\ Exchange Release No. 45533 (March 11, 2002), 67 FR 11739 
(March 15, 2002) (SR-SCCP-2002-02).
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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.\4\
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    \4\ 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.\5\ Pursuant to that proposed rule 
change, SCCP waived certain dues, fees, and charges, including trade 
recording fees, value fees, and treasury transaction charges and Nasdaq 
100 Trust, Series 1 (``QQQ'') charges,\6\ but not account fees,

[[Page 33559]]

research fees, computer transmission/tape charges, or miscellaneous 
charges on its fee schedule.\7\ At this time, SCCP proposes to continue 
the existing fee schedule for ECNs through January 24, 2004.
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    \5\ Securities Exchange Act Release No. 45145 (December 10, 
2001), 66 FR 65017 (December 17, 2001) (SR-SCCP-2001-01).
    \6\ The Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg] The 
Nasdaq Stock Market[reg], Nasdaq 100 Sharessm, Nasdaq-100 
Trustsm, Nasdaq-100 Index Tracking Stocksm and 
QQQsm are trademarks or service marks of The Nasdaq Stock 
Market, Inc. (Nasdaq) and have been licensed for use for certain 
purposes by the Philadelphia Stock Exchange pursuant to a License 
Agreement with Nasdaq. The Nasdaq-200 Index[reg] (the Index) is 
determined, composed, and calculated by Nasdaq without regard to the 
Licensee, the Nasdaq-100 Trustsm, or the beneficial 
owners of Nasdaq-100 Sharessm. Nasdaq has complete 
control and sole discretion in determining, comprising or 
calculating the Index or in modifying in any way its method for 
determining, comprising or calculating the Index in the future.
    \7\ 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, buy-ins, PACE specialist credit, and specialist 
QQQ charges. At this time, SCCP is also adding to its fee schedule 
the language ``except ECNs'' next to the fees applicable to trades 
in the QQQs, which was missing due to an oversight; the waiver has 
applied to these QQQ fees because the ECN fee waiver has always 
applied to transaction fees.
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    This rule change affects ECN trades not related to an 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 its non-ECN floor operation.\8\ 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 eligible for this waiver.
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    \8\ 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 the existing SCCP fee waivers 
described above for ECNs, is consistent with section 17A(b)(3)(D) of 
the Act \9\ 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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    \9\ 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 \10\ and Rule 19b-4(f)(2) 
thereunder.\11\ 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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    \10\ 15 U.S.C. 78s(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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-SCCP-2002-06. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. 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 also will be available for inspection and copying at the 
principal office of SCCP.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-13939 Filed 6-3-03; 8:45 am]
BILLING CODE 8010-01-P