[Federal Register Volume 71, Number 152 (Tuesday, August 8, 2006)]
[Notices]
[Pages 45089-45090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-12838]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54257; File No. SR-Phlx-2006-46]


 Self-Regulatory Organizations; Philadelphia Stock Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Extending the Specialist Option Transaction Charge Credit Pilot 
Program

August 1, 2006.
    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 July 21, 2006, 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. The 
Exchange has designated this proposal as one establishing or changing a 
due, fee, or other charge imposed by a self-regulatory organization 
pursuant to 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend for a one-year period, until July 
31, 2007, its current pilot program that provides for an option 
transaction charge credit of $0.21 per contract for Exchange options 
specialist units \5\ that incur Phlx option transaction charges when a 
customer order is delivered to the limit order book via the Exchange's 
Options Floor Broker Management System (``FBMS'') \6\ and is then sent 
to an away market and executed via the Intermarket Option Linkage 
(``Linkage'') under the Plan for the Purpose of Creating and Operating 
an Intermarket Option Linkage (``Plan'') \7\ as a Principal Acting as 
Agent Order (``P/A Order'').\8\
---------------------------------------------------------------------------

    \5\ The terms ``specialist'' and ``specialist unit'' are used 
interchangeably.
    \6\ The FBMS is a component of the Exchange's Automated Options 
Market (AUTOM) System designed to enable Floor Brokers and/or their 
employees to enter, route and report transactions stemming from 
options orders received on the Exchange. The FBMS also is designed 
to establish an electronic audit trail for options orders 
represented and executed by Floor Brokers on the Exchange, such that 
the audit trail provides an accurate, time-sequenced record of 
electronic and other orders, quotations and transactions on the 
Exchange, beginning with the receipt of an order by the Exchange, 
and further documenting the life of the order through the process of 
execution, partial execution, or cancellation of that order. See 
Phlx Rule 1080, Commentary .06.
    \7\ See Securities Exchange Act Release Nos. 43086 (July 28, 
2000), 65 FR 48023 (August 4, 2000); and 43573 (November 16, 2000), 
65 FR 70851 (November 28, 2000) (order approving Phlx as a 
participant in the Plan).
    \8\ A P/A order 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. See Phlx Rule 1083(k)(i).
---------------------------------------------------------------------------

    The pilot program in effect is currently scheduled to expire on 
July 31, 2006.\9\ The text of the proposed rule change is available at 
the Commission's Public Reference Room, at the Office of the Secretary 
of the Exchange, and on the Exchange's Web site at http://www.Phlx.com.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 53761 (May 5, 2006), 
71 FR 27768 (May 12, 2006) (SR-Phlx-2006-20). This proposal is 
scheduled to be in effect for the same time period as fees for 
Linkage Principal Orders (``P Orders'') and P/A Orders. See 
Securities Exchange Act Release No. 54233 (July 27, 2006) (SR-Phlx-
2006-44).
---------------------------------------------------------------------------

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 received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange 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 provides an option transaction charge 
credit of $0.21 per contract for Exchange options specialist units that 
incur Phlx option transaction charges when a customer order is 
delivered to the limit order book via FBMS and is then sent to an away 
market and executed via Linkage under the Plan as a P/A Order.
    The purpose of this proposal is to continue to alleviate the 
potential economic burden of multiple transaction charges imposed on 
Exchange specialist units by establishing a credit for Exchange option 
transaction charges incurred by an Exchange specialist unit when a 
customer limit order placed on the limit order book by a Floor Broker 
\10\ results in an execution of a P/A Order that is sent to another 
exchange via Linkage. The Exchange believes that continuing to give an 
options transaction charge credit of $0.21 per contract should 
encourage the use of Linkage and should allow the Exchange to remain 
competitive with other exchanges with respect to the assessment of 
Linkage-related fees.\11\
---------------------------------------------------------------------------

    \10\ A Floor Broker who wishes to place a limit order on the 
limit order book must submit such a limit order electronically 
through the FBMS. See Phlx Rule 1063, Commentary .01. See also Phlx 
Rule 1080, Commentary .02(b).
    \11\ See Securities Exchange Act Release Nos. 53372 (February 
24, 2006), 71 FR 11003 (March 3, 2006) (SR-CBOE-2006-10) (rebate of 
certain transaction fees to Designated Primary Market Makers related 
to the execution of outbound P/A orders) and 53526 (March 21, 2006), 
71 FR 15794 (March 29, 2006) (SR-PCX-2006-19) (creating a credit 
associated with the fees a Market Maker is charged for executions 
that result from P/A Orders sent to and executed at away market 
centers). See also Securities Exchange Act Release No. 54064 (June 
28, 2006), 71 FR 38438 (July 6, 2006) (SR-CBOE-2006-59).
---------------------------------------------------------------------------

    This proposal is to remain in effect as a pilot program until July 
31, 2007.\12\
---------------------------------------------------------------------------

    \12\ This proposal is in connection with an existing pilot 
program for Linkage P and P/A Orders and is in effect for the same 
time period as the pilot program for Linkage P and P/A Orders. The 
Exchange filed a separate proposed rule change to extend the fees 
for Linkage P and P/A orders for a one-year period until July 31, 
2007. See Securities Exchange Act Release No. 54233, supra at note 
9. See also Securities Exchange Act Release Nos. 53650 (April 13, 
2006), 71 FR 20430 (April 20, 2006) (SR-Phlx-2006-22) and 53761 (May 
5, 2006), 71 FR 27768 (May 12, 2006) (SR-Phlx-2006-20).

---------------------------------------------------------------------------

[[Page 45090]]

2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees 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 
and other charges among Exchange members.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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 establishes or changes a due, 
fee, or other charge applicable only to a member pursuant to Section 
19(b)(3)(A)(ii) of the Act \15\ and Rule 19b-4(f)(2) thereunder.\16\ 
Accordingly, the proposal took effect upon filing with the Commission.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \17\ See Section 19(b)(3)(C), 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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-2006-46 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Phlx-2006-46. 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-2006-46 and should be submitted on or before August 
29, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-12838 Filed 8-7-06; 8:45 am]
BILLING CODE 8010-01-P