[Federal Register: March 5, 2007 (Volume 72, Number 42)]
[Notices]
[Page 9828-9830]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr07-101]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55358; File No. SR-Phlx-2007-14]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Extending the Dividend, Merger, and Short Stock Interest Strategies Fee
Cap Program
February 27, 2007.
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 February 21, 2007, 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 substantially prepared by the
Exchange. Phlx has designated this proposal as one establishing or
changing a due, fee, or other charge imposed by a self-regulatory
organization pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and
Rule 19b-4(f)(2) thereunder,\4\ which
[[Page 9829]]
renders the proposal effective upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Phlx proposes to extend for a period of one year, until March 1,
2008, the pilot programs for: (1) The $1,000 and $25,000 fee caps on
equity option transaction and comparison charges on dividend,\5\
merger,\6\ and short stock interest \7\ strategies; and (2) the license
fee of $0.05 per contract side imposed on dividend and short stock
interest strategies, as described below. The current fee caps and $0.05
per contract side license fee are in effect as a pilot program that is
scheduled to expire on March 1, 2007.\8\ Other than extending the pilot
program for an additional one-year period until March 1, 2008, no other
changes to the Exchange's current dividend, merger and short stock
interest strategy program, which includes the $0.05 per contract side
license fee, are being proposed at this time.
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\5\ For purposes of this proposal, the Exchange defines a
``dividend strategy'' as transactions done to achieve a dividend
arbitrage involving the purchase, sale, and exercise of in-the-money
options of the same class, executed prior to the date on which the
underlying stock goes ex-dividend. See, e.g., Securities Exchange
Act Release No. 54174 (July 19, 2006), 71 FR 42156 (July 25, 2006)
(SR-Phlx-2006-40).
\6\ For purposes of this proposal, the Exchange defines a
``merger strategy'' as transactions done to achieve a merger
arbitrage involving the purchase, sale and exercise of options of
the same class and expiration date, executed prior to the date on
which shareholders of record are required to elect their respective
form of consideration, i.e., cash or stock. Id.
\7\ For purposes of this proposal, the Exchange defines a
``short stock interest strategy'' as transactions done to achieve a
short stock interest arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class. Id.
\8\ See Securities Exchange Act Release Nos. 54381 (August 29,
2006), 71 FR 52598 (September 6, 2006) (SR-Phlx-2006-50) and 54424
(September 11, 2006), 71 FR 54699 (September 18, 2006) (SR-Phlx-
2006-55).
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The text of the proposed rule change is available on the Exchange's
Web site (http://www.phlx.com/exchange/phlx_rule_fil.html), at the
Exchange's principal office, and at the Commission's Public Reference
Room.
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 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 fee cap on equity option
transaction and comparison charges on dividend, merger, and short stock
interest strategies executed on the same trading day in the same
options class. Specifically, Registered Options Trader (``ROT'') and
specialist net equity option transaction and comparison charges are
capped at $1,000 for dividend, merger, and short stock interest
strategies executed on the same trading day in the same options
class.\9\ In addition, there is a $25,000 per member organization fee
cap on equity option transaction and comparison charges incurred in one
month for dividend, merger, and short stock interest strategies
combined. The $1,000 and $25,000 fee caps are implemented after any
applicable rebates are applied to ROT and specialist equity option
transaction and comparison charges occurring as part of a dividend,
merger, or short stock interest strategy.\10\
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\9\ See Securities Exchange Act Release No. 54424 (September 11,
2006), 71 FR 54699 (September 18, 2006) (SR-Phlx-2006-55).
\10\ Currently, the Exchange rebates $0.08 per contract side for
ROT executions and $0.07 per contract side for trades occurring as
part of a dividend, merger, or short stock interest strategy.
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In addition, the Exchange assesses a license fee of $0.05 per
contract side for dividend and short stock interest strategies in
connection with certain products that carry license fees, if
applicable.\11\ The applicable license fee is assessed on every
transaction and is not subject to the $1,000 or $25,000 fee caps
described above, nor does it count towards reaching the $1,000 or
$25,000 fee caps.
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\11\ For a complete list of these product symbols, see the
Exchange's $60,000 Firm-Related Equity Option and Index Option Cap
Fee Schedule.
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The Exchange represents that the purpose of extending the pilot
program for the fee caps on equity option transaction and comparison
charges on dividend, merger, and short stock interest strategies and
the $0.05 per contract fee imposed on dividend and short stock interest
strategies until March 1, 2008 is to continue to attract additional
liquidity to the Exchange and to remain competitive with other options
exchanges in connection with these types of options strategies. In
addition, the Exchange also represents that the purpose of extending
the pilot is to recoup the license fees owed in connection with the
trading of products that carry license fees. Even with the assessment
of the $0.05 license fee per contract side, the Exchange believes that
the fee caps and rebates should continue to encourage specialists and
ROTs to provide liquidity for these types of options strategies.
This proposal is scheduled to become effective for trades settling
on or after March 1, 2007 and will remain in effect as a pilot program
until March 1, 2008.
2. Statutory Basis
The Exchange believes that its proposal to amend its schedule of
fees is consistent with Section 6(b) of the Act,\12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\13\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members.
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\12\ 15 U.S.C. 78f(b).
\13\ 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 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 has become effective pursuant to
Section 19(b)(3)(A)(ii) of the Act \14\ and Rule 19b-4(f)(2) thereunder
\15\ because it establishes or changes a due, fee, or other charge
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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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 17 CFR 19b-4(f)(2).
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[[Page 9830]]
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 No. SR-Phlx-2007-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2007-14. 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 Commissions 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. Copies of the filing also will be
available for inspection and copying at the principal office of Phlx.
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 Number SR-Phlx-2007-14
and should be submitted on or before March 26, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3763 Filed 3-2-07; 8:45 am]
BILLING CODE 8010-01-P