[Federal Register Volume 73, Number 159 (Friday, August 15, 2008)]
[Notices]
[Pages 48001-48002]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-18855]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58334; File No. SR-Phlx-2008-59]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Relating to Changes to Its Equity Option Fees
August 8, 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 August 1, 2008, Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the Phlx.
On August 8, 2008, the Exchange filed Amendment No. 1 to the proposed
rule change. The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx, pursuant to Section 19(b)(1) of the Act \3\ and Rule 19b-
4 thereunder,\4\ proposes to amend its equity option fees as follows:
(1) Reduce its equity option transaction charge to $0.01 per contract
for Registered Options Traders (``ROTs'') \5\ and specialists for
contract volume above 4.5 million contracts per month (``Volume
Threshold''); (2) delete the ROT equity option comparison charge for
contract volume above the Volume Threshold; and (3) delete the $0.08
per contract side rebate for ROTs and $0.07 per contract side rebate
for specialists in connection with trades occurring as part of a
dividend, merger, and short stock interest strategy.
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\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ ROT equity option transaction charges are referred to on the
Exchange's fee schedule as ``Registered Option Trader (on floor).''
This charge applies to ROTs, Streaming Quote Traders (``SQTs''), and
Remote Streaming Quote Traders (``RSQTs''). SQTs and RSQTs are
considered to be ROTs pursuant to Exchange Rule 1014. ROT
transactions entered from off-floor would continue to be included in
the broker/dealer equity option transaction charges for billing
purposes, as set forth in footnote 3 of the Exchange's Summary of
Equity Option, and MNX, NDX, RUT and RMN Charges fee schedule.
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This proposal is scheduled to become effective for trades settling
on or after August 1, 2008.
The text of the proposed rule change is available on the Exchange's
Web site at http://www.phlx.com/regulatory/reg_rulefilings.aspx.
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 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 the proposed rule change is to revise the Exchange's
fee schedule in order to remain competitive and encourage additional
order flow to the Exchange. Pursuant to this proposal, the Exchange
intends to amend its equity option transaction charges for ROTs and
specialists. For contract volume below the Volume Threshold, ROTs would
continue to be assessed the current equity option transaction charge of
$0.19 per contract and specialists would be assessed the current equity
option transaction charge of $0.21 per contract. Thereafter, both ROTs
and specialists would be assessed an equity option transaction charge
of $0.01 per contract for contract volume over the Volume Threshold for
that month. ROTs would not be charged the current $0.03 per contract
equity option comparison charge for any transactions over the Volume
Threshold.\6\ Thus, the total equity option transaction and comparison
charge for both specialists and ROTs would be $0.01 per contract for
contract volume over the Volume Threshold for that month.
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\6\ Specialists are not currently assessed a comparison charge.
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Currently, a fee credit of $0.21 per contract is given to
specialists that incur equity option transaction charges when a
customer order is delivered electronically via Phlx XL \7\ or via the
Exchange's Options Floor Broker Management System (``FBMS''),\8\ and is
then executed via the Intermarket Option Linkage (``Linkage'') \9\ as a
Principal Acting as Agent Order (``P/A Order''). In connection with
decreasing the equity option transaction charge for specialists as
described above, the fee credit would now be equal to the applicable
equity option transaction charge per contract (i.e. $0.21 per contract
or $0.01 per contract), in order not to give a credit that is greater
than the equity option transaction charge that is imposed.
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\7\ See Exchange Rule 1080.
\8\ FBMS is designed to enable Floor Brokers and/or their
employees to enter, route and report transactions stemming from
options orders received on the Exchange. See Exchange Rule 1080,
Commentary .06.
\9\ Linkage is governed by the Options Linkage Authority under
the conditions set forth under the Plan for the Purpose of Creating
and Operating an Intermarket Option Linkage (the ``Plan'') approved
by the Commission. The registered U.S. options markets are linked
together on a real-time basis through a network capable of
transporting orders and messages to and from each market.
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To determine the Volume Threshold, the Exchange would aggregate the
trading activity of separate ROTs and specialist member organizations
if there is at least 75% common ownership between the member
organizations as reflected on each member organizations' Form BD,
Schedule A.\10\ Contract volume resulting from dividend, merger, and
short stock interest strategies \11\ and contract volume resulting from
specialists that incur Phlx equity option transaction charges when a
customer order is delivered electronically via Phlx XL \12\ or via FBMS
and is then executed via Linkage as a P/A Order would not be included
in the Volume Threshold calculation. In addition, currently, the
Exchange does not assess ROT equity option transaction and comparison
charges and specialist equity option transaction charges on additional
qualifying transactions on
[[Page 48002]]
option contracts that number greater than 14,000, calculated per day:
(1) per equity option overlying the same underlying security; (2) per
RUT option; (3) per RMN option; (4) per MNX option; and (5) per NDX
option (``14,000 cap''). The contract volume above the 14,000 cap
described above would not be included in the Volume Threshold
calculations. Therefore, per day, up to 14,000 contracts that meet the
criteria above would be included in the Volume Threshold. The purpose
of excluding this volume is because it is already subject to different
fee caps or fee credits.
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\10\ An ROT's or a specialist's monthly contract volume is
determined at the member organization affiliation level, e.g., if
five ROTs are affiliated with member organization ABC as reflected
by Exchange records for the entire month, all of the volume from
those five ROTs counts towards member organization ABC's Volume
Threshold for that month.
\11\ The current equity option comparison and transaction caps
of $1,000 and $25,000 that are imposed in connection with dividend,
merger and short stock interest strategies would continue to apply.
\12\ See Exchange Rule 1080.
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The Exchange also proposes to delete the $0.08 per contract side
rebate for ROTs and $0.07 per contract side rebate for specialists in
connection with trades occurring as part of a dividend, merger, and
short stock interest strategy. The Exchange believes that at this time
the rebate is no longer necessary. The Exchange believes that the
current $1,000 and $25,000 fee caps that will remain unchanged are
sufficient incentives to encourage this type of business at the
Exchange.
The purpose of SR-Phlx-2008-59, Amendment No. 1 is to clarify the
application of the proposed reduction of the equity option transaction
charge to $0.01 per contract.
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 designed to provide for the equitable
allocation of reasonable dues, fees, and other charges among Exchange
members. The Exchange believes that this proposal is equitable because
it generally should result in a reduction in fees for ROTs and
specialists who meet the Volume Threshold, which should, in turn,
increase order flow to the Exchange. Specifically, the Exchange
believes that it is equitable to reduce fees for specialists and ROTs,
which includes SQTs and RSQTs, as opposed to other broker-dealers and
ROTs entering transactions from off-floor because specialists and ROTs
have continuous quoting and affirmative market making obligations.\15\
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4).
\15\ For billing purposes, ROTs entering transactions from off-
floor will continue to be charged the broker/dealer equity option
transaction charge because those transactions generally are
considered to be not the core part of their continuous quoting and
affirmative market making obligations.
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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 proposed rule change is effective upon filing
pursuant to Section 19(b)(3)(A)(ii) of the Act \16\ and paragraph
(f)(2) of Rule 19b-4 \17\ thereunder, because it establishes or changes
a due, fee, or other charge applicable only to a member imposed by the
Exchange. 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.
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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
\17\ 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 rule-comments@sec.gov. Please include
File Number SR-Phlx-2008-59 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.
All submissions should refer to File Number SR-Phlx-2008-59. 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 such filing will
also 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 No. SR-Phlx-
2008-59 and should be submitted on or before September 5, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-18855 Filed 8-14-08; 8:45 am]
BILLING CODE 8010-01-P