Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Phlx proposes to amend its schedule of fees and charges to adopt a new category of permit holders for billing purposes to address situations where permit holders do not fall under one of the existing permit fee categories. These permit holders, delineated as “other”, will be assessed a fee of $200 per month. The text of the proposed rule change is available at the Exchange and at the Commission.
Monthly permit fees are assessed based on how each permit is used. Current permit fees are as follows:
Order Flow Provider Permit Fee:
a. Permits used only to submit orders to the equity, foreign currency options or options trading floor (one floor only)—$200 per month.
b. Permits used only to submit orders to more than one trading floor—$300 per month.
Floor Broker, Specialist or ROT (on any trading floor) or Off-Floor Trader Permit Fee:
a. First permit—$1,200 per month.
b. Additional permits for members in the same organization—$1,000 per month.
Permit holders may also be designated as “excess” permit holders in cases where permit holders in the same organization, other than the permit holder who qualifies the member organization, are either: (1) not Floor Brokers, Specialists or ROTs (on any trading floor) or Off-Floor Traders; or (2) not associated with a member organization that meets the definition of an order flow provider.
The Exchange is proposing to adopt a permit fee category to address the limited situations where a permit holder does not fit within any of the existing permit fee categories. The Exchange represents that it has found that a few permit holders have not fit in the other permit fee categories, and, consequently, no permit fee was applicable. For example, a member organization may determine to have a permit holder in order to be a Phlx member organization and reflect such status on its letterhead, which is common in the securities industry. The Exchange states that, if such member
Additionally, the Exchange proposes to establish the date of notification for terminating a permit as the date that permit fee billing will cease. The Exchange represents that this is a change from using the effective date of the posting period. Currently, upon notice of termination of a permit, the effective date is subject to the posting and notice requirements set forth by the Exchange.
Further, the Exchange is proposing to assess only one monthly permit fee in certain limited situations where two monthly permit fees would be imposed. The Exchange states that, pursuant to current Exchange rules, a permit may not be transferred except if the transfer occurs within the permit holder's member organization. For example, if the permit holder transfers the permit to another individual within the same member organization only one monthly permit fee is assessed for that permit. Conversely, if the permit holder transfers from one member organization to another unrelated member organization in the same month, both member organizations are assessed a permit fee in the same billing period. The Exchange states that, when a permit holder becomes associated with another member organization as a result of a merger, partial sale of the current member organization, or other business combination, a new permit will be issued but, pursuant to this proposal, the related monthly permit fee for the new permit will not be assessed in these limited situations in order to avoid double billing for monthly permit fees in the month that the merger or business combination occurs. This interpretation of the assessment of only one permit fee when a permit holder becomes associated with another member organization as a result of a merger partial sale or other business combination with another member organization is noted in the fee schedule.
The Exchange represents that this proposal creates no new permits or permit holders, but merely categorizes permit holders for purposes of applicable permit fees.
In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change, as amended, 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.
The purpose of the proposed rule change is to garner additional revenue by creating an additional category of permit fees to cover the limited instances where permit holders do not currently fall within an existing category of permit fees. This should ensure that each permit holder is subject to a permit fee. In addition, allowing monthly billing of permit fees to cease at the time a member notifies the Exchange, as opposed to waiting for the effective date of the posting and notice requirements, should avoid unnecessarily billing a member for permit fees for a month during which their permit was terminated. Also, charging only one permit fee for the month in which a merger or other business combination occurs should avoid unfairly double billing for a permit fee to a permit holder changing affiliation due to a merger or other business organizational changes.
The Exchange believes that the proposed rule change, as amended, is consistent with section 6(b) of the Act
The Exchange does not believe that the proposed rule change, as amended, will impose any inappropriate burden on competition.
Written comments were neither solicited nor received.
The Exchange has designated the foregoing proposed rule change, as amended, as a fee change pursuant to section 19(b)(3)(A)(ii) of the Act
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
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609.
All submissions should refer to File Number SR–Phlx–2004–32. 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 (
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.