[Federal Register Volume 69, Number 97 (Wednesday, May 19, 2004)]
[Notices]
[Pages 28974-28975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-11312]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49693; File No. SR-Phlx-2004-30]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Specialist Unit Fixed Monthly Fees

May 12, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4\2\ thereunder, notice is hereby given that 
on April 30, 2004, 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 Phlx. The proposed 
rule change has been filed by the Phlx as establishing or changing a 
due, fee, or other charge, pursuant to section 19(b)(3)(A)(ii) of the 
Act \3\ and Rule 19b-4(f)(2)\4\ thereunder, which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 cap the current specialist unit fixed monthly fee (``fixed monthly 
fee'') \5\ at $310,000 per specialist unit per month for transactions 
settling on May 1, 2004 through August 31, 2004. The proposed $310,000 
monthly fee cap would not include the Nasdaq-100 Index Tracking Stock 
(``QQQ'') \SM 6\ license fee of $0.10 per contract side for specialist 
unit transactions in the QQQ equity options.
    Currently, the Exchange offers specialist units \7\ the opportunity 
to elect to pay a fixed monthly fee in lieu of paying fees currently in 
effect for equity option and index option transaction charges and the 
equity option specialist deficit (shortfall) fee (``shortfall 
fee'').\8\ In addition to the fixed monthly fee, a $0.10 charge per 
contract side for specialist unit transactions in the QQQ equity 
options (``QQQ license fee'') is imposed, if applicable, if the 
specialist unit elects to pay the fixed monthly fee.\9\ The current 
fixed monthly fee and QQQ license fee are scheduled to be in effect 
through August 31, 2004.\10\ Pursuant to this proposal, specialist 
units that have elected to pay the fixed monthly fee as described above 
and reach the proposed $310,000 monthly fee cap would pay $310,000 per 
month plus a QQQ license fee, if applicable.
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    \5\ See Securities Exchange Act Release No. 49467 (March 24, 
2004), 69 FR 17017 (March 31, 2004) (SR-Phlx-2004-17).
    \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 Stock \SM\, and QQQ \SM\ are trademarks or 
service marks of The Nasdaq Stock Market, Inc. (Nasdaq) and have 
been licensed for use for certain purposes by the Phlx pursuant to a 
License Agreement with Nasdaq. The Nasdaq-100 Index[reg] (the Index) 
is determined, composed, and calculated by Nasdaq without regard to 
the Licensee, the Nasdaq-100 Trust \SM\, or the beneficial owners of 
Nasdaq-100 Shares\SM\. 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\ The Exchange uses the terms ``specialist'' and ``specialist 
unit'' interchangeably herein.
    \8\ The fixed monthly fee program does not affect additional 
charges, such as non-transaction and membership-related charges 
listed on Appendix A of the Exchange's schedule of dues, fees and 
charges. See Securities Exchange Act Release Nos. 48459 (September 
8, 2003), 68 FR 54034 (September 15, 2003) (SR-Phlx-2003-61); and 
49467 (March 24, 2004), 69 FR 17017 (March 31, 2004) (SR-Phlx-2004-
17).
    \9\ The $0.10 fee does not apply if the specialist unit elects 
to pay the current equity option and index option transaction 
charges and the applicable shortfall fees.
    \10\ See Securities Exchange Act Release No. 49467 (March 24, 
2004), 69 FR 17017 (March 31, 2004) (SR-Phlx-2004-17).
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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 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 limit the amount of 
fixed monthly fees incurred per specialist unit per month. The current 
fixed monthly fee and the proposed $310,000 monthly fee cap should 
create an

[[Page 28975]]

incentive for specialist units to bring in more business, above the 
fixed monthly fee amount, which would be free of additional transaction 
charges assessed on specialist units, while protecting the Exchange's 
revenue base. Additional order flow may generate transaction fees on 
the contra side that, in turn, may generate additional revenue for the 
Exchange. In addition, the proposed $310,000 monthly fee cap has the 
potential to attract additional specialist units to the Exchange's 
trading floor.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
dues, fees and charges is consistent with section 6(b) of the Act \11\ 
in general, and furthers the objectives of section 6(b)(4) of the Act 
\12\ in particular, in that it is an equitable allocation of reasonable 
dues, fees, and other charges among Exchange members.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 burden on competition not necessary or appropriate in 
furtherance of purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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 \13\ and subparagraph 
(f)(2) of Rule 19b-4\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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. Comments may be submitted by any of 
the following methods:
    Electronic comments:
     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Phlx-2004-30 on the subject line.
    Paper comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.

    All submissions should refer to File Number SR-Phlx--2004-30. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 such 
filing also will be available for inspection and copying at the 
principal office of the Phlx. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2004-30 and should be submitted on or before June 
9, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-11312 Filed 5-18-04; 8:45 am]
BILLING CODE 8010-01-P