[Federal Register Volume 69, Number 170 (Thursday, September 2, 2004)]
[Notices]
[Pages 53761-53763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2020]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50276; File No. SR-PHLX-2004-55]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. Relating to NASDAQ-100 Index Tracking 
Stock\SM\ Equity Transaction Charges

August 26, 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 August 13, 2004, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Phlx. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons, and at the same time is 
granting accelerated approval of 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 retroactively apply its amended schedule of 
fees and charges to replace the tiered equity transaction charges with 
a single per share charge for equity transactions from July 1, 2004 
through July 30, 2004 \3\ in NASDAQ-100 Index Tracking Stock\SM\ (known 
as QQQ\SM\).\4\ Below is the text of the proposed rule change. Proposed 
new language is in italics; deletions are in brackets.
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    \3\ The Exchange filed a proposed rule change, Securities 
Exchange Act Release No. 50106 (July 28, 2004), 69 FR 47197 (August 
4, 2004) (SR-PHLX-2004-40), which amended the Summary of Equity 
Charges portion of the fee schedule by replacing the total shares 
per transaction charge with a single per share charge. The NASDAQ-
100 Index Tracking Stock\SM\ fee schedule, which contains a 
duplicate tiered fee schedule as contained in the Summary of Equity 
Charges, was inadvertently omitted from that filing. This filing 
seeks to amend the replicated tiered fee schedule which is displayed 
in the NASDAQ-100 Index Tracking Stock\SM\ in the same fashion as it 
was amended in the Summary of Equity Charges portion of the fee 
schedule for the period July 1 through July 30, 2004. The Exchange 
has filed a proposed rule change, SR-PHLX-2004-52, designated as 
effective upon filing, to cover QQQ\SM\ transactions on or after 
August 2, 2004. See Securities Exchange Act Release No. 50174 
(August 10, 2004), 69 FR 51137 (August 17, 2004).
    \4\ Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg], The 
Nasdaq Stock Market[reg], Nasdaq-100 Shares\SM\, Nasdaq-100 
Trust\SM\, 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 Philadelphia Stock Exchange pursuant to a License Agreement with 
Nasdaq. The Nasdaq-100 Index[reg] (``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.
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* * * * *

            NASDAQ-100 Index Tracking Stock\SM\ Fee Schedule
------------------------------------------------------------------------
 
------------------------------------------------------------------------
           Phlx Fee Schedule
Customer
  PACE................................  none \5\
  Non-PACE............................
    Transaction [Charge] Fee..........  $.0035 per share
                                        [Rate per Share]
    [First 500 shares.................  $0.00
    Next 2,000 shares.................  0.0075
    Remaining shares..................  0.005]
    $50 maximum fee per trade side. ..
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\5\ However, this charge applies where an order, after being delivered
  to the Exchange by the PACE system is executed by the specialist by
  way of an outbound ITS commitment, when such outbound ITS commitment
  reflects the PACE order's clearing information, but does not apply
  where a PACE trade was executed against an inbound ITS commitment.

* * * * *

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 its proposal and discussed any 
comments it received on the proposal. The text of these statements may 
be examined at the places specified in Item III 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 remain competitive 
and

[[Page 53762]]

foster growth of the equity floor brokerage business by seeking to 
increase volume. This proposal seeks to retroactively replace the 
current tiered fee schedule for non-PACE NASDAQ-100 Index Tracking 
Stock\SM\ trades with a single per share charge of $.0035, subject to a 
cap of $50 per trade side for equity transactions traded from July 1, 
2004 through July 30, 2004.\5\ Previously, the tiered fee schedule was 
based on total shares per transaction. Recently, the Exchange's other 
equity transaction charges, with the exception of the NASDAQ-100 Index 
Tracking Stock\SM\, were replaced with a single per share charge of 
$.0035.\6\
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    \5\ However, this charge applies where an order, after being 
delivered to the Exchange by the PACE system is executed by the 
specialist by way of an outbound ITS commitment, when such outbound 
ITS commitment reflects the PACE order's clearing information, but 
does not apply where a PACE trade was executed against an inbound 
ITS commitment. See footnote 5 of the NASDAQ-100 Index Tracking 
Stock\SM\ Fee Schedule.
    \6\ The exclusion of the NASDAQ-100 Index Tracking Stock\SM\ was 
inadvertent. See supra footnote 3.
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    For trades prior to August 2, 2004, the NASDAQ-100 Index Tracking 
Stock\SM\ used the same tiered fee schedule as was previously present 
in the Summary of Equity Charges fee schedule.\7\ For example, for the 
first 500 shares the transaction fee is $0, for the next 2,000 shares 
the transaction fee is $.0075 on a per share basis, and thereafter, for 
any remaining shares the transaction fee is $.005 on a per share basis. 
This proposal would amend the fee schedule to a single per share charge 
of $.0035 for such transactions traded from July 1, 2004 through July 
30, 2004, thereby conforming the fees to the Summary of Equity Charges, 
which were likewise amended to reflect this change.\8\
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    \7\ The fee is charged only to members of the Phlx. Telephone 
conversation between Angela Saccomandi Dunn, Counsel, Phlx, and 
David Liu, Attorney, Division of Market Regulation (``Division''), 
Commission, on August 20, 2004. See Securities Exchange Act Release 
Nos. 50106 (July 28, 2004), 69 FR 47197 (August 4, 2004) (SR-PHLX-
2004-40); and 50174 (August 10, 2004), 69 FR 51137 (August 17, 2004) 
(SR-PHLX-2004-52).
    \8\ Telephone conversation between Angela Saccomandi Dunn, 
Counsel, Phlx, and David Liu, Attorney, Division, Commission, on 
August 20, 2004. See Securities Exchange Act Release No. 50106 (July 
28, 2004), 69 FR 47197 (August 4, 2004) (SR-Phlx-2004-40).
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    In addition, the term ``charge'' is being replaced with the term 
``fee'' for the purpose of clarity.
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 \9\ 
in general, and furthers the objectives of Section 6(b)(4) of the Act 
\10\ in particular, in that it is an equitable allocation of reasonable 
dues, fees, and other charges among Exchange members and would allow 
the equity floor to remain competitive and encourage growth.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 burden on competition that is 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

    The Phlx states that no written comments were either solicited or 
received.

III. 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-2004-55 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-2004-55. 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 the 
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-2004-55 and should be submitted on or before 
September 23, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change as a Pilot Program

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\11\ 
Specifically, the Commission believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\12\ which requires that the 
rules of the Exchange provide for the equitable allocation of 
reasonable dues, fees, and other charges among its members and issuers 
and other persons using its facilities.
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    \11\ The Commission has considered the proposed rule's impact on 
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Commission notes that this proposal, which permits the 
retroactive application of non-PACE NASDAQ-100 Index Tracking Stock\SM\ 
equity transaction charges to the period from July 1, 2004 through July 
30, 2004, reflects a change to the Phlx fee schedule which was 
inadvertently omitted from the filing exhibit of SR-PHLX-2004-40.\13\ 
Further, the Commission notes that the Phlx states that the Exchange 
membership was provided with adequate notification of this fee 
amendment.
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    \13\ See Securities Exchange Act Release No. 50106 (July 28, 
2004), 69 FR 47197 (August 4, 2004) (SR-PHLX-2004-40).
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    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day of the date of publication of notice of 
filing thereof in the Federal Register. The Commission notes that the 
proposed charges are substantially similar to those in SR-PHLX-2004-40, 
relating to equity transaction charges generally, and SR-PHLX-2004-52, 
relating to non-PACE NASDAQ-100 Index Tracking Stock\SM\ equity 
transaction charges specifically, both filings of which were 
immediately

[[Page 53763]]

effective upon filing and which, as of August 24, 2004, have not 
received any comments regarding the proposed transaction charges.\14\ 
In addition, except for the first 500 shares of a transaction, the 
proposed charges would lower fees charged for non-PACE NASDAQ-100 Index 
Tracking Stock\SM\ transactions. Finally, the Commission notes that 
this change will promote consistency in the Exchange's fee schedule by 
conforming the non-PACE NASDAQ-100 Index Tracking Stock\SM\ equity 
transaction charge to the Phlx's equity transaction charges generally 
for the period from July 1, 2004 through July 30, 2004. Therefore, the 
Commission finds that there is good cause, consistent with Section 
19(b)(2) of the Act,\15\ to approve the proposed rule change on an 
accelerated basis.
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    \14\ See Securities Exchange Act Release Nos. 50106 (July 28, 
2004), 69 FR 47197 (August 4, 2004) (SR-PHLX-2004-40); and 50174 
(August 10, 2004), 69 FR 51137 (August 17, 2004) (SR-PHLX-2004-52).
    \15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (File No. SR-PHLX-2004-55) be 
approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-2020 Filed 9-1-04; 8:45 am]
BILLING CODE 8010-01-P