[Federal Register Volume 70, Number 12 (Wednesday, January 19, 2005)]
[Notices]
[Pages 3088-3089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-176]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51024; File No. SR-Phlx-2004-94]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Increasing the Firm-Related Equity Option and Index Option 
Comparison and Transaction Cap

January 11, 2005.
    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 28, 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 Exchange. Phlx 
filed this proposal pursuant to Section 19(b)(3)(A)(ii) \3\ of the Act 
and Rule 19b-4(f)(2) \4\ thereunder as a proposal establishing or 
changing a due, fee, or other charge imposed by the self-regulatory 
organization, 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

    Phlx proposes to amend its schedule of fees to increase the current 
cap of $50,000 per month per member organization to $60,000, to be 
imposed on all ``firm-related'' equity option and index option 
comparison and transaction charges combined.
    This proposal is scheduled to become effective for transactions 
settling on or after January 3, 2005. The text of the proposed rule 
change is available at 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, 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 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
    Currently, the Exchange imposes a cap of $50,000 per member 
organization on all ``firm-related'' equity option and index option 
comparison and transaction charges combined.\5\ Specifically, ``firm-
related'' charges include equity option firm/proprietary comparison 
charges, equity option firm/proprietary transaction charges, equity 
option firm/proprietary facilitation transaction charges, index option 
firm (proprietary and customer executions) comparison charges, index 
option firm/proprietary transaction charges, and index option firm/
proprietary facilitation transaction charges (collectively ``firm-
related charges''). Thus, such firm-related charges for equity options 
and index options, in the aggregate for one billing month, may not 
exceed $50,000 per month per member organization. Certain options are 
not subject to the cap.\6\
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    \5\ The firm/proprietary comparison or transaction charge 
applies to member organizations for orders for the proprietary 
account of any member or non-member broker-dealer that derives more 
than 35% of its annual, gross revenues from commissions and 
principal transactions with customers. Member organizations will be 
required to verify this amount to the Exchange by certifying that 
they have reached this threshold by submitting a copy of their 
annual report, which was prepared in accordance with Generally 
Accepted Accounting Principles (``GAAP''). In the event that a 
member organization has not been in business for one year, the most 
recent quarterly reports, prepared in accordance with GAAP, will be 
accepted. See Securities Exchange Act Release No. 43558 (November 
14, 2000), 65 FR 69984 (November 21, 2000) (SR-Phlx-00-85).
    \6\ Variable (not fixed) firm-related charges are imposed on the 
following three options: Full-size index options (``QCX'') and Mini 
index options (``QCE'') on the Nasdaq Composite Index, Inc.[reg] and 
options listed on the iShares FTSE/Xinhua China 25 Index Fund (``FXI 
Options''), an exchange-traded fund. In addition, certain license 
fees per contract side may be imposed after the $50,000 cap is 
reached. See Securities Exchange Act Release No. 50836 (December 10, 
2004), 69 FR 75584 (December 17, 2004) (SR-Phlx-2004-70).
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    Pursuant to this proposal, the cap would increase from $50,000 to 
$60,000. No other changes to the firm-related equity option and index 
option cap are being proposed at this time.
    The purpose of the proposed rule change is to raise revenue, while 
continuing to promote equity option and index option business on the 
Phlx. Specifically, the Exchange believes that imposing a cap of 
$60,000 (rather than $50,000) will continue to offer an incentive for 
member organizations to transact more volume on the Phlx floor. An 
increase in firm orders should provide more trading opportunities for 
floor members, thereby increasing revenue potential to the membership, 
in addition to increasing revenue to the Exchange. Because the $50,000 
cap was established over one year ago,\7\ the Exchange believes that it 
is now appropriate to raise it by $10,000.
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    \7\ See Securities Exchange Act Release No. 48459 (September 8, 
2003), 68 FR 54034 (September 15, 2003) (SR-Phlx-2003-61).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \9\ in particular, in that it 
is an equitable allocation of reasonable fees among Exchange members.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 foregoing proposal has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \10\ and Rule 19b-4(f)(2) \11\ thereunder as 
a proposal establishing or changing a due, fee, or other charge imposed 
by the self-regulatory organization. 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

[[Page 3089]]

appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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-2004-94 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-2004-94. 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-2004-94 and should be submitted on or before 
February 9, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E5-176 Filed 1-18-05; 8:45 am]
BILLING CODE 8010-01-P