[Federal Register: July 6, 2007 (Volume 72, Number 129)]
[Notices]
[Page 37069-37070]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jy07-119]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55972; File No. SR-Phlx-2007-47]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Automating the Rebate Request Process for Dividend, Merger
and Short Stock Interest Strategies
June 28, 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 June 15, 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 Phlx.
Phlx has designated this proposal as one constituting a stated policy,
practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule pursuant to Section
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(1) 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)(1).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to eliminate the members' requirement to
manually submit rebate request forms and to automate the rebate request
process for dividend, merger, and short stock interest strategies,
effective for transactions settling on or after July 1, 2007.
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 provides a rebate for certain contracts
executed in connection with transactions occurring as part of a
dividend,\5\ merger,\6\ or short stock interest \7\ strategy.
Specifically, for these option contracts executed pursuant to a
dividend strategy, the Exchange rebates $0.08 per contract side for
Registered Options Trader (``ROT'') executions and $0.07 per contract
side for specialist executions transacted on the day prior to the date
on which the underlying stock goes ex-dividend. The Exchange also
provides for a rebate of $0.08 per contract side for ROT executions and
$0.07 per contract side for specialist executions made pursuant to a
merger or short stock interest strategy.\8\
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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.
\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.
\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.
\8\ See, e.g., Securities Exchange Act Release Nos. 54174 (July
19, 2006), 71 FR 42156 (July 25, 2006) (SR-Phlx-2006-40) and 53094
(January 10, 2006), 71 FR 2975 (January 18, 2006) (SR-Phlx-2005-75).
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The Exchange currently uses a manual procedure to process rebate
requests. To qualify a transaction for the rebate process, a written
rebate request form, along with supporting documentation, must be
submitted to the Exchange within three business days following the end
of the previous month.
The Exchange proposes to eliminate the manual rebate process and
replace it with an automated process. In order to capture the necessary
information electronically, the Exchange has modified its trade tickets
to allow for members to designate on the trade ticket whether the trade
involves a dividend, merger, or short stock interest strategy.
The purpose of eliminating the manual procedure is to increase
efficiency in connection with the processing of the dividend, merger,
and short stock interest rebate request forms.
For transactions settling in June 2007, members must continue to
submit the required written rebate request forms as described above.
Beginning with transactions settling on or after July 1, 2007, written
rebate request forms will no longer be accepted by the Exchange as the
rebates will be processed automatically.
2. Statutory Basis
The Exchange believes that its proposal to automate its procedures
relating to processing the rebate request forms for dividend, merger,
or short stock interest strategies as described above is consistent
with Section 6(b) of the Act \9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \10\ in particular, as the
proposal is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
[[Page 37070]]
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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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 rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(1) thereunder,\12\
because it constitutes a stated policy, practice, or interpretation
with respect to the meaning, administration, or enforcement of an
existing rule. 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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(1).
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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-2007-47 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-2007-47. 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 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-2007-47 and should be
submitted on or before July 27, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-13067 Filed 7-5-07; 8:45 am]
BILLING CODE 8010-01-P