[Federal Register Volume 68, Number 120 (Monday, June 23, 2003)]
[Notices]
[Pages 37194-37195]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15772]
[[Page 37194]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48032; File No. SR-Phlx-2003-42]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Relating to the Payment for Order Flow Fees Assessed on
Registered Options Traders
June 13, 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 May 30, 2003, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed a proposed rule change with the Securities and
Exchange Commission (``Commission''). The proposed rule change is
described in Items I, II and III below, which the Phlx has prepared.
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)(ii) of the Act,\3\ 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)(ii).
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The text of the proposed rule change is available at the Phlx and
at the Commission.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to amend its payment-for order flow fees imposed
on the transactions of Phlx Registered Options Traders (``ROTs'') for
the equity options currently ranked two through fifty.\4\ The fees for
the equity options ranked from two through fifty will decrease from
$0.50 per contract to $0.40 per contract. The fee for the top-ranked
equity option will remain at $1.00 and the fee for equity options
ranked 51 through 120 will remain at $0.00. No other changes to the
Phlx's payment for order flow program are being made at this time.\5\
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\4\ The Phlx's payment for order flow fee is assessed on ROTs on
the top 120 most actively traded equity options in terms of the
total number of contracts that are traded nationally, based on
volume statistics provided by the Options Clearing Corporation. The
measuring periods for the top 120 options are calculated every three
months. See Securities Exchange Act Release No. 47424 (February 28,
2003), 68 FR 11168 (March 7, 2003) (SR-Phlx-2003-04). For the
payment for order flow fees imposed on trades settling on or after
May 1, 2003 through July 31, 2003, the measuring period for the top
120 options was based on volume statistics from January, February
and March 2003. See Securities Exchange Act Release No. 47805 (May
6, 2003), 68 FR 25669 (May 13, 2003) (SR-Phlx-2003-34).
\5\ Therefore, the top 120 options currently in effect will
remain the same through July 31, 2003. No recalculation of the top
120 options is being done at this time.
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The Phlx intends to implement the attached payment for order flow
fees for trades settling June 1, 2003 through July 31, 2003.\6\
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\6\ The Exchange previously filed a proposed rule change to
establish the payment for order flow fees for the time period May 1,
2003 through July 31, 2003. See Securities Exchange Act Release No.
47805 (May 6, 2003), 68 FR 25669 (May 13, 2003) (SR-Phlx-2003-34).
This proposal seeks to amend the payment for order flow fees within
this three-month cycle, specifically for transactions settling on
June 1, 2003 through July 31, 2003. Thereafter, consistent with the
Phlx's payment for order flow program, the Phlx will file with the
Commission a proposed rule change to address any changes to its fee
schedule for subsequent time periods.
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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 had received on the proposed rule change. 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
The Phlx previously filed a proposed rule change with the
Commission to reinstate its payment for order flow program.\7\ Pursuant
to the Phlx's current program, ROTs are assessed a payment for order
flow fee on the 120 most actively traded equity options, on a per-
contract, per-options issue basis, as set forth on the Phlx's ROT
Equity Option Payment for Order Flow Charges Schedule.\8\
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\7\ See Securities Exchange Act Release No. 47090 (December 23,
2002), 68 FR 141 (January 2, 2003) (SR-Phlx-2002-75).
\8\ The payment for order flow fee does not apply to
transactions between: (1) a ROT and a specialist; (2) a ROT and a
ROT; (3) a ROT and a firm; and (4) a ROT and a broker-dealer.
Indeed, because the primary focus of the program is to attract order
flow from customers, the payment for order flow fee is not imposed
on the above-specified transactions. Also, the payment for order
flow fee does not apply to index or foreign currency options.
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The purpose of the proposed rule change is to encourage additional
volume in the most actively traded equity options ranked two through
fifty by decreasing the payment for order flow fee assessed on ROTs
from the current rate of $0.50 per contract to $0.40 per contract. The
reduced fee, applicable to trades settling from June 1, 2003 through
July 31, 2003, should promote additional liquidity in those options by
reducing the ultimate costs incurred by the ROTs in connection with
trading these options.
2. Statutory Basis
The Exchange believes that its proposal to amend its schedule of
dues, fees and charges is consistent with section 6(b) of the Act \9\
in general, and furthers the objectives of section 6(b)(4) of the Act
\10\ in particular, in that it is an equitable allocation of reasonable
fees among Phlx members.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx does not believe that the proposed rule change will result
in 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
The Phlx neither solicited nor received written comments with
respect to the proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act \11\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\12\ because it establishes or changes a due, fee, or other
charge imposed by the Exchange. At any time within 60 days after 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)(ii).
\12\ 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,
[[Page 37195]]
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 in the Commission's Public
Reference Room. Copies of such filing will also be available for
inspection and copying at the principal office of the Phlx. All
submissions should refer to file number SR-Phlx-2003-42 and should be
submitted by July 14, 2003.
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).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15772 Filed 6-20-03; 8:45 am]
BILLING CODE 8010-01-P