[Federal Register Volume 70, Number 42 (Friday, March 4, 2005)]
[Notices]
[Pages 10736-10738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-878]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51257; File No. SR-Phlx-2005-10]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval to a Proposed 
Rule Change and Amendment No. 1 Thereto Relating to Fees Applicable to 
Linkage P and P/A Orders

February 25, 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 28, 2005, 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 Exchange. On February 
16, 2005, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons and is 
granting accelerated approval of the proposed rule change, as amended, 
on a pilot basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Form 19b-4 dated February 16, 2005 (``Amendment No. 
1''). Amendment No. 1 replaced and superseded the original filing in 
its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its schedule of fees to: (1) Reduce 
from $.45 per contract to $.15 per contract the Exchange's equity 
option transaction charge \4\ applicable to Principal Orders

[[Page 10737]]

(``P Orders'') sent to the Exchange via the Intermarket Options Linkage 
(``Linkage'') pursuant to the Plan for the Purpose of Creating and 
Operating an Intermarket Option Linkage (``Plan''); \5\ and (2) adopt a 
$.15 per contract equity option transaction charge for Linkage 
Principal Acting as Agent Orders (``P/A Orders'').\6\
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    \4\ The equity option transaction charge would apply to equity 
options and to options overlying Exchange-Traded Fund Shares.
    \5\ See Securities Exchange Act Release Nos. 43086 (July 28, 
2000), 65 FR 48023 (August 4, 2000); (order approving the Plan); and 
43573 (November 16, 2000), 65 FR 70851 (November 28, 2000) (order 
approving Phlx as a participant in the Plan).
    \6\ Under Section 2(16) of the Plan and Exchange Rule 1083(k), a 
``Linkage Order'' means an Immediate or Cancel order routed through 
the Linkage as permitted under the Plan. There are three types of 
Linkage Orders:
    (i) ``Principal Acting as Agent Order,'' which is an order for 
the principal account of a specialist (or equivalent entity on 
another Participant Exchange that is authorized to represent Public 
Customer orders), reflecting the terms of a related unexecuted 
Public Customer order for which the specialist is acting as agent;
    (ii) ``Principal Order,'' which is an order for the principal 
account of an Eligible Market Maker and is not a P/A Order; and
    (iii) ``Satisfaction Order,'' which is an order sent through the 
Linkage to notify a member of another Participant Exchange of a 
Trade-Through and to seek satisfaction of the liability arising from 
that Trade-Through.
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    The Exchange would charge the clearing member firm of the sender of 
inbound Linkage P and P/A Orders. Consistent with current practice and 
with the Plan, the Exchange would not charge for the execution of 
Satisfaction Orders sent through Linkage.
    The Exchange intends to incorporate this new fee structure as part 
of an existing pilot program, which is scheduled to expire July 31, 
2005.\7\
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    \7\ See Securities Exchange Act Release No. 50125 (July 30, 
2004), 69 FR 47479 (August 5, 2004) (SR-Phlx-2004-44). In that 
filing, the Exchange established, on a pilot basis, a fee of $.45 
per contract for inbound P Orders. The instant proposed rule change 
would reduce the fee for inbound P Orders from $.45 per contract to 
$.15 per contract, and would establish, as part of the pilot, a fee 
of $.15 per contract for inbound P/A Orders.
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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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it had received on the proposed rule change. 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 reducing the charge for P Orders from $.45 to $.15 
is to encourage additional order flow to the Exchange and remain 
competitive. The purpose of adopting a $.15 fee for P/A Orders is to 
raise revenue for the Exchange. The Exchange notes that other exchanges 
that are participants in the Plan (``Participants'') also charge fees 
for P and P/A Orders.\8\
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    \8\ See e.g., Securities Exchange Act Release Nos. 50124 (July 
30, 2004), 69 FR 47963 (August 6, 2004) (SR-BSE-2004-32); 50010 
(July 13, 2004), 69 FR 43649 (July 21, 2004) (SR-ISE-2004-25); 50048 
(July 20, 2004), 69 FR 45102 (July 28, 2004) (SR-CBOE-2004-40); 
50082 (July 26, 2004), 69 FR 45875 (July 30, 2004) (SR-PCX-2004-68); 
and 50116 (July 29, 2004), 69 FR 47473 (August 5, 2004) (SR-Amex-
2004-54).
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    The Exchange specifically requests that the Commission approve the 
proposal such that it would apply to transactions that settle on or 
after February 1, 2005.
2. Statutory Basis
    The Exchange believes that the proposed rule change 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 fees among Exchange members.
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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 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

    Written comments on the proposed rule change were neither solicited 
nor 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-2005-10 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-2005-10. 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 Exchange. 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 publicly available. All submissions should refer to 
File Number SR-Phlx-2005-10 and should be submitted on or before March 
25, 2005.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful consideration, 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\ and, in particular, the requirements of Section 6(b) of 
the Act \12\ and the rules

[[Page 10738]]

and regulations thereunder. The Commission finds that the proposed rule 
change is consistent with Section 6(b)(4) of the Act,\13\ which 
requires that the rules of the Exchange provide for the equitable 
allocation of reasonable dues, fees and other charges among its members 
and other persons using its facilities. The Commission believes that 
lowering the fee for inbound P Orders retroactively to transactions 
that settled on or after February 1, 2005 should reduce a financial 
disincentive to send P Orders to the Phlx. The Commission also believes 
that implementing a fee for inbound P/A Orders is consistent with the 
practices of the other Participants. The Commission believes that 
approving the proposed rule change, as amended, on a pilot basis, until 
July 31, 2005, will give the Exchange and the Commission further 
opportunity to evaluate whether Linkage fee are appropriate.
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    \11\ In approving this proposal, the Commission notes that it 
has considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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    The Commission believes that the proposed rule change, as amended, 
is generally consistent with the practices of other Participants and 
presents no new regulatory issues. Accordingly, the Commission finds 
good cause pursuant to Section 19(b)(2) of the Act,\14\ for approving 
this proposed rule change, as amended, prior to the thirtieth day after 
publication of notice thereof in the Federal Register.
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    \14\ 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,\15\ that the proposed rule change (SR-Phlx-2005-10), as amended, 
is hereby approved on an accelerated basis for a pilot period to expire 
on July 31, 2005.
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    \15\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-878 Filed 3-3-05; 8:45 am]
BILLING CODE 8010-01-P