[Federal Register Volume 73, Number 129 (Thursday, July 3, 2008)]
[Notices]
[Pages 38286-38288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-15103]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58049; File No. SR-Phlx-2008-46]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Fees for Options on the Full-Size Nasdaq 100 Index and 
Options on the Mini Nasdaq 100 Index

June 27, 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 June 13, 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 and 
II below, which Items have been substantially prepared by the Exchange. 
The Exchange has designated this proposal as one establishing or 
changing a due, fee, or other charge applicable only to a member, 
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.
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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 assess equity option charges, as opposed to index 
option charges, on: (1) Options on the full value of the Nasdaq 100 
Index \5\ traded under the symbol NDX (the ``Full-size Nasdaq 100 
Index''); and (2) options on the one-tenth of the value of the Nasdaq 
100 Index traded under the symbol MNX (the ``Mini Nasdaq 100 Index'') 
(collectively referred to herein as the ``Nasdaq Index Products''). \6\ 
Therefore, the Exchange proposes to charge the Nasdaq Index Products, 
which are index options, in a similar manner that it charges for equity 
options, except that there will be a fee assessed for customer 
transactions.\7\ Specifically, for purposes of the option transaction 
charge, the Exchange proposes to adopt a specific customer option 
transaction charge of $0.12 per contract side customer execution 
transaction fee on the Nasdaq Index Products.
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    \5\ NASDAQ[supreg], NASDAQ-100[supreg] and NASDAQ-100 
Index[supreg] are registered trademarks of The NASDAQ OMX Group, 
Inc. (which with its affiliates are the ``Corporations'') and are 
licensed for use by the Philadelphia Stock Exchange, Inc. in 
connection with the trading of options products based on the NASDAQ-
100 Index[supreg]. The options products have not been passed on by 
the Corporations as to their legality or suitability. The options 
products are not issued, endorsed, sold, or promoted by the 
Corporations. The Corporations make no warranties and bear no 
liability with respect to the options products.
    \6\ See Securities Exchange Act Release No. 57936 (June 6, 
2008), 73 FR 33481 (June 12, 2008) (SR-Phlx-2008-36) (proposed rule 
change relating to the listing and trading of options on the Nasdaq 
Index Products).
    \7\ Phlx has clarified that the index option transaction charge 
for customer executions, which is currently $0.40 per contract, 
applies to broker-dealer transactions. Pursuant to this proposed 
rule change, Phlx has stated that broker-dealer transactions in MNX 
and MDX index options will be assessed the equity option transaction 
charges as set forth on the Exchange's current Summary of Equity 
Option and RUT and RMN Charges fee schedule. Pursuant to that fee 
schedule, the broker-dealer equity option transaction charges are 
either $0.45 per contract for AUTOM-delivered orders or $0.25 per 
contract for non-AUTOM-delivered orders. Email communication to 
Heather Seidel, Assistant Director, Division of Trading and Markets 
(``Division''), Commission, and Leah Mesfin, Special Counsel, 
Division, Commission, from Cynthia Hoekstra, Vice President, Phlx, 
on June 24, 2008.
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    In addition, the Exchange proposes to adopt a $0.10 per contract 
side license fee on ``firm-related'' comparison and transaction charges 
for the Nasdaq Index Products.\8\ This license fee will be imposed only 
after the Exchange's $60,000 firm-related equity option and index 
option comparison and transaction charge cap is reached.\9\
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    \8\ Specifically, ``firm-related'' charges include equity option 
firm/proprietary comparison charges, equity option firm/proprietary 
transaction charges, equity option firm/proprietary facilitation 
transaction charges, index option firm (proprietary and customer 
executions) comparison charges, index option firm/proprietary 
transaction charges, and index option firm/proprietary facilitation 
transaction charges (collectively the ``firm-related charges'').
    \9\ Currently, the Exchange imposes a per contract side license 
fee for equity option and index option ``firm'' transactions on 
certain licensed products (collectively ``licensed products'') after 
the $60,000 cap per member organization on all ``firm-related'' 
equity option and index option comparison and transaction charges 
combined is reached Therefore, when a member organization exceeds 
the $60,000 cap (comprised of firm-related charges), the member 
organization is charged $60,000, plus the applicable license fee per 
contract side for any contracts in licensed products (if any) over 
those that were included in reaching the $60,000 cap. Thus, such 
firm-related charges in the aggregate for one billing month may not 
exceed $60,000 per month per member organization. For a complete 
list of the licensed products that are assessed a license fee per 
contract side after the $60,000 cap is reached, see $60,000 ``Firm 
Related'' Equity Option and Index Option Cap on the Exchange's fee 
schedule.

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[[Page 38287]]

    In addition, the Exchange proposes to amend its Summary of Equity 
Option and RUT and RMN Charges to reflect that a $0.10 license fee on 
the Nasdaq Index Products will be assessed in connection with the 
Exchange's current cap on Registered Options Traders (``ROT'') 
comparison charges and ROT and specialist transaction charges \10\ on 
non-AUTOM delivered equity option contracts \11\ when an ROT or 
specialist executes over 14,000 contracts calculated on a daily basis. 
These terms apply only to transactions when an ROT or specialist is the 
contra-party to a customer order.\12\ Therefore, after the 14,000 non-
AUTOM delivered contract level is reached in a specific option, 
additional comparison and transaction charges are not assessed on 
subsequent option contracts in excess of 14,000 that are executed on 
that day in that specific option when the ROT or specialist is the 
contra-party to a customer order. Even when the 14,000 cap is reached, 
the license fee will be imposed on applicable ROTs and specialists for 
equity option transactions on those licensed products that carry a 
license fee.\13\
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    \10\ The Exchange does not currently assess a comparison charge 
on specialist transactions. Therefore, the cap applies to ROT 
comparison and transaction charges combined and separately to 
specialist transaction charges.
    \11\ For purposes of this fee, orders delivered via the Floor 
Broker Management System are deemed to be non-AUTOM delivered 
orders. See Phlx Rule 1063.
    \12\ See Securities Exchange Act Release No. 54659 (October 27, 
2006), 71 FR 64603 (November 2, 2006) (SR-Phlx-2006-67) (capping ROT 
comparison charges and ROT and specialist transaction charges when 
certain requirements are met).
    \13\ For a complete list of the licensed products that are 
currently assessed a license fee per contract side after the 14,000 
equity option contract is reached, see $60,000 ``Firm Related'' 
Equity Option and Index Option Cap on the Exchange's fee schedule.
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    This proposal is schedule to become effective for transactions 
settling on or after June 16, 2008.
    The text of the proposed rule change is available at the Exchange's 
principal office, on the Exchange's Web site at http://www.phlx.com/regulatory/reg_rulefilings.aspx, 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 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
    The purpose of this proposal is to assess equity option charges, 
including payment for order flow charges, on the Nasdaq Index Products 
that are competitive with charges assessed on these same products by 
other exchanges.\14\
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    \14\ See e.g., Securities Exchange Act Release Nos. 57052 
(December 27, 2007), 73 FR 523 (January 3, 2008) (SR-Amex-2007-140) 
(assessing license fee of $0.16 per contract side for NDX and MNX 
options); 51351 (March 9, 2005), 70 FR 12917 (March 16, 2005) 
(relating to transaction fees and license fees for the Nasdaq Index 
Products); 57128 (January 10, 2008), 73 FR 2969 (January 16, 2008) 
(SR-ISE-2008-02) (assessing license fee of $0.16 per contract for 
trading in options on NDX and MNX); 52983 (December 20, 2005), 70 FR 
76475 (December 27, 2005) (SR-ISE-2005-047) (adopting a flat 
execution fee for public customer orders in ``Premium Products''); 
52493 (September 22, 2005), 70 FR 56941 (September 29, 2005) (SR-
Amex-2005-087) (certain transaction fees applicable to the Nasdaq 
Index Products); and 55193 (January 30, 2007), 72 FR 5476 (February 
6, 2007) (SR-CBOE-2006-111) (amending certain public customer fees 
for other indexes, ETFs and HOLDRs).
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    The purpose of assessing the Nasdaq Index Products a license fee of 
$0.10 per contract side after reaching the $60,000 cap and the 14,000 
cap as described herein is to help defray licensing costs associated 
with the trading of these products, while still capping member 
organizations' fees enough to attract volume from other exchanges.\15\ 
The caps operate this way in order to offer an incentive for additional 
volume without leaving the Exchange with significant out-of-pocket 
costs. This proposal is scheduled to become effective for transactions 
settling on or after June 16, 2008.
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    \15\ Id.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \16\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \17\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members, as all the applicable equity 
option charges will be assessed on the Nasdaq Index Products. 
Additionally, assessing customer transaction and license fees on the 
Nasdaq Index Products, as described herein, should help the Exchange 
remain competitive by attracting additional order flow to the Exchange.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 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 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

    Because the foregoing rule change is establishing or changing a 
due, fee, or other charge applicable only to a member, it has become 
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \18\ and Rule 
19b-4(f)(2) thereunder.\19\ 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 furtherance of the purposes of the Act.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 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-2008-46 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.


[[Page 38288]]


All submissions should refer to File Number SR-Phlx-2008-46. 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, on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of the 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-2008-46 and should be submitted on or before July 24, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Florence E. Harmon,
Acting Secretary.
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    \20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-15103 Filed 7-2-08; 8:45 am]
BILLING CODE 8010-01-P