Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change, and Amendment No. 1 Thereto Relating to the Exchange's Covered Sale Fee and Exchange Rule 607, 2286-2289 [E6-257]
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Federal Register / Vol. 71, No. 9 / Friday, January 13, 2006 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.15
Nancy M. Morris,
Secretary.
[FR Doc. E6–324 Filed 1–12–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53070; File No. SR–Phlx–
2005–63
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Order Granting Approval to Proposed
Rule Change Relating to the
Prohibition of Trade Shredding
January 6, 2006.
I. Introduction
On October 25, 2005, the Philadelphia
Stock Exchange, Inc. (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 the proposed rule change
relating to the prohibition of trade
shredding. The proposed rule change
was published for comment in the
Federal Register on December 5, 2005.3
The Commission received no comments
on the proposal. This order approves the
proposed rule change.
II. Description of the Proposal
The Exchange proposed to amend
Rule 707, Conduct Inconsistent with
Just and Equitable Principles of Trade,
to prohibit members, member
organizations and persons associated
with or employed by a member or
member organization from unbundling
orders for execution for the primary
purpose of maximizing a monetary or
like payment to the member, member
organization, or person associated with
or employed by a member or member
organization.
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III. Discussion and Commission
Findings
The Commission has reviewed
carefully the proposed rule change and
finds that it is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange,4
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 52834
(November 25, 2005), 70 FR 72492.
4 In approving this proposed rule change, the
Commission has considered the proposed rule’s
1 15
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particularly Section 6(b)(5) of the Act
which, among other things, requires that
the rules of a national securities
exchange be designed to promote just
and equitable principles of trade, to
foster cooperation and coordination
with persons engaged in regulating
securities transactions, to remove
impediments to perfect the mechanism
of a free and open market and a national
market system and, in general, to protect
investors and the public interest.5 The
Commission believes that the proposed
rule change should help eliminate the
distortive practice of trade shredding,
and, therefore, promote just and
equitable principles of trade.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,6 that the
proposed rule change (File No. SR–
Phlx–2005–63), be and hereby is,
approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.7
Nancy M. Morris,
Secretary.
[FR Doc. E6–256 Filed 1–12–06; 8:45 am]
change.3 The Commission is publishing
this notice to solicit comments on the
proposed rule change, as amended, from
interested persons, and is approving the
amended proposal on an accelerated
basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to change the title
from the ‘‘SEC Fee’’ to ‘‘Covered Sale
Fee’’ as it appears on the Exchange’s
Summary of Equity Charges and the
Nasdaq-100 Index Tracking StockSM Fee
Schedule (‘‘Fee Schedule’’).4 The
Exchange also proposes to amend
Exchange Rule 607 to clarify the
description of the Covered Sale Fee,
including renaming the title of Phlx
Rule 607 to ‘‘Covered Sale Fee’’ and
providing a more complete description
of a new arrangement for passing fees
among Intermarket Trading System
(‘‘ITS’’) participants. Below is the text of
the proposed rule change, as amended.
Proposed new language is in italics;
proposed deletions are in brackets.
Rule 607.
[Transaction] Covered Sale Fee
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53088; File No. SR–Phlx–
2005–87]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Order Granting
Accelerated Approval to a Proposed
Rule Change, and Amendment No. 1
Thereto Relating to the Exchange’s
Covered Sale Fee and Exchange Rule
607
January 6, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
23, 2005, the Philadelphia Stock
Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Phlx. On
January 4, 2006, the Exchange filed
Amendment No. 1 to the proposed rule
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
5 15 U.S.C. 78f(b)(5).
6 15 U.S.C. 78s(b)(2).
7 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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Under Section 31 of the Securities
Exchange Act of 1934, the Exchange
must pay certain fees to the Securities
and Exchange Commission
(‘‘Commission’’). To help fund the
Exchange’s obligations to the
Commission under Section 31, a
Covered Sale Fee is assessed by the
Exchange to members and member
organizations. To the extent there may
be any excess monies collected under
this Rule, the Exchange may retain
those monies to help fund its general
operating expenses. [Every member and
member organization shall pay to the
Exchange in such manner and at such
time as the Exchange shall direct, the
fees specified in Section 31 of the
Securities Exchange Act of 1934, and
rules thereunder, for all sales upon the
Exchange of securities specified in
3 Amendment No. 1 made technical changes to
the proposed rule text.
4 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 Phlx 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 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.
E:\FR\FM\13JAN1.SGM
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Federal Register / Vol. 71, No. 9 / Friday, January 13, 2006 / Notices
Section 31 of the Securities Exchange
Act of 1934, and rules thereunder.]
Each member and member
organization engaged in executing sale
transactions on the Exchange or
executing transactions, which were
routed over the Intermarket Trading
System, on another exchange during
any computational period shall pay a
Covered Sale Fee equal to (i) the Section
31 fee rate multiplied by (ii) the
member’s aggregate dollar amount of
covered sales.
The Exchange may enter into
arrangements with other exchanges to
pass the Covered Sale Fee among the
applicable exchanges where the
Exchange has collected the Covered
Sale Fee from its members and member
organizations for sale transactions
executed on another exchange through
the Intermarket Trading System and
when other exchanges have collected
the Covered Sale Fee from its members
for sale transactions executed on the
Exchange through the Intermarket
Trading System.
*
*
*
*
*
SUMMARY OF EQUITY CHARGES
(p 2/3)*
*
*
*
*
*
[SEC FEE] Covered Sale Fee
[The amount shall be determined by
Section 31 of the Securities Exchange
Act of 1934.]
Each member and member
organization engaged in executing sale
transactions on the Exchange or
executing transactions, which were
routed over the Intermarket Trading
System, on another exchange during
any computational period shall pay a
Covered Sale Fee equal to (i) the Section
31 fee rate multiplied by (ii) the
member’s aggregate dollar amount of
covered sales.
*
*
*
*
*
NASDAQ–100 INDEX TRACKING
STOCKSM FEE SCHEDULE
PHLX FEE SCHEDULE
*
*
*
*
*
hsrobinson on PROD1PC70 with NOTICES
[SEC FEE] Covered Sale Fee
[The amount shall be determined by
Section 31 of the Securities Exchange
Act of 1934.]
Each member and member
organization engaged in executing sale
transactions on the Exchange or
executing transactions, which were
routed over the Intermarket Trading
System, on another exchange during
any computational period shall pay a
Covered Sale Fee equal to (i) the Section
31 fee rate multiplied by (ii) the
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member’s aggregate dollar amount of
covered sales.
*
*
*
*
*
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
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change, as amended,
and discussed any comments it received
on the proposed rule change, as
amended. The text of these statements
may be examined at the places specified
in Item III 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
1. Purpose
The purpose of changing the name of
the ‘‘SEC Fee’’ as it appears on the
Exchange’s fee schedule and in Phlx
Rule 607 is to conform with the
Commission’s request to rename this fee
to help clarify that members and
member organizations do not incur an
obligation to the Commission under
Section 31 of the Act and to help
minimize confusion in connection with
the Exchange’s assessment of the fee. In
addition, the amendments to Rule 607
reflect the new arrangements with
respect to the passing of fees among ITS
participants that each collects from its
respective members for transactions
executed on another SRO through ITS.
Background
In late June 2004, the Commission
established new procedures governing
the calculation, payment, and collection
of fees and assessments on securities
transactions owed by national securities
exchanges and national securities
associations (collectively ‘‘SROs’’) to the
Commission pursuant to Section 31 of
the Act.5 In connection with these new
procedures, the Commission expressed
its concern about the manner in which
SROs labeled the fees that they passed
to their members and the manner in
which members labeled the fees passed
to their customers. Because Section 31
does not place an obligation on
members of covered SROs or their
customers, the Commission stated its
belief that it is misleading to suggest
that a customer or an SRO member
incurred an obligation to the
5 See Securities Exchange Act Release No. 49928
(June 28, 2004), 69 FR 41060 (July 7, 2004).
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2287
Commission under Section 31.
Accordingly, the Commission requested
that SROs take action to correct any
such misperception, which would
include changing the title of the ‘‘SEC
Fee’’ as it appears on the Exchange’s fee
schedule.
Thus, in order to comply with the
Commission’s request and to minimize
any confusion relating to the assessment
of the fee, the Exchange proposes to
rename its ‘‘SEC Fee’’ and Phlx Rule 607
‘‘Transaction Fee’’ to ‘‘Covered Sale
Fee.’’ 6
ITS Collection
In addition, the Exchange recently
filed with, and received an SEC order
granting accelerated approval from, the
Commission to enter into arrangements
with other participating SROs to pass
certain fees they have collected from
members for transactions executed on
another exchange through the ITS.7
Participating SROs have entered into an
arrangement to pass fees among ITS
participants that each participating SRO
has collected from its members for sale
transactions executed on another
participating SRO through ITS. Pursuant
to this new arrangement, each ITS
participant will determine whether it
has received and executed more in
dollar value of covered sales than it has
originated and sent to each other ITS
participant.8 One participating SRO will
then deduct the amount it owes another
participating SRO and will invoice only
for the difference; however, the duty to
report and pay the Section 31 fee will
remain with the ITS participant SRO on
which the sale was in fact transacted. It
is anticipated that the invoicing process
will occur twice yearly to coincide with
the March 15 and September 30
payment schedule for Section 31 fees set
forth in the Act.
6 Pursuant to Rule 31 under the Act, 17 CFR
240.31, a covered sale is a sale of a security, other
than an exempt sale or a sale of a security future,
occurring on a national securities exchange or by
or through any member of a national securities
association otherwise than on a national securities
exchange.
7 See Securities Exchange Act Release No. 52745
(November 7, 2005), 70 FR 69182, (November 14,
2005) (SR–Phlx–2005–64).
8 For example, for the period September 2003
through August 2004, SRO A sent ITS commitments
for covered sales whose dollar value was $150
million to SRO B for execution. SRO A collected
fees from its members to fund its Section 31
obligation for those covered sales executed on SRO
B. Under the new procedures established by the
Commission for the calculation and collection of
Section 31 fees on such covered sales, SRO B, as
the executing market center, is obligated to pay the
Section 31 fee to the Commission.
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Federal Register / Vol. 71, No. 9 / Friday, January 13, 2006 / Notices
NSCC Collection and Computational
Period
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange intends to have the
National Securities Clearing Corporation
(‘‘NSCC’’) collect this fee (and other
Exchange fees) for the Exchange for
certain members and member
organizations and pay over to the
Exchange the funds collected in
connection with equity transactions,
which should increase the efficiency in
which this fee, as well as other
Exchange fees, are collected.9 Further,
the Exchange intends to have the
Options Clearing Corporation (‘‘OCC’’)
continue to bill and collect this fee in
connection with covered sales of
options.10
The computational period, referred to
in proposed Rule 607 above, may
change during the course of a year if
there is a change in the Section 31 fee
rate.11 Thus, the amount of the Section
31 fee may change during the year,
which would, in turn, start a new
computational period. The Exchange
determines whether a trade ‘‘occurs’’
before or after a fee rate change so that
the appropriate dollar amounts of
securities sales are multiplied by the
correct fee rate.
The Exchange does not believe that
the proposed rule change, as amended,
will impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
2. Statutory Basis
hsrobinson on PROD1PC70 with NOTICES
The Exchange believes that the
proposed rule change, as amended, is
consistent with and furthers the
objective of Section 6(b)(4) of the Act,12
which requires that the rules of an
exchange provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
issuers and other persons using its
facilities.
9 Currently, NSCC collects the fee on the 23rd
calendar day of each month, provided that if such
day is other than an NSCC business/settlement day,
on the next succeeding NSCC business/settlement
day. The Exchange implemented this collection
practice in November 2005, which covered
transactions that occurred in October 2005. For
equity transactions, the NSCC debits the Phlx
member’s or member organization’s clearing firm. If
an Exchange member clears through the Stock
Clearing Corporation of Philadelphia (‘‘SCCP’’), a
Phlx subsidiary, the Exchange will debit the
member’s or member organizations’ margin account
at SCCP.
10 Currently, OCC and the options exchanges,
including the Phlx, have established arrangements
whereby OCC tabulates the aggregate amount of
sales of options that occur on the exchanges, based
on data captured by OCC’s systems. OCC then
calculates the Section 31 fees owed by the
exchanges and, in turn, remits to the Commission
the Section 31 fees on behalf of these exchanges.
11 The Commission is required to adjust the
securities transaction fee rates on an annual basis,
after consultation with the Congressional Budget
Office and the Office of Management and Budget.
The Commission may also be required to make a
‘‘mid-year’’ adjustment to the Section 31 fee rate.
12 15 U.S.C. 78f(b)(4).
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change, as amended.
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–2005–87 and should
be submitted on or before February 3,
2006.
IV. Commission’s Findings and Order
Granting Accelerated Approval of a
Proposed Rule Change and Amendment
No. 1 Thereto
The Commission finds that the
proposed rule change, as amended, is
consistent with the Act and the rules
III. Solicitation of Comments
and regulations thereunder applicable to
Interested persons are invited to
a national securities exchange.13 In
submit written data, views, and
particular, the Commission believes that
arguments concerning the foregoing,
the proposal is consistent with Section
including whether the proposed rule
6(b)(4) of the Act,14 which requires that
change, as amended, is consistent with
the rules of an exchange provide for the
the Act. Comments may be submitted by
equitable allocation of reasonable dues,
any of the following methods:
fees, and other charges among its
Electronic Comments
members, issuers, and other persons
using its facilities.
• Use the Commission’s Internet
comment form (https://www.sec.gov/
Under Section 19(b)(2) of the Act,15
rules/sro.shtml); or
the Commission may not approve any
• Send an e-mail to ruleproposed rule change prior to the
comments@sec.gov. Please include File
thirtieth day after the date of
Number SR–Phlx–2005–87 on the
publication of the notice of filing
subject line.
thereof, unless the Commission finds
good cause for so doing. The
Paper Comments
Commission hereby finds good cause for
• Send paper comments in triplicate
approving the proposed rule change, as
to Nancy M. Morris, Secretary,
amended, prior to the thirtieth day after
Securities and Exchange Commission,
publishing notice of filing thereof in the
Station Place, 100 F Street, NE.,
Federal Register. The Commission
Washington, DC 20549–9303.
believes that such action is consistent
All submissions should refer to File
with the protection of investors and the
Number SR-Phlx-2005–87. This file
public interest. This proposal will make
number should be included on the
the Exchange’s rules consistent with the
subject line if e-mail is used. To help the Commission’s guidance on Section 31
Commission process and review your
without undue delay. The proposal also
comments more efficiently, please use
codifies the current Exchange
only one method. The Commission will arrangement for passing the Covered
post all comments on the Commission’s Sale Fees between the ITS participants.
Internet Web site (https://www.sec.gov/
Therefore, the Commission believes that
rules/sro.shtml). Copies of the
proposed rule change, as amended,
submission, all subsequent
raises no new regulatory issues and that
amendments, all written statements
a full notice-and-comment period is not
with respect to the proposed rule
necessary.
change, as amended, that are filed with
V. Conclusion
the Commission, and all written
communications relating to the
It is therefore ordered, pursuant to
proposed rule change between the
16
Commission and any person, other than Section 19(b)(2) of the Act, that the
proposed rule change, as amended (SR–
those that may be withheld from the
Phlx–2005–87), is hereby approved on
public in accordance with the
an accelerated basis.
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
13 In approving this proposal, as amended, the
the Commission’s Public Reference
Room. Copies of such filing also will be Commission has considered its impact on
efficiency, competition, and capital formation. See
available for inspection and copying at
15 U.S.C. 78c(f).
the principal office of the Phlx. All
14 15 U.S.C. 78f(b)(4).
15 15 U.S.C. 78s(b)(2).
comments received will be posted
16 Id.
without change; the Commission does
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Federal Register / Vol. 71, No. 9 / Friday, January 13, 2006 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.17
Nancy M. Morris,
Secretary.
[FR Doc. E6–257 Filed 1–12–06; 8:45 am]
Summary of Equity Option Charges (p.
3/6)
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53078; File No. SR–Phlx–
2005–88]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to the Elimination of
the 500 Contract Cap on Payment for
Order Flow Fees
January 9, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
23, 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.
The Phlx has designated this proposal
as one changing a fee imposed by the
Phlx under 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.
hsrobinson on PROD1PC70 with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to eliminate the
500-contract cap per individual cleared
side of a transaction which is currently
imposed in connection with the
Exchange’s equity options payment for
order flow program.5 The Exchange
states that the elimination of the 500contract cap would be scheduled to
become effective for trades settling on or
after January 2, 2006.
Below is the text of the proposed rule
change. Proposed deletions are in
[brackets].
*
*
*
*
*
17 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 See Securities Exchange Act Release No. 52568
(October 6, 2005), 70 FR 60120 (October 14, 2005)
(SR–Phlx–2005–58).
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For any top 120 option listed after
February 1, 2004 and for any top 120
option acquired by a new specialist
unit ** within the first 60-days of
operations, the following thresholds
will apply, with a cap of $10,000 for the
first 4 full months of trading per month
per option provided that the total
monthly market share effected on the
Phlx in that top 120 Option is equal to
or greater than 50% of the volume
threshold in effect:
First full month of trading: 0% national
market share.
Second full month of trading: 3%
national market share.
Third full month of trading: 6% national
market share.
Fourth full month of trading: 9%
national market share.
Fifth full month of trading (and
thereafter): 12% national market
share.
** A new specialist unit is one that is
approved to operate as a specialist unit by
the Options Allocation, Evaluation, and
Securities Committee on or after February 1,
2004 and is a specialist unit that is not
currently affiliated with an existing options
specialist unit as reported on the member
organization’s Form BD, which refers to
direct and indirect owners, or as reported in
connection with any other financial
arrangement, such as is required by Exchange
Rule 783.
Real-Time Risk Management Fee
$.0025 per contract for firms/members
receiving information on a real-time
basis.
Equity Option Payment for Order Flow
Fees *
(1) For trades resulting from either
Directed or non-Directed Orders that are
delivered electronically and executed
on the Exchange: Assessed on ROTs,
specialists and Directed ROTs on those
trades when the specialist unit or
Directed ROT elects to participate in the
payment for order flow program.***
(2) No payment for order flow fees
will be assessed on trades that are not
delivered electronically.
QQQQ (NASDAQ–100 Index Tracking
StockSM)—$0.75 per contract.
Remaining Equity Options, except FXI
Options—$0.60 per contract.
* Assessed on transactions resulting from
customer orders[, subject to a 500-contract
cap, per individual cleared side of
transaction]. This proposal will be in effect
for trades settling on or after October 1, 2005
and will remain in effect as a pilot program
that is scheduled to expire on May 27, 2006.
*** Any excess payment for order flow
funds billed but not utilized by the specialist
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2289
or Directed ROT will be carried forward
unless the Directed ROT or specialist elects
to have those funds rebated to the applicable
ROT, Directed ROT or specialist on a pro rata
basis, reflected as a credit on the monthly
invoices.
See Appendix A for additional fees.
*
*
*
*
*
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
According to the Phlx, currently, the
following payment for order flow rates
are in effect at the Exchange: (1) Equity
options other than QQQQ 6 and FXI
Options are assessed $0.60 per contract;
(2) options on QQQQ are assessed $0.75
per contract; and (3) no payment for
order flow fees are assessed on FXI
Options. Trades resulting from either
Directed or non-Directed Orders that are
delivered electronically over AUTOM
and executed on the Exchange are
assessed a payment for order flow fee,
while non-electronically-delivered
orders (i.e., represented by a floor
broker) are not assessed a payment for
order flow fee.7 The Exchange also
imposes a 500-contract cap per
individual cleared side of a transaction.
At this time, the Exchange proposes to
eliminate the 500-contract cap per
6 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 Phlx 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 TrustSM, or the beneficial owners of
Nasdaq-100 SharesSM. The Exchange states that
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.
7 The Phlx states that electronically-delivered
orders do not include orders delivered through the
Floor Broker Management System pursuant to
Exchange Rule 1063.
E:\FR\FM\13JAN1.SGM
13JAN1
]]>Agencies
[Federal Register Volume 71, Number 9 (Friday, January 13, 2006)]
[Notices]
[Pages 2286-2289]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-257]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53088; File No. SR-Phlx-2005-87]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval to a Proposed
Rule Change, and Amendment No. 1 Thereto Relating to the Exchange's
Covered Sale Fee and Exchange Rule 607
January 6, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 23, 2005, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Phlx. On
January 4, 2006, the Exchange filed Amendment No. 1 to the proposed
rule change.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons, and is approving the amended proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 made technical changes to the proposed rule
text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to change the title from the ``SEC Fee'' to
``Covered Sale Fee'' as it appears on the Exchange's Summary of Equity
Charges and the Nasdaq-100 Index Tracking StockSM Fee
Schedule (``Fee Schedule'').\4\ The Exchange also proposes to amend
Exchange Rule 607 to clarify the description of the Covered Sale Fee,
including renaming the title of Phlx Rule 607 to ``Covered Sale Fee''
and providing a more complete description of a new arrangement for
passing fees among Intermarket Trading System (``ITS'') participants.
Below is the text of the proposed rule change, as amended. Proposed new
language is in italics; proposed deletions are in brackets.
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\4\ 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 Phlx 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 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.
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Rule 607.
[Transaction] Covered Sale Fee
Under Section 31 of the Securities Exchange Act of 1934, the
Exchange must pay certain fees to the Securities and Exchange
Commission (``Commission''). To help fund the Exchange's obligations to
the Commission under Section 31, a Covered Sale Fee is assessed by the
Exchange to members and member organizations. To the extent there may
be any excess monies collected under this Rule, the Exchange may retain
those monies to help fund its general operating expenses. [Every member
and member organization shall pay to the Exchange in such manner and at
such time as the Exchange shall direct, the fees specified in Section
31 of the Securities Exchange Act of 1934, and rules thereunder, for
all sales upon the Exchange of securities specified in
[[Page 2287]]
Section 31 of the Securities Exchange Act of 1934, and rules
thereunder.]
Each member and member organization engaged in executing sale
transactions on the Exchange or executing transactions, which were
routed over the Intermarket Trading System, on another exchange during
any computational period shall pay a Covered Sale Fee equal to (i) the
Section 31 fee rate multiplied by (ii) the member's aggregate dollar
amount of covered sales.
The Exchange may enter into arrangements with other exchanges to
pass the Covered Sale Fee among the applicable exchanges where the
Exchange has collected the Covered Sale Fee from its members and member
organizations for sale transactions executed on another exchange
through the Intermarket Trading System and when other exchanges have
collected the Covered Sale Fee from its members for sale transactions
executed on the Exchange through the Intermarket Trading System.
* * * * *
SUMMARY OF EQUITY CHARGES (p 2/3)*
* * * * *
[SEC FEE] Covered Sale Fee
[The amount shall be determined by Section 31 of the Securities
Exchange Act of 1934.]
Each member and member organization engaged in executing sale
transactions on the Exchange or executing transactions, which were
routed over the Intermarket Trading System, on another exchange during
any computational period shall pay a Covered Sale Fee equal to (i) the
Section 31 fee rate multiplied by (ii) the member's aggregate dollar
amount of covered sales.
* * * * *
NASDAQ-100 INDEX TRACKING STOCKSM FEE SCHEDULE
PHLX FEE SCHEDULE
* * * * *
[SEC FEE] Covered Sale Fee
[The amount shall be determined by Section 31 of the Securities
Exchange Act of 1934.]
Each member and member organization engaged in executing sale
transactions on the Exchange or executing transactions, which were
routed over the Intermarket Trading System, on another exchange during
any computational period shall pay a Covered Sale Fee equal to (i) the
Section 31 fee rate multiplied by (ii) the member's aggregate dollar
amount of covered sales.
* * * * *
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 Exchange included statements
concerning the purpose of, and basis for, the proposed rule change, as
amended, and discussed any comments it received on the proposed rule
change, as amended. The text of these statements may be examined at the
places specified in Item III 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
1. Purpose
The purpose of changing the name of the ``SEC Fee'' as it appears
on the Exchange's fee schedule and in Phlx Rule 607 is to conform with
the Commission's request to rename this fee to help clarify that
members and member organizations do not incur an obligation to the
Commission under Section 31 of the Act and to help minimize confusion
in connection with the Exchange's assessment of the fee. In addition,
the amendments to Rule 607 reflect the new arrangements with respect to
the passing of fees among ITS participants that each collects from its
respective members for transactions executed on another SRO through
ITS.
Background
In late June 2004, the Commission established new procedures
governing the calculation, payment, and collection of fees and
assessments on securities transactions owed by national securities
exchanges and national securities associations (collectively ``SROs'')
to the Commission pursuant to Section 31 of the Act.\5\ In connection
with these new procedures, the Commission expressed its concern about
the manner in which SROs labeled the fees that they passed to their
members and the manner in which members labeled the fees passed to
their customers. Because Section 31 does not place an obligation on
members of covered SROs or their customers, the Commission stated its
belief that it is misleading to suggest that a customer or an SRO
member incurred an obligation to the Commission under Section 31.
Accordingly, the Commission requested that SROs take action to correct
any such misperception, which would include changing the title of the
``SEC Fee'' as it appears on the Exchange's fee schedule.
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\5\ See Securities Exchange Act Release No. 49928 (June 28,
2004), 69 FR 41060 (July 7, 2004).
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Thus, in order to comply with the Commission's request and to
minimize any confusion relating to the assessment of the fee, the
Exchange proposes to rename its ``SEC Fee'' and Phlx Rule 607
``Transaction Fee'' to ``Covered Sale Fee.'' \6\
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\6\ Pursuant to Rule 31 under the Act, 17 CFR 240.31, a covered
sale is a sale of a security, other than an exempt sale or a sale of
a security future, occurring on a national securities exchange or by
or through any member of a national securities association otherwise
than on a national securities exchange.
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ITS Collection
In addition, the Exchange recently filed with, and received an SEC
order granting accelerated approval from, the Commission to enter into
arrangements with other participating SROs to pass certain fees they
have collected from members for transactions executed on another
exchange through the ITS.\7\ Participating SROs have entered into an
arrangement to pass fees among ITS participants that each participating
SRO has collected from its members for sale transactions executed on
another participating SRO through ITS. Pursuant to this new
arrangement, each ITS participant will determine whether it has
received and executed more in dollar value of covered sales than it has
originated and sent to each other ITS participant.\8\ One participating
SRO will then deduct the amount it owes another participating SRO and
will invoice only for the difference; however, the duty to report and
pay the Section 31 fee will remain with the ITS participant SRO on
which the sale was in fact transacted. It is anticipated that the
invoicing process will occur twice yearly to coincide with the March 15
and September 30 payment schedule for Section 31 fees set forth in the
Act.
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\7\ See Securities Exchange Act Release No. 52745 (November 7,
2005), 70 FR 69182, (November 14, 2005) (SR-Phlx-2005-64).
\8\ For example, for the period September 2003 through August
2004, SRO A sent ITS commitments for covered sales whose dollar
value was $150 million to SRO B for execution. SRO A collected fees
from its members to fund its Section 31 obligation for those covered
sales executed on SRO B. Under the new procedures established by the
Commission for the calculation and collection of Section 31 fees on
such covered sales, SRO B, as the executing market center, is
obligated to pay the Section 31 fee to the Commission.
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[[Page 2288]]
NSCC Collection and Computational Period
The Exchange intends to have the National Securities Clearing
Corporation (``NSCC'') collect this fee (and other Exchange fees) for
the Exchange for certain members and member organizations and pay over
to the Exchange the funds collected in connection with equity
transactions, which should increase the efficiency in which this fee,
as well as other Exchange fees, are collected.\9\ Further, the Exchange
intends to have the Options Clearing Corporation (``OCC'') continue to
bill and collect this fee in connection with covered sales of
options.\10\
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\9\ Currently, NSCC collects the fee on the 23rd calendar day of
each month, provided that if such day is other than an NSCC
business/settlement day, on the next succeeding NSCC business/
settlement day. The Exchange implemented this collection practice in
November 2005, which covered transactions that occurred in October
2005. For equity transactions, the NSCC debits the Phlx member's or
member organization's clearing firm. If an Exchange member clears
through the Stock Clearing Corporation of Philadelphia (``SCCP''), a
Phlx subsidiary, the Exchange will debit the member's or member
organizations' margin account at SCCP.
\10\ Currently, OCC and the options exchanges, including the
Phlx, have established arrangements whereby OCC tabulates the
aggregate amount of sales of options that occur on the exchanges,
based on data captured by OCC's systems. OCC then calculates the
Section 31 fees owed by the exchanges and, in turn, remits to the
Commission the Section 31 fees on behalf of these exchanges.
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The computational period, referred to in proposed Rule 607 above,
may change during the course of a year if there is a change in the
Section 31 fee rate.\11\ Thus, the amount of the Section 31 fee may
change during the year, which would, in turn, start a new computational
period. The Exchange determines whether a trade ``occurs'' before or
after a fee rate change so that the appropriate dollar amounts of
securities sales are multiplied by the correct fee rate.
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\11\ The Commission is required to adjust the securities
transaction fee rates on an annual basis, after consultation with
the Congressional Budget Office and the Office of Management and
Budget. The Commission may also be required to make a ``mid-year''
adjustment to the Section 31 fee rate.
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2. Statutory Basis
The Exchange believes that the proposed rule change, as amended, is
consistent with and furthers the objective of Section 6(b)(4) of the
Act,\12\ which requires that the rules of an exchange provide for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities.
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\12\ 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, as
amended, will impose 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
No written comments were solicited or received with respect to the
proposed rule change, as amended.
III. 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-2005-87 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.
All submissions should refer to File Number SR-Phlx-2005-87. 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, as
amended, that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for inspection and copying in the Commission's Public
Reference Room. Copies of such filing also will be available for
inspection and copying at the principal office of the Phlx. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2005-87 and should be
submitted on or before February 3, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of a
Proposed Rule Change and Amendment No. 1 Thereto
The Commission finds that the proposed rule change, as amended, is
consistent with the Act and the rules and regulations thereunder
applicable to a national securities exchange.\13\ In particular, the
Commission believes that the proposal is consistent with Section
6(b)(4) of the Act,\14\ which requires that the rules of an exchange
provide for the equitable allocation of reasonable dues, fees, and
other charges among its members, issuers, and other persons using its
facilities.
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\13\ In approving this proposal, as amended, the Commission has
considered its impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(4).
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Under Section 19(b)(2) of the Act,\15\ the Commission may not
approve any proposed rule change prior to the thirtieth day after the
date of publication of the notice of filing thereof, unless the
Commission finds good cause for so doing. The Commission hereby finds
good cause for approving the proposed rule change, as amended, prior to
the thirtieth day after publishing notice of filing thereof in the
Federal Register. The Commission believes that such action is
consistent with the protection of investors and the public interest.
This proposal will make the Exchange's rules consistent with the
Commission's guidance on Section 31 without undue delay. The proposal
also codifies the current Exchange arrangement for passing the Covered
Sale Fees between the ITS participants. Therefore, the Commission
believes that proposed rule change, as amended, raises no new
regulatory issues and that a full notice-and-comment period is not
necessary.
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\15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change, as amended (SR-Phlx-2005-87),
is hereby approved on an accelerated basis.
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\16\ Id.
[[Page 2289]]
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-257 Filed 1-12-06; 8:45 am]
BILLING CODE 8010-01-P
