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, 2289-2290 [E6-326]

Download as PDF 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). VerDate Aug<31>2005 15:41 Jan 12, 2006 Jkt 208001 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 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 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 2290 Federal Register / Vol. 71, No. 9 / Friday, January 13, 2006 / Notices individual cleared side of a transaction. The Phlx states that the purpose of this proposal is to remain competitive with other options payment for order flow programs in place at other exchanges that do not cap payment for order flow fees collected on a per order or trade basis.8 The Exchange represents that no other changes to the Exchange’s payment for order flow program are being proposed at this time. IV. Solicitation of Comments 2. Statutory Basis • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2005–88 on the subject line. The Exchange believes that its proposal to amend its schedule of fees is consistent with Section 6(b) of the Act 9 in general, and furthers the objectives of Sections 6(b)(4) of the Act 10 in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among the Phlx’s members. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change 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 either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action hsrobinson on PROD1PC70 with NOTICES The foregoing proposed rule change has been designated as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act 11 and Rule 19b–4(f)(2) 12 thereunder, because it establishes or changes a due, fee, or other charge imposed by the Exchange. Accordingly, the proposal will take effect upon filing with the Commission. 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. 8 See, e.g., Securities Exchange Act Release No. 52024 (July 13, 2005), 70 FR 41806 (July 20, 2005) (SR–PCX–2005–82). Telephone conversation between Cynthia K. Hoekstra, Director, Exchange, and Michou Nguyen, Attorney, Division of Market Regulation, Commission, on January 9, 2006. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). 11 15 U.S.C. 78s(b)(3)(A)(ii). 12 17 CFR 240.19b–4(f)(2). VerDate Aug<31>2005 15:41 Jan 12, 2006 Jkt 208001 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 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Nancy M. Morris, Secretary. [FR Doc. E6–326 Filed 1–12–06; 8:45 am] BILLING CODE 8010–01–P DEPARTMENT OF STATE [Public Notice 5272] Culturally Significant Objects Imported for Exhibition Determinations: ‘‘Degas, Sickert, and Toulouse-Lautrec: London and Paris’’ SUMMARY: Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of • Send paper comments in triplicate October 19, 1965 (79 Stat. 985; 22 U.S.C. to Nancy M. Morris, Secretary, 2459), Executive Order 12047 of March Securities and Exchange Commission, 27, 1978, the Foreign Affairs Reform and 100 F Street, NE., Washington, DC Restructuring Act of 1998 (112 Stat. 20549–9303. 2681, et seq.; 22 U.S.C. 6501 note, et seq.), Delegation of Authority No. 234 of All submissions should refer to File October 1, 1999, Delegation of Authority Number SR–Phlx–2005–88. This file No. 236 of October 19, 1999, as number should be included on the amended, and Delegation of Authority subject line if e-mail is used. To help the No. 257 of April 15, 2003 [68 FR 19875], Commission process and review your I hereby determine that the objects to be comments more efficiently, please use included in the exhibition ‘‘Degas, only one method. The Commission will Sickert, and Toulouse-Lautrec: London post all comments on the Commission’s and Paris, 1870–1910’’, imported from Internet Web site (http://www.sec.gov/ abroad for temporary exhibition within rules/sro.shtml). Copies of the the United States, are of cultural submission, all subsequent significance. The objects are imported amendments, all written statements pursuant to loan agreements with the with respect to the proposed rule foreign owners or custodians. I also change that are filed with the determine that the exhibition or display Commission, and all written of the exhibit objects at The Phillips communications relating to the Collection, from on or about February 18, 2006, until on or about May 14, proposed rule change between the Commission and any person, other than 2006, and at possible additional venues yet to be determined, is in the national those that may be withheld from the interest. Public Notice of these public in accordance with the 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 Room. Copies of such filing also will be further information, including a list of the exhibit objects, contact Paul available for inspection and copying at Manning, Attorney-Adviser, Office of the principal office of the Phlx. All the Legal Adviser, U.S. Department of comments received will be posted State (telephone: 202/453–8052). The without change; the Commission does address is U.S. Department of State, SA– not edit personal identifying 44, 301 4th Street, SW., Room 700, information from submissions. You Washington, DC 20547–0001. should submit only information that Dated: January 9, 2006. you wish to make available publicly. All C. Miller Crouch, submissions should refer to File Number SR–Phlx–2005–88 and should Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department be submitted on or before February 3, of State. 2006. Paper Comments PO 00000 [FR Doc. E6–331 Filed 1–12–06; 8:45 am] BILLING CODE 4710–05–P 13 17 Frm 00113 Fmt 4703 Sfmt 4703 E:\FR\FM\13JAN1.SGM CFR 200.30–3(a)(12). 13JAN1

Agencies

[Federal Register Volume 71, Number 9 (Friday, January 13, 2006)]
[Notices]
[Pages 2289-2290]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-326]


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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.
---------------------------------------------------------------------------

    \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).
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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 500-contract cap would 
be scheduled to become effective for trades settling on or after 
January 2, 2006.
---------------------------------------------------------------------------

    \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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    Below is the text of the proposed rule change. Proposed deletions 
are in [brackets].
* * * * *

Summary of Equity Option Charges (p. 3/6)

    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 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.
---------------------------------------------------------------------------

    \6\ 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. 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.
---------------------------------------------------------------------------

    At this time, the Exchange proposes to eliminate the 500-contract 
cap per

[[Page 2290]]

individual cleared side of a transaction. The Phlx states that the 
purpose of this proposal is to remain competitive with other options 
payment for order flow programs in place at other exchanges that do not 
cap payment for order flow fees collected on a per order or trade 
basis.\8\ The Exchange represents that no other changes to the 
Exchange's payment for order flow program are being proposed at this 
time.
---------------------------------------------------------------------------

    \8\ See, e.g., Securities Exchange Act Release No. 52024 (July 
13, 2005), 70 FR 41806 (July 20, 2005) (SR-PCX-2005-82). Telephone 
conversation between Cynthia K. Hoekstra, Director, Exchange, and 
Michou Nguyen, Attorney, Division of Market Regulation, Commission, 
on January 9, 2006.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \9\ in general, and 
furthers the objectives of Sections 6(b)(4) of the Act \10\ in 
particular, in that it is an equitable allocation of reasonable dues, 
fees, and other charges among the Phlx's members.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any 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 either solicited or received.

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \11\ and Rule 
19b-4(f)(2) \12\ thereunder, because it establishes or changes a due, 
fee, or other charge imposed by the Exchange. Accordingly, the proposal 
will take effect upon filing with the Commission. 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2005-88 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

    All submissions should refer to File Number SR-Phlx-2005-88. 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 (http://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 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-2005-88 and should be submitted on or before 
February 3, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-326 Filed 1-12-06; 8:45 am]
BILLING CODE 8010-01-P