Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to the Exchange's Fee Schedule Concerning Complex Orders, 51035-51038 [E8-20140]

Download as PDF Federal Register / Vol. 73, No. 169 / Friday, August 29, 2008 / Notices equitable principles of trade, to remove impediments, and 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. The proposed amendment specifically seeks to remove impediments to and perfect the mechanisms of a free and open market by conforming the Exchange’s listing procedures to those of Nasdaq and the Amex, thereby eliminating any competitive disadvantage the Exchange may suffer as a result of imposing a legal opinion requirement with respect to securities listings. In addition, the Exchange’s procedures will continue to protect the interests of investors by imposing requirements that will ensure that listed companies are duly and validly organized and in good standing in their jurisdiction of incorporation. 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. mstockstill on PROD1PC66 with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has taken effect upon filing pursuant to section 19(b)(3)(A) of the Act.10 The Exchange asserts that the proposed rule change (i) will not significantly affect the protection of investors or the public interest, (ii) will not impose any significant burden on competition, and (iii) will not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of the filing of the proposed rule change as required by Rule 19b–4(f)(6).11 At any time within 60 days of the filing of the proposed rule change, the 10 15 11 17 U.S.C. 78s(b)(3)(A). C.F.R. 240.19b–4(f)(6). VerDate Aug<31>2005 17:32 Aug 28, 2008 Jkt 214001 Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rule-comments@sec.gov. Please include File Number SR–NYSEArca–2008–84 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2008–84. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the self-regulatory organization. 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– NYSEArca–2008–84 and should be PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 51035 submitted on or before September 19, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Florence E. Harmon, Acting Secretary. [FR Doc. E8–20063 Filed 8–28–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58420; File No. SR–Phlx– 2008–62] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to the Exchange’s Fee Schedule Concerning Complex Orders August 25, 2008. 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 August 22, 2008, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Phlx. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Phlx, pursuant to section 19(b)(1) of the Act 3 and Rule 19b–4 thereunder,4 proposes to amend its option fee schedule by establishing that certain fees would not be assessed on contracts that are executed electronically as part of a Complex Order 5 on the Exchange’s electronic trading platform for options, Phlx XL,6 and that contract volume thresholds applicable to certain 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(1). 4 17 CFR 240.19b–4. 5The Exchange recently filed, and the Commission approved, a proposed rule change with the Commission to automate the process for handling and executing complex orders. See Securities Exchange Act Release No. 58361 (August 14, 2008) (SR–Phlx–2008–50) (‘‘Approval Order’’). A Complex Order is composed of two or more option components and is priced as a single order (a ‘‘Complex Order Strategy’’) on a net debit or net credit basis. 6 See Securities Exchange Act Release No. 50100 (July 27, 2004), 69 FR 46612 (August 3, 2004) (SR– Phlx–2003–59). 1 15 E:\FR\FM\29AUN1.SGM 29AUN1 51036 Federal Register / Vol. 73, No. 169 / Friday, August 29, 2008 / Notices Exchange subsidies, volume bonuses and discounts would not include contracts that are executed electronically as part of a Complex Order. This proposal is effective upon filing and will be implemented beginning with the rollout of the automated Complex Order system on the Exchange on August 22, 2008. The rollout date will be posted on the Exchange’s Web site at https://www.phlx.com/index.aspx. The text of the proposed rule change is available on the Exchange’s Web site at https://www.phlx.com/regulatory/ reg_rulefilings.aspx. 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 mstockstill on PROD1PC66 with NOTICES 1. Purpose The purpose of the proposed rule change is to revise the Exchange’s fee schedule in order to launch the Exchange’s automated Complex Order system, and to compete for and encourage the submission of electronic Complex Order flow to the Exchange. Pursuant to this proposal, the Exchange intends to amend the Exchange’s: (i) Summary of Equity Option, and MNX, NDX, RUT and RMN Charges; (ii) Summary of Index Option Charges; (iii) Summary of U.S. Dollar-Settled Foreign Currency Option Charges; (iv) Market Access Provider Subsidy; and (v) Options Floor Broker Subsidy, as described in detail below. Summary of Equity Option, and MNX, NDX, RUT and RMN Charges Currently, the Exchange assesses various option transaction charges for equity options, depending on such factors as the category of person(s) submitting orders for execution (e.g., customers, specialists, broker-dealers, Registered Options Traders (‘‘ROTs’’) 7 7 ROT equity option transaction charges are referred to on the Exchange’s fee schedule as ‘‘Registered Option Trader (on floor).’’ This charge VerDate Aug<31>2005 17:32 Aug 28, 2008 Jkt 214001 and Firms are all charged differently, on a per contract basis, ranging from $0.00 per contract to $0.45 per contract) and the manner in which the order is delivered to the Exchange. For example, broker-dealer orders submitted electronically to the Exchange’s systems are charged $0.45 per contract, whereas broker-dealer orders submitted through means other than the Exchange’s electronic system are charged $0.25 per contract. Customers submitting orders in equity options are generally not charged transaction fees 8 whereas ROTs and Firms are charged. The Exchange also assesses an option comparison charge of $0.03 per contract for ROTs and $0.04 per contract for Firms that submit proprietary orders. Customers and broker-dealers are not charged. The Exchange currently provides a discount for ROTs (on-floor) and specialists that exceed 4.5 million contracts in a given month (the ‘‘Volume Threshold’’) by assessing $0.01 per contract on contract volume above the Volume Threshold instead of the applicable options transaction charge and option comparison charge described in the Summary of Equity Option, and MNX, NDX, RUT and RMN Charges. Complex Order volume will not be used in calculating the Volume Threshold. In order to compete for order flow respecting Complex Orders in equity options, the Exchange proposes to amend the fee schedule to clarify that the option comparison charge and the option transaction charge will not be assessed on contracts in equity options that are executed electronically as part of a Complex Order. Summary of Index Option Charges The Exchange currently assesses an option comparison charge and an option transaction charge for index option transactions, as described in the Exchange’s Summary of Index Option Charges. The Exchange proposes to amend the fee schedule to clarify that the option comparison charge and the option transaction charge will not be assessed on contracts in Index Options that are executed electronically as part of a Complex Order. applies to ROTs, Streaming Quote Traders (‘‘SQTs’’), and Remote Streaming Quote Traders (‘‘RSQTs’’). SQTs and RSQTs are considered to be ROTs pursuant to Exchange Rule 1014. ROT transactions entered from off-floor would continue to be included in the broker-dealer equity option transaction charges for billing purposes, as set forth in footnote 3 of the Exchange’s Summary of Equity Option, and MNX, NDX, RUT and RMN Charges fee schedule. 8 Customers are charged $0.12 per contract for executions in MNX and NDX options. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 Summary of U.S Dollar-Settled Foreign Currency Option Charges The Exchange currently assesses an option comparison charge and an option transaction charge for transactions in options overlying U.S. dollar-settled foreign currencies, as described in the Exchange’s Summary of U.S DollarSettled Foreign Currency Option Charges. The Exchange proposes to amend the fee schedule to clarify that the option comparison charge and the option transaction charge will not be assessed on contracts in U.S dollarsettled foreign currency options that are executed electronically as part of a Complex Order. Market Access Provider Subsidy In August 2007, the Exchange amended its fee schedule to provide a per contract subsidy (the ‘‘Subsidy’’) for certain Exchange members known as Market Access Providers (‘‘MAPs’’).9 A MAP is an Exchange member organization that offers to customers automated order routing systems and electronic market access to U.S. options markets. The Exchange pays a percontract MAP Subsidy to any Exchange member organization that qualifies as a MAP (an ‘‘Eligible MAP,’’ as described in footnote 5(b) of the Market Access Provider Subsidy section of the Exchange’s fee schedule). The Subsidy is paid on contract volume that exceeds the ‘‘Baseline Order Flow’’ in ‘‘Eligible Contracts’’ as described in the MAP Subsidy section. The Exchange also pays a monthly Volume Bonus to MAPs that exceed certain volume thresholds in Eligible Contracts in a given month. The Exchange proposes to amend the Market Access Provider Subsidy section of the fee schedule by clarifying that volume in Complex Orders that is submitted and executed electronically on Phlx XL will not be counted towards the MAP’s Baseline Order Flow and that the Exchange will not use Complex Order volume to determine eligibility for the Monthly MAP Volume Bonus. The Exchange proposes to state in the MAP Subsidy section of the fee schedule that contracts executed electronically on Phlx XL as part of a Complex Order would not be considered to be ‘‘Eligible Contracts,’’ and thus will not be included in the Exchange’s calculation of Baseline Order Flow and will not be included in its calculation of monthly volume in determining a MAP’s eligibility for the Monthly Volume Bonus. 9 See Securities Exchange Act Release No. 56274 (August 16, 2007), 72 FR 48720 (August 24, 2007) (SR–Phlx–2007–54). E:\FR\FM\29AUN1.SGM 29AUN1 Federal Register / Vol. 73, No. 169 / Friday, August 29, 2008 / Notices Options Floor Broker Subsidy The Exchange currently pays an Options Floor Broker Subsidy to member organizations with registered Floor Brokers based on two volume thresholds. In order to be eligible for the Options Floor Broker Subsidy, the member organization must have an average daily volume in a particular calendar month in excess of 75,000 contracts, and must have 40,000 executed contracts or more per day for at least 8 trading days during that same month. The Exchange proposes to amend the Options Floor Broker Subsidy section of the fee schedule by establishing that only the largest component of a complex order (i.e., the component that includes the greatest number of contracts) will be included in the calculation of the two above-mentioned volume thresholds, and that, while the largest component’s volume will count towards the volume threshold, the Exchange will not pay the Options Floor Broker Subsidy for any contracts that are executed electronically as part of a Complex Order. Cancellation Fees The Exchange currently charges a cancellation fee of $1.10 per order for each order (in equity, index and U.S. dollar-settled foreign currency options) that is delivered electronically that exceeds the number of orders executed on the Exchange by a member organization in a given month. The cancellation fee is not assessed in a month in which fewer than 500 electronically delivered orders are cancelled. For example, if a member organization delivers 1700 orders in a given month, and 700 of those orders are executed on the Exchange but the member organization cancels 1,000 of those orders in a given month, the Exchange will assess a cancellation fee of $330.00 ($1.10 × 300 orders cancelled in excess of the 700 executed orders). The cancellation fee will not apply to Complex Orders that are submitted electronically in equity, index and U.S. dollar-settled foreign currency options. mstockstill on PROD1PC66 with NOTICES Miscellaneous Fees and Charges There are several current charges that will continue to be assessed for contracts executed electronically as part of a Complex Order, and thus are not proposed to be amended. First, the Exchange charges a real-time risk management fee in equity and index options of $.0025 per contract for firms receiving information on a realtime basis. The real-time risk management fee will apply to Complex VerDate Aug<31>2005 17:32 Aug 28, 2008 Jkt 214001 Orders that are executed electronically as part of a Complex Order in equity and index options. Secondly, the Exchange assesses percontract payment for order flow fees on transactions resulting from customer orders in equity options as described in the Equity Option, and MNX, NDX, RUT and RMN Charges. Such fees, if applicable, will apply to Complex Orders that are executed electronically as part of a Complex Order in equity options. Third, the Exchange charges a specialist deficit (shortfall) fee of $0.35 per contract for specialists trading any Top 120 equity option if 12% of the total national monthly contract volume (volume threshold) is not affected on the Exchange. The Exchange will include contracts executed electronically as part of a Complex Order in its calculation of the volume threshold. Finally, the Exchange currently ‘‘caps’’ the specialist deficit (shortfall) fee for any Top 120 equity option listed after February 2004 and for any Top 120 equity option acquired by a new specialist unit 10 within the first 60 days of operations, by establishing increasing volume thresholds (beginning at 0% for the first month of operations, ramping up to 12% in the fifth month of operations and thereafter). The Exchange will include contracts executed electronically as part of a Complex Order in its calculation of the ‘‘new specialist unit’’ volume threshold. 2. Statutory Basis The Exchange believes that its proposal to amend its schedule of fees is consistent with section 6(b) of the Act 11 in general, and furthers the objectives of section 6(b)(4) of the Act 12 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members. Specifically, the Exchange believes that this proposal is equitable because it generally should result in the effective waiver of comparison and transaction charges that would otherwise be assessed to specialists, ROTs, SQTs, RSQTs and Floor Brokers submitting Complex Orders to the Exchange, thus encouraging the submission of electronic Complex Orders to the Exchange for execution. The Exchange further believes that the inclusion of contract volume executed electronically as part of Complex Orders in its calculation of certain volume 10 A ‘‘new specialist unit’’ is one that is approved to operate as a specialist unit by the Exchange’s Options Allocation, Evaluation and Securities Committee on or after February 1, 2004. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(4). PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 51037 thresholds relating to the various volume discounts and volume bonuses enumerated above is equitable because it generally applies to all market participants that qualify for such volume bonuses and discounts. The Exchange also believes that the exclusion of Complex Orders and contract volume executed electronically as part of Complex Orders from certain fees should create incentives for member organizations to submit electronic Complex Orders to the Exchange, thus enhancing the depth and liquidity of the Exchange’s markets. 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 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 rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act 13 and paragraph (f)(2) of Rule 19b–414 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2008–62 on the subject line. 13 15 14 17 E:\FR\FM\29AUN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 29AUN1 51038 Federal Register / Vol. 73, No. 169 / Friday, August 29, 2008 / Notices Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2008–62. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing will also be available for inspection and copying at the principal office of the self-regulatory organization. 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– 2008–62 and should be submitted on or before September 19, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Florence E. Harmon, Acting Secretary. [FR Doc. E8–20140 Filed 8–28–08; 8:45 am] BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11370] New Hampshire Disaster Number NH– 00006 U.S. Small Business Administration. ACTION: Amendment 1. mstockstill on PROD1PC66 with NOTICES AGENCY: SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for 15 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 17:32 Aug 28, 2008 Jkt 214001 the State of New Hampshire ( FEMA– 1782–DR ), dated 08/11/2008. Incident: Severe Storms, Tornado, and Flooding. Incident Period: 07/24/2008. Effective Date: 08/20/2008. Physical Loan Application Deadline Date: 10/10/2008. Economic Injury (EIDL) Loan Application Deadline Date: 05/11/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, 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: The notice of the President’s major disaster declaration for Private Non-Profit organizations in the State of New Hampshire, dated 08/11/2008, is hereby amended to include the following areas as adversely affected by the disaster. Primary Counties: Merrimack, Strafford. Contiguous Counties (Economic Injury Loans Only): New Hampshire: Sullivan. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008) James E. Rivera, Acting Associate Administrator for Disaster Assistance. [FR Doc. E8–20129 Filed 8–28–08; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [License No. 09/79–0454] Emergence Capital Partners SBIC, L.P.; Notice Seeking Exemption Under Section 312 of the Small Business Investment Act, Conflicts of Interest Notice is hereby given that Emergence Capital Partners SBIC, L.P., 160 Bovet Road, Suite 300, San Mateo, CA 94402, a Federal Licensee under the Small Business Investment Act of 1958, as amended (‘‘the Act’’), in connection with the financing of a small concern, has sought an exemption under Section 312 of the Act and Section 107.730, Financings which Constitute Conflicts of Interest of the Small Business Administration (‘‘SBA’’) Rules and Regulations (13 CFR 107.730). Emergence Capital Partners SBIC, L.P. proposes to provide equity/debt security financing to Krugle, Inc., 200 Middlefield Road, Suite 104, Menlo Park, CA 94025. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 The financing is brought within the purview of § 107.730(a)(1) of the Regulations because Emergence Capital Partners, L.P. and Emergence Capital Associates, L.P., all Associates of Emergence Capital Partners SBIC, L.P., own more than ten percent of Krugle, Inc., and therefore this transaction is considered a financing of an Associate requiring prior SBA approval. Notice is hereby given that any interested person may submit written comments on the transaction, within fifteen days of the date of this publication, to the Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416. August 11, 2008. A. Joseph Shepard, Associate Administrator for Investment. [FR Doc. E8–20125 Filed 8–28–08; 8:45 am] BILLING CODE 8025–01–P DEPARTMENT OF STATE [Public Notice 6337] In the Matter of the Designation of: Joseph Kony as a Specially Designated Global Terrorist Pursuant to Section 1(b) of Executive Order 13224, as Amended Acting under the authority of and in accordance with section 1(b) of Executive Order 13224 of September 23, 2001, as amended by Executive Order 13268 of July 2, 2002, and Executive Order 13284 of January 23, 2003, I hereby determine that the individual known as Joseph Kony has committed, or poses a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States. Consistent with the determination in section 10 of Executive Order 13224 that ‘‘prior notice to persons determined to be subject to the Order who might have a constitutional presence in the United States would render ineffectual the blocking and other measures authorized in the Order because of the ability to transfer funds instantaneously,’’ I determine that no prior notice needs to be provided to any person subject to this determination who might have a constitutional presence in the United States, because to do so would render ineffectual the measures authorized in the Order. This notice shall be published in the Federal Register. E:\FR\FM\29AUN1.SGM 29AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 73, Number 169 (Friday, August 29, 2008)]
[Notices]
[Pages 51035-51038]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-20140]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58420; File No. SR-Phlx-2008-62]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to the Exchange's Fee Schedule Concerning 
Complex Orders

August 25, 2008.
    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 August 22, 2008, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Phlx. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx, pursuant to section 19(b)(1) of the Act \3\ and Rule 19b-
4 thereunder,\4\ proposes to amend its option fee schedule by 
establishing that certain fees would not be assessed on contracts that 
are executed electronically as part of a Complex Order \5\ on the 
Exchange's electronic trading platform for options, Phlx XL,\6\ and 
that contract volume thresholds applicable to certain

[[Page 51036]]

Exchange subsidies, volume bonuses and discounts would not include 
contracts that are executed electronically as part of a Complex Order.
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\The Exchange recently filed, and the Commission approved, a 
proposed rule change with the Commission to automate the process for 
handling and executing complex orders. See Securities Exchange Act 
Release No. 58361 (August 14, 2008) (SR-Phlx-2008-50) (``Approval 
Order''). A Complex Order is composed of two or more option 
components and is priced as a single order (a ``Complex Order 
Strategy'') on a net debit or net credit basis.
    \6\ See Securities Exchange Act Release No. 50100 (July 27, 
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59).
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    This proposal is effective upon filing and will be implemented 
beginning with the rollout of the automated Complex Order system on the 
Exchange on August 22, 2008. The rollout date will be posted on the 
Exchange's Web site at https://www.phlx.com/index.aspx.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://www.phlx.com/regulatory/reg_rulefilings.aspx.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Phlx included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Phlx has prepared summaries, set forth in sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to revise the Exchange's 
fee schedule in order to launch the Exchange's automated Complex Order 
system, and to compete for and encourage the submission of electronic 
Complex Order flow to the Exchange. Pursuant to this proposal, the 
Exchange intends to amend the Exchange's: (i) Summary of Equity Option, 
and MNX, NDX, RUT and RMN Charges; (ii) Summary of Index Option 
Charges; (iii) Summary of U.S. Dollar-Settled Foreign Currency Option 
Charges; (iv) Market Access Provider Subsidy; and (v) Options Floor 
Broker Subsidy, as described in detail below.
Summary of Equity Option, and MNX, NDX, RUT and RMN Charges
    Currently, the Exchange assesses various option transaction charges 
for equity options, depending on such factors as the category of 
person(s) submitting orders for execution (e.g., customers, 
specialists, broker-dealers, Registered Options Traders (``ROTs'') \7\ 
and Firms are all charged differently, on a per contract basis, ranging 
from $0.00 per contract to $0.45 per contract) and the manner in which 
the order is delivered to the Exchange. For example, broker-dealer 
orders submitted electronically to the Exchange's systems are charged 
$0.45 per contract, whereas broker-dealer orders submitted through 
means other than the Exchange's electronic system are charged $0.25 per 
contract. Customers submitting orders in equity options are generally 
not charged transaction fees \8\ whereas ROTs and Firms are charged.
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    \7\ ROT equity option transaction charges are referred to on the 
Exchange's fee schedule as ``Registered Option Trader (on floor).'' 
This charge applies to ROTs, Streaming Quote Traders (``SQTs''), and 
Remote Streaming Quote Traders (``RSQTs''). SQTs and RSQTs are 
considered to be ROTs pursuant to Exchange Rule 1014. ROT 
transactions entered from off-floor would continue to be included in 
the broker-dealer equity option transaction charges for billing 
purposes, as set forth in footnote 3 of the Exchange's Summary of 
Equity Option, and MNX, NDX, RUT and RMN Charges fee schedule.
    \8\ Customers are charged $0.12 per contract for executions in 
MNX and NDX options.
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    The Exchange also assesses an option comparison charge of $0.03 per 
contract for ROTs and $0.04 per contract for Firms that submit 
proprietary orders. Customers and broker-dealers are not charged.
    The Exchange currently provides a discount for ROTs (on-floor) and 
specialists that exceed 4.5 million contracts in a given month (the 
``Volume Threshold'') by assessing $0.01 per contract on contract 
volume above the Volume Threshold instead of the applicable options 
transaction charge and option comparison charge described in the 
Summary of Equity Option, and MNX, NDX, RUT and RMN Charges. Complex 
Order volume will not be used in calculating the Volume Threshold.
    In order to compete for order flow respecting Complex Orders in 
equity options, the Exchange proposes to amend the fee schedule to 
clarify that the option comparison charge and the option transaction 
charge will not be assessed on contracts in equity options that are 
executed electronically as part of a Complex Order.
Summary of Index Option Charges
    The Exchange currently assesses an option comparison charge and an 
option transaction charge for index option transactions, as described 
in the Exchange's Summary of Index Option Charges. The Exchange 
proposes to amend the fee schedule to clarify that the option 
comparison charge and the option transaction charge will not be 
assessed on contracts in Index Options that are executed electronically 
as part of a Complex Order.
Summary of U.S Dollar-Settled Foreign Currency Option Charges
    The Exchange currently assesses an option comparison charge and an 
option transaction charge for transactions in options overlying U.S. 
dollar-settled foreign currencies, as described in the Exchange's 
Summary of U.S Dollar-Settled Foreign Currency Option Charges. The 
Exchange proposes to amend the fee schedule to clarify that the option 
comparison charge and the option transaction charge will not be 
assessed on contracts in U.S dollar-settled foreign currency options 
that are executed electronically as part of a Complex Order.
Market Access Provider Subsidy
    In August 2007, the Exchange amended its fee schedule to provide a 
per contract subsidy (the ``Subsidy'') for certain Exchange members 
known as Market Access Providers (``MAPs'').\9\ A MAP is an Exchange 
member organization that offers to customers automated order routing 
systems and electronic market access to U.S. options markets. The 
Exchange pays a per-contract MAP Subsidy to any Exchange member 
organization that qualifies as a MAP (an ``Eligible MAP,'' as described 
in footnote 5(b) of the Market Access Provider Subsidy section of the 
Exchange's fee schedule). The Subsidy is paid on contract volume that 
exceeds the ``Baseline Order Flow'' in ``Eligible Contracts'' as 
described in the MAP Subsidy section. The Exchange also pays a monthly 
Volume Bonus to MAPs that exceed certain volume thresholds in Eligible 
Contracts in a given month.
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    \9\ See Securities Exchange Act Release No. 56274 (August 16, 
2007), 72 FR 48720 (August 24, 2007) (SR-Phlx-2007-54).
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    The Exchange proposes to amend the Market Access Provider Subsidy 
section of the fee schedule by clarifying that volume in Complex Orders 
that is submitted and executed electronically on Phlx XL will not be 
counted towards the MAP's Baseline Order Flow and that the Exchange 
will not use Complex Order volume to determine eligibility for the 
Monthly MAP Volume Bonus. The Exchange proposes to state in the MAP 
Subsidy section of the fee schedule that contracts executed 
electronically on Phlx XL as part of a Complex Order would not be 
considered to be ``Eligible Contracts,'' and thus will not be included 
in the Exchange's calculation of Baseline Order Flow and will not be 
included in its calculation of monthly volume in determining a MAP's 
eligibility for the Monthly Volume Bonus.

[[Page 51037]]

Options Floor Broker Subsidy
    The Exchange currently pays an Options Floor Broker Subsidy to 
member organizations with registered Floor Brokers based on two volume 
thresholds. In order to be eligible for the Options Floor Broker 
Subsidy, the member organization must have an average daily volume in a 
particular calendar month in excess of 75,000 contracts, and must have 
40,000 executed contracts or more per day for at least 8 trading days 
during that same month.
    The Exchange proposes to amend the Options Floor Broker Subsidy 
section of the fee schedule by establishing that only the largest 
component of a complex order (i.e., the component that includes the 
greatest number of contracts) will be included in the calculation of 
the two above-mentioned volume thresholds, and that, while the largest 
component's volume will count towards the volume threshold, the 
Exchange will not pay the Options Floor Broker Subsidy for any 
contracts that are executed electronically as part of a Complex Order.
Cancellation Fees
    The Exchange currently charges a cancellation fee of $1.10 per 
order for each order (in equity, index and U.S. dollar-settled foreign 
currency options) that is delivered electronically that exceeds the 
number of orders executed on the Exchange by a member organization in a 
given month. The cancellation fee is not assessed in a month in which 
fewer than 500 electronically delivered orders are cancelled. For 
example, if a member organization delivers 1700 orders in a given 
month, and 700 of those orders are executed on the Exchange but the 
member organization cancels 1,000 of those orders in a given month, the 
Exchange will assess a cancellation fee of $330.00 ($1.10 x 300 orders 
cancelled in excess of the 700 executed orders). The cancellation fee 
will not apply to Complex Orders that are submitted electronically in 
equity, index and U.S. dollar-settled foreign currency options.
Miscellaneous Fees and Charges
    There are several current charges that will continue to be assessed 
for contracts executed electronically as part of a Complex Order, and 
thus are not proposed to be amended.
    First, the Exchange charges a real-time risk management fee in 
equity and index options of $.0025 per contract for firms receiving 
information on a real-time basis. The real-time risk management fee 
will apply to Complex Orders that are executed electronically as part 
of a Complex Order in equity and index options.
    Secondly, the Exchange assesses per-contract payment for order flow 
fees on transactions resulting from customer orders in equity options 
as described in the Equity Option, and MNX, NDX, RUT and RMN Charges. 
Such fees, if applicable, will apply to Complex Orders that are 
executed electronically as part of a Complex Order in equity options.
    Third, the Exchange charges a specialist deficit (shortfall) fee of 
$0.35 per contract for specialists trading any Top 120 equity option if 
12% of the total national monthly contract volume (volume threshold) is 
not affected on the Exchange. The Exchange will include contracts 
executed electronically as part of a Complex Order in its calculation 
of the volume threshold.
    Finally, the Exchange currently ``caps'' the specialist deficit 
(shortfall) fee for any Top 120 equity option listed after February 
2004 and for any Top 120 equity option acquired by a new specialist 
unit \10\ within the first 60 days of operations, by establishing 
increasing volume thresholds (beginning at 0% for the first month of 
operations, ramping up to 12% in the fifth month of operations and 
thereafter). The Exchange will include contracts executed 
electronically as part of a Complex Order in its calculation of the 
``new specialist unit'' volume threshold.
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    \10\ A ``new specialist unit'' is one that is approved to 
operate as a specialist unit by the Exchange's Options Allocation, 
Evaluation and Securities Committee on or after February 1, 2004.
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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 \11\ in general, and 
furthers the objectives of section 6(b)(4) of the Act \12\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. Specifically, the Exchange 
believes that this proposal is equitable because it generally should 
result in the effective waiver of comparison and transaction charges 
that would otherwise be assessed to specialists, ROTs, SQTs, RSQTs and 
Floor Brokers submitting Complex Orders to the Exchange, thus 
encouraging the submission of electronic Complex Orders to the Exchange 
for execution.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange further believes that the inclusion of contract volume 
executed electronically as part of Complex Orders in its calculation of 
certain volume thresholds relating to the various volume discounts and 
volume bonuses enumerated above is equitable because it generally 
applies to all market participants that qualify for such volume bonuses 
and discounts. The Exchange also believes that the exclusion of Complex 
Orders and contract volume executed electronically as part of Complex 
Orders from certain fees should create incentives for member 
organizations to submit electronic Complex Orders to the Exchange, thus 
enhancing the depth and liquidity of the Exchange's markets.

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 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 rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \13\ and paragraph (f)(2) of Rule 19b-4\14\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission may summarily abrogate such rule change if 
it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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 (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2008-62 on the subject line.

[[Page 51038]]

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2008-62. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2008-62 and should be submitted on or before September 19, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20140 Filed 8-28-08; 8:45 am]
BILLING CODE 8010-01-P

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