[Federal Register Volume 73, Number 47 (Monday, March 10, 2008)]
[Notices]
[Pages 12790-12791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4558]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57420; File No. SR-Phlx-2008-16]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Extend the Dividend, Merger, and Short Stock Interest Strategies Fee 
Cap Program

March 3, 2008.
    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 February 27, 2008, 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 substantially prepared by the 
Exchange. The Phlx has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by the Exchange under 
Section 19(b)(3)(A),\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).
    \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

    The Phlx proposes to extend for a period of one year, until March 
1, 2009, the pilot programs for: (1) The $1,000 and $25,000 fee caps on 
equity option transaction and comparison charges on dividend,\5\ 
merger,\6\ and short stock interest \7\ strategies; and (2) the license 
fee of $0.05 per contract side imposed on dividend and short stock 
interest strategies, as described below. The current fee caps and $0.05 
per contract side license fee are in effect as a pilot program that is 
scheduled to expire on March 1, 2008.\8\ Other than extending the pilot 
program for an additional one-year period until March 1, 2009, no other 
changes to the Exchange's current dividend, merger and short stock 
interest strategy program, which includes the $0.05 per contract side 
license fee, are being proposed at this time.
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    \5\ For purposes of this proposal, the Exchange defines a 
``dividend strategy'' as transactions done to achieve a dividend 
arbitrage involving the purchase, sale and exercise of in-the-money 
options of the same class, executed prior to the date on which the 
underlying stock goes ex-dividend. See, e.g., Securities Exchange 
Act Release No. 54174 (July 19, 2006), 71 FR 42156 (July 25, 2006) 
(SR-Phlx-2006-40).
    \6\ For purposes of this proposal, the Exchange defines a 
``merger strategy'' as transactions done to achieve a merger 
arbitrage involving the purchase, sale and exercise of options of 
the same class and expiration date, 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 id.
    \7\ For purposes of this proposal, the Exchange defines a 
``short stock interest strategy'' as transactions done to achieve a 
short stock interest arbitrage involving the purchase, sale and 
exercise of in-the-money options of the same class. See id.
    \8\ See Securities Exchange Act Release No. 55358 (February 27, 
2007), 72 FR 9828 (March 5, 2007) (SR-Phlx-2007-14).
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    The text of the proposed rule change is available at the Exchange, 
the Commission's Public Reference Room, and http://www.Phlx.com/exchange/phlx-rule-fil.htm.

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 proposal. 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
    Currently, the Exchange imposes a fee cap on equity option 
transaction and comparison charges on dividend, merger and short stock 
interest strategies executed on the same trading day in the same 
options class. Specifically, Registered Options Trader (``ROT'') and 
specialist net equity option transaction and comparison charges are 
capped at $1,000 for dividend, merger, and short stock interest 
strategies executed on the same trading day in the same options 
class.\9\ In addition, there is a $25,000 per member organization fee 
cap on equity option transaction and comparison charges incurred in one 
month for dividend, merger and short stock interest strategies 
combined. The $1,000 and $25,000 fee caps are implemented after any 
applicable rebates are applied to ROT and specialist equity option 
transaction and

[[Page 12791]]

comparison charges occurring as part of a dividend, merger, or short 
stock interest strategy. \10\
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    \9\ See id.
    \10\ Currently, the Exchange rebates $0.08 per contract side for 
ROT executions and $0.07 per contract side for specialist executions 
in connection with trades occurring as part of a dividend, merger or 
short stock interest strategy.
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    In addition, the Exchange assesses a license fee of $0.05 per 
contract side for dividend and short stock interest strategies in 
connection with certain products that carry license fees, if 
applicable.\11\ The applicable license fee is assessed on every 
transaction and is not subject to the $1,000 or $25,000 fee caps 
described above, nor does it count towards reaching the $1,000 or 
$25,000 fee caps.
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    \11\ For a complete list of these product symbols, see the 
Exchange's $60,000 Firm-Related Equity Option and Index Option Cap 
Fee Schedule.
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    The purpose of extending the pilot program for the fee caps on 
equity option transaction and comparison charges on dividend, merger 
and short stock interest strategies and the $0.05 per contract fee 
imposed on dividend and short stock interest strategies until March 1, 
2009 is to continue to attract additional liquidity to the Exchange and 
to remain competitive with other options exchanges in connection with 
these types of options strategies. In addition, the purpose of 
extending the pilot is to recoup the license fees owed in connection 
with the trading of products that carry license fees. Even with the 
assessment of the $0.05 license fee per contract side, the fee caps and 
rebates should continue to encourage specialists and ROTs to provide 
liquidity for these types of options strategies.
    This proposal is scheduled to continue the fee for trades settling 
on or after March 1, 2008 and will remain in effect as a pilot program 
until March 1, 2009.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\13\ in 
particular, in that it is an equitable allocation of reasonable fees, 
and other charges among Exchange members. The Exchange believes that 
the proposed extension of the current fee caps is beneficial to its 
members by providing additional trading opportunities at an efficient 
cost. Additionally, the proposal allows the Exchange to recoup the 
license fees owed in connection with the trading of products that carry 
license fees.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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 burden on competition that is 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 rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \14\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\15\ since it establishes or changes a due, fee or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such 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 the furtherance of the 
purposes of the Act.
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    \14\ 15 U.S.C. 78s(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-Phlx-2008-16 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-2008-16. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such 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 No. SR-Phlx-2008-16 and should be 
submitted on or before March 31, 2008.

    For the Commission, by the Division of Trading and Market, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-4558 Filed 3-7-08; 8:45 am]
BILLING CODE 8011-01-P