Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.,

[Federal Register: January 19, 2005 (Volume 70, Number 12)]

[Notices]

[Page 3088-3089]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr19ja05-105]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51024; File No. SR-Phlx-2004-94]

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Increasing the Firm-Related Equity Option and Index Option Comparison and Transaction Cap

January 11, 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 December 28, 2004, 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 filed this proposal pursuant to Section 19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(2) \4\ thereunder as a proposal establishing or changing a due, fee, or other charge imposed by the self-regulatory organization, 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)(ii).

\4\ 17 CFR 240.19b-4(f)(2).

1. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

   Phlx proposes to amend its schedule of fees to increase the current cap of $50,000 per month per member organization to $60,000, to be imposed on all ``firm-related'' equity option and index option comparison and transaction charges combined.

   This proposal is scheduled to become effective for transactions settling on or after January 3, 2005. The text of the proposed rule change is available at Phlx and at the Commission.

2. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

   In its filing with the Commission, Phlx included statements concerning the purpose of and basis for its proposal 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.

   1. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

      1. Purpose

         Currently, the Exchange imposes a cap of $50,000 per member organization on all ``firm-related'' equity option and index option comparison and transaction charges combined.\5\ 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 and customer executions) 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 for equity options and index options, in the aggregate for one billing month, may not exceed $50,000 per month per member organization. Certain options are not subject to the cap.\6\

         \5\ 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 will be 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, will be accepted. See Securities Exchange Act Release No. 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000) (SR-Phlx-00-85).

         \6\ Variable (not fixed) firm-related charges are imposed on the following three options: Full-size index options (``QCX'') and Mini index options (``QCE'') on the Nasdaq Composite Index, Inc.[reg] and options listed on the iShares FTSE/Xinhua China 25 Index Fund (``FXI Options''), an exchange-traded fund. In addition, certain license fees per contract side may be imposed after the $50,000 cap is reached. See Securities Exchange Act Release No. 50836 (December 10, 2004), 69 FR 75584 (December 17, 2004) (SR-Phlx-2004-70).

         Pursuant to this proposal, the cap would increase from $50,000 to $60,000. No other changes to the firm-related equity option and index option cap are being proposed at this time.

         The purpose of the proposed rule change is to raise revenue, while continuing to promote equity option and index option business on the Phlx. Specifically, the Exchange believes that imposing a cap of $60,000 (rather than $50,000) will continue to offer an incentive for member organizations to transact more volume on the Phlx floor. An increase in firm orders should provide more trading opportunities for floor members, thereby increasing revenue potential to the membership, in addition to increasing revenue to the Exchange. Because the $50,000 cap was established over one year ago,\7\ the Exchange believes that it is now appropriate to raise it by $10,000.

         \7\ See Securities Exchange Act Release No. 48459 (September 8, 2003), 68 FR 54034 (September 15, 2003) (SR-Phlx-2003-61).

      2. Statutory Basis

         The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act \8\ in general, and furthers the objectives of Section 6(b)(4) of the Act \9\ in particular, in that it is an equitable allocation of reasonable fees among Exchange members.

         \8\ 15 U.S.C. 78f(b).

         \9\ 15 U.S.C. 78f(b)(4).

   2. 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.

   3. 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.

3. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

   The foregoing proposal has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act \10\ and Rule 19b-4(f)(2) \11\ thereunder as a proposal establishing or changing a due, fee, or other charge imposed by the self-regulatory organization. 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

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   appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

   \10\ 15 U.S.C. 78s(b)(3)(A)(ii).

   \11\ 17 CFR 240.19b-4(f)(2).

4. 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-2004-94 on the subject line.

   Paper Comments

   Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.

   All submissions should refer to File Number SR-Phlx-2004-94. 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. 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 Number SR-Phlx-2004-94 and should be submitted on or before February 9, 2005.

   For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\12\

   \12\ 17 CFR 200.30-3(a)(12).

   Jill M. Peterson, Assistant Secretary. [FR Doc. E5-176 Filed 1-18-05; 8:45 am]

   BILLING CODE 8010-01-P