Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval of Proposed Rule Change and Amendment No. 2 Thereto Relating to Dissemination of Index Values, 28738-28740 [E6-7464]

Download as PDF 28738 Federal Register / Vol. 71, No. 95 / Wednesday, May 17, 2006 / Notices Exchange jurisdiction and oversight with respect to their activities. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that the proposal does not impose any burden on competition 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 Comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. 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 mstockstill on PROD1PC61 with NOTICES • 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–NYSE–2006–05 on the subject line. 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 NYSE. 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–NYSE–2006–05 and should be submitted on or before June 7, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.19 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–7466 Filed 5–16–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53790; File No. SR–Phlx– 2006–04] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval of Proposed Rule Change and Amendment No. 2 Thereto Relating to Dissemination of Index Values May 11, 2006. I. Introduction On January 12, 2006, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission Paper Comments (‘‘Commission’’), pursuant to section • Send paper comments in triplicate 19(b)(1) of the Securities Exchange Act to Nancy M. Morris, Secretary, of 1934 (‘‘Act’’) 1 and Rule 19b–4 Securities and Exchange Commission, thereunder,2 a proposal to license the 100 F Street, NE., Washington, DC current and closing index values 20549–1090. underlying the Exchange’s proprietary All submissions should refer to File options to its wholly owned subsidiary, Number SR–NYSE–2006–05. This file the Philadelphia Board of Trade number should be included on the (‘‘PBOT’’), and to allow PBOT to collect subject line if e-mail is used. To help the subscriber fees from market data Commission process and review your vendors. The Phlx filed Amendment No. comments more efficiently, please use only one method. The Commission will 19 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). post all comments on the Commission’s 2 17 CFR 240.19b–4. Internet Web site (https://www.sec.gov/ VerDate Aug<31>2005 15:08 May 16, 2006 Jkt 208001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 1 to the proposed rule change on March 23, 2006 and submitted notification of withdrawal of Amendment No. 1 on March 24, 2006. On March 24, 2006, the Phlx filed Amendment No. 2 to the proposed rule change. The proposed rule change, as amended, was published for comment in the Federal Register on April 7, 2006.3 The Commission received no comments regarding the proposal.4 This order approves the proposed rule change, as amended. II. Description of the Proposal A. Dissemination of Index Values The Phlx proposes to license the current and closing index values underlying most of the Phlx’s proprietary indexes including the following options to PBOT for the purpose of selling, reproducing, and distributing the index values over PBOT’s Market Data Distribution Network (‘‘MDDN’’) 5: the Phlx Gold/ Silver Sector SM (‘‘XAU SM’’), Phlx Oil Service Sector SM (‘‘OSX SM’’), Phlx Semiconductor Sector (‘‘SOX SM’’), and the Phlx Utility Sector SM (‘‘UTY SM’’) (together, the ‘‘Approved Index Options’’). The Exchange proposes that the index values underlying the Approved Index Options no longer be disseminated as described in their respective Rule 19b–4 filings and approval orders.6 3 See Securities Exchange Act Release No. 53584 (March 31, 2006), 71 FR 17938. 4 Although the Commission received no written comments on the proposed rule change, the Exchange did receive one comment opposing the Exchange’s underlying decision to remove index values from the consolidated tape and disseminate them through PBOT. See e-mail from Brian Schaer to the Exchange dated Thursday, August 25, 2005. The Exchange believes that the continued listing and trading of the Approved Index Options, the relocation of Phlx proprietary index values from the consolidated tape to PBOT, and the fees to be assessed by PBOT after underlying index values are removed from the consolidated tape are appropriate and consistent with the Act so long as the index values continue to be widely disseminated by one or more market data vendors. 5 Additional information regarding the PBOT MDDN can be found on the Exchange’s Web site at https://www.phlx.com/pbot/Market_Data/ mktdata.html. Phlx also lists and trades options on a number of other stock indices whose values will not be disseminated by PBOT. Phlx represents that those indices will continue to be maintained, and options thereon will continue to be listed, as they are today. Phlx further represents that PBOT has, however, secured a similar license from one other index provider, and Phlx anticipates that PBOT will enter into similar license agreements with proprietors of other indexes underlying options traded on the Phlx. 6 See Securities Exchange Act Release Nos. 20437 (December 2, 1983), 48 FR 55229 (December 9, 1983) (XAU); 38207 (January 27, 1997), 62 FR 5268 (February 4, 1997) (OSX); 34546 (August 18, 1994), 59 FR 43881 (August 25, 1994) (SOX); 24889 (September 9, 1987), 52 FR 35021 (September 16, 1987) (UTY). In the proposed rule changes filed by E:\FR\FM\17MYN1.SGM 17MYN1 Federal Register / Vol. 71, No. 95 / Wednesday, May 17, 2006 / Notices The Exchange proposes to cease disseminating the current and closing index values of certain of its proprietary indexes 7 over the facilities of the Consolidated Tape Association (‘‘CTA’’). The Exchange states that it has entered into a license agreement with PBOT pursuant to which PBOT will disseminate such values solely over the PBOT’s MDDN.8 The Exchange or its third party designee will objectively calculate and make available to PBOT every 15 seconds real time current and closing index values on each trading day. The three industry leading market data vendors would make the real time market data widely available to subscribers, as would several mid-tier vendors.9 B. Subscriber Fees mstockstill on PROD1PC61 with NOTICES The Exchange also proposes to allow PBOT to charge subscriber fees to vendors of market data for all the values of Phlx’s proprietary indexes disseminated by PBOT’s MDDN. The subscriber fees are set out in agreements that PBOT would execute and has executed with various market data vendors for the right to receive, store, and retransmit the current and closing index values transmitted over the the Exchange seeking Commission approval for the listing and trading of the Approved Index Options, the Exchange made certain representations regarding the manner in which index values would be disseminated. The Commission’s approval orders also described the index value dissemination procedures in some cases. 7 Phlx’s proprietary indexes are, in addition to the indexes underlying the Approved Index Options, the Phlx Defense Sector SM, Phlx Drug Sector SM, Phlx Europe Sector SM, Phlx Housing Sector SM, and the Phlx World Energy Index SM, all of which were listed pursuant to Phlx Rule 1009A(b), the Exchange’s generic index option listing standard rule. Phlx’s proprietary indexes are owned and maintained by Phlx. The Exchange represents that it has determined not to remove the Phlx World Energy Index SM (‘‘XWE’’ SM) and the Phlx Europe Sector SM (‘‘XEX’’ SM) from CTA immediately but proposes to move these index values to the PBOT MDDN at a future date. 8 The MDDN is a new internet protocol multicast network developed by PBOT and SAVVIS Communications. The Exchange states that its licensing agreement grants PBOT the exclusive, royalty-free, worldwide right to sell, offer for sale, perform, display, reproduce and distribute the current and closing index values derived from the Exchange’s proprietary indices. Phlx represents that the license does not include the right to sublicense, modify, improve or create derivative works of, the values or the indices. Phlx also states that it may list options on new Phlx proprietary indexes in the future, in which event the underlying current and closing values of those new indexes will also be disseminated over the PBOT MDDN, and not over CTA Tape B. 9 The term ‘‘vendors’’ as used herein includes subvendors which receive the market data feed from vendors rather than directly from PBOT, but which execute the same agreement with PBOT that vendors execute and pay the same subscriber fees. VerDate Aug<31>2005 15:08 May 16, 2006 Jkt 208001 MDDN.10 Phlx proposes that all vendors will be charged, based upon usage by their subscribers, a monthly fee of $1.00 per ‘‘Device,’’ as defined in the agreement,11 that is used by vendors and their subscribers to receive and retransmit Phlx proprietary sector index current and settlement values on a real time basis and disseminated every 15 seconds. This monthly fee would be reduced by 15% for those vendors which provide market data to 200,000 or more Devices in any month (‘‘15 Percent Administrative Fee Deduction’’). For snapshot data, which is essentially market data that is refreshed no more frequently than once every 60 seconds, Phlx proposes that vendors will be charged $.00025 per request or $1,500 per month for unlimited snapshot data requests.12 III. Discussion After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 13 and, in particular, the 10 The Exchange represents that approximately 25 vendors, including for example Bloomberg L.P., Telekurs Financial Information Ltd. and Thomson Financial, have already entered into such market data agreements with PBOT. At least three of the vendors have elected to offer only the continuous real-time market data and will not offer snapshot or delayed data. The fees described in this proposed rule change cover values of all the indexes disseminated over the MDDN. 11 The definition of ‘‘Device’’ in the agreement is complex and incorporates a number of other defined terms. The agreement provides that ‘‘Device’’ shall mean, in case of each Subscriber and in such Subscriber’s discretion, either any Terminal or any End User. For the avoidance of doubt, a Subscriber’s Device may be exclusively Terminals, exclusively End Users or a combination of Terminals or End Users and shall be reported in a manner that is consistent with the way the Vendor identifies such Subscriber’s access to Vendor’s data. By way of further explanation, an ‘‘End User’’ is an individual authorized or allowed by a vendor or a Subscriber to access and display real time market data that distributed by PBOT over the MDDN; and a ‘‘Terminal’’ is any type of equipment (fixed or portable) that accesses and displays such market data. For example, a vendor whose Subscribers collectively may access the index values on a realtime basis through 10,000 Devices would be assessed a monthly fee of $10,000. A vendor which makes available unlimited snapshot data to its customers would be assessed a monthly fee of $1500.00 regardless of the number of End Users or Devices involved. 12 The index values may also be made available by vendors on a delayed basis (i.e., no sooner than twenty minutes following receipt of the data by vendors) at no charge. The Exchange also notes that Devices used in customer service areas or for purposes such as quality control, software programming, sales demonstrations, or promotions are not subject to any fees. 13 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 28739 requirements of section 6 of the Act.14 Specifically, as discussed in detail below, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act,15 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, and processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. In addition, the Commission believes that the proposal is consistent with section 6(b)(4) of the Act,16 in that the proposed rule change provides for the equitable allocation of reasonable dues, fees, and other charges among the Exchange’s members and issuers and other persons using its facilities as described below. The subscriber fees are also consistent with Rule 603 under the Act.17 A. Dissemination of Index Values The Commission believes that the Exchange’s proposal to disseminate the index values of its proprietary index options through PBOT is consistent with the Commission’s requirement that the index values underlying exchange traded options and other products be frequently and widely disseminated.18 The Exchange has represented that under its proposal current index values for the Phlx proprietary indexes would be widely disseminated by one or more major market data vendors at least every 15 seconds during Exchange trading hours and that closing index values would be promptly disseminated.19 14 15 U.S.C. 78f. U.S.C. 78f(b)(5). 16 15 U.S.C. 78f(b)(4). 17 17 CFR 242.603. 18 See Securities Exchange Act Release Nos. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998), at 70960; 52572 (October 7, 2005), 70 FR 60125 (October 14, 2005) (SR–Phlx–2005–57) (amending the listing standards for Trust Shares and Index Fund Shares to provide that the current value of the underlying index must be widely disseminated by one or more market data vendors every 15 seconds); and 51748 (May 26, 2005), 70 FR 32684 (June 3, 2005) (SR–NASD–2005–024) (revising the listing standards for Portfolio Depository Receipts and Index Fund Shares to provide that the current value of the underlying index must be widely disseminated by one or more major market data vendors at least every 15 seconds); 51868 (June 17, 2005), 70 FR 36672 (June 24, 2005) (SR–Amex–2005–044). 19 This is consistent with Phlx Rule 1100A(a), which provides that ‘‘[t]he Exchange shall 15 15 E:\FR\FM\17MYN1.SGM Continued 17MYN1 28740 Federal Register / Vol. 71, No. 95 / Wednesday, May 17, 2006 / Notices The Commission notes that, apart from changing the mechanism by which index values are disseminated, the Exchange represents that it will continue to maintain the indexes underlying the Approved Index Options as described in their respective Rule 19b–4 filings and approval orders. Thus, the Commission believes the proposal will continue to provide investors with the pricing information necessary for the orderly trading of options and derivative securities based on these indexes. B. Subscriber Fees mstockstill on PROD1PC61 with NOTICES The Exchange represents that the fees to be charged by PBOT are consistent with the requirements of Rule 603 under the Act in that the fees are fair and reasonable and not unreasonably discriminatory.20 The Commission believes that PBOT’s proposed fee structure is reasonable as it is based on the type of data received (real-time, delayed and snapshot), which is, in turn, generally based on the timeliness of the data.21 With regard to the 15 percent Administrative Fee Deduction proposed by the Exchange, the Commission does not believe it to be unreasonably discriminatory. As proposed by the Exchange, vendors which provide market data to 200,000 or more Devices in any given month would receive a credit against the fees charged and collected by PBOT pursuant to the vendor agreement. Any vendor that meets the 200,000 Device standard will qualify for and receive the 15 Percent Administrative Fee Deduction. The Exchange represents that PBOT is disseminate or shall assure that the closing index value is disseminated after the close of business and the current index value is disseminated from timeto-time on days on which transactions in index options are made on the Exchange.’’ Current underlying index values for narrow-based index options trading pursuant to Phlx Rule 1009A(b) and Rule 19b–4(e) under the Act are also reported at least once every 15 seconds during the time the index options are traded on the Exchange pursuant to Phlx Rule 1009A(b)(10). 20 17 CFR 242.603 (Distribution, consolidation, and display of information with respect to quotations for and transactions in NMS stocks). The Exchange represents that the Vendor/Subvendor Agreements between PBOT and the market data vendors provide that PBOT may change any of the fees enumerated in the agreement by giving the vendor or subvendor advance written notice of such changes. The Commission notes that any such fee changes would need to be submitted to the Commission under section 19(b) of the Act. 21 The Exchange represents that it does not presently realize any revenue from the sale of current and closing index values disseminated over CTA that are not shared with other CTA Plan participants. Currently, market data vendors pay a $200.00 monthly fee to CTA for the right to redistribute current and closing index values on a real time basis, together with delayed last sale data. VerDate Aug<31>2005 17:17 May 16, 2006 Jkt 208001 offering the 15 Percent Administrative Fee Deduction as an incentive for large market data vendors to carry the data disseminated by the PBOT network. The Commission recognizes that volumebased discounts of fees are not uncommon, and where the discount can be applied objectively, it is consistent with Rule 603. For the same reasons noted above, the Commission believes that the fee structure meets the standard in section 6(b)(4) of the Act 22 in that the proposed rule change provides for the equitable allocation of reasonable dues, fees, and other charges among the Exchange’s members and issuers and other persons using its facilities. IV. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,23 that the proposed rule change (SR–Phlx–2006– 04), as amended, is hereby approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.24 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–7464 Filed 5–16–06; 8:45 am] BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10464 and #10465] Tennessee Disaster # TN–00009 Small Business Administration. ACTION: Notice. AGENCY: This is a notice of an Administrative declaration of a disaster for the State of Tennessee dated 05/09/ 2006. Incident: Severe Storms. Incident Period: 04/25/2006. Effective Date: 05/09/2006. Physical Loan Application Deadline Date: 07/10/2006. Economic Injury (EIDL) Loan Application Deadline Date: 02/09/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, National Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth , TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator’s disaster declaration SUMMARY: 22 15 U.S.C. 78f(b)(4). U.S.C. 78s(b)(2). 24 17 CFR 200.30–3(a)(12). 23 15 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Gibson. Contiguous Counties: Tennessee: Carroll; Crockett; Dyer; Madison; Obion; Weakley. The Interest Rates are: Percent Homeowners With Credit Available Elsewhere ................................... Homeowners Without Credit Available Elsewhere ........................... Businesses With Credit Available Elsewhere ................................... Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere .................... Other (Including Non-Profit Organizations) With Credit Available Elsewhere ................................... Businesses and Non-Profit Organizations Without Credit Available Elsewhere ................................... 5.875. 2.937. 7.763. 4.000. 5.000. 4.000. The number assigned to this disaster for physical damage is 10464 B and for economic injury is 104650. The State which received an EIDL Declaration # is Tennessee. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008.) Hector V. Barreto, Administrator. [FR Doc. E6–7460 Filed 5–16–06; 8:45 am] BILLING CODE 8025–01–P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request The Social Security Administration (SSA) publishes a list of information collection packages that will require clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection package that may be included in this notice is for a new information collection. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written comments and recommendations E:\FR\FM\17MYN1.SGM 17MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 71, Number 95 (Wednesday, May 17, 2006)]
[Notices]
[Pages 28738-28740]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-7464]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53790; File No. SR-Phlx-2006-04]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval of Proposed Rule Change and Amendment No. 2 
Thereto Relating to Dissemination of Index Values

May 11, 2006.

I. Introduction

    On January 12, 2006, 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\ a proposal to license the current and closing index 
values underlying the Exchange's proprietary options to its wholly 
owned subsidiary, the Philadelphia Board of Trade (``PBOT''), and to 
allow PBOT to collect subscriber fees from market data vendors. The 
Phlx filed Amendment No. 1 to the proposed rule change on March 23, 
2006 and submitted notification of withdrawal of Amendment No. 1 on 
March 24, 2006. On March 24, 2006, the Phlx filed Amendment No. 2 to 
the proposed rule change. The proposed rule change, as amended, was 
published for comment in the Federal Register on April 7, 2006.\3\ The 
Commission received no comments regarding the proposal.\4\ This order 
approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 53584 (March 31, 
2006), 71 FR 17938.
    \4\ Although the Commission received no written comments on the 
proposed rule change, the Exchange did receive one comment opposing 
the Exchange's underlying decision to remove index values from the 
consolidated tape and disseminate them through PBOT. See e-mail from 
Brian Schaer to the Exchange dated Thursday, August 25, 2005. The 
Exchange believes that the continued listing and trading of the 
Approved Index Options, the relocation of Phlx proprietary index 
values from the consolidated tape to PBOT, and the fees to be 
assessed by PBOT after underlying index values are removed from the 
consolidated tape are appropriate and consistent with the Act so 
long as the index values continue to be widely disseminated by one 
or more market data vendors.
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II. Description of the Proposal

A. Dissemination of Index Values

    The Phlx proposes to license the current and closing index values 
underlying most of the Phlx's proprietary indexes including the 
following options to PBOT for the purpose of selling, reproducing, and 
distributing the index values over PBOT's Market Data Distribution 
Network (``MDDN'') \5\: the Phlx Gold/Silver Sector \SM\ (``XAU 
\SM\''), Phlx Oil Service Sector \SM\ (``OSX \SM\''), Phlx 
Semiconductor Sector (``SOX \SM\''), and the Phlx Utility Sector \SM\ 
(``UTY \SM\'') (together, the ``Approved Index Options''). The Exchange 
proposes that the index values underlying the Approved Index Options no 
longer be disseminated as described in their respective Rule 19b-4 
filings and approval orders.\6\
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    \5\ Additional information regarding the PBOT MDDN can be found 
on the Exchange's Web site at https://www.phlx.com/pbot/Market_Data/
mktdata.html.
    Phlx also lists and trades options on a number of other stock 
indices whose values will not be disseminated by PBOT. Phlx 
represents that those indices will continue to be maintained, and 
options thereon will continue to be listed, as they are today. Phlx 
further represents that PBOT has, however, secured a similar license 
from one other index provider, and Phlx anticipates that PBOT will 
enter into similar license agreements with proprietors of other 
indexes underlying options traded on the Phlx.
    \6\ See Securities Exchange Act Release Nos. 20437 (December 2, 
1983), 48 FR 55229 (December 9, 1983) (XAU); 38207 (January 27, 
1997), 62 FR 5268 (February 4, 1997) (OSX); 34546 (August 18, 1994), 
59 FR 43881 (August 25, 1994) (SOX); 24889 (September 9, 1987), 52 
FR 35021 (September 16, 1987) (UTY). In the proposed rule changes 
filed by the Exchange seeking Commission approval for the listing 
and trading of the Approved Index Options, the Exchange made certain 
representations regarding the manner in which index values would be 
disseminated. The Commission's approval orders also described the 
index value dissemination procedures in some cases.

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[[Page 28739]]

    The Exchange proposes to cease disseminating the current and 
closing index values of certain of its proprietary indexes \7\ over the 
facilities of the Consolidated Tape Association (``CTA''). The Exchange 
states that it has entered into a license agreement with PBOT pursuant 
to which PBOT will disseminate such values solely over the PBOT's 
MDDN.\8\ The Exchange or its third party designee will objectively 
calculate and make available to PBOT every 15 seconds real time current 
and closing index values on each trading day. The three industry 
leading market data vendors would make the real time market data widely 
available to subscribers, as would several mid-tier vendors.\9\
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    \7\ Phlx's proprietary indexes are, in addition to the indexes 
underlying the Approved Index Options, the Phlx Defense Sector \SM\, 
Phlx Drug Sector \SM\, Phlx Europe Sector \SM\, Phlx Housing Sector 
\SM\, and the Phlx World Energy Index \SM\, all of which were listed 
pursuant to Phlx Rule 1009A(b), the Exchange's generic index option 
listing standard rule. Phlx's proprietary indexes are owned and 
maintained by Phlx. The Exchange represents that it has determined 
not to remove the Phlx World Energy Index \SM\ (``XWE'' \SM\) and 
the Phlx Europe Sector \SM\ (``XEX'' \SM\) from CTA immediately but 
proposes to move these index values to the PBOT MDDN at a future 
date.
    \8\ The MDDN is a new internet protocol multicast network 
developed by PBOT and SAVVIS Communications. The Exchange states 
that its licensing agreement grants PBOT the exclusive, royalty-
free, worldwide right to sell, offer for sale, perform, display, 
reproduce and distribute the current and closing index values 
derived from the Exchange's proprietary indices. Phlx represents 
that the license does not include the right to sublicense, modify, 
improve or create derivative works of, the values or the indices. 
Phlx also states that it may list options on new Phlx proprietary 
indexes in the future, in which event the underlying current and 
closing values of those new indexes will also be disseminated over 
the PBOT MDDN, and not over CTA Tape B.
    \9\ The term ``vendors'' as used herein includes subvendors 
which receive the market data feed from vendors rather than directly 
from PBOT, but which execute the same agreement with PBOT that 
vendors execute and pay the same subscriber fees.
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B. Subscriber Fees

    The Exchange also proposes to allow PBOT to charge subscriber fees 
to vendors of market data for all the values of Phlx's proprietary 
indexes disseminated by PBOT's MDDN. The subscriber fees are set out in 
agreements that PBOT would execute and has executed with various market 
data vendors for the right to receive, store, and retransmit the 
current and closing index values transmitted over the MDDN.\10\ Phlx 
proposes that all vendors will be charged, based upon usage by their 
subscribers, a monthly fee of $1.00 per ``Device,'' as defined in the 
agreement,\11\ that is used by vendors and their subscribers to receive 
and re-transmit Phlx proprietary sector index current and settlement 
values on a real time basis and disseminated every 15 seconds. This 
monthly fee would be reduced by 15% for those vendors which provide 
market data to 200,000 or more Devices in any month (``15 Percent 
Administrative Fee Deduction''). For snapshot data, which is 
essentially market data that is refreshed no more frequently than once 
every 60 seconds, Phlx proposes that vendors will be charged $.00025 
per request or $1,500 per month for unlimited snapshot data 
requests.\12\
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    \10\ The Exchange represents that approximately 25 vendors, 
including for example Bloomberg L.P., Telekurs Financial Information 
Ltd. and Thomson Financial, have already entered into such market 
data agreements with PBOT. At least three of the vendors have 
elected to offer only the continuous real-time market data and will 
not offer snapshot or delayed data. The fees described in this 
proposed rule change cover values of all the indexes disseminated 
over the MDDN.
    \11\ The definition of ``Device'' in the agreement is complex 
and incorporates a number of other defined terms. The agreement 
provides that ``Device'' shall mean, in case of each Subscriber and 
in such Subscriber's discretion, either any Terminal or any End 
User. For the avoidance of doubt, a Subscriber's Device may be 
exclusively Terminals, exclusively End Users or a combination of 
Terminals or End Users and shall be reported in a manner that is 
consistent with the way the Vendor identifies such Subscriber's 
access to Vendor's data.
    By way of further explanation, an ``End User'' is an individual 
authorized or allowed by a vendor or a Subscriber to access and 
display real time market data that distributed by PBOT over the 
MDDN; and a ``Terminal'' is any type of equipment (fixed or 
portable) that accesses and displays such market data. For example, 
a vendor whose Subscribers collectively may access the index values 
on a real-time basis through 10,000 Devices would be assessed a 
monthly fee of $10,000. A vendor which makes available unlimited 
snapshot data to its customers would be assessed a monthly fee of 
$1500.00 regardless of the number of End Users or Devices involved.
    \12\ The index values may also be made available by vendors on a 
delayed basis (i.e., no sooner than twenty minutes following receipt 
of the data by vendors) at no charge. The Exchange also notes that 
Devices used in customer service areas or for purposes such as 
quality control, software programming, sales demonstrations, or 
promotions are not subject to any fees.
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III. Discussion

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange \13\ and, in particular, the requirements of 
section 6 of the Act.\14\ Specifically, as discussed in detail below, 
the Commission finds that the proposed rule change is consistent with 
section 6(b)(5) of the Act,\15\ which requires, among other things, 
that the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, and processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. In addition, the Commission 
believes that the proposal is consistent with section 6(b)(4) of the 
Act,\16\ in that the proposed rule change provides for the equitable 
allocation of reasonable dues, fees, and other charges among the 
Exchange's members and issuers and other persons using its facilities 
as described below. The subscriber fees are also consistent with Rule 
603 under the Act.\17\
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    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78f(b)(4).
    \17\ 17 CFR 242.603.
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A. Dissemination of Index Values

    The Commission believes that the Exchange's proposal to disseminate 
the index values of its proprietary index options through PBOT is 
consistent with the Commission's requirement that the index values 
underlying exchange traded options and other products be frequently and 
widely disseminated.\18\ The Exchange has represented that under its 
proposal current index values for the Phlx proprietary indexes would be 
widely disseminated by one or more major market data vendors at least 
every 15 seconds during Exchange trading hours and that closing index 
values would be promptly disseminated.\19\
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    \18\ See Securities Exchange Act Release Nos. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998), at 70960; 52572 (October 7, 
2005), 70 FR 60125 (October 14, 2005) (SR-Phlx-2005-57) (amending 
the listing standards for Trust Shares and Index Fund Shares to 
provide that the current value of the underlying index must be 
widely disseminated by one or more market data vendors every 15 
seconds); and 51748 (May 26, 2005), 70 FR 32684 (June 3, 2005) (SR-
NASD-2005-024) (revising the listing standards for Portfolio 
Depository Receipts and Index Fund Shares to provide that the 
current value of the underlying index must be widely disseminated by 
one or more major market data vendors at least every 15 seconds); 
51868 (June 17, 2005), 70 FR 36672 (June 24, 2005) (SR-Amex-2005-
044).
    \19\ This is consistent with Phlx Rule 1100A(a), which provides 
that ``[t]he Exchange shall disseminate or shall assure that the 
closing index value is disseminated after the close of business and 
the current index value is disseminated from time-to-time on days on 
which transactions in index options are made on the Exchange.'' 
Current underlying index values for narrow-based index options 
trading pursuant to Phlx Rule 1009A(b) and Rule 19b-4(e) under the 
Act are also reported at least once every 15 seconds during the time 
the index options are traded on the Exchange pursuant to Phlx Rule 
1009A(b)(10).

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[[Page 28740]]

    The Commission notes that, apart from changing the mechanism by 
which index values are disseminated, the Exchange represents that it 
will continue to maintain the indexes underlying the Approved Index 
Options as described in their respective Rule 19b-4 filings and 
approval orders. Thus, the Commission believes the proposal will 
continue to provide investors with the pricing information necessary 
for the orderly trading of options and derivative securities based on 
these indexes.

B. Subscriber Fees

    The Exchange represents that the fees to be charged by PBOT are 
consistent with the requirements of Rule 603 under the Act in that the 
fees are fair and reasonable and not unreasonably discriminatory.\20\ 
The Commission believes that PBOT's proposed fee structure is 
reasonable as it is based on the type of data received (real-time, 
delayed and snapshot), which is, in turn, generally based on the 
timeliness of the data.\21\
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    \20\ 17 CFR 242.603 (Distribution, consolidation, and display of 
information with respect to quotations for and transactions in NMS 
stocks). The Exchange represents that the Vendor/Subvendor 
Agreements between PBOT and the market data vendors provide that 
PBOT may change any of the fees enumerated in the agreement by 
giving the vendor or subvendor advance written notice of such 
changes. The Commission notes that any such fee changes would need 
to be submitted to the Commission under section 19(b) of the Act.
    \21\ The Exchange represents that it does not presently realize 
any revenue from the sale of current and closing index values 
disseminated over CTA that are not shared with other CTA Plan 
participants. Currently, market data vendors pay a $200.00 monthly 
fee to CTA for the right to redistribute current and closing index 
values on a real time basis, together with delayed last sale data.
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    With regard to the 15 percent Administrative Fee Deduction proposed 
by the Exchange, the Commission does not believe it to be unreasonably 
discriminatory. As proposed by the Exchange, vendors which provide 
market data to 200,000 or more Devices in any given month would receive 
a credit against the fees charged and collected by PBOT pursuant to the 
vendor agreement. Any vendor that meets the 200,000 Device standard 
will qualify for and receive the 15 Percent Administrative Fee 
Deduction. The Exchange represents that PBOT is offering the 15 Percent 
Administrative Fee Deduction as an incentive for large market data 
vendors to carry the data disseminated by the PBOT network. The 
Commission recognizes that volume-based discounts of fees are not 
uncommon, and where the discount can be applied objectively, it is 
consistent with Rule 603. For the same reasons noted above, the 
Commission believes that the fee structure meets the standard in 
section 6(b)(4) of the Act \22\ in that the proposed rule change 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among the Exchange's members and issuers and other 
persons using its facilities.
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    \22\ 15 U.S.C. 78f(b)(4).
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-Phlx-2006-04), as amended, 
is hereby approved.
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-7464 Filed 5-16-06; 8:45 am]
BILLING CODE 8010-01-P

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