[Federal Register: April 28, 2003 (Volume 68, Number 81)]
[Notices]
[Page 22446-22447]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ap03-124]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47715; File No. SR-Phlx-2003-26]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. To Amend Its Broker-Dealer Transaction Fee for Equity
Option Transactions
April 22, 2003.
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 April 11, 2003, 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
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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its schedule of dues, fees and
charges to decrease the broker-dealer transaction fee for ``block''
equity option transactions as follows: Broker/Dealer \3\ (non-AUTO-X)
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\3\ This charge applies to members for transactions, received
from other than the floor of the Exchange, for any account (i) in
which the holder of beneficial interest is a member or non-member
broker-dealer or (ii) in which the holder of beneficial interest is
a person associated with or employed by a member or non-member
broker-dealer. This includes transactions for the account of a
Register Options Trader (``ROT'') entered from off-floor.
Up to 2,000 contracts--$.35 per contract
Between 2001 and 3,000 contracts--$.25 per contract (for all contracts)
Residual above 3,000 contracts--$.20 per contract above 3,000 contracts
(with the first 3,000 contracts charged $.25 per contract)
This fee will be applied per transaction (not per month).\4\ The
Exchange proposes to implement this fee on transactions settling on or
after April 11, 2003.\5\ Footnote 10 of the Exchange's fee schedule is
also being amended to change the term ``orders'' to ``transactions.''
All other equity option transaction charges will remain unchanged.
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\4\ Member organizations may need to file a form with the
Exchange to identify eligible block trades.
\5\ This fee will continue to be eligible for the monthly credit
of up to $1,000 to be applied against certain fees, dues and charges
and other amounts owed to the Exchange by certain members. See
Securities Exchange Act Release No. 44292 (May 11, 2001), 66 FR
27715 (May 28, 2001)(SR-Phlx-2002-32).
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The text of the proposed rule change is available upon request from
the Office of the Secretary, the Commission, and the Exchange.
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
[[Page 22447]]
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 imposes a flat $0.35 per contract for
broker-dealer transactions not executed via the AUTO-X feature of
AUTOM,\6\ the Exchange's automated options trading system. The intent
of the present fee change is to add breakpoints above which the per
contract charge for broker-dealer transactions will be reduced, thereby
potentially attracting additional options business to the Exchange,
particularly large transactions. For example, under the proposal (i) a
transaction of 1,700 contracts will be charged $0.35 per contract, (ii)
a transaction of 2,500 contracts will be charged $0.25 per contract for
all contracts, and (iii) a transaction of 3,500 option contracts will
be charged $0.25 for each of the first 3,000 contracts and $0.20 for
each of the remaining 500 contracts.\7\ Footnote 10 of the Exchange's
fee schedule is also being amended to change the term ``orders'' to
``transactions.''
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\6\ AUTOM is the Exchange's electronic order delivery, routing,
execution and reporting system, which provides for the automatic
entry and routing of equity option and index option orders to the
Exchange trading floor. Orders delivered through AUTOM may be
executed manually, or certain orders are eligible for AUTOM's
automatic execution feature, AUTO-X. Equity option and index option
specialists are required by the Exchange to participate in AUTOM and
its features and enhancements. Option orders entered by Exchange
members into AUTOM are routed to the appropriate specialist unit on
the Exchange trading floor. See Exchange Rule 1080.
\7\ Of course, the contra-side to a transaction may also be
subject to transaction and other charges.
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The purpose of the proposed rule change is to generate additional
revenue for the Exchange by attracting additional order flow through
lowering the cost of executing certain large block equity option
transactions. The proposed rule change should also make the Exchange's
fees for trading equity option contracts on the Phlx more competitive
with other options exchanges.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\8\ in general, and furthers the
objectives of section 6(b)(4) of the Act,\9\ in particular, in that it
is an equitable allocation of reasonable dues, fees, and other charges
among Exchange members. The Exchange believes the proposal is
reasonable and equitable because it decreases transaction costs for
broker-dealers executing equity options transactions on the Exchange.
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\8\ 15 U.S.C. 78f(b).
\9\ 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 establishes or changes a due, fee, or
charge imposed by the Exchange and, therefore, has become effective
upon filing pursuant to section 19(b)(3)(A)(ii) of the Act \10\ and
rule 19b-4(f)(2) thereunder.\11\ 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 purpose of
the Act.
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\10\ 15 U.S.C. 78(s)(b)(3)(A)(ii).
\11\ 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 at the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-Phlx-2003-26 and
should be submitted by May 19, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-10377 Filed 4-25-03; 8:45 am]
BILLING CODE 8010-01-P