[Federal Register: March 10, 2008 (Volume 73, Number 47)]
[Notices]
[Page 12790-12791]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10mr08-111]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57420; File No. SR-Phlx-2008-16]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Extend the Dividend, Merger, and Short Stock Interest Strategies Fee
Cap Program
March 3, 2008.
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 27, 2008, 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. The Phlx has designated this proposal as one establishing or
changing a due, fee, or other charge imposed by the Exchange under
Section 19(b)(3)(A),\3\ and Rule 19b-4(f)(2) thereunder,\4\ which
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to extend for a period of one year, until March
1, 2009, 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, 2008.\8\ Other than extending the pilot
program for an additional one-year period until March 1, 2009, 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.
---------------------------------------------------------------------------
\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. See 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. See id.
\8\ See Securities Exchange Act Release No. 55358 (February 27,
2007), 72 FR 9828 (March 5, 2007) (SR-Phlx-2007-14).
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange,
the Commission's Public Reference Room, and http://www.Phlx.com/
exchange/phlx-rule-fil.htm.
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 Phlx included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposal. The text of these
statements may be examined at the places specified in Item IV below.
The Phlx 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
[[Page 12791]]
comparison charges occurring as part of a dividend, merger, or short
stock interest strategy. \10\
---------------------------------------------------------------------------
\9\ See id.
\10\ Currently, the Exchange rebates $0.08 per contract side for
ROT executions and $0.07 per contract side for specialist executions
in connection with trades occurring as part of a dividend, merger or
short stock interest strategy.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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,
2009 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 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 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 continue the fee for trades settling
on or after March 1, 2008 and will remain in effect as a pilot program
until March 1, 2009.
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. The Exchange believes that
the proposed extension of the current fee caps is beneficial to its
members by providing additional trading opportunities at an efficient
cost. Additionally, the proposal allows the Exchange to recoup the
license fees owed in connection with the trading of products that carry
license fees.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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 rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \14\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\15\ since it establishes or changes a due, fee or other
charge imposed by the Exchange. At any time within 60 days of the
filing of such 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 the furtherance of the
purposes of the Act.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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 Number SR-Phlx-2008-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2008-16. 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 Commission's 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the 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 No. SR-Phlx-2008-16 and should be
submitted on or before March 31, 2008.
For the Commission, by the Division of Trading and Market,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-4558 Filed 3-7-08; 8:45 am]
BILLING CODE 8011-01-P