[Federal Register: August 11, 2005 (Volume 70, Number 154)]
[Notices]
[Page 46899-46901]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11au05-120]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52220; File No. SR-Phlx-2005-49]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Impose Licensing Fees in Connection With the Firm-Related Equity Option
and Index Option Fee Cap
August 5, 2005.
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 July 28, 2005, 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 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) of the Act,\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.
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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).
\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
The Phlx proposes to amend its schedule of fees to adopt a license
fee of $0.10 for options traded on the following products: \5\ (1)
Keefe, Bruyette & Woods Regional Banking Index or the KBW Regional
Banking Index, traded under the symbol KRX, and (2) Keefe, Bruyette &
Woods Mortgage Finance Index or the KBW Mortgage Finance Index, traded
under the symbol MFX (collectively ``KBW products''), to be assessed
per contract side for index option ``firm'' transactions (comprised of
index option firm/proprietary comparison transactions, index option
firm/proprietary transactions and index option firm/proprietary
facilitation transactions). This license fee will be imposed only after
the Exchange's $60,000 ``firm-related'' equity option and index option
comparison and transaction charge cap, described more fully below, is
reached.
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\5\ This fee will be charged to Exchange members.
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Currently, the Exchange imposes a cap of $60,000 per member
organization \6\ on all ``firm-related'' equity option and index option
comparison and transaction charges combined.\7\ Specifically, ``firm-
related'' charges include equity option firm/proprietary comparison
charges, equity option firm/proprietary transaction charges, equity
option firm/proprietary facilitation transaction charges, index option
firm/proprietary comparison charges, index option firm/proprietary
transaction charges, and index option firm/proprietary facilitation
transaction charges (collectively ``firm-related charges''). Thus, such
firm-related charges in the aggregate for one billing month may not
exceed $60,000 per month per member organization.
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\6\ The firm/proprietary comparison or transaction charge
applies to member organizations for orders for the proprietary
account of any member or non-member broker-dealer that derives more
than 35% of its annual, gross revenues from commissions and
principal transactions with customers. Member organizations are
required to verify this amount to the Exchange by certifying that
they have reached this threshold by submitting a copy of their
annual report, which was prepared in accordance with Generally
Accepted Accounting Principles (``GAAP''). In the event that a
member organization has not been in business for one year, the most
recent quarterly reports, prepared in accordance with GAAP, are
accepted. See Securities Exchange Act Release No. 43558 (November
14, 2000), 65 FR 69984 (November 21, 2000) (SR-Phlx-2000-85).
\7\ See Securities Exchange Act Release No. 51024 (January 11,
2005), 70 FR 3088 (January 19, 2005) (SR-Phlx-2004-94).
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[[Page 46900]]
The Exchange also imposes a license fee of $0.10 per contract side
for equity option and index option ``firm'' transactions on certain
licensed products (collectively ``licensed products'') after the
$60,000 cap, as described above, is reached.\8\ Therefore, when a
member organization exceeds the $60,000 cap (comprised of combined
firm-related charges), the member organization is charged $60,000, plus
license fees of $0.10 per contract side for any contracts in licensed
products (if any) over those that were included in reaching the $60,000
cap. In other words, if the cap is reached, the $0.10 license fee is
imposed on all subsequent equity option and index option firm
transactions; these license fees are charged in addition to the $60,000
cap.
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\8\ For a complete list of licensed products, see $60,000 ``Firm
Related'' Equity Option and Index Option Cap on the Exchange's fee
schedule. See also, Securities Exchange Act Release No. 52054 (July
18, 2005), 70 FR 42611 (July 25, 2005) (SR-Phlx-2005-40).
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The Exchange proposes to adopt a $0.10 license fee per contract
side for the KBW products for index option firm transactions, which
will be imposed after the $60,000 cap is reached in the same way as the
current licensed product fees are assessed. Thus, when a member
organization exceeds the $60,000 cap, the member organization will be
charged $60,000 plus any applicable license fees for trades of licensed
products, including the KBW products, over those trades that were
counted in reaching the $60,000 cap.\9\
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\9\ Consistent with current practice, when calculating the
$60,000 cap, the Exchange first calculates all equity option and
index option transaction and comparison charges for products without
license fees and then equity option and index option transaction and
comparison charges for products with license fees (e.g., QQQ license
fees) that are assessed by the Exchange after the $60,000 cap is
reached. See Securities Exchange Act Release No. 50836 (December 10,
2004), 69 FR 75584 (December 17, 2004) (SR-Phlx-2004-70).
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The fees set forth in this proposal are scheduled to become
effective for transactions settling on or after August 1, 2005.
The text of the proposed rule change is available on the Phlx's Web
site, http://www.phlx.com, at the Phlx's Office of the Secretary, and
at the Commission's Public Reference Section.
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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of assessing the KBW products license fee of $0.10 per
contract side after reaching the $60,000 cap as described in this
proposal is to help defray licensing costs associated with the trading
of these products, while still capping member organizations' fees
enough to attract volume from other exchanges. The cap operates this
way in order to offer an incentive for additional volume without
leaving the Exchange with significant out-of-pocket costs.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \10\ in general, and furthers the
objectives of section 6(b)(4) of the Act \11\ in particular, in that it
is an equitable allocation of reasonable dues, fees, and other charges
among Exchange members.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx believes that the proposed rule change would impose no
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
The Exchange did not solicit or receive any written comments with
respect to the proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has been designated as a fee
change pursuant to section 19(b)(3)(A)(ii) of the Act \12\ and Rule
19b-4(f)(2) \13\ thereunder. Accordingly, the proposal is effective
upon filing with the Commission. 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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\12\ 15 U.S.C. 78s(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 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-2005-49 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.
All submissions should refer to File Number SR-Phlx-2005-49. 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 Section. Copies of
such filing also will be available for inspection and copying at the
principal office of the Exchange. 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-2005-49 and should be submitted on or before
September 1, 2005.
[[Page 46901]]
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. E5-4352 Filed 8-10-05; 8:45 am]
BILLING CODE 8010-01-P