[Federal Register Volume 69, Number 104 (Friday, May 28, 2004)]
[Notices]
[Pages 30735-30737]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12110]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49751; File No. SR-Phlx-2004-25]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Broker-Dealer Equity Option Transaction Fees

May 21, 2004.
    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 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. On May 13, 
2004, the Exchange submitted Amendment No. 1 to the proposal.\3\ The

[[Page 30736]]

proposed rule change, as amended, 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 \4\ and Rule 19b-4(f)(2) 
thereunder,\5\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Mark I. Salvacion, Director & Counsel, Phlx, 
to Nathan H. Saunders, Attorney, Division of Market Regulation, 
Commission, dated May 12, 2004 (``Amendment No. 1''). In Amendment 
No. 1, the Exchange revised the filing to clarify the purpose of the 
proposed rule change and to correct a typographical error in the 
text of the proposed rule change.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 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 increase certain broker-dealer equity option transaction charges for 
orders delivered through the Philadelphia Stock Exchange Automated 
Options Market (``AUTOM'') System \6\ to $.45 per contract, without 
regard to whether such contracts are executed automatically or 
manually. The Exchange has implemented this fee on transactions 
settling on or after May 1, 2004. All other equity option transaction 
charges remain unchanged. Below is the text of the proposed rule 
change, as amended. Proposed new language is in italics; language to be 
deleted is in brackets.
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    \6\ AUTOM is the Exchange's electronic order delivery, routing, 
execution and reporting system, which provides for the automatic 
entry and routing of equity option and index option orders to the 
Exchange trading floor. Equity option and index option specialists 
are required by the Exchange to participate in AUTOM and its 
features and enhancements. Option orders entered by Exchange members 
into AUTOM are routed to the appropriate specialist unit on the 
Exchange trading floor. See Exchange Rule 1080.
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SUMMARY OF EQUITY OPTION CHARGES
* * * * *
Option Transaction Charge
* * * * *

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Broker/Dealer 11 (AUTOM-delivered).....  $.45 per contract
Broker/Dealer[\11\] 12 (non-[AUTO-X]AUTOM-delivered) and Linkage ``P''
 Orders[\12\] 13 .
Up to 2,000 contracts..................  $.35 per contract
Between 2,001 and 3,000 contracts......  $.25 per contract (for all
                                          contracts)
Residual above 3,000 contracts.........  $.20 per contract above 3,000
                                          contracts (with the first
                                          3,000 contracts charged $.25
                                          per contract)
[Broker/Dealer \13\ (AUTO-X)...........  $.45 per contract]
                              * * * * * * *
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\11\ For the purpose of this Summary of Equity Option Charges, this
  charge applies to members for transactions, received from other than
  the floor of the Exchange, for any account (i) in which the holder of
  beneficial interest is a member or non-member broker-dealer or (ii) in
  which the holder of beneficial interest is a person associated with or
  employed by a member or non-member broker-dealer. This includes
  transactions for the account of an ROT entered from off-floor.
\12\See footnote 11. [Fees for linkage ``P'' Orders are subject to a
  pilot program scheduled to expire July 31, 2004.]
\13\ [See footnote 11.] Fees for linkage ``P'' Orders are subject to a
  pilot program scheduled to expire July 31, 2004.

* * * * *

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 establish a uniform 
charge for all broker-dealer orders delivered via AUTOM, regardless of 
whether those orders are executed automatically or manually. Currently, 
the Exchange charges fees for broker-dealer orders based on the method 
of execution: transactions that are executed automatically are charged 
$.45 per contract \7\ and transactions that are executed manually are 
charged up to $.35 per contract.\8\ Under the current proposal, broker-
dealer orders will be charged based on the method of delivery. Orders 
delivered via AUTOM will be charged $.45 per contract, regardless of 
whether they receive automatic or manual execution. Non-AUTOM delivered 
orders, consisting of manually delivered floor broker orders, including 
orders transmitted by the Floor Broker Management System (``FBMS''),\9\ 
and Linkage ``P'' orders,\10\ will continue to be charged up to $.35 
per contract, depending on the size of the order.
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    \7\ See Securities Exchange Act Release No. 47109 (December 30, 
2002), 68 FR 841 (January 7, 2003)(SR-Phlx-2002-78).
    \8\ See Securities Exchange Act Release No. 47715 (April 22, 
2003), 68 FR 22446 (April 28, 2003)(SR-Phlx-2003-26).
    \9\ See Exchange Rule 1063(e) and Exchange Rule 1080, Commentary 
.06.
    \10\ See Securities Exchange Act Release No. 47953 (May 30, 
2003), 68 FR 34027 (June 6, 2003)(SR-Phlx-2003-16). Fees for linkage 
``P'' orders are subject to a pilot program scheduled to expire on 
July 31, 2004.
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2. Statutory Basis
    The Exchange believes that its proposal 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 relating to the automatic delivery of off-floor broker-dealer 
orders. The Exchange believes the proposal is reasonable and equitable 
because it equalizes transaction costs for broker-dealers delivering 
orders to the Exchange via AUTOM, without regard to the manner in which 
they are executed.
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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 the purposes of the Act.

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

    Written comments were neither solicited nor received with respect 
to the proposed rule change.

[[Page 30737]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective upon filing pursuant 
to section 19(b)(3)(A)(ii) of the Act \13\ and Rule 19b-4(f)(2) 
thereunder,\14\ because it changes a fee imposed by the Exchange. 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.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
    \15\ For purposes of calculating the 60 day abrogation period, 
the Commission considers the period to have begun on May 13, 2004, 
the date on which the Phlx submitted Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
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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-2004-25 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-2004-25. 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, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. 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-2004-25 and should be submitted on or before June 18, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12110 Filed 5-27-04; 8:45 am]
BILLING CODE 8010-01-P