[Federal Register Volume 69, Number 187 (Tuesday, September 28, 2004)]
[Notices]
[Pages 58007-58008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2398]


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SECURITIES AND EXCHANGE COMMISSION

[File Nos. SR-Phlx-2004-50 and SR-Phlx-2004-56]


Securities Exchange Act of 1934; Release No. 50420; In the Matter 
of the Philadelphia Stock Exchange, Inc.; Order of Summary Abrogation

September 22, 2004.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(3)(C) of the Securities 
Exchange Act of 1934 (``Act''),\1\ is summarily abrogating certain 
proposed rule changes of the Philadelphia Stock Exchange, Inc. 
(``Phlx'').
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    \1\ 15 U.S.C. 78s(b)(3)(C).
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    On July 29, 2004, the Phlx filed SR-Phlx-2004-50. On August 16, 
2004, the Phlx submitted Amendment No. 1 to the proposed rule 
change.\2\ On August 18, 2004, the Phlx submitted Amendment No. 2 to 
the proposed rule change.\3\ The proposed rule change, as amended, 
modified the Phlx's schedule of dues, fees, and charges to revise its 
equity option payment for order flow program by (1) charging a $0.35 
per contract (for all equity options other than options on the QQQ) or 
a $1.00 per contract (for options on the QQQ) equity option payment for 
order flow fee on transactions by Phlx's Registered Options Traders 
(``ROTs'') when they trade with a customer; (2) permitting specialists 
to opt in or out of the program by notifying the Exchange in writing at 
least five business days prior to the start of the month; and (3) 
combining the payment for order flow fees collected from ROTs in one 
account to form a ``pool'' from which specialists may request 
reimbursement for the amounts that they pay to order flow providers to 
send order flow to the Exchange. The filing was immediately effective 
upon filing with the Commission pursuant to Section 19(b)(3)(A) of the 
Act.\4\
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    \2\ See letter from Cynthia K. Hoekstra, Counsel, Phlx, to Nancy 
J. Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated August 13, 2004 (``Amendment No. 
1''). Amendment No. 1 replaced the original proposed rule change in 
its entirety.
    \3\ See letter from Richard S. Rudoph, Director and Counsel, 
Phlx, to David Liu, Attorney, Division, Commission, dated August 18, 
2004 (``Amendment No. 2''). Amendment No. 2 deleted all references 
to the proposed $0.05 per contract charge for broker-dealer (AUTOM-
delivered) transactions and replaced the proposed rule text 
contained in Amendment No. 1 in its entirety.
    \4\ 15 U.S.C. 78s(b)(3)(A).
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    On August 16, 2004, the Phlx filed SR-Phlx-2004-56. The proposed 
rule change amended the Phlx's schedule of dues, fees, and charges to 
revise its equity option payment for order flow program by (1) 
requiring a specialist unit to pay equity option payment for order flow 
fees in a given month at the same rate as ROTs if the specialist unit 
elects to participate in the program and does not pay a specified 
percentage of the total amount of equity option payment for order flow 
funds collected from ROTs in the options for which that specialist unit 
is acting as the specialist, and (2) providing that specialist units 
may opt out of the equity option payment for order flow program, as 
long as they notify the Exchange in writing by the 15th day of the 
month. The filing was immediately effective upon filing with the 
Commission pursuant to Section 19(b)(3)(A) of the Act.\5\
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    \5\ 15 U.S.C. 78s(b)(3)(A).
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    Pursuant to Section 19(b)(3)(C) of the Act,\6\ at any time within 
60 days of the date of filing a proposed rule change pursuant to 
Section 19(b)(1) of the Act,\7\ the Commission may summarily abrogate 
the change in the rules of the self-regulatory organization and require 
that the proposed rule change be re-filed in accordance with the 
provisions of Section 19(b)(1) of the Act \8\ and reviewed in 
accordance with Section 19(b)(2) of the Act,\9\ 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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    \6\ 15 U.S.C. 78s(b)(3)(C).
    \7\ 15 U.S.C. 78s(b)(1).
    \8\ 15 U.S.C. 78s(b)(1).
    \9\ 15 U.S.C. 78s(b)(2).
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    The Commission believes that the above-referenced proposed rule 
changes raise serious questions as to whether they are consistent with 
the Act and with the protection of investors.

[[Page 58008]]

Specifically, the proposed rule changes appear to raise serious 
questions as to whether they provide for the equitable allocation of 
reasonable dues, fees, and other charges among the Phlx's members and 
issuers and other persons using its facilities.\10\
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    \10\ 15 U.S.C. 78f(b)(4).
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    Accordingly, the Commission believes that the procedures provided 
by Section 19(b)(2) of the Act \11\ will provide a more appropriate 
mechanism for determining whether the proposed rule changes are 
consistent with the Act. Therefore, the Commission finds that it is 
appropriate in the public interest, for the protection of investors, 
and otherwise in furtherance of the purposes of the Act, to abrogate 
the proposed rule changes.
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    \11\ 15 U.S.C. 78s(b)(2).
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    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\12\ that File Nos. SR-Phlx-2004-50 and SR-Phlx-2004-56 be, and 
they hereby are, summarily abrogated. If the Phlx chooses to re-file 
the proposed rule changes, it must do so pursuant to Sections 
19(b)(1)\13\ and 19(b)(2) of the Act.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(C).
    \13\ 15 U.S.C. 78s(b)(1).
    \14\ 15 U.S.C. 78s(b)(2).

    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)(58).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2398 Filed 9-27-04; 8:45 am]
BILLING CODE 8010-01-P