Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Impose a New Licensing Fee in Connection With the Firm-Related Equity Option and Index Option Fee Cap, 42611-42613 [E5-3945]

Download as PDF Federal Register / Vol. 70, No. 141 / Monday, July 25, 2005 / Notices open market, and, in general, to protect investors and the public interest. A complex order sent to the PCX currently routes to and resides on the EOC until it trades in open outcry. Thus, a complex order currently cannot be executed on the PCX without manual intervention by a Floor Broker. The CTE will allow complex orders to trade electronically, without the intervention of a Floor Broker. OTP Holders and OTP Firms will use an electronic interface to the PCX to view complex orders resting in the CTE. As described more fully above, a complex order routed to the CTE may execute automatically against orders in the Exchange’s consolidated book or against an order resting in the CTE. In addition, OTP Holders and OTP Firms may trade against orders resting in the CTE. Accordingly, the Commission believes that the CTE should increase the transparency of complex orders and could facilitate the execution of complex orders. Under the proposal, the Exchange will determine which options classes will route directly to the CTE and those that will route to the EOC. The Commission notes that PCX Rule 6.76(c) applies to complex orders on PCX Plus.15 Accordingly, an OTP Holder or OTP Firm seeking to trade with its customer’s complex order, or to cross complex orders, would be required to comply with PCX Rule 6.76(c). In addition, the complex order priority provisions in PCX Rule 6.75(e) and PCX Rule 6.75, Commentary .04, will continue to apply to complex orders. Accordingly, complex orders will be able to trade ahead of orders in the consolidated book only under the conditions specified in PCX Rule 6.75(e) and PCX Rule 6.75, Commentary .04. The Commission also notes that complex orders from public customers will have priority over complex orders from non-public customers.16 The Commission finds good cause for approving the proposed rule change prior to the thirtieth day after the date of publication of notice thereof in the Federal Register. The Commission notes that the proposal is similar to a Chicago Board Options Exchange, Inc. (‘‘CBOE’’) proposal that the Commission approved.17 Accelerated approval of the PCX’s proposal may help the PCX to compete for complex orders. Accordingly, the Commission finds good cause, consistent with Sections 15 See note 10, supra. PCX Rule 6.76(a)(A). 17 See Securities Exchange Act Release No. 51271 (February 28, 2005), 70 FR 10712 (March 4, 2005) (SR–CBOE–2004–45). 16 See VerDate jul<14>2003 14:21 Jul 22, 2005 Jkt 205001 6(b)(5)and 19(b) of the Exchange Act, to approve the proposed rule change, as amended, on an accelerated basis. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,18 that the proposed rule change (SR–PCX–2005– 71), as amended, is approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.19 Jill M. Peterson, Assistant Secretary. [FR Doc. E5–3946 Filed 7–22–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52054; File No. SR–Phlx– 2005–40] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Impose a New Licensing Fee in Connection With the Firm-Related Equity Option and Index Option Fee Cap July 18, 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 7, 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 Exchange. On July 5, 2005, the Exchange filed Amendment No. 1 to the proposed rule change.3 Phlx has designated this proposal as one establishing or changing a due, fee, or other charge imposed by a self-regulatory organization pursuant to Section 19(b)(3)(A) of the Act,4 and U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, the Exchange made nonsubstantive changes to re-format a defined term and clarify the addition of disclaimer language in its $60,000 ‘‘Firm Related’’ Equity Option and Index Option Cap schedule. The effective date of the original proposed rule change is June 7, 2005, and the effective date of Amendment No. 1 is July 5, 2005. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act, the Commission considers such period to commence on July 5, 2005, the date on which the Exchange filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C). 4 15 U.S.C. 78s(b)(3)(A). PO 00000 18 15 19 17 Frm 00081 Fmt 4703 Sfmt 4703 42611 Rule 19b–4(f)(2) thereunder,5 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, 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 schedule of fees to adopt a license fee of $0.10 for options traded on the following products: 6 (1) iShares S&P 100 Index, traded under the symbol OEF; (2) iShares S&P Europe 350, traded under the symbol IEV; (3) iShares S&P Global 100 Index, traded under the symbol IOO; (4) iShares S&P Global Energy Sector Index, traded under the symbol IXC; (5) iShares S&P Global Financial Sector Index, traded under the symbol IXG; (6) iShares S&P Global Healthcare Sector Index, traded under the symbol IXJ; (7) iShares S&P Global Information Technology Sector Index, traded under the symbol IXN; (8) iShares S&P Global Telecom Sector Index, traded under the symbol IXP; (9) iShares S&P Latin America 40, traded under the symbol ILF; (10) iShares S&P MidCap 400, traded under the symbol IJH; (11) iShares S&P SmallCap 600, traded under the symbol IJR; (12) iShares S&P TOPIX 150, traded under the symbol ITF; (13) iShares S&P 500, traded under the symbol IVV; (14) S&P Industrial Select Sector SPDR, traded under the symbol XLI; (15) S&P Technology Select Sector SPDR, traded under the symbol XLK; (16) S&P Utilities Select Sector SPDR, traded under the symbol XLU; (17) S&P Consumer Staples Select Sector SPDR, traded under the symbol XLP; (18) S&P Energy Select Sector SPDR, traded under the symbol XLE; (19) S&P Financial Select Sector SPDR, traded under the symbol XLF; (20) S&P Health Care Select Sector SPDR, traded under the symbol XLV; (21) S&P Materials Select Sector SPDR, traded under the symbol XLB; (22) S&P Consumer Discretionary Select Sector SPDR, traded under the symbol XLY; (23) MidCap SPDR, traded under the symbol MDY (collectively, the ‘‘S&P products’’); and (24) WellSpring Bio-Clinical Trials 5 17 CFR 240.19b–4(f)(2). Exchange represents that this fee will be charged only to Exchange members. Telephone conversation between Cynthia Hoekstra, Director, Phlx, and Edward Cho, Attorney, Division of Market Regulation (‘‘Division’’), Commission (July 7, 2005). 6 The E:\FR\FM\25JYN1.SGM 25JYN1 42612 Federal Register / Vol. 70, No. 141 / Monday, July 25, 2005 / Notices Index (‘‘WHC’’) 7 to be assessed per contract side for equity option and index option ‘‘firm’’ transactions (comprised of equity option firm/ proprietary comparison transactions, equity option firm/proprietary transactions, equity option firm/ proprietary facilitation transactions, index option firm/proprietary comparison transactions, index option firm/proprietary transactions and index option firm/proprietary facilitation transactions). This license fee will be imposed only after the Exchange’s $60,000 ‘‘firm-related’’ equity option and index option comparison and transaction charge cap, described more fully below, is reached. Currently, the Exchange imposes a cap of $60,000 per member organization 8 on all ‘‘firm-related’’ equity option and index option comparison and transaction charges combined.9 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 comparison charges, index option firm/proprietary transaction charges, and index option firm/proprietary facilitation transaction charges (collectively, the ‘‘firm-related charges’’). Thus, such firm-related charges in the aggregate for one billing month may not exceed $60,000 per month per member organization. The Exchange also imposes a license fee of $0.10 per contract side for equity option ‘‘firm’’ transactions on options on Nasdaq-100 Index Tracking StockSM 10 traded under the symbol 7 WellSpring Bio-Clinical Trials Index, ‘‘ORCHIDs’’ and ‘‘WellSpring’’ are trademarks of WellSpring BioCapital Partners, LLC (‘‘WellSpring LLC’’) and have been licensed for use by the Exchange. WellSpring LLC makes no recommendations concerning the advisability of investing in options based on the WellSpring BioClinical Trials Index. 8 The firm/proprietary comparison or transaction charge applies to member organizations for orders for the proprietary account of any member or nonmember broker-dealer that derives more than 35% of its annual, gross revenues from commissions and principal transactions with customers. Member organizations are 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, are accepted. See Securities Exchange Act Release No. 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000) (SR–Phlx–2000–85). 9 See Securities Exchange Act Release No. 51024 (January 11, 2005), 70 FR 3088 (January 19, 2005) (SR–Phlx–2004–94). 10 The Nasdaq-100, Nasdaq-100 Index, Nasdaq, The Nasdaq Stock Market, Nasdaq-100 VerDate jul<14>2003 14:21 Jul 22, 2005 Jkt 205001 QQQQ (‘‘QQQ’’) and certain other licensed products (collectively, the ‘‘licensed products’’) 11 after the $60,000 cap, as described above, is reached. Therefore, when a member organization exceeds the $60,000 cap (comprised of combined firm-related charges), the member organization is charged $60,000, plus license fees of $0.10 per contract side for any contracts in licensed products (if any) over those that were included in reaching the $60,000 cap. In other words, if the cap is reached, the $0.10 license fee is imposed on all subsequent equity option and index option firm transactions; these license fees are charged in addition to the $60,000 cap. The Exchange proposes to adopt a $0.10 license fee per contract side for the S&P products and WHC for equity option and index option firm transactions, which will be imposed after the $60,000 cap is reached in the same way as the current licensed product fees are assessed. Thus, when a member organization exceeds the $60,000 cap, the member organization will be charged $60,000 plus any applicable license fees for trades of licensed products, including the S&P products and WHC, over those trades that were counted in reaching the $60,000 cap.12 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 Phlx pursuant to a License Agreement with Nasdaq. The Nasdaq-100 Index (the ‘‘Index’’) is determined, composed, and calculated by Nasdaq without regard to the Licensee, the Nasdaq-100 TrustSM, 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. 11 In addition to the QQQs, the following licensed products are assessed a $0.10 license fee per contract side after the $60,000 cap is reached: Russell 1000 Growth iShares (IWF); Russell 2000 iShares (IWM); Russell 2000 Value iShares (IWN); Russell 2000 Growth iShares (IWO); Russell Midcap Growth iShares (IWP); Russell Midcap Value iShares (IWS); NYSE Composite Index (NYC); NYSE U.S. 100 Index (NY); and Standard & Poor’s Depositary Receipts, Trust Series 1 (SPY); iShares Lehman 1–3 Year Treasury Bond Fund (SHY); iShares Lehman 7–10 Year Treasury Bond Fund (IEF); iShares Lehman 20+ Treasury Bond Fund (TLT); iShares Lehman Aggregate Bond Fund (AGG); iShares Lehman TIPS Bond Fund (TIP); KBW Capital Markets Index (KSX); KBW Insurance Index (KIX); and Phlx/KBW Bank Index (BKX). 12 Consistent with current practice, when calculating the $60,000 cap, the Exchange first calculates all equity option and index option transaction and comparison charges for products without license fees and then equity option and index option transaction and comparison charges for products with license fees (i.e., QQQ license fees) that are assessed by the Exchange after the $60,000 cap is reached. See Securities Exchange Act PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 In addition, the Exchange proposes to make a technical change to its Summary of Index Option and FXI Options Charges (‘‘Options Charge Schedule’’) to make a footnote, which relates to the $60,000 cap and appears in other applicable sections of the Exchange’s fee schedule, more consistent.13 The Exchange also proposes to include nonsubstantive disclaimer language relating to the trading of certain licensed products on the Exchange in its $60,000 ‘‘Firm Related’’ Equity Option and Index Option Cap schedule (‘‘$60,000 Cap Schedule’’).14 The fees set forth in this proposal are scheduled to become effective for transactions settling on or after June 8, 2005. The text of the proposed rule change is available on the Phlx’s Internet 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 proposal. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of assessing the S&P products and WHC license fee of $0.10 per contract side after reaching the $60,000 cap as described in this proposal is to help defray licensing costs associated with the trading of these products, while still capping member organizations’ fees enough to attract volume from other exchanges. The cap operates this way in order to offer an incentive for additional volume without leaving the Exchange with significant out-of-pocket costs. The purpose of making minor technical changes to the Exchange’s Options Charge Schedule is to make a footnote, which relates to the $60,000 Release No. 50836 (December 10, 2004), 69 FR 75584 (December 17, 2004) (SR–Phlx–2004–70). 13 Telephone conversation between Cynthia Hoekstra, Director, Phlx, and Edward Cho, Attorney, Division, Commission (July 7, 2005). 14 Id. E:\FR\FM\25JYN1.SGM 25JYN1 Federal Register / Vol. 70, No. 141 / Monday, July 25, 2005 / Notices cap and appears in other applicable sections of the Exchange’s fee schedule, more consistent. In addition, the Exchange proposes to include nonsubstantive disclaimer language relating to the trading of certain licensed products on the Exchange in its $60,000 Cap Schedule. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act 15 in general, and furthers the objectives of Section 6(b)(4) of the Act 16 in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among Exchange members. B. Self-Regulatory Organization’s Statement on Burden on Competition The Phlx believes that the proposed rule change would impose no 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 Exchange did not solicit or receive any written comments with respect to the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change, as amended, has been designated as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act 17 and Rule 19b–4(f)(2) 18 thereunder. Accordingly, the proposal is effective upon filing with the Commission. At any time within 60 days of the filing of the amended 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.19 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments DEPARTMENT OF STATE • 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–2005–40 on the subject line. [Public Notice 5139] For the Commission, by the Division of Market Regulation, pursuant to delegated authority.20 Jill M. Peterson, Assistant Secretary. [FR Doc. E5–3945 Filed 7–22–05; 8:45 am] BILLING CODE 4710–08–P BILLING CODE 8010–01–P U.S.C. 78f(b). U.S.C. 78f(b)(4). 17 15 U.S.C. 78s(b)(3)(A)(ii). 18 17 CFR 240.19b–4(f)(2). 19 See supra note 3. 16 15 14:21 Jul 22, 2005 20 17 Jkt 205001 Culturally Significant Objects Imported for Exhibition; Determinations: ‘‘David Milne Watercolors: Painting Toward the Light’’ SUMMARY: Notice is hereby given of the following determinations: Pursuant to Paper Comments the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. • Send paper comments in triplicate 2459), Executive Order 12047 of March to Jonathan G. Katz, Secretary, 27, 1978, the Foreign Affairs Reform and Securities and Exchange Commission, Restructuring Act of 1998 (112 Stat. Station Place, 100 F Street NE., 2681, et seq.; 22 U.S.C. 6501 note, et Washington, DC 20549–9303. seq.), Delegation of Authority No. 234 of October 1, 1999, and Delegation of All submissions should refer to File Authority No. 236 of October 19, 1999, Number SR–Phlx–2005–40. This file as amended, and Delegation of number should be included on the subject line if e-mail is used. To help the Authority No. 257 of April 15, 2003 [68 FR 19875], I hereby determine that the Commission process and review your objects to be included in the exhibition comments more efficiently, please use only one method. The Commission will ‘‘David Milne Watercolors: Painting post all comments on the Commission’s Toward the Light,’’ imported from abroad for temporary exhibition within Internet Web site (https://www.sec.gov/ the United States, are of cultural rules/sro.shtml). Copies of the significance. The objects are imported submission, all subsequent pursuant to a loan agreement with the amendments, all written statements foreign lenders. I also determine that the with respect to the proposed rule exhibition or display of the exhibit change that are filed with the objects at The Metropolitan Museum of Commission, and all written Art, New York, NY from on or about communications relating to the November 7, 2005 to on or about proposed rule change between the January 29, 2006, and at possible Commission and any person, other than additional venues yet to be determined, those that may be withheld from the is in the national interest. Public Notice public in accordance with the of these determinations is ordered to be provisions of 5 U.S.C. 552, will be published in the Federal Register. available for inspection and copying in FOR FURTHER INFORMATION CONTACT: For the Commission’s Public Reference further information, including a list of Room. Copies of such filing also will be the exhibit objects, contact Carol B. available for inspection and copying at Epstein, Attorney-Adviser, Office of the the principal office of the Exchange. All Legal Adviser, Department of State, (telephone: (202) 453–8048). The comments received will be posted address is Department of State, SA–44, without change; the Commission does 301 4th Street, SW., Room 700, not edit personal identifying Washington, DC 20547–0001. information from submissions. You should submit only information that Dated: July 18, 2005. you wish to make available publicly. All C. Miller Crouch, submissions should refer to File Principal Deputy Assistant Secretary for Number SR–Phlx–2005–40 and should Educational and Cultural Affairs Department of State. be submitted on or before August 15, 2005. [FR Doc. 05–14611 Filed 7–22–05; 8:45 am] 15 15 VerDate jul<14>2003 42613 PO 00000 CFR 200.30–3(a)(12). Frm 00083 Fmt 4703 Sfmt 4703 DEPARTMENT OF STATE [Public Notice 5140] Culturally Significant Objects Imported for Exhibition Determinations: ‘‘Monumental Sculpture in Florence: Ghiberti, Nanni di Banco, and Verrocchio’’ SUMMARY: Notice is hereby given of the following determinations: Pursuant to E:\FR\FM\25JYN1.SGM 25JYN1

Agencies

[Federal Register Volume 70, Number 141 (Monday, July 25, 2005)]
[Notices]
[Pages 42611-42613]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3945]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52054; File No. SR-Phlx-2005-40]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto To Impose a New Licensing Fee in Connection 
With the Firm-Related Equity Option and Index Option Fee Cap

July 18, 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 7, 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 Exchange. On July 
5, 2005, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ Phlx has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by a self-regulatory 
organization pursuant to Section 19(b)(3)(A) of the Act,\4\ and Rule 
19b-4(f)(2) thereunder,\5\ which renders the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange made non-substantive 
changes to re-format a defined term and clarify the addition of 
disclaimer language in its $60,000 ``Firm Related'' Equity Option 
and Index Option Cap schedule. The effective date of the original 
proposed rule change is June 7, 2005, and the effective date of 
Amendment No. 1 is July 5, 2005. For purposes of calculating the 60-
day period within which the Commission may summarily abrogate the 
proposed rule change, as amended, under Section 19(b)(3)(C) of the 
Act, the Commission considers such period to commence on July 5, 
2005, the date on which the Exchange filed Amendment No. 1. See 15 
U.S.C. 78s(b)(3)(C).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend its schedule of fees to adopt a license 
fee of $0.10 for options traded on the following products: \6\ (1) 
iShares S&P 100 Index, traded under the symbol OEF; (2) iShares S&P 
Europe 350, traded under the symbol IEV; (3) iShares S&P Global 100 
Index, traded under the symbol IOO; (4) iShares S&P Global Energy 
Sector Index, traded under the symbol IXC; (5) iShares S&P Global 
Financial Sector Index, traded under the symbol IXG; (6) iShares S&P 
Global Healthcare Sector Index, traded under the symbol IXJ; (7) 
iShares S&P Global Information Technology Sector Index, traded under 
the symbol IXN; (8) iShares S&P Global Telecom Sector Index, traded 
under the symbol IXP; (9) iShares S&P Latin America 40, traded under 
the symbol ILF; (10) iShares S&P MidCap 400, traded under the symbol 
IJH; (11) iShares S&P SmallCap 600, traded under the symbol IJR; (12) 
iShares S&P TOPIX 150, traded under the symbol ITF; (13) iShares S&P 
500, traded under the symbol IVV; (14) S&P Industrial Select Sector 
SPDR, traded under the symbol XLI; (15) S&P Technology Select Sector 
SPDR, traded under the symbol XLK; (16) S&P Utilities Select Sector 
SPDR, traded under the symbol XLU; (17) S&P Consumer Staples Select 
Sector SPDR, traded under the symbol XLP; (18) S&P Energy Select Sector 
SPDR, traded under the symbol XLE; (19) S&P Financial Select Sector 
SPDR, traded under the symbol XLF; (20) S&P Health Care Select Sector 
SPDR, traded under the symbol XLV; (21) S&P Materials Select Sector 
SPDR, traded under the symbol XLB; (22) S&P Consumer Discretionary 
Select Sector SPDR, traded under the symbol XLY; (23) MidCap SPDR, 
traded under the symbol MDY (collectively, the ``S&P products''); and 
(24) WellSpring Bio-Clinical Trials

[[Page 42612]]

Index (``WHC'') \7\ to be assessed per contract side for equity option 
and index option ``firm'' transactions (comprised of equity option 
firm/proprietary comparison transactions, equity option firm/
proprietary transactions, equity option firm/proprietary facilitation 
transactions, index option firm/proprietary comparison transactions, 
index option firm/proprietary transactions and index option firm/
proprietary facilitation transactions). This license fee will be 
imposed only after the Exchange's $60,000 ``firm-related'' equity 
option and index option comparison and transaction charge cap, 
described more fully below, is reached.
---------------------------------------------------------------------------

    \6\ The Exchange represents that this fee will be charged only 
to Exchange members. Telephone conversation between Cynthia 
Hoekstra, Director, Phlx, and Edward Cho, Attorney, Division of 
Market Regulation (``Division''), Commission (July 7, 2005).
    \7\ WellSpring Bio-Clinical Trials Index, ``ORCHIDs'' and 
``WellSpring'' are trademarks of WellSpring BioCapital Partners, LLC 
(``WellSpring LLC'') and have been licensed for use by the Exchange. 
WellSpring LLC makes no recommendations concerning the advisability 
of investing in options based on the WellSpring Bio-Clinical Trials 
Index.
---------------------------------------------------------------------------

    Currently, the Exchange imposes a cap of $60,000 per member 
organization \8\ on all ``firm-related'' equity option and index option 
comparison and transaction charges combined.\9\ 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 comparison charges, index option firm/proprietary 
transaction charges, and index option firm/proprietary facilitation 
transaction charges (collectively, the ``firm-related charges''). Thus, 
such firm-related charges in the aggregate for one billing month may 
not exceed $60,000 per month per member organization.
---------------------------------------------------------------------------

    \8\ 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 are 
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, are 
accepted. See Securities Exchange Act Release No. 43558 (November 
14, 2000), 65 FR 69984 (November 21, 2000) (SR-Phlx-2000-85).
    \9\ See Securities Exchange Act Release No. 51024 (January 11, 
2005), 70 FR 3088 (January 19, 2005) (SR-Phlx-2004-94).
---------------------------------------------------------------------------

    The Exchange also imposes a license fee of $0.10 per contract side 
for equity option ``firm'' transactions on options on Nasdaq-100 Index 
Tracking StockSM \10\ traded under the symbol QQQQ (``QQQ'') 
and certain other licensed products (collectively, the ``licensed 
products'') \11\ after the $60,000 cap, as described above, is reached. 
Therefore, when a member organization exceeds the $60,000 cap 
(comprised of combined firm-related charges), the member organization 
is charged $60,000, plus license fees of $0.10 per contract side for 
any contracts in licensed products (if any) over those that were 
included in reaching the $60,000 cap. In other words, if the cap is 
reached, the $0.10 license fee is imposed on all subsequent equity 
option and index option firm transactions; these license fees are 
charged in addition to the $60,000 cap.
    The Exchange proposes to adopt a $0.10 license fee per contract 
side for the S&P products and WHC for equity option and index option 
firm transactions, which will be imposed after the $60,000 cap is 
reached in the same way as the current licensed product fees are 
assessed. Thus, when a member organization exceeds the $60,000 cap, the 
member organization will be charged $60,000 plus any applicable license 
fees for trades of licensed products, including the S&P products and 
WHC, over those trades that were counted in reaching the $60,000 
cap.\12\
---------------------------------------------------------------------------

    \10\ The Nasdaq-100[supreg], Nasdaq-100 Index[supreg], 
Nasdaq[supreg], The Nasdaq Stock Market[supreg], 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 Phlx pursuant to a 
License Agreement with Nasdaq. The Nasdaq-100 Index[supreg] (the 
``Index'') is determined, composed, and calculated by Nasdaq without 
regard to the Licensee, the Nasdaq-100 TrustSM, 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.
    \11\ In addition to the QQQs, the following licensed products 
are assessed a $0.10 license fee per contract side after the $60,000 
cap is reached: Russell 1000 Growth iShares (IWF); Russell 2000 
iShares (IWM); Russell 2000 Value iShares (IWN); Russell 2000 Growth 
iShares (IWO); Russell Midcap Growth iShares (IWP); Russell Midcap 
Value iShares (IWS); NYSE Composite Index (NYC); NYSE U.S. 100 Index 
(NY); and Standard & Poor's Depositary Receipts[supreg], Trust 
Series 1 (SPY); iShares Lehman 1-3 Year Treasury Bond Fund (SHY); 
iShares Lehman 7-10 Year Treasury Bond Fund (IEF); iShares Lehman 
20+ Treasury Bond Fund (TLT); iShares Lehman Aggregate Bond Fund 
(AGG); iShares Lehman TIPS Bond Fund (TIP); KBW Capital Markets 
Index (KSX); KBW Insurance Index (KIX); and Phlx/KBW Bank Index 
(BKX).
    \12\ Consistent with current practice, when calculating the 
$60,000 cap, the Exchange first calculates all equity option and 
index option transaction and comparison charges for products without 
license fees and then equity option and index option transaction and 
comparison charges for products with license fees (i.e., QQQ license 
fees) that are assessed by the Exchange after the $60,000 cap is 
reached. See Securities Exchange Act Release No. 50836 (December 10, 
2004), 69 FR 75584 (December 17, 2004) (SR-Phlx-2004-70).
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    In addition, the Exchange proposes to make a technical change to 
its Summary of Index Option and FXI Options Charges (``Options Charge 
Schedule'') to make a footnote, which relates to the $60,000 cap and 
appears in other applicable sections of the Exchange's fee schedule, 
more consistent.\13\ The Exchange also proposes to include non-
substantive disclaimer language relating to the trading of certain 
licensed products on the Exchange in its $60,000 ``Firm Related'' 
Equity Option and Index Option Cap schedule (``$60,000 Cap 
Schedule'').\14\ The fees set forth in this proposal are scheduled to 
become effective for transactions settling on or after June 8, 2005.
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    \13\ Telephone conversation between Cynthia Hoekstra, Director, 
Phlx, and Edward Cho, Attorney, Division, Commission (July 7, 2005).
    \14\ Id.
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    The text of the proposed rule change is available on the Phlx's 
Internet 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 proposal. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of assessing the S&P products and WHC license fee of 
$0.10 per contract side after reaching the $60,000 cap as described in 
this proposal is to help defray licensing costs associated with the 
trading of these products, while still capping member organizations' 
fees enough to attract volume from other exchanges. The cap operates 
this way in order to offer an incentive for additional volume without 
leaving the Exchange with significant out-of-pocket costs.
    The purpose of making minor technical changes to the Exchange's 
Options Charge Schedule is to make a footnote, which relates to the 
$60,000

[[Page 42613]]

cap and appears in other applicable sections of the Exchange's fee 
schedule, more consistent. In addition, the Exchange proposes to 
include non-substantive disclaimer language relating to the trading of 
certain licensed products on the Exchange in its $60,000 Cap Schedule.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \15\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \16\ in particular, in 
that it is an equitable allocation of reasonable dues, fees, and other 
charges among Exchange members.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx believes that the proposed rule change would impose no 
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 Exchange did not solicit or receive any written comments with 
respect to the proposal.

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

    The foregoing proposed rule change, as amended, has been designated 
as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act \17\ and 
Rule 19b-4(f)(2) \18\ thereunder. Accordingly, the proposal is 
effective upon filing with the Commission. At any time within 60 days 
of the filing of the amended 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.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 17 CFR 240.19b-4(f)(2).
    \19\ See supra note 3.
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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, as amended, 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-2005-40 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Phlx-2005-40. 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 Room. Copies of such 
filing also will 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-Phlx-2005-40 and should be submitted on or before August 
15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3945 Filed 7-22-05; 8:45 am]
BILLING CODE 8010-01-P
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