[Federal Register Volume 68, Number 250 (Wednesday, December 31, 2003)]
[Notices]
[Pages 75703-75704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-32174]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48983; File No. SR-Phlx-2003-80]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. To Revise Its Schedule of Dues, Fees and Charges To 
Provide a Rebate for Certain Trades Executed Pursuant to a Dividend 
Spread Strategy

December 23, 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 December 15, 2003, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') submitted to 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.
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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 schedule of dues, fees and charges 
to provide a rebate for certain trades executed pursuant to a dividend 
spread strategy.\3\ The proposed rebate would be effective for trades 
clearing on and after December 17, 2003.
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    \3\ A ``dividend spread'' is any trade done within a defined 
time frame in which a dividend arbitrage can be achieved between any 
two (2) deep-in-the-money options.
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    The schedule of dues, fees and charges is available at the Office 
of the Secretary, 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 Exchange included statements 
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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange states that the purpose of the proposed rule change is 
to amend the Exchange's schedule of dues, fees and charges to adopt a 
rebate for certain contracts executed in trades occurring as part of a 
dividend spread strategy. Specifically, for those options contracts 
executed pursuant to a dividend spread strategy by member registered 
options traders (``ROT'') and options specialists who have not elected 
to have the specialist unit fixed monthly fee (``non-fixed 
specialists'') \4\ be applicable on the business day before the 
underlying stock's ex-date,\5\ the Exchange would rebate $0.08 per 
contract side for ROT executions and $0.07 per side for non-fixed 
specialists executions. The proposed rebate would be effective for 
trades clearing on and after December 17, 2003.
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    \4\ Specialist units that have been active trading equity and 
index option books in the capacity of a specialist unit for at least 
one year from September 1, 2002 may elect to pay a fixed monthly 
charge as described in the Exchange's fee schedule. A specialist 
unit may, by the 15th day of the billing month, select the fixed 
monthly fee methodology for subsequent months, which would be 
continued until February 29, 2004. See Securities Exchange Act 
Release No. 48459 (September 8, 2003), 68 FR 54034 (September 15, 
2003).
    \5\ The ex-date is the date on or after which a security is 
traded without a previously declared dividend or distribution. After 
the ex-date, a stock is said to trade ex-dividend.
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    The Exchange's billing system is unable to distinguish between 
dividend spreads and other types of trades. The Exchange has therefore 
developed a manual procedure to implement the proposed rebate. 
Specifically, within thirty calendar days of the billing period (i.e., 
within thirty days from the issue date of the invoice) for these 
transactions, a Fee Reimbursement Form, including the appropriate 
documentation, must be completed and submitted to the Exchange. After 
the appropriate verification and subsequent acceptance, the Exchange 
would credit the appropriate member's account for the amount of the 
rebate (i.e., either $0.08 or $0.07 per contract side) charged on 
contracts executed in trades occurring as part of a dividend spread 
strategy.
    The Exchange states that the primary reason for this fee is to 
create a cost effective environment for a dividend spread strategy to 
be executed. By keeping fees low, the Exchange believes that this 
program should encourage specialists and registered options traders to 
provide liquidity for these

[[Page 75704]]

types of financial strategies and should permit the Exchange to remain 
competitive.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \6\ in general, and furthers the 
objectives of section 6(b)(4) of the Act \7\ in particular, because it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members. The Exchange notes that 
although the rebate would result in a net transaction charge of $0.11 
per contract side for a ROT and $0.14 per contract side for non-fixed 
specialist executions, ROTs pay an additional comparison charge of 
$0.03. Thus, both member organizations--ROTs and non-fixed specialist--
would pay the same net per contract side charge.
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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 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 proposed rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \9\ because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such 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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    \8\ 15 U.S.C. 78s(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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-Phlx-2003-80. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your 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 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-2003-80 and should be 
submitted by January 21, 2004.

    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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-32174 Filed 12-30-03; 8:45 am]
BILLING CODE 8010-01-P