[Federal Register Volume 70, Number 30 (Tuesday, February 15, 2005)]
[Notices]
[Pages 7786-7787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-605]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51153; File No. SR-SCCP-2005-01]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by Stock Clearing Corporation of 
Philadelphia Relating to the Extension of Its Fee Waiver for Electronic 
Communications Networks

February 8, 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 January 20, 2005, Stock Clearing Corporation of Philadelphia 
(``SCCP'') 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 SCCP. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to extend SCCP's 
existing fee waiver for ECN trades for an additional one-year period, 
through January 23, 2006, with the intention of attracting equity order 
flow from ECNs to the Exchange.
    SCCP believes that its current program is a reasonable method to 
attract large order flow providers such as ECNs to the Exchange and 
SCCP. Additional order flow should enhance liquidity and improve the 
Exchange's, and therefore SCCP's, competitive position in equity 
trading and processing.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, SCCP 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. SCCP 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

    SCCP, pursuant to Section 19(b)(1) and Rule 19b-4 thereunder,\3\ 
proposes to amend its schedule of fees to extend SCCP's current one-
year pilot program for an additional one-year period, through January 
23, 2006, in order to continue the existing SCCP fee waivers for SCCP 
participants for trades executed on the Philadelphia Stock Exchange, 
Inc. (``Phlx'' or ``Exchange'') for Electronic Communications Networks 
(``ECNs'').\4\ The current pilot program is scheduled to expire on 
January 23, 2005.\5\
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    \3\ 17 CFR 240.19b-4.
    \4\ As stated on the SCCP fee schedule, ECNs shall mean any 
electronic system that widely disseminates to third parties orders 
entered therein by an Exchange market maker or over-the-counter 
(``OTC'') market maker, and permits such orders to be executed 
against in whole or in part; except that the term ECN shall not 
include: any system that crosses multiple orders at one or more 
specified times at a single price set by the ECN (by algorithm or by 
any derivative pricing mechanism) and does not allow orders to be 
crossed or executed against directly by participants outside of such 
times; or, any system operated by, or on behalf of, an OTC market 
maker or exchange market maker that executes customer orders 
primarily against the account of such market maker as principal, 
other than riskless principal. See SEC Rule 11Ac1-1(a)(8).
    \5\ Securities Exchange Act Release No. 49189 (February 4, 
2004), 69 FR 6713 (February 11, 2004) [File No. SR-SCCP-2004-01].
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    SCCP has implemented a fee waiver, since early 2001,\6\ such that 
SCCP waives certain fees and charges, including trade recording fees, 
value fees, treasury transaction charges, charges for non-specialist 
Nasdaq 100 Trust, Series 1 (``QQQ''),\7\ Standard & Poor's Depository 
Receipts[reg]

[[Page 7787]]

(``SPDRs'') \8\ and DIAMONDS[reg] Exchange Traded Funds 
(``DIAMONDS[reg]'') \9\ (collectively ``ETF charges'') for ECN 
trades,\10\ but not account fees, research fees, computer transmission/
tape charges, or other charges on its fee schedule. At this time, SCCP 
proposes to continue this fee waiver through January 23, 2006.
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    \6\ Securities Exchange Act Release No. 45145 (December 10, 
2001), 66 FR 65017 (December 17, 2001) [File No. SR-SCCP-2001-01].
    \7\ 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 Stocksm, 
and QQQsm, 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] (the Index) 
is determined, composed, and calculated by Nasdaq without regard to 
the Licensee, the Nasdaq-100 Trustsm,, or the beneficial 
owners of Nasdaq-100 Sharessm,. 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.
    \8\ Standard & Poor's[reg],'' ``S&P[reg],'' ``S&P 500[reg],'' 
``Standard & Poor's 500[reg]'', and ``500'' are trademarks of The 
McGraw-Hill Companies, Inc., and have been licensed for use by the 
Philadelphia Stock Exchange, Inc., in connection with the listing 
and trading of SPDRs, on the Phlx. These products are not sponsored, 
sold or endorsed by S&P, a division of The McGraw-Hill Companies, 
Inc., and S&P makes no representation regarding the advisability of 
investing SPDRs.
    \9\ Dow Jones[reg],'' ``The DowSM,'' ``Dow 
30SM,'' ``Dow Jones Industrial AverageSM'', 
``Dow Jones IndustrialsSM,'' ``DJIASM,'' 
``DIAMONDS[reg]'' and ``The Market's Measure[reg]'' are trademarks 
of Dow Jones & Company, Inc. (``Dow Jones'') and have been licensed 
for use for certain purposes by the Philadelphia Stock Exchange, 
Inc., pursuant to a License Agreement with Dow Jones. The DIAMONDS 
Trust, based on the DJIA, is not sponsored, endorsed, sold or 
promoted by Dow Jones, and Dow Jones makes no representation 
regarding the advisability of investing in the DIAMONDS Trust.
    \10\ Certain provisions of the SCCP Fee Schedule do not apply to 
ECNs because they apply to specialists and/or relate to margin 
financing, such as specialist discount, margin account interest, P&L 
statement charges, buy-ins, specialist ETF charges, and SCCP 
Transaction Charge (Remote Specialists Only).
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    This proposal affects ECN trades not related to such ECN acting as 
a Phlx specialist or floor broker on the Phlx. Currently, no ECN 
operates from the Exchange's equity trading floor as a floor broker or 
specialist unit. If, however, an ECN did operate from the Phlx equity 
trading floor, it could be subject to various SCCP fees respecting its 
non-ECN floor operation. In addition, an ECN's transactions as a floor 
broker would be subject to the applicable SCCP fee, as would any ECN's 
specialist trades.\11\ Even if the ECN is acting as a floor broker or 
specialist with respect to some trades, those trades for which it is 
not acting as a floor broker or specialist, but rather an ECN, would be 
eligible for this fee waiver.
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    \11\ For example, an ECN acting as a specialist would be subject 
to the trade recording fee for specialist trades matching with PACE 
trades.
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    A copy of SCCP's schedule of fees which includes the fees proposed 
to be waived for ECNs to the filing of proposed rule change as Exhibit 
5.\12\
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    \12\ No changes are being made to the SCCP fee schedule in 
connection with the ECN fee as described in this proposal. The 
Exchange, however, proposes to make a minor, technical change to 
delete a reference to a date when the fee schedule was last updated 
(``December 2004'') in order to minimize any member confusion.
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    SCCP believes that its proposal to extend its current pilot program 
for one year, thereby continuing to implement the existing SCCP fee 
waivers described above for ECNs, is consistent with Section 
17A(b)(3)(D) \13\ of the Act because it provides for the equitable 
allocation of reasonable dues, fees, and other charges in order to 
attract new order flow to Phlx and SCCP. SCCP believes that structuring 
this fee for ECNs is appropriate, as ECNs are unique in their role as 
order flow providers to the Exchange. Specifically, ECNs operate a 
unique electronic agency business, similar to a securities exchange, as 
opposed to directly executing orders for their own customers as 
principal or agent.
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    \13\ 15 U.S.C. 78q-1(b)(3)(D).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    SCCP 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 proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act \14\ and Rule 19b-4(f)(2) \15\ 
thereunder because it establishes or changes a due, fee, or other 
charge. 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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    \14\ 15 U.S.C. 78(s)(b)(3)(A)(ii).
    \15\ 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-SCCP-2005-01 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-SCCP-2005-01. 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 SCCP. 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-SCCP-2005-01 and should be submitted on or before March 8, 2005.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-605 Filed 2-14-05; 8:45 am]
BILLING CODE 8010-01-P