Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.,
[Federal Register: April 28, 2003 (Volume 68, Number 81)]
[Notices]
[Page 22446-22447]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ap03-124]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47715; File No. SR-Phlx-2003-26]
Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. To Amend Its Broker-Dealer Transaction Fee for Equity Option Transactions
April 22, 2003.
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 April 11, 2003, 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. 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.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend its schedule of dues, fees and charges to decrease the broker-dealer transaction fee for ``block'' equity option transactions as follows: Broker/Dealer \3\ (non-AUTO-X)
\3\ This charge applies to members for transactions, received from other than the floor of the Exchange, for any account (i) in which the holder of beneficial interest is a member or non-member broker-dealer or (ii) in which the holder of beneficial interest is a person associated with or employed by a member or non-member broker-dealer. This includes transactions for the account of a Register Options Trader (``ROT'') entered from off-floor.
Up to 2,000 contracts--$.35 per contract Between 2001 and 3,000 contracts--$.25 per contract (for all contracts) Residual above 3,000 contracts--$.20 per contract above 3,000 contracts (with the first 3,000 contracts charged $.25 per contract)
This fee will be applied per transaction (not per month).\4\ The Exchange proposes to implement this fee on transactions settling on or after April 11, 2003.\5\ Footnote 10 of the Exchange's fee schedule is also being amended to change the term ``orders'' to ``transactions.'' All other equity option transaction charges will remain unchanged.
\4\ Member organizations may need to file a form with the Exchange to identify eligible block trades.
\5\ This fee will continue to be eligible for the monthly credit of up to $1,000 to be applied against certain fees, dues and charges and other amounts owed to the Exchange by certain members. See Securities Exchange Act Release No. 44292 (May 11, 2001), 66 FR 27715 (May 28, 2001)(SR-Phlx-2002-32).
The text of the proposed rule change is available upon request from the Office of the Secretary, the Commission, and the Exchange.
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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
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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
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Purpose
Currently, the Exchange imposes a flat $0.35 per contract for broker-dealer transactions not executed via the AUTO-X feature of AUTOM,\6\ the Exchange's automated options trading system. The intent of the present fee change is to add breakpoints above which the per contract charge for broker-dealer transactions will be reduced, thereby potentially attracting additional options business to the Exchange, particularly large transactions. For example, under the proposal (i) a transaction of 1,700 contracts will be charged $0.35 per contract, (ii) a transaction of 2,500 contracts will be charged $0.25 per contract for all contracts, and (iii) a transaction of 3,500 option contracts will be charged $0.25 for each of the first 3,000 contracts and $0.20 for each of the remaining 500 contracts.\7\ Footnote 10 of the Exchange's fee schedule is also being amended to change the term ``orders'' to ``transactions.''
\6\ AUTOM is the Exchange's electronic order delivery, routing, execution and reporting system, which provides for the automatic entry and routing of equity option and index option orders to the Exchange trading floor. Orders delivered through AUTOM may be executed manually, or certain orders are eligible for AUTOM's automatic execution feature, AUTO-X. Equity option and index option specialists are required by the Exchange to participate in AUTOM and its features and enhancements. Option orders entered by Exchange members into AUTOM are routed to the appropriate specialist unit on the Exchange trading floor. See Exchange Rule 1080.
\7\ Of course, the contra-side to a transaction may also be subject to transaction and other charges.
The purpose of the proposed rule change is to generate additional revenue for the Exchange by attracting additional order flow through lowering the cost of executing certain large block equity option transactions. The proposed rule change should also make the Exchange's fees for trading equity option contracts on the Phlx more competitive with other options exchanges. 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 dues, fees, and other charges among Exchange members. The Exchange believes the proposal is reasonable and equitable because it decreases transaction costs for broker-dealers executing equity options transactions on the Exchange.
\8\ 15 U.S.C. 78f(b).
\9\ 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 inappropriate burden on competition.
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.
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Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The foregoing rule change establishes or changes a due, fee, or charge imposed by the Exchange and, therefore, has become effective upon filing pursuant to section 19(b)(3)(A)(ii) of the Act \10\ and rule 19b-4(f)(2) thereunder.\11\ 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 purpose of the Act.
\10\ 15 U.S.C. 78(s)(b)(3)(A)(ii).
\11\ 17 CFR 240.19b-4(f)(2).
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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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 at the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-Phlx-2003-26 and should be submitted by May 19, 2003.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\12\
\12\ 17 CFR 200.30-3(a)(12).
J. Lynn Taylor, Assistant Secretary.
[FR Doc. 03-10377 Filed 4-25-03; 8:45 am]
BILLING CODE 8010-01-P
