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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Fees for Transactions Executed Through the eVWAP Trading System

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Start Preamble February 22, 2001.

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 January 29, 2001, the Philadelphia Stock Exchange, Inc. (“Exchange” or “Phlx”) 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 Phlx. Phlx filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act,[3] and Rule 19b-4(f)(2) thereunder.[4] Pursuant to Rule 19b-4(f)(2), Phlx has designated this proposal as one changing a due, fee or charge imposed by the Exchange. As such, the proposed rule change is immediately effective upon the Commission's receipt of this filing. 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

Pursuant to Rule 19b-4 of the Act, Phlx is revising its fee schedule governing transactions executed through the Volume Weighted Average Price (“VWAP”),[5] Trading System (“eVWAP”).[6]

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

In its filling with the Commission, 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. 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

The purpose of the proposed rule change is to amend the Exchange's current fee schedule for eVWAP transactions. The eVWAP is a pre-opening order matching session for the electronic execution of large-sized stock orders at a standardized VWAP price (“eVWAP Price”).[7] The Exchange established the initial eVWAP fee schedule in July, 1999.[8] The revised fee schedule, like the current schedule, will apply to Phlx member firms who will be billed and held responsible for paying such fees. The revised fee schedule was effective on February 1, 2001. The Phlx endeavored to issue a notice to its members of the revised fee schedule before its effectiveness on February 1, 2001.

The Phlx has been advised by UTTC that the demand that exists for eVWAP is price sensitive to transaction costs. Therefore, the Phlx believes that the revised fee schedule should encourage greater use of the eVWAP system.

Fees will continue to vary depending upon the ultimate user (e.g., institutional, broker-dealer, Committer), type of trade (e.g., cross versus non-cross), and volume of user activity. The fee schedule amendments are as follows:

1. Institutional user and retail customer (non-cross trades and direct access):

  • 0 to 10 million shares per year changed to 0 to 750,000 shares per month: $0.02 per share changed to $0.015 per share.
  • Greater than 10 million shares to 20 million shares per year changed to greater than 750,000 shares to 1.5 million shares per month: $0.015 per share changed to $0.01 per share.
  • Greater than 20 million shares per year changed to greater than 1.5 million shares per month: $0.01 per share changed to $0.005 per share.[9]

2. Institutional user and retail customer (cross trades):

  • Intra-firm: changed from $0.005 to $0.00125 per share.[10]
  • Inter-firm: changed from $0.01 to $0.00125 per share.[11]

3. Non-member/non-institutional user category, along with its $0.015 per share fee, is eliminated.

4. Enrolled [12] specialist or alternate specialist Committer: No charge.

5. Enrolled member off-floor liquidity provider: changed from $0.01 per share to no charge.

6. Ad hoc [13] Committer or liquidity provider: $0.005 per share.

7. Member user category, along with its $0.01 per share fee, is eliminated.

8. Broker-dealer user (not enrolled as Committer) category added:

  • Principal trades: $0.005 per share
  • Agency trades (entered by broker) 0 to 1.5 million shares per month: $0.01 per share
  • Greater than 1.5 million shares per month: $0.005 per share.[14]

The proposed rule change is consistent with Section 6(b)(4) of the Act in that it provides for the equitable allocation of reasonable fees and other charges among members using eVWAP. The Exchange further believes that the proposed fee schedule amendments should help attract increased participation and order flow to the system.

(B) Self-Regulatory Organization's Statement on Burden on Competition

Phlx does not believe that the proposed rule change will result in any burden on completion 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

Written comments were neither solicited nor received.

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

Because the foregoing rule changes a due, fee or charge imposed upon by the Exchange, it has become effective pursuant to Section 19(b)(3)(A) [15] of the Act and Rule 19b-4(f)(2) [16] thereunder. 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.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 will also be available for inspection and copying at the principal office of Phlx. All submissions should refer to SR-Phlx-01-13 and should be submitted by March 21, 2001.

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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[17]

Margaret H. McFarland,

Deputy Secretary.

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Footnotes

5.  VWAP is registered trademark of the Universal Trading Technologies Corporation (“UTTC”).

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6.  eVWAPTM. was developed by UTTC, and was approved by the Commission to operate as a facility of the Exchange. See Securities Exchange Act Release No. 41210 (March 24, 1999), 64 FR 15857 (April 1, 1999) (SR-Phlx-96-14). The Commission approved the facility to operate as a pilot program until November 30, 2001. See Securities Exchange Act Release No. 43477 (October 23, 2000), 65 FR 64734 (October 30, 2000) SR-Phlx-00-84).

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7.  See Phlx Rule 237.

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8.  See Securities Exchange Act Release No. 41646 (July 23, 1999), 64 FR 41480 (July 30, 1999) (SR-Phlx-99-21).

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9.  The proposed monthly volume discounts are not graduated and if a user reaches a discount threshold, the user's entire eVWAP trades for the month in the category receive the benefit of the fee discount.

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10.  Intra-firm cross trades refer to cross trades where the identified contra-sides are from the same firm. Because the same firm is on both sides of an intra-firm cross trade, the proposed $0.00125 per share fee applies to each side, thus totaling $0.0025 per share.

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11.  Intra-firm cross trades refer to cross trades where the identified contra-sides are from different firms.

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12.  Enrolled committers enter liquidity commitments on a good-till cancelled basis.

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13.  Ad hoc Committers or liquidity providers enter liquidity commitments on a day-only basis.

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14.  The broker-dealer category applies to both member and non-member broker-dealers. A broker-dealer's principal trade volume will be included with its agency trade volume in calculating such broker-dealer's monthly agency trade volume discount. These volume discounts likewise are not graduated.

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[FR Doc. 01-4843 Filed 2-27-01; 8:45 am]

BILLING CODE 8010-01-M