[Federal Register Volume 70, Number 175 (Monday, September 12, 2005)]
[Notices]
[Pages 53828-53829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18005]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52380; File No. SR-Phlx-2005-56]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to an Extension of the Pilot Program on Dividend Spread and 
Merger Spread Fee Caps Until March 1, 2006

September 2, 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 August 29, 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, II, 
and III, below, which Items have been prepared by Phlx. The Exchange 
designated the proposed rule change as establishing or changing a due, 
fee, or other charge imposed by the Exchange under Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
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 extend for a period of six months its fee caps on 
equity option transaction and comparison charges on dividend spread 
transactions \5\ and merger spread transactions.\6\ The current fee 
caps are in effect as a pilot program that expires on September 1, 
2005. The Exchange proposes to extend the pilot program for the fee 
caps for a six-month period until March 1, 2006. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.phlx.com), at the Office of the Secretary, Phlx, and at the 
Commission.
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    \5\ For purposes of this proposal, a ``dividend spread'' 
transaction is any trade done within a defined time frame pursuant 
to a strategy in which a dividend arbitrage can be achieved between 
any two deep-in-the-money options. See Securities Exchange Act 
Release No. 48983 (December 23, 2003), 68 FR 75703 (December 31, 
2003) (SR-Phlx-2003-80).
    \6\ For purposes of this proposal, the Exchange defines a 
``merger spread'' transaction as a transaction executed pursuant to 
a merger spread strategy involving the simultaneous purchase and 
sale of options of the same class and expiration date, but different 
strike prices, followed by the exercise of the resulting long 
options position, each executed prior to the date on which 
shareholders of record are required to elect their respective form 
of consideration, i.e., cash or stock. See Securities Exchange Act 
Release No. 51596 (April 21, 2005), 70 FR 22381 (April 29, 2005) 
(SR-Phlx-2005-19).
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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 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. 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 fee cap on equity option 
transaction and comparison charges on merger spread transactions and 
dividend spread transactions executed on the same trading day in the 
same options class. Specifically, ROTs' and specialists' equity option 
transaction and comparison charges are capped at $1,750 for 
transactions effected pursuant to a merger spread strategy or dividend 
spread strategy when the dividend is $0.25 or greater. However, for 
dividend spread transactions for a security with a declared dividend or 
distribution of less than $0.25, the ROTs' and specialists' equity 
option transaction and comparison charges are capped at $1,000 for 
transactions effected pursuant to a dividend spread strategy executed 
on the same trading day in the same options class. The fee caps are 
implemented after any applicable rebates are applied to ROT and 
specialist equity option transaction and comparison charges.\7\ The 
purpose of extending the pilot program for a six-month period is to 
continue to attract additional liquidity to the Exchange and to remain 
competitive.\8\
2. Statutory Basis
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    \7\ Currently, the Exchange provides a rebate for certain 
contracts executed in connection with transactions occurring as part 
of a dividend spread strategy or merger spread strategy. See notes 5 
and 6, supra.
    \8\ Similar to the Exchange's current rebate process, members 
who wish to benefit from the fee cap are required to submit to the 
Exchange a written rebate request with supporting documentation.
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    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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \11\ and paragraph (f)(2) of Rule 19b-4 
thereunder \12\ because it is establishing or changing a due, fee, or 
other charge applicable only to the Exchange's members. 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

[[Page 53829]]

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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2005-56 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Phlx-2005-56. 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 available publicly. All submissions should refer to 
File Number SR-Phlx-2005-56 and should be submitted on or before 
October 3, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18005 Filed 9-9-05; 8:45 am]
BILLING CODE 8010-01-P