[Federal Register: June 4, 2003 (Volume 68, Number 107)]
[Notices]
[Page 33558-33559]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04jn03-139]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47924; File No. SR-SCCP-2002-06]
Self-Regulatory Organizations; Stock Clearing Corporation of
Philadelphia; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the Extension of its Pilot Program to
Implement its Existing Fee Schedule for Electronic Communications
Networks
May 23, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 30, 2002, the
Stock Clearing Corporation of Philadelphia (``SCCP'') 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 primarily by SCCP. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
parties.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change extends SCCP's pilot program for an
additional one year period thereby continuing the existing SCCP fee
waivers for SCCP participants for trades executed on the Philadelphia
Stock Exchange, Inc. (``Phlx'') for Electronic Communications Networks
(``ECNs'').\2\ The current pilot program expires on January 23,
2003.\3\
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\2\ ECN shall mean any electronic system that widely
disseminates to third parties orders entered therein by an exchange
market maker or over-the-counter (``OTC'') market maker and permits
such orders to be executed against in whole or in part except that
the term ECN shall not include: any system that crosses multiple
orders at one or more specified times at a specified price set by
the ECN, algorithm, or by any derivative pricing mechanism and does
not allow orders to be crossed or executed against directly by
participants outside of such times or any system operated by or on
behalf of an OTC market maker or exchange market maker that executes
customer orders primarily against the account of such market maker
as principal other than riskless principal.
\3\ Exchange Release No. 45533 (March 11, 2002), 67 FR 11739
(March 15, 2002) (SR-SCCP-2002-02).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
In its filing with the Commission, SCCP included statements
concerning the purpose of and statutory basis for the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. SCCP has prepared summaries, set forth in
sections (A), (B), and (C) below, of the most significant aspects of
such statements.\4\
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\4\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
SCCP previously filed with the Commission a proposed rule change to
adopt a fee schedule for ECNs.\5\ Pursuant to that proposed rule
change, SCCP waived certain dues, fees, and charges, including trade
recording fees, value fees, and treasury transaction charges and Nasdaq
100 Trust, Series 1 (``QQQ'') charges,\6\ but not account fees,
[[Page 33559]]
research fees, computer transmission/tape charges, or miscellaneous
charges on its fee schedule.\7\ At this time, SCCP proposes to continue
the existing fee schedule for ECNs through January 24, 2004.
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\5\ Securities Exchange Act Release No. 45145 (December 10,
2001), 66 FR 65017 (December 17, 2001) (SR-SCCP-2001-01).
\6\ The Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg] The
Nasdaq Stock Market[reg], Nasdaq 100 Sharessm, Nasdaq-100
Trustsm, Nasdaq-100 Index Tracking Stocksm and
QQQsm are trademarks or service marks of The Nasdaq Stock
Market, Inc. (Nasdaq) and have been licensed for use for certain
purposes by the Philadelphia Stock Exchange pursuant to a License
Agreement with Nasdaq. The Nasdaq-200 Index[reg] (the Index) is
determined, composed, and calculated by Nasdaq without regard to the
Licensee, the Nasdaq-100 Trustsm, or the beneficial
owners of Nasdaq-100 Sharessm. Nasdaq has complete
control and sole discretion in determining, comprising or
calculating the Index or in modifying in any way its method for
determining, comprising or calculating the Index in the future.
\7\ Certain provisions of the SCCP fee schedule do not apply to
ECNs because they apply to specialists and/or relate to margin
financing, such as specialist discount, margin account interest, P&L
statement charges, buy-ins, PACE specialist credit, and specialist
QQQ charges. At this time, SCCP is also adding to its fee schedule
the language ``except ECNs'' next to the fees applicable to trades
in the QQQs, which was missing due to an oversight; the waiver has
applied to these QQQ fees because the ECN fee waiver has always
applied to transaction fees.
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This rule change affects ECN trades not related to an ECN acting as
a Phlx specialist or floor broker. Thus, an ECN may incur specialist or
floor brokerage transaction fees if it acts in that capacity.
Currently, no ECN operates from Phlx's equity trading floor as a floor
broker or specialist unit. If, however, an ECN did operate from the
Phlx equity trading floor, it could be subject to various SCCP fees
respecting its non-ECN floor operation.\8\ In addition, an ECN's
transactions as a floor broker would be subject to the applicable SCCP
fee as would any ECN's specialist trades. Even if the ECN is acting as
a floor broker or specialist with respect to some trades, those trades
for which it is not acting as a floor broker or specialist, but rather
as an ECN, would be eligible for this waiver.
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\8\ For example, an ECN acting as a specialist would be subject
to the trade recording fee for specialist trades matching with PACE
trades.
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The proposed rule change extends SCCP's existing fee schedule for
ECNs for an additional one year period in order to have the opportunity
to fully review and evaluate the overall structure of the ECN program,
including whether to impose volume threshold requirements.
SCCP believes that its current ECN fee schedule provides
competitive fees with appropriate incentives thus proving a reasonable
method to attract large order flow providers such as ECNs to Phlx and
SCCP. Additional order flow should enhance liquidity and improve Phlx's
and therefore SCCP's competitive position in equity trading and
clearing.
SCCP believes that its proposal to extend its current pilot program
for one year, thereby continuing the existing SCCP fee waivers
described above for ECNs, is consistent with section 17A(b)(3)(D) of
the Act \9\ because it provides for the equitable allocation of
reasonable dues, fees, and other charges. SCCP believes that
structuring this fee for ECNs is appropriate, as ECNs are unique in
their role as order flow providers to Phlx. Specifically, SCCP points
out that ECNs operate a unique electronic agency business similar to a
securities exchange as opposed to directly executing orders for their
own customers as principal or agent.
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\9\ 15 U.S.C. 78q-1(b)(3)(D).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
SCCP 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
Because the foregoing rule change establishes or changes a due,
fee, or other charge imposed by SCCP, it has become effective pursuant
to section 19(b)(3)(A)(ii) of the Act \10\ and Rule 19b-4(f)(2)
thereunder.\11\ At any time within sixty 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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\10\ 15 U.S.C. 78s(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.
Comments may also be submitted electronically at the following e-mail
address: rule-comments@sec.gov. All comment letters should refer to
File No. SR-SCCP-2002-06. This file number should be included on the
subject line if e-mail is used. To help us process and review comments
more efficiently, comments should be sent in hardcopy or by e-mail but
not by both methods. 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 Section, 450 Fifth Street, NW, Washington, DC 20549. Copies
of such filing also will be available for inspection and copying at the
principal office of SCCP.
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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-13939 Filed 6-3-03; 8:45 am]
BILLING CODE 8010-01-P