[Federal Register: June 6, 2003 (Volume 68, Number 109)]
[Notices]
[Page 34027-34028]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jn03-120]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47953; File No. SR-Phlx-2003-16]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change and Notice of Filing and Order Accelerating Approval of
Amendment No. 3 Thereto, by the Philadelphia Stock Exchange, Inc.,
Relating to a Pilot Program for Options Intermarket Linkage Fees
May 30, 2003.
On March 18, 2003, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend its fee structure to clarify which fees
apply to trades pertaining to the options intermarket linkage
(``Linkage'') and to specify that such fees are for a one-year
pilot.\3\ On March 21, 2003, Phlx submitted Amendment No. 1 to the
proposed rule change.\4\ The proposed rule change, as amended by
Amendment No. 1, was originally published for comment in the Federal
Register on April 2, 2003.\5\ On April 23, 2003, Phlx filed Amendment
No. 2 to the proposed rule change.\6\ On April 23, 2003, Phlx filed a
supplementary letter to Amendment No. 2.\7\ Amendment No. 2 was
published for comment in the
[[Page 34028]]
Federal Register on May 5, 2003.\8\ The Commission received one comment
on the proposal.\9\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Richard S. Rudolph, Director and Counsel,
Phlx to Nancy Sanow, Assistant Director, Division of Market
Regulation (``Division''), Commission, dated March 17, 2003
(``Original Filing'').
\4\ See letter from Richard S. Rudolph, Director and Counsel,
Phlx to Jennifer Lewis, Attorney, Division, Commission, dated March
20, 2003 (``Amendment No. 1'').
\5\ See Securities Exchange Act Release No. 47561 (March 21,
2003), 68 FR 15250.
\6\ See letter from Richard S. Rudolph, Director and Counsel,
Phlx to Jennifer Lewis, Attorney, Division, Commission, dated April
22, 2003 (``Amendment No. 2'').
\7\ See letter from Richard S. Rudolph, Director and Counsel,
Phlx to Jennifer Lewis, Attorney, Division, Commission, dated April
22, 2003.
\8\ See Securities Exchange Act Release No. 47750 (April 28,
2003), 68 FR 23789.
\9\ See letter from Michael J. Simon, Senior Vice President and
Secretary, International Securities Exchange, to Jonathan G. Katz,
Secretary, Commission, dated May 27, 2003 (``ISE Comment Letter'').
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On May 30, 2003, Phlx submitted Amendment No. 3 to the proposed
rule change.\10\ Amendment No. 3 replaces Amendments No. 1 and 2 in
their entirety.\11\ This order approves the proposed rule change, and
grants accelerated approval to Amendment No. 3. The Commission also
solicits comment from interested persons on Amendment No. 3.
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\10\ See letter from Richard S. Rudolph, Director and Counsel,
Phlx to Jennifer Lewis, Attorney, Division, Commission, dated May
29, 2003.
\11\ Telephone call between Richard S. Rudolph, Director and
Counsel, Phlx, and Jennifer Lewis, Special Counsel, Division,
Commission, on May 30, 2003.
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Pursuant to the Original Filing, Phlx proposed to charge Exchange
members for orders for the principal account of market makers sent to
the Exchange through the Linkage from the floor of another exchange
(``P Orders'') $.35 per contract executed. In the Original Filing, Phlx
stated that its proposed linkage fees were consistent with other fees
charged by the Exchange for non-Linkage orders. In Amendment No. 2,
Phlx explained that it had amended its fee schedule on April 11, 2003
to modify the fees applicable to broker/dealers for non-AUTO-X
trades.\12\ Previously, such fee was $.35 per contract. Now, the fee
ranges from $.35 per contract to $.20 per contract, depending on the
number of contracts.\13\ In Amendment No. 2, Phlx clarified that due to
this recent change, the proposed Linkage fee for P Orders would no
longer be consistent with other fees charged by the Exchange for non-
Linkage orders.
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\12\ See Securities Exchange Act Release No. 47715 (April 23,
2003), 68 FR 22446 (April 28, 2003).
\13\ The fee is $.35 per contract for up to 2,000 contracts,
$.25 per contract for between 2,001 and 3,000 contracts; and $.20
per contract above 3,001 contracts (with the first 3,000 contracts
charged $.25 per contract).
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In the ISE Comment Letter, ISE argued that by charging more for
Linkage access than for access through regular order-routing systems,
the Phlx would be imposing inappropriate barriers to members of other
exchanges.\14\ ISE also explained that the general consensus and
understanding of the parties to the plan implementing the Linkage was
that Linkage fees would be no greater than fees charged to professional
traders outside of Linkage and that the other four exchanges have
proposed, and the Commission has approved, such limited fees for the
other options exchanges.\15\ ISE further argued, ``Phlx is the only
exchange proposing to discourage use of the Linkage through its fee
schedule. This will require members on the other exchanges to pay a
premium for access to the efficiencies of Linkage,'' and would ``result
in ``unfair discrimination'' on broker-dealer access.''
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\14\ See ISE Comment Letter, supra note 9.
\15\ See Securities Exchange Act Release Nos. 47719 (April 23,
2003), 68 FR 22764 (April 29, 2003) (File No. SR-ISE-2003-11); 47822
(May 9, 2003), 68 FR 27115 (May 19, 2003) (File No. SR-Amex-2003-
14); 47761 (April 29, 2003), 68 FR 24042 (May 6, 2003) (File No. SR-
CBOE-2003-11); and 47786 (May 2, 2003), 68 FR 24779 (May 8, 2003)
(File No. SR-PCX-2003-08).
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In Amendment No. 3, Phlx proposes to amend its fee schedule to
provide that P Orders would be subject to the same fees as non-Linkage
non-AUTO-X broker-dealer orders. Therefore, the proposed fee for P
Orders ranges from $.35 per contract to $.20 per contract, depending on
the number of contracts.\16\ Phlx proposes that the fees applicable to
P Orders would be implemented as a pilot, expiring on January 31, 2004.
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\16\ See supra, note 13.
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The Commission finds that the proposed rule change, as amended by
Amendment No. 3, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange \17\ and, in particular, the requirements of Section 6 of the
Act.\18\ The Commission finds that the proposed rule change, as amended
by Amendment No. 3, is consistent with Section 6(b)(4) of the Act,\19\
which requires that the rules of an exchange provide equitable
allocation of reasonable dues, fees and other charges among its members
and other persons using its facilities. The Commission believes the
pilot will give the Exchange and the Commission the opportunity to
evaluate whether these fees are appropriate.
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\17\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(4).
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The Commission finds good cause, consistent with Section 19(b)(2)
of the Act,\20\ to approve Amendment No. 3 to the proposed rule change
prior to the thirtieth day after the date of publication of notice of
filing thereof in the Federal Register. The Commission notes that the
issues addressed in the comment letter received in response to
Amendment No. 2 related to Phlx's proposal to charge higher fees for
Linkage orders than for non-Linkage orders. In Amendment No. 3, Phlx
revises its proposal to provide for fees for Linkage orders that would
be consistent with fees for non-Linkage orders. Accordingly, the
Commission believes good cause exists, pursuant to Sections 6(b)(5) and
19(b) of the Act \21\ to accelerate approval of Amendment No. 3 to the
proposed rule change.
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\20\ 15 U.S.C. 78s(b)(2).
\21\ 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78s(b).
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Interested persons are invited to submit written data, views and
arguments concerning Amendment No. 3, including whether it 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 in the Commission's
Public Reference Room. Copies of such filing will also be available for
inspection and copying at the principal office of the Phlx. All
submissions should refer to File No. SR-Phlx-2003-16 and should be
submitted by June 27, 2003.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-Phlx-2003-16), as amended,
is approved on a pilot basis until January 31, 2004, and Amendment No.
3 is also approved on an accelerated basis until January 31, 2004.
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\22\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-14256 Filed 6-5-03; 8:45 am]
BILLING CODE 8010-01-P