[Federal Register: April 7, 2003 (Volume 68, Number 66)]
[Notices]
[Page 16850-16852]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap03-120]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47605; File No. SR-Phlx-2003-17]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
the Philadelphia Stock Exchange, Inc. To Adopt a License Fee for
Transactions in Standard & Poor's Depository Receipts[reg]
April 1, 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 March 17, 2003, the 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 and II below, which Items have been prepared by the Exchange.
The Exchange amended the proposal on March 28, 2003.\3\ 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.
\3\ On March 28, 2003, the Exchange filed a Form 19b-4, which
completely replaced and superceded the original filing in its
entirety (``Amendment No. 1''). For purposes of calculating the 60-
day abrogation period, the Commission considers the period to have
commenced on March 28, 2003, the date the Exchange filed Amendment
No. 1. 15 U.S.C. 78(s)(b)(3)(C).
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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 Summary of Equity Charges to
adopt a license fee of $0.00025 per share per trade side for sides
greater than 500 shares, with no maximum fee per trade side charged to
Non-PACE Customers \4\ and Electronic Communications Networks
(``ECNs''),\5\ and a license fee
[[Page 16851]]
of $0.00035 per share per trade side, with no maximum fee per trade
side charged to specialists for transactions on the Phlx in Standard &
Poor's Depository Receipts[reg] (``SPDRs'').\6\ The Exchange
also proposes to make minor, technical changes to its equity fee
schedule to make corresponding references to the proposed fees. All
other equity charges currently assessed by the Phlx will be imposed
where applicable.\7\
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\4\ PACE is the acronym for the Exchange's Automated
Communication and Execution System, which is the Exchange's order
routing, delivery, execution and reporting system for its equity
trading floor. See Exchange Rules 229 and 229A.
\5\ ECNs 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 derivation 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 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.
\6\ Standard & Poor's[reg], ``S&P
500[reg],'' ``Standard & Poor's 500[reg],''
and ``500'' are trademarks of The McGraw-Hill Companies, Inc., and
have been licensed for use by the Phlx, in connection with the
listing and trading of SPDRs, on the Phlx. These products are not
sponsored, sold or endorsed by Standard & Poor's (``S&P''), a
division of The McGraw-Hill Companies, Inc., and S&P makes no
representation regarding the advisability of investing in SPDRs.
\7\ These charges may include equity transaction charges, an
equity floor brokerage assessment, an equity floor brokerage
transaction fee, an off-Exchange trade information fee, an SEC fee,
a remote information access fee, an Electronic Communications
Network fee, an outbound Inter-Market Trading System (``ITS'') fee
and a net inbound ITS credit. Additionally, the PACE Specialist
charge does not apply because specialists are not eligible for
further PACE volume discounts. See Securities Exchange Act No. 44259
(May 4, 2001), 66 FR 23962 (May 10, 2001) (SR-Phlx-200-41). The
proposals also codifies that the PACE Specialist Charge does not
apply to QQQ transactions. This charge has not previously applied to
Nasdaq-100 Tracking Stock Index (``QQQ'') trades, as evidenced by
the separate QQQ fee schedule. See also Securities Exchange Act
Release No. 43776 (December 28, 2000), 66 FR 1166 (January 5, 2001)
(SR-Phlx-2000-103). Nevertheless when adding a footnote that this
charge does not apply to SPDRs, the Exchange determined, to avoid
confusion, to refer to both products.
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The Exchange proposes to implement this fee as of March 17, 2003,
the date that it began trading in the SPDRs. Text of the proposed rule
change is set forth below. New text is in italics. Deleted text is in
brackets.
Summary of Equity Charges (p 1/[2]3[hairsp])*
------------------------------------------------------------------------
------------------------------------------------------------------------
EQUITY TRANSACTION CHARGE I
Based on total shares per transaction with the exception of specialist
trades and PACE trades.\1\
Monthly Transaction Value Rate per
share
First 500 shares............................................ $0.00
Next 2,000 shares........................................... $0.0075
Next 7,500 shares........................................... $0.005
Remaining shares............................................ $0.004
$50 maximum fee per trade side.
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License Fee
SPDRs, Standard & Poor's Depositary Receipts[hairsp]**
Customer Non-PACE and Electronic Communications
Network[hairsp]E
(``ECN'') License Fee
$0.00025 per share per trade side for sides greater than 500 shares
No maximum fee per trade side
Specialist License Fee
$0.00035 per share per trade side
No maximum fee per trade side
Pace Specialist Charge[hairsp]\2\ I
$.20 per PHLX Specialist Trade against PACE Executions (Not
applicable to PACE trades on the opening)
See Appendix A for additional fees.
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I denotes fee eligible for monthly credit of up to $1,000.
* not applicable to transactions in Nasdaq-100 Index Tracking
StockSM (see page [3]4 for fees).
Summary of Equity Charges (p 2/[2]3)[hairsp]*
Equity Floor Brokerage Assessment I
$250 monthly charge[2]3
Equity Floor Brokerage Transaction Fee I
$.05 per 100 shares or fraction thereof, for floor broker executing
transactions for their own member firms.
Sec Fee
The amount shall be determined by Section 31 of the Securities
Exchange Act of 1934.
Off-Exchange Trade Information Fee I
$.10 per DOT trade
Remote Information Access Fee I
$300.00 per month
Electronic Communications Network[hairsp]E (``ECN'') Fee
$2,500.00 per month (in lieu of equity transaction charges)
Outbound ITS Fee I (also applicable to transactions in Nasdaq-100 Index
Tracking StockSM)[3]4
For PACE orders sent over ITS with the customer information
attached:
500 shares or less--$0.60 per 100 shares
501 to 4,999 shares--$0.30 per 100 shares
Net Inbound ITS Credit (also applicable to transactions in Nasdaq-100
Index Tracking Stock[hairsp]SM)[hairsp][4]5
$0.30 per 100 shares on the excess, if any, of the number of
inbound ITS shares executed over the number of outbound ITS shares sent
and executed on a monthly basis.
Summary of Equity Charges (p 3/3)
See Appendix A for additional fees.
I denotes fee eligible for monthly credit of up to $1,000.
* not applicable to transactions in Nasdaq-100 Index Tracking
Stock[hairsp]SM (see next page for fees).
E ECNs 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.
Any fees, credits, discounts and other charges in the Exchange's
fee schedule which are based upon an equity specialist's specialist
activity apply to competing specialists.
** Standard & Poor's[reg],'' ``S&P[reg],'' ``S&P 500[reg],''
``Standard & Poor's 500[reg]'', and ``500'' are trademarks of The
McGraw-Hill Companies, Inc., and have been licensed for use by the
Philadelphia Stock Exchange, Inc., in connection with the listing
and trading of SPDRs, on the Phlx. These products are not sponsored,
sold or endorsed by S&P, a division of The McGraw-Hill Companies,
Inc., and S&P makes no representation regarding the advisability of
investing SPDRs.
\1\ However, this charge applies where an order, after being
delivered to the Exchange by the PACE system is executed by the
specialist by way of an outbound commitment, when such outbound ITS
commitment reflects the PACE order's clearing information, but does
not apply where a PACE trade was executed against an inbound ITS
commitment.
\2\ This charge does not apply to transactions in Nasdaq-100
Index Tracking Stock[hairsp]SM and SPDRs.
[2]3 Applies to each member who derives at
least 80% of gross income generated from Phlx floor based activities
from his/her floor brokerage business conducted on the Exchange.
Floor brokerage business conducted on the Exchange includes orders
that are received on the Phlx, even if those orders are executed on
an exchange other than the Phlx. The 5% floor brokerage assessment
is waived until Dec 31, 2003 and is scheduled to be reinstated Jan
1, 2004.
[3]4 This fee will only apply when the
specialist sends an order received over PACE to ITS and receives an
execution, if the specialist used the PACE customer's clearing
information on the outbound ITS commitment.
[4]5 This credit will include all inbound
and outbound ITS executions, including both
[[Page 16852]]
PACE and non-PACE and both proprietary and customer commitments.
* * * * *
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 III 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 adopt a license fee
that will apply to trading SPDRs on the Exchange. The Exchange recently
determined to begin trading SPDRs. The license fees should help off-set
licensing fees payable to Standard & Poor's \8\ associated with the
trading of these products on the Exchange.
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\8\ See supra note 6.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\9\ in general, and furthers the
objectives of section 6(b)(4) of the Act,\10\ in particular, in that it
is an equitable allocation of reasonable dues, fees, and other charges
among Exchange members. The Exchange believes that charging members
that trade these products a licensing fee is an equitable means of
recovering a portion of the licensing fees incurred by the
Exchange.\11\
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
\11\ With regard to the distinction between Customer PACE and
Non-PACE license fees, the Exchange states that it is consistent
with its current practice to not impose customer charges for equity
transactions delivered through PACE, but to impose customer charges
for Non-PACE executions. See, e.g., Securities Exchange Act Release
Nos. 47385 (February 20, 2003), 68 FR 10295 (March 4, 2003) (SR-
Phlx-2003-06); 44381 (June 1, 2001), 66 FR 31264 (June 11, 2001)
(SR-Phlx-2001-57); and 43776 (December 28, 2000), 66 FR 1166
(January 5, 2001) (SR-Phlx-00-103). Also, consistent with its
current practice, the Exchange charges customer transaction fees and
specialist transaction fees at different rates. See, e.g.,
Securities Exchange Act Release Nos. 44381 (June 1, 2001), 66 FR
31264 (June 11, 2001) (SR-Phlx-2001-57); 47109 (December 30, 2002),
68 FR 841 (January 7, 2003) (SR-Phlx-2002-78); and 42332 (January
12, 2000), 65 FR 3517 (January 21, 2000) (SR-Phlx-00-59).
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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 \12\ and
Rule 19b-4(f)(2) thereunder.\13\ 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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\12\ 15 U.S.C. 78(s)(b)(3)(A)(ii).
\13\ 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, as amended, 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-2003-17 and should be submitted by April 28, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-8388 Filed 4-4-03; 8:45 am]
BILLING CODE 8010-01-P