Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Equity Option Specialist Deficit (Shortfall) Fee, 39542-39544 [E5-3593]
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39542
Federal Register / Vol. 70, No. 130 / Friday, July 8, 2005 / Notices
and the public interest.15 The Exchange
has requested that the Commission
waive the 30-day operative delay and
designate the proposed rule change to
become effective immediately, so that
the pilot can continue uninterrupted.
The Commission hereby grants the
request.16 The Commission believes that
such waiver is consistent with the
protection of investors and the public
interest because it will allow the
benefits of Manning protection provided
by the pilot to continue without
interruption. For these reasons, the
Commission designates the proposed
rule change to be operative upon filing
with the Commission.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
the proposed 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.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NSX–2005–04 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
No. SR–NSX–2005–04. This file number
should be included in the subject line
if e-mail is used. To help the
Commission process and review
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
15 In addition, Rule 19b-4(f)(6)(iii) states that the
Exchange must provide the Commission with
written notice of its intent to file the proposed rule
change at least five days prior to the date of filing
of the proposed rule change. The Exchange has
satisfied this pre-filing requirement.
16 For purposes only of accelerating the operative
date of the proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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16:32 Jul 07, 2005
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Internet Web site (https://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, 100 F Street, NE., Washington,
DC 20549. Copies of such filings will
also 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–NSX–
2005–04 and should be submitted on or
before July 29, 2005.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.17
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–3592 Filed 7–7–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51947; File No. SR–Phlx–
2005–39]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to the Equity Option
Specialist Deficit (Shortfall) Fee
June 30, 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 June 6,
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 Phlx. The
Exchange filed this proposal pursuant to
Section 19(b)(3)(A)(ii) of the Act,3 and
PO 00000
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
1 15
Frm 00060
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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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to amend its
Equity Option Specialist Deficit
(Shortfall) Fee (‘‘shortfall fee’’) to no
longer charge the equity option
specialist the shortfall fee when one or
more Streaming Quote Traders
(‘‘SQTs’’) 5 or Remote Streaming Quote
Traders (‘‘RSQTs’’) 6 trading on the
Exchange’s electronic options trading
platform, Phlx XL 7, have been
designated to receive Directed Orders 8
from Order Flow Providers 9 for the
same option in which that specialist
unit is acting as the specialist.
Currently, the Exchange charges
equity options specialist units 10 a
shortfall fee of $0.35 per contract to be
paid monthly in connection with
transactions in any top 120 equity
4 17
U.S.C. 240.19b–4(f)(2).
SQT is an Exchange Registered Options
Trader (‘‘ROT’’) who has received permission from
the Exchange to generate and submit option
quotations electronically through an electronic
interface with AUTOM via an Exchange approved
proprietary electronic quoting device in eligible
options to which such SQT is assigned. 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. See Exchange Rules 1014(b)(ii) and 1080.
6 An RSQT is an Exchange ROT that is a member
or member organization of the Exchange with no
physical trading floor presence who has received
permission from the Exchange to generate and
submit option quotations electronically through
AUTOM in eligible options to which such RSQT
has been assigned. An RSQT may only submit such
quotations electronically from off the floor of the
Exchange. An RSQT may only trade in a market
making capacity in classes of options in which he
is assigned. See Exchange Rule 1014(b)(ii)(B). See
Securities Exchange Act Release Nos. 51126
(February 2, 2005), 70 FR 6915 (February 9, 2005)
(SR–Phlx–2004–90) and 51429 (March 24, 2005)
(SR–Phlx–2005–12).
7 In July 2004, the Exchange began trading equity
options on Phlx XL, followed by index options in
December 2004. See Securities Exchange Act
Release No. 50100 (July 27, 2004), 69 FR 46612
(August 3, 2004), SR–Phlx–2003–59).
8 The term ‘‘Directed Order’’ means any customer
order to buy or sell which has been directed to a
particular specialist, RSQT, or SQT by an Order
Flow Provider (defined below in footnote 9). See
Exchange Rule 1080(l). The provisions of Rule
1080(l) are in effect of a one-year pilot period to
expire on May 27, 2006. See Securities Exchange
Act Release No. 51759 (May 27, 2005) (SR–Phlx–
2004–91).
9 An ‘‘Order Flow Provider’’ is any member or
member organization that submits, as agent,
customer orders to the Exchange. See Exchange
Rule 1080(l).
10 The Exchange uses the terms ‘‘specialist unit’’
and ‘‘specialist’’ interchangeably herein.
5 An
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Federal Register / Vol. 70, No. 130 / Friday, July 8, 2005 / Notices
option,11 including Streaming Quote
Options traded on Phlx XL,12 in most
cases,13 if at least 12 percent of the total
national monthly contract volume in
that option is not effected on the
Exchange in that month.
A shortfall fee cap is applied to
transactions in any of the top 120 equity
options pursuant to the following
schedule: (1) If Phlx volume in any top
120 equity option, except options on
Nasdaq-100 Index Tracking StockSM
(traded under the symbol ‘‘QQQQ’’),14 is
less than or equal to 50 percent of the
current threshold volume (presently six
percent), a cap of $10,000 will apply; (2)
If Phlx volume in any top 120 equity
option, except options on QQQQ, is
greater than 50 percent of the current
threshold volume (presently six percent)
and less than 12 percent of the total
national monthly contract volume, a cap
of $5,000 will apply; (3) If Phlx volume
in options on QQQQ is less than or
equal to 50 percent of the current
threshold volume (presently six
percent), a cap of $20,000 will apply;
and (4) If Phlx volume in options on
QQQQ is greater than 50 percent of the
current threshold volume (presently six
percent) and less than 12 percent of the
11 A top 120 equity option is defined as one of
the 120 most actively traded equity options in terms
of the total number of contracts in that option that
were traded nationally for specified month, based
on volume reflected by The Options Clearing
Corporation.
12 See Securities Exchange Act Release No. 51096
(January 28, 2005), 70 FR 6495 (February 7, 2005)
(SR–Phlx–2004–96).
13 An exception to the 12 percent volume
threshold amount relates to a transition period for
newly listed top 120 options or for any top 120
option (including those equity options listed on the
Exchange before February 1, 2004) acquired by a
new specialist unit. During the transition period,
the shortfall fee is imposed in stages such that the
requisite volume threshold is zero percent for the
first full calendar month of trading, three percent
for the second full calendar month of trading, six
percent for the third full calendar month of trading,
nine percent for the fourth full calendar month of
trading and 12 percent for the fifth full calendar
month of trading (and thereafter). See Securities
Exchange Act Release No. 49324 (February 26,
2004), 69 FR 10089 (March 3, 2004) (SR–Phlx–
2004–08).
14 The Nasdaq-100, Nasdaq-100 Index,
Nasdaq, The Nasdaq Stock Market, Nasdaq-100
SharesSM, Nasdaq-100 TrustSM, Nasdaq-100 Index
Tracking StockSM, and QQQSM are trademarks or
service marks of The Nasdaq Stock Market, Inc.
(‘‘Nasdaq’’) and have been licensed for use for
certain purposes by the Exchange pursuant to a
License Agreement with Nasdaq. The Nasdaq-100
Index (‘‘Index’’) is determined, composed, and
calculated by Nasdaq without regard to the
Licensee, the Nasdaq-100 Trust SM, or the beneficial
owners of Nasdaq-100 SharesSM. Nasdaq has
complete control and sole discretion in
determining, comprising, or calculating the Index or
in modifying in any way its method for
determining, comprising, or calculating the Index in
the future.
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16:32 Jul 07, 2005
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total national monthly contract volume,
a cap of $10,000 will apply.
Any applicable cap will be pro rated
in the month that the Exchange’s system
designates the option(s) to be directed to
a specific SQT or RSQT.
The amount of the shortfall fee and
the applicable caps as described above,
as well as all other aspects of the
shortfall fee, will remain unchanged.15
This proposal is scheduled to apply to
trades settling on or after June 6, 2005.
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.phlx.com), at the Phlx’s
Office of the Secretary, 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
Phlx 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 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 shortfall fee is designed to create
an incentive for options specialists to
promote the options for which they are
the designated specialists. The purpose
of this proposal is to address the effect
of the shortfall fee as it relates to options
traded by SQTs or RSQTs. The
Exchange believes that it would be
unreasonable to impose a shortfall fee
on specialists when SQTs or RSQTs will
be competing for market share on a
relatively equal basis, as the shortfall fee
was designed, in part, to create an
incentive for specialists to promote the
options they have been allocated.
example, the total volume calculation for
purposes of determining the requisite threshold will
continue to be based on the current month’s volume
and the three-month differentiation to determine
whether an equity option is considered a top 120
option will also remain in effect, i.e. December’s top
120 option are based on September’s volume. In
addition, the $10,000 cap applied in connection
with the tiered threshold schedule for any newly
listed top 120 option and any top 120 options
acquired by a new specialist unit, not affiliated with
an existing Phlx options specialist unit will remain
unchanged. See Securities Exchange Act Release
No. 49324 (February 26, 2004), 69 FR 10089 (March
3, 2004) (SR–Phlx–2004–08).
PO 00000
15 For
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39543
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,16 in general, and
furthers the objectives of Section 6(b)(4)
of the Act,17 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among its members.
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
Written comments on the proposed
rule change were neither solicited nor
received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become immediately effective
pursuant to Section 19(b)(3)(A)(ii) of the
Act18 and subparagraph (f)(2) of Rule
19b-4 thereunder,19 in that it establishes
or changes a due, fee or other charge
imposed by the Exchange. At any time
within 60 days of the filing of such
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.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR-Phlx-2005–39 on the subject
line.
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
18 U.S.C. 78s(b)(3)(A)(ii).
19 CFR 240.19b-4(f)(2).
17 15
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Federal Register / Vol. 70, No. 130 / Friday, July 8, 2005 / Notices
Incident Period: May 11, 2005,
through May 12, 2005.
• Send paper comments in triplicate
DATES: Effective Date: June 23, 2005.
to Jonathan G. Katz, Secretary,
Physical Loan Application Deadline
Securities and Exchange Commission,
Date: August 22, 2005.
100 F Street, NE., Washington, DC
ADDRESSES: Submit completed loan
20549–9303.
applications to: U.S. Small Business
All submissions should refer to File
Administration, Disaster Area Office 3,
Number SR-Phlx-2005–39. This file
14925 Kingsport Road, Fort Worth, TX
number should be included on the
subject line if e-mail is used. To help the 76155.
Commission process and review your
FOR FURTHER INFORMATION CONTACT:
comments more efficiently, please use
Alan Escobar, Office of Disaster
only one method. The Commission will Assistance, U.S. Small Business
post all comments on the Commission’s Administration, 409 3rd Street, Suite
Internet Web site (https://www.sec.gov/
6050, Washington, DC 20416.
rules/sro.shtml). Copies of the
SUPPLEMENTARY INFORMATION: Notice is
submission, all subsequent
hereby given that as a result of the
amendments, all written statements
President’s major disaster declaration on
with respect to the proposed rule
June 23, 2005, applications for Private
change that are filed with the
Non-Profit organizations that provide
Commission, and all written
essential services of a governmental
communications relating to the
nature may file disaster loan
proposed rule change between the
applications at the address listed above
Commission and any person, other than or other locally announced locations.
those that may be withheld from the
The following areas have been
public in accordance with the
determined to be adversely affected by
provisions of 5 U.S.C. 552, will be
the disaster:
available for inspection and copying in
Primary Counties:
the Commission’s Public Reference
Adams, Buffalo, Fillmore, Frontier,
Section. Copies of the filing also will be
Hall, Hamilton, Howard, Kearney,
available for inspection and copying at
Merrick, Seward, York
the principal office of the Phlx. All
The Interest Rates are:
comments received will be posted
without change; the Commission does
Percent
not edit personal identifying
information from submissions. You
Other (Including Non-Profit Orgashould submit only information that
nizations) with Credit Available
you wish to make available publicly.
Elsewhere .................................
4.750
Businesses and Non-Profit OrgaAll submissions should refer to File
nizations without Credit AvailNumber SR-Phlx-2005–39 and should
able Elsewhere .........................
4.000
be submitted on or before July 29, 2005.
Paper Comments
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.20
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–3593 Filed 7–7–05; 8:45 am]
The number assigned to this disaster
for physical damage is 10132.
(Catalog of Federal Domestic Assistance
Number 59008).
BILLING CODE 8010–01–P
Herbert L. Mitchell,
Associate Administrator for Disaster
Assistance.
[FR Doc. 05–13407 Filed 7–7–05; 8:45 am]
SMALL BUSINESS ADMINISTRATION
BILLING CODE 8025–01–P
[Disaster Declaration # 10132]
SMALL BUSINESS ADMINISTRATION
Nebraska Disaster # NE–00002
AGENCY:
National Advisory Council; Public
Meeting
SUMMARY: This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Nebraska (FEMA—1590—
DR), dated June 23, 2005.
Incident: Severe Storms and Flooding.
The U.S. Small Business
Administration, National Advisory
Council will be hosting a public meeting
via conference call to discuss such
matters that may be presented by
members, staff of the U.S. Small
Business Administration, or interested
others. The conference call will take
place on Thursday, July 28, 2005, at 12
p.m. eastern standard time. The call
U.S. Small Business
Administration.
ACTION: Notice.
20 17
CFR 200.30–3(a)(12).
VerDate jul<14>2003
16:32 Jul 07, 2005
Jkt 205001
PO 00000
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number is 1–866–740–1260 and enter
access code 2057001.
Additionally, we will be using http:/
/www.readtytalk.com to offer a live
display of a PowerPoint presentation.
The access code is the same: 2057001.
Please log-in 10 minutes before the
conference.
Anyone wishing to participate or
make an oral presentation to the Board
must contact Adrienne Abney-Cole,
Administrative Assistant, National
Advisory Council, no later than
Thursday, July 18, 2005, via e-mail or
fax. Adrienne Abney-Cole,
Administrative Assistant, U.S. Small
Business Administration, 409 3rd Street,
SW., Washington, DC 20516, (202) 205–
6742 phone, or (202) 481–0112 fax, or
e-mail Andrienne.Abney-Cole@sba.gov.
Matthew K. Becker,
Committee Management Officer.
[FR Doc. 05–13408 Filed 7–7–05; 8:45 am]
BILLING CODE 8025–01–P
DEPARTMENT OF STATE
[Public Notice 5099]
Announcement of Meetings of the
International Telecommunication
Advisory Committee
SUMMARY: The International
Telecommunication Advisory
Committee announces a meeting of U.S.
Study Group A on July 28, 2005, which
will be held to prepare positions for the
next meeting of ITU–T Study Group 3,
and three meetings to prepare for ITU
Development Sector Study Group
Meetings 1 and 2. Members of the
public will be admitted to the extent
that seating is available, and may join in
the discussions, subject to the
instructions of the Chair.
The International Telecommunication
Advisory Committee (ITAC) will meet
on Thursday, July 28, 2005, 2:00–
4:00pm, to prepare U.S. and company
contributions for the next meeting of
ITU–accounting principles, which will
take place September 12–16, 2005. The
U.S. Study Group A meeting will be
held at the AT&T Innovation Center,
1133 21st St, Suite 210, Washington,
DC. A conference bridge will be
available to those outside the
Washington Metro area. Directions to
the meeting and conference bridge
information may be obtained from
minardje@state.gov.
The International Telecommunication
Advisory Committee (ITAC) will meet
on Tuesday, July 26, 2005, and on
August 2 and August 30 to prepare for
the ITU–D Study Group 1 and 2
meetings, which will take place in
E:\FR\FM\08JYN1.SGM
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]]>Agencies
[Federal Register Volume 70, Number 130 (Friday, July 8, 2005)]
[Notices]
[Pages 39542-39544]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3593]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51947; File No. SR-Phlx-2005-39]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Equity Option Specialist Deficit (Shortfall) Fee
June 30, 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 June 6, 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 Phlx. The Exchange
filed this proposal pursuant to Section 19(b)(3)(A)(ii) 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.
---------------------------------------------------------------------------
\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 U.S.C. 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to amend its Equity Option Specialist Deficit
(Shortfall) Fee (``shortfall fee'') to no longer charge the equity
option specialist the shortfall fee when one or more Streaming Quote
Traders (``SQTs'') \5\ or Remote Streaming Quote Traders (``RSQTs'')
\6\ trading on the Exchange's electronic options trading platform, Phlx
XL \7\, have been designated to receive Directed Orders \8\ from Order
Flow Providers \9\ for the same option in which that specialist unit is
acting as the specialist.
---------------------------------------------------------------------------
\5\ An SQT is an Exchange Registered Options Trader (``ROT'')
who has received permission from the Exchange to generate and submit
option quotations electronically through an electronic interface
with AUTOM via an Exchange approved proprietary electronic quoting
device in eligible options to which such SQT is assigned. 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. See Exchange Rules 1014(b)(ii) and 1080.
\6\ An RSQT is an Exchange ROT that is a member or member
organization of the Exchange with no physical trading floor presence
who has received permission from the Exchange to generate and submit
option quotations electronically through AUTOM in eligible options
to which such RSQT has been assigned. An RSQT may only submit such
quotations electronically from off the floor of the Exchange. An
RSQT may only trade in a market making capacity in classes of
options in which he is assigned. See Exchange Rule 1014(b)(ii)(B).
See Securities Exchange Act Release Nos. 51126 (February 2, 2005),
70 FR 6915 (February 9, 2005) (SR-Phlx-2004-90) and 51429 (March 24,
2005) (SR-Phlx-2005-12).
\7\ In July 2004, the Exchange began trading equity options on
Phlx XL, followed by index options in December 2004. See Securities
Exchange Act Release No. 50100 (July 27, 2004), 69 FR 46612 (August
3, 2004), SR-Phlx-2003-59).
\8\ The term ``Directed Order'' means any customer order to buy
or sell which has been directed to a particular specialist, RSQT, or
SQT by an Order Flow Provider (defined below in footnote 9). See
Exchange Rule 1080(l). The provisions of Rule 1080(l) are in effect
of a one-year pilot period to expire on May 27, 2006. See Securities
Exchange Act Release No. 51759 (May 27, 2005) (SR-Phlx-2004-91).
\9\ An ``Order Flow Provider'' is any member or member
organization that submits, as agent, customer orders to the
Exchange. See Exchange Rule 1080(l).
---------------------------------------------------------------------------
Currently, the Exchange charges equity options specialist units
\10\ a shortfall fee of $0.35 per contract to be paid monthly in
connection with transactions in any top 120 equity
[[Page 39543]]
option,\11\ including Streaming Quote Options traded on Phlx XL,\12\ in
most cases,\13\ if at least 12 percent of the total national monthly
contract volume in that option is not effected on the Exchange in that
month.
---------------------------------------------------------------------------
\10\ The Exchange uses the terms ``specialist unit'' and
``specialist'' interchangeably herein.
\11\ A top 120 equity option is defined as one of the 120 most
actively traded equity options in terms of the total number of
contracts in that option that were traded nationally for specified
month, based on volume reflected by The Options Clearing
Corporation.
\12\ See Securities Exchange Act Release No. 51096 (January 28,
2005), 70 FR 6495 (February 7, 2005) (SR-Phlx-2004-96).
\13\ An exception to the 12 percent volume threshold amount
relates to a transition period for newly listed top 120 options or
for any top 120 option (including those equity options listed on the
Exchange before February 1, 2004) acquired by a new specialist unit.
During the transition period, the shortfall fee is imposed in stages
such that the requisite volume threshold is zero percent for the
first full calendar month of trading, three percent for the second
full calendar month of trading, six percent for the third full
calendar month of trading, nine percent for the fourth full calendar
month of trading and 12 percent for the fifth full calendar month of
trading (and thereafter). See Securities Exchange Act Release No.
49324 (February 26, 2004), 69 FR 10089 (March 3, 2004) (SR-Phlx-
2004-08).
---------------------------------------------------------------------------
A shortfall fee cap is applied to transactions in any of the top
120 equity options pursuant to the following schedule: (1) If Phlx
volume in any top 120 equity option, except options on Nasdaq-100 Index
Tracking StockSM (traded under the symbol ``QQQQ''),\14\ is
less than or equal to 50 percent of the current threshold volume
(presently six percent), a cap of $10,000 will apply; (2) If Phlx
volume in any top 120 equity option, except options on QQQQ, is greater
than 50 percent of the current threshold volume (presently six percent)
and less than 12 percent of the total national monthly contract volume,
a cap of $5,000 will apply; (3) If Phlx volume in options on QQQQ is
less than or equal to 50 percent of the current threshold volume
(presently six percent), a cap of $20,000 will apply; and (4) If Phlx
volume in options on QQQQ is greater than 50 percent of the current
threshold volume (presently six percent) and less than 12 percent of
the total national monthly contract volume, a cap of $10,000 will
apply.
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\14\ The Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg],
The Nasdaq Stock Market[reg], Nasdaq-100 SharesSM,
Nasdaq-100 TrustSM, Nasdaq-100 Index Tracking
StockSM, and QQQSM are trademarks or service
marks of The Nasdaq Stock Market, Inc. (``Nasdaq'') and have been
licensed for use for certain purposes by the Exchange pursuant to a
License Agreement with Nasdaq. The Nasdaq-100 Index[reg] (``Index'')
is determined, composed, and calculated by Nasdaq without regard to
the Licensee, the Nasdaq-100 Trust SM, or the beneficial
owners of Nasdaq-100 SharesSM. Nasdaq has complete
control and sole discretion in determining, comprising, or
calculating the Index or in modifying in any way its method for
determining, comprising, or calculating the Index in the future.
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Any applicable cap will be pro rated in the month that the
Exchange's system designates the option(s) to be directed to a specific
SQT or RSQT.
The amount of the shortfall fee and the applicable caps as
described above, as well as all other aspects of the shortfall fee,
will remain unchanged.\15\
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\15\ For example, the total volume calculation for purposes of
determining the requisite threshold will continue to be based on the
current month's volume and the three-month differentiation to
determine whether an equity option is considered a top 120 option
will also remain in effect, i.e. December's top 120 option are based
on September's volume. In addition, the $10,000 cap applied in
connection with the tiered threshold schedule for any newly listed
top 120 option and any top 120 options acquired by a new specialist
unit, not affiliated with an existing Phlx options specialist unit
will remain unchanged. See Securities Exchange Act Release No. 49324
(February 26, 2004), 69 FR 10089 (March 3, 2004) (SR-Phlx-2004-08).
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This proposal is scheduled to apply to trades settling on or after
June 6, 2005.
The text of the proposed rule change is available on the Exchange's
Web site (https://www.phlx.com), at the Phlx's Office of the Secretary,
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 Phlx 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 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 shortfall fee is designed to create an incentive for options
specialists to promote the options for which they are the designated
specialists. The purpose of this proposal is to address the effect of
the shortfall fee as it relates to options traded by SQTs or RSQTs. The
Exchange believes that it would be unreasonable to impose a shortfall
fee on specialists when SQTs or RSQTs will be competing for market
share on a relatively equal basis, as the shortfall fee was designed,
in part, to create an incentive for specialists to promote the options
they have been allocated.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\16\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\17\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees, and
other charges among its members.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4).
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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 inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has become immediately effective
pursuant to Section 19(b)(3)(A)(ii) of the Act\18\ and subparagraph
(f)(2) of Rule 19b-4 thereunder,\19\ in that it establishes or changes
a due, fee or other charge imposed by the Exchange. At any time within
60 days of the filing of such 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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\18\ U.S.C. 78s(b)(3)(A)(ii).
\19\ 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Phlx-2005-39 on the subject line.
[[Page 39544]]
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-Phlx-2005-39. 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 (https://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 the
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-2005-39 and
should be submitted on or before July 29, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\20\
Margaret H. McFarland,
Deputy Secretary.
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\20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E5-3593 Filed 7-7-05; 8:45 am]
BILLING CODE 8010-01-P
