[Federal Register Volume 68, Number 145 (Tuesday, July 29, 2003)]
[Notices]
[Pages 44555-44556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19179]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48206; File No. SR-Phlx-2003-45]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to the Volume Threshold for the Options 
Specialist Shortfall Fee

July 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 June 25, 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 Phlx proposes to amend its Equity Option Specialist Deficit 
(Shortfall) fee (``shortfall fee'') to reduce the total national 
monthly contract volume threshold associated with the shortfall fee 
from the current rate of 14 percent to 12 percent for specialists 
trading in any Top 120 Option.\3\
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    \3\ A Top 120 Option is defined as one of the 120 most actively 
traded equity options in terms of the total number of contracts in 
that option that were traded nationally for a specified month, based 
on volume reflected by the Options Clearing Corporation.
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    Currently, specialists \4\ are required to reach a total national 
monthly contract volume threshold of 14 percent in order not to be 
charged a shortfall fee by the Phlx.\5\ Under this proposal, the total 
national monthly contract volume threshold would be reduced to 12 
percent.
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    \4\ The Exchange uses the terms ``specialist'' and ``specialist 
unit'' interchangeably herein.
    \5\ See Securities Exchange Act Release No. 45322 (January 22, 
2002), 67 FR 3927 (January 28, 2002) (SR-Phlx-2001-115).
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    The current rate of $0.35 per contract and other procedures 
relating to shortfall fee, including the Specialist Deficit (Shortfall 
Fee) Credit, remain unchanged at this time.\6\
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    \6\ A shortfall credit of $0.35 per contract may be earned 
toward previously-imposed shortfall fees for each contract traded in 
excess of the 14 percent volume threshold during a subsequent 
monthly time period. See Securities Exchange Act Release No. 45322 
(January 22, 2002), 67 FR 3927 (January 28, 2002) (SR-Phlx-2001-
115). The Exchange intends to file a separate proposed rule change 
to eliminate the shortfall credit and to clarify the application of 
the credit while it was in effect.
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    The Exchange intends to implement the 12 percent total national 
monthly contract volume threshold for transactions settling on or after 
July 1, 2003.\7\
    The text of the proposed rule change is available at the Office of 
the Secretary, the Phlx, and the Commission.
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    \7\ The shortfall fee had heretofore been eligible for a 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 18, 2001) (SR-Phlx-2001-49). This credit program expired 
effective May 2003. The Exchange intends to file a separate proposed 
rule change to remove references to the member credit throughout the 
entire schedule of dues, fees and charges.
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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

[[Page 44556]]

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 purpose of the proposed rule change is to reduce the economic 
burden on specialists who are competing for order flow in the Top 120 
Options and to remain competitive. The 12 percent volume threshold 
should continue to encourage specialists to compete for order flow in 
the national market, while lessening the economic burdens placed on 
specialists from the imposition of the shortfall fee at a higher volume 
threshold.
2. Statutory Basis
    The Exchange believes that its proposal 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.
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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 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

    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 the Exchange, it has become effective 
pursuant to Section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph 
(f)(2) of Rule 19b-4\11\ thereunder. 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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    \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. 
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 also will be 
available for inspection and copying at the principal office of the 
Phlx. All submissions should refer to File No. SR-Phlx-2003-45 and 
should be submitted by August 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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-19179 Filed 7-28-03; 8:45 am]
BILLING CODE 8010-01-P