[Federal Register Volume 70, Number 31 (Wednesday, February 16, 2005)]
[Notices]
[Pages 7993-7994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-646]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51179; File No. SR-Phlx-2004-95]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Relating to Limitation of the Net Inbound ITS 
Credit to Certain Phlx and SCCP Fees and Transaction-Related Charges

February 9, 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 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 and 
II below, which Items have been prepared by the Phlx. On January 24, 
2005, the Exchange filed Amendment No. 1.\3\ 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\ Amendment No. 1 clarified certain terminology used in the 
proposed rule change and slightly changed the text of the rule.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise its schedule of fees to limit the 
Net Inbound Intermarket Trading System (``ITS'') \4\ Credit (``ITS 
Credit'') \5\ to certain Phlx and Stock Clearing Corporation of 
Philadelphia (``SCCP'') \6\ fees and transaction-related charges. 
Specifically, the proposal limits the ITS Credit to the amount of Phlx 
Permit Fees, Phlx Outbound ITS Fees, SCCP Trade Recording Fees, SCCP 
Value Fees, SCCP Transaction Charges (Remote Specialist Only), SCCP ETF 
Fees (related to NASDAQ-100 Trust, Series 1 (``QQQ''),\7\ Standard & 
Poor's Depository Receipts[reg] (``SPDRs''),\8\ and DIAMONDS[reg] 
Exchange Traded Funds (``DIAMONDS[reg]'')) \9\ incurred in the same 
month that the credit is earned.\10\ On a monthly basis, ITS Credit in 
excess of the amount charged for the fees may not be used for any other 
purpose and may not be carried forward.\11\ The proposed amendment is 
scheduled to become effective for transactions occurring in February, 
2005.
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    \4\ ITS is an order routing network designed to facilitate 
intermarket trading in exchange-listed equity securities among 
participating self-regulatory organizations based on current 
quotation information emanating from their markets.
    \5\ Currently, the ITS Credit (which is calculated on a monthly 
basis) is: $0.30 per 100 shares on the excess, if any, of the number 
of inbound ITS shares executed compared to the number of outbound 
ITS shares sent and executed on a monthly basis. The outbound ITS 
fee (``Outbound ITS Fee'') for PACE orders (PACE is the Exchange's 
electronic order routing, delivery, execution, and reporting system 
for equities) sent over ITS and containing customer clearing 
information is: $0.60 per 100 shares for up to 501 shares and $0.30 
per 100 shares for 501 to 4,999 shares. See Securities Exchange Act 
Release No. 45388 (February 4, 2002), 67 FR 6310 (February 11, 2002) 
SR-Phlx-2001-121).
    \6\ SCCP, a subsidiary of Phlx, is a registered clearing agency.
    \7\ The Nasdaq-100[reg], The 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 Phlx pursuant to a License 
Agreement with Nasdaq. The Nasdaq-200 Index[reg] (``Index'') is 
determined, composed, and calculated by Nasdaq without regard to the 
licensee of the product, 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.
    \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 
Phlx, in connection with the listing and trading of SPDRs, on the 
Phlx. These products are not sponsored, sold or endorsed by Standard 
& Poor's (``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 Dow SM,'' ``Dow 30 
SM,'' ``Dow Jones Industrial Average SM'', 
``Dow Jones Industrials SM,'' ``DJIA SM,'' 
``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 Phlx, 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\ SCCP is simultaneously submitting a proposed rule change 
that adds reference to the ITS Credit in the SCCP Fee Schedule and 
also renames fees related to certain products as ``ETF Fees.'' See 
SR-SCCP-2004-05.
    \11\ Thus, for example, if an equity specialist had a monthly 
ITS Credit of $30,000 and monthly Phlx and SCCP charges that were 
eligible to be reduced by the ITS Credit of $5,000 and $20,000, 
respectively, the equity specialist would receive a credit of 
$25,000, and the unused credit amount of $5,000 could not be used 
for any purpose.
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    The text of the proposed rule change is available on the Phlx's Web 
site http://www.phlx.com, at the Phlx's Office of the Secretary, and at 
the Commission's Public Reference Room.

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 continue encouraging 
ITS trades by allowing equity specialists to get an ITS Credit, but to 
limit the credit in a reasonable fashion so as not to financially 
burden the Exchange, particularly in light of the change in equity 
business on the Exchange. Specifically, while the current ITS Fee and 
ITS Credit methodology was practical when instituted in 2002,\12\ the 
equity business mix on the Exchange has changed, such that the ITS 
Credit is now substantially greater than the ITS Fee, with the Exchange 
generally having to credit substantial amounts to equity specialists. 
The Exchange is therefore constricting the amount of the ITS Credit, 
which will continue to be calculated on a monthly basis, such that the 
credit is limited as described above. The fees to which the ITS Credit 
is now limited reflect the most fundamental fees applicable to equity 
specialists.
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    \12\ See Securities Exchange Act Release No. 45388 (February 4, 
2002), 67 FR 6310 (February 11, 2002) (SR-Phlx-2001-121).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \13\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \14\ in particular, in that it 
is an equitable allocation of reasonable fees among Exchange members.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4).

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[[Page 7994]]

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 proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \15\ and paragraph (f) of Rule 19b-4 
thereunder,\16\ because it establishes or changes a due, fee, or other 
charge imposed by the Phlx. 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.\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
    \17\ For purposes of claculating the 60-day abrogation period, 
the Commission considers the proposed rule change to have been filed 
on January 24, 2005 when Amendment No. 1 was filed.
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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, as amended, 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-2004-95 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-2004-95. 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-2004-95 and should be submitted on or before March 
9, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E5-646 Filed 2-15-05; 8:45 am]
BILLING CODE 8010-01-P