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

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Start Preamble December 23, 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 December 18, 2002, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. 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 Exchange proposes to amend its schedule of dues, fees and charges by: (1) increasing the Registered Option Trader (“ROT”) Index Option Transaction Charge from $0.14 per contract to $0.19 per contract; [3] and (2) assessing an Index Option Book Charge of $1000 per month on Phlx specialists in the Exchange's Sector Index Options (“Index Options”), except for the KBW Bank SectorSM (“BKXSM”), the Oil Service SectorSM (“OSXSM”), the Semiconductor SectorSM (“SOXSM”) and the Gold and Silver SectorSM (“XAUSM”), which will be assessed a $2,000 per month Index Option Book Charge.[4] Any newly-listed Index Options will be assessed at $1,000 per Start Printed Page 147month, beginning with the first full month of trading.

The $0.19 per contract ROT Index Option Transaction Charge is scheduled to be implemented on transactions settling on or after January 2, 2003. The Index Option Book Charge is scheduled to become effective on January 2, 2003. The text of the proposed rule change is set forth below. New text is in italics. Deleted text is in brackets.

Summary of Index Option Charges

Option Comparison Charge I (Applicable to All Trades—except specialist trades):
Registered Option Trader$.03 per contract
Firm (Proprietary and Customer Executions)$.04 per contract
Option Transaction Charge I:
Customer Executions
Market value less than $1.00*$.20 per contract
Market value $1.00 or over*$.40 per contract
Firm**$.10 per contract
Registered Option Trader [and Specialist]$[.14] .19 per contract
Specialist$.14 per contract
Option Book Charge I:
KBW Bank SectorSM$2,000 per month
Oil Service Sector SM
Semiconductor Sector SM
Gold and Silver Sector SM
All other Index Options$1,000 per month
Option Floor Brokerage Assessment I: 5% of net floor brokerage income.
Floor Brokerage Transaction Fee I: $.05 per contract, for floor brokers executing transactions for their own member firms.
Real-time Risk Management Fee I: $.0025 per contract for firms/members receiving information on a real-time basis See Appendix A for additional fees. I denotes fee eligible for monthly credit of up to $1,000.
*Block transaction for customer executions of 500 to 999 contracts and 1000 contracts and more are eligible for a discount to such charges of 15% and 25% respectively from the stated rates upon submission to the PHLX of a customer option block discount request form with supportive documentation within thirty (30) days of monthly billing date.
**Non-clearing firm members' proprietary transactions are eligible for the “firm” rate based upon submission of a PHLX rebate request form with supportive documentation within thirty (30) days of invoice date.

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 Exchange 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 III below. The Exchange 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 raise revenue for the Exchange. In addition, there are certain costs associated with the calculation of underlying index values. Because BKXSM, OSXSM, SOXSM and XAUSM have the highest trading interest and volume of all of the Exchange's Index Options, these Index Options will be assessed a higher Index Option Book Charge than other Index Options.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,[5] in general, and furthers the objectives of Section 6(b)(4) of the Act,[6] in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among Exchange members.

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 solicited or received with respect to the proposed rule change.

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

The foregoing rule change establishes or changes a due, fee, or charge imposed by the Exchange and, therefore, has become effective upon filing pursuant to Section 19(b)(3)(A)(ii) of the Act [7] and Rule 19b-4(f)(2) thereunder.[8] 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 purpose 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 provisions of 5 U.S.C. 552, will be Start Printed Page 148available for inspection and copying at the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-Phlx-2002-80 and should be submitted by January 23, 2003.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[9]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  The $0.03 per contract Index Option Comparison Charge will continue to apply to ROT transactions.

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4.  The Index Option Transaction Charge for Specialists will remain at $.14 per contract. The ROT Index Option Transaction Charge and the Index Option Book Charge will 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. See Securities Exchange Act Release No. 44292 (May 11, 2001), 66 FR 27715 (May 18, 2001) (SR-Phlx-2001-49).

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7.  15 U.S.C. 78(s)(b)(3)(A)(ii).

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[FR Doc. 02-33121 Filed 12-31-02; 8:45 am]