Skip to Content

Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Various Option Fees

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble May 16, 2002.

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 May 1, 2002, 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 proposes to amend its schedule of dues, fees, and charges for its equity option transaction charges in the following three ways: (1) To reinstate a $.08 per contract Firm/Proprietary Facilitation Transaction charge,[3] (2) to increase the Firm/Start Printed Page 36061Proprietary charge [4] from $.08 to $.15 per contract, and (3) to increase the Broker/Dealer charge [5] from $.25 to $.30 per contract.

All three charges continue to be eligible for the monthly credit of up to $1,000 to be applied against certain fees, dues and charges and other amounts owed to the Exchange by certain members.[6]

The proposed amended fees will be implemented for transactions settling on May 1, 2002 and thereafter.

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 Exchange proposes to amend its schedule of dues, fees and charges for its equity option transaction charges in the following three ways: to reinstate the Firm/Proprietary Facilitation Transaction charge, to increase the Firm/Proprietary charge, and to increase the Broker/Dealer charge. The purpose of the proposed rule change is to generate additional revenue.

The Exchange does not currently impose any Firm/Proprietary Facilitation Transaction charge on Floor Brokers that hold an options order for a public customer and a contra-side order for the same option series and, after providing an opportunity for all persons in the trading crowd to participate in the transaction, execute both orders as a facilitation cross. A Floor Broker engaging in a facilitation transaction must announce that he/she holds an order subject to facilitation prior to the execution, and must mark the floor ticket for the public customer's order with a legible “F.” The Exchange proposes to reinstate this charge, which it eliminated in 2001, at $.08 per contract.[7]

Currently, the Exchange imposes an $.08 per contract Firm/Proprietary Transaction charge on members for orders for the proprietary account of any member or non-member broker-dealer that derives more than 35 percent of its annual, gross revenues from commissions and principal transactions with customers. Firms are required to verify this amount to the Exchange by certifying that they have reached this threshold and by submitting a copy of their annual report that was prepared in accordance with Generally Accepted Accounting Principles.[8] The Exchange proposes to increase this charge to $.15 per contract.

Currently, the Exchange imposes a $.25 per contract Broker/Dealer equity option transaction charge on members for orders entered from other than the floor of the Exchange, for any account where the holder of beneficial interest is a member or non-member broker-dealer, or where the holder of beneficial interest is a person associated with or employed by a member or non-member broker-dealer.[9] This includes broker/dealer orders for the account of a Registered Options Trader (“ROT”) entered from off-floor.[10] The Exchange proposes to increase this charge to $.30 per contract.

2. Statutory Basis

The Exchange believes that its proposal to amend its schedule of dues, fees and charges 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, because it is an equitable allocation of reasonable charges among the Exchange's members. The proposal to amend the three charges is intended to generate additional revenue and the Exchange believes the proposal is reasonable and proper.

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

The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition.

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 Exchange has designated the proposed rule change as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act [13] and Rule 19b-4(f)(2) thereunder.[14] Accordingly, the proposal will take effect upon filing with the Commission. 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. 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 Start Printed Page 36062provisions 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 the Phlx. All submissions should refer to File No. SR-Phlx-2002-32 and should be submitted by June 12, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[15]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  A facilitation transaction occurs when a Floor Broker holds an options order for a public customer and a contra-side order for the same option series and, after providing an opportunity for all persons in the trading crowd to participate in the transaction, executes both orders as a facilitation cross. See Securities Exchange Act Release No. 44893 (October 2, 2001), 66 FR 51485 (October 9, 2001) (eliminating Firm/Proprietary Facilitation Transaction charge); Phlx Rule 1064.

Back to Citation

4.  The Firm/Proprietary charge applies to members for orders for the proprietary account of any member or non-member broker/dealer that derives more than 35 percent of its annual, gross revenues from commissions and principal transactions with customers. See Securities Exchange Act Release No. 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000) (adopting Firm/Proprietary charge).

Back to Citation

5.  The Broker/Dealer equity option transaction charge is applied to members for orders, entered from other than the floor of the Exchange, for any account (i) in which the holder of beneficial interest is a member or non-member broker-dealer or (ii) in which the holder of beneficial interest is a person associated with or employed by a member or non-member broker-dealer. See Securities Exchange Act Release Nos. 45185 (December 21, 2001), 66 FR 67614 (December 31, 2001) (SR-Phlx-2001-113) (increasing Broker/Dealer equity option transaction charge from $.20 to $.25) and 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000) (adopting Broker/Dealer equity option transaction charge).

Back to Citation

6.  See Securities Exchange Act Release No. 44292 (May 11, 2001), 66 FR 27715 (May 18, 2001) (adopting monthly credit).

Back to Citation

7.  See Securities Exchange Act Release No. 44893 (October 2, 2001), 66 FR 51485 (October 9, 2001).

Back to Citation

8.  See Securities Exchange Act Release No. 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000).

Back to Citation

9.  Recently, the Exchange began accepting broker-dealer orders over its Automated Options Market System (“AUTOM”). See Securities Exchange Act Release No. 45758 (April 15, 2002), 67 FR 19610 (April 22, 2002).

Back to Citation

10.  See Securities Exchange Act Release Nos. 45185 (December 21, 2001), 66 FR 67614 (December 31, 2001) and 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000).

Back to Citation

13.  15 U.S.C. 78s(b)(3)(A)(ii).

Back to Citation

[FR Doc. 02-12806 Filed 5-21-02; 8:45 am]

BILLING CODE 8010-01-P