Federal Register / Vol. 65, No. 214 / Friday, November 3, 2000 / Notices 66275

3 15 U.S.C. 78f(b)(4).

4 15 U.S.C. 78s(b)(3)(A).

5 17 CFR 240.19b–4(f)(2).

6 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

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 ISE 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 effect the following changes

in the ISE’s fees:

Discounts: A Click terminal is a

device that ISE Electronic Access

Members (‘‘EAMs’’) can use to enter

orders on the ISE. The current ISE fee

schedule imposes a flat monthly fee of

$500 per terminal and $250 for each

application program interface (‘‘API’’)

associated with a terminal. This

structure can act as a disincentive for

EAMs to utilize multiple Click

terminals. The ISE is adopting a tiered

fee schedule with volume discounts for

Clicks and APIs that would lower the

software fees to half the current charges

(from $500 to $250) for the sixth Click

terminal and all subsequent terminals,

and the API fee (from $250 to $100) for

the sixth and subsequent APIs.

Trade review devices: These devices

allow a member to ‘‘listen’’ to the

broadcast of ISE messages confirming

executions effected by the member.

Members use these devices for

analytical, hedging, risk management,

back-office processing and similar

purposes. The ISE is establishing

monthly ‘‘trade review device’’ fees,

including multiple-terminal discounts,

that are the same as the Click fees: $500

for the first five terminals and $250 per

terminal thereafter.

Execution Fees: The ISE fee schedule

provides for lower execution fees as the

Exchange’s average daily volume (ADV)

increases. There are discounts at ADV of

300,000, 500,000 and 700,000 contracts

a day. The amendment to the fee

schedule clarifies that the reduced fees

apply only to executions above the

break-points. For example, at ADV of

550,000 contracts; the $.21 fee will

apply for the first 300,000 contracts; the

$.17 fee will apply for the next 200,000

contracts; and the $.14 fee will apply for

the last 50,000 contracts.

Membership Dues: ISE Rule 205

authorizes the Exchange to charge

‘‘membership dues,’’ payable on the first

day of a calendar quarter. The fee

schedule, however, includes monthly

‘‘access fees,’’ rather than specific

membership dues. The ISE is amending

ISE Rule 205 to reflect this, and is not

proposing any changes to the access fees

themselves.

Regulatory Fees: The ISE fee schedule

contains a provision for an annual

$3,500 regulatory fee. ISE Rule 208

currently states that this fee is to be

collected on a quarterly basis. The ISE

believes that it is an unnecessary

administrative burden to bill for and

collect this relatively small fee on a

quarterly basis. Accordingly, the ISE is

eliminating the word ‘‘quarterly’’ from

this rule so that it can collect the fee on

an annual basis. There are no changes

to the fee itself.

The basis for this proposed rule

change is the requirement under section

6(b)(4) of the Act 3 that an exchange

provide for the equitable allocation of

reasonable dues, fees and other charges

among its members and other persons

using its facilities.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The ISE believes that the proposed

rule change does not impose any burden

on competition that is 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

The Exchange has not solicited, and

does not intend to solicit, comments on

this proposed rule change. The

Exchange has not received any

unsolicited written comments from

members or other interested parties.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the ISE has designated the

foregoing proposed rule change as a fee

change pursuant to section 19(b)(3)(A)

of the Act 4 and Rule 19b–4(f)(2)

thereunder,5 the proposal has taken

effect upon filing with the Commission.

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 offices of the ISE. All

submissions should refer to SR–ISE–00–

08 and should be submitted by

November 24, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28222 Filed 11–2–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43380; File Nos. SR–PHLX–

00–86 and SR–PHLX–00–87]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Changes by the

Philadelphia Stock Exchange, Inc.

Relating to an Amendment to the

Exchange’s Payment for Order Flow

Fee and a Rebate for Certain Fees

Incurred

October 25, 2000.

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

September 11, 2000, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ of the

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

changes 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 changes

from interested persons.

66276 Federal Register / Vol. 65, No. 214 / Friday, November 3, 2000 / Notices

3See Securities Exchange Act Release No. 43177

(Aug. 18, 2000), 65 FR 51889 (Aug. 25, 2000).

4A top 120 Option is defined as one of the 120

most actively traded equity options in terms of the

total number of contracts that were traded on all

U.S. options markets for the period January 1, 2000

through June 30, 2000, based on volume

information provided by The Options Clearing

Corporation. The Phlx will determine the Top 120

Options every six months, with the next measuring

period commencing June 1, 2000 and ending on

November 30, 2000. The proposed fee does not

apply to index or currency options.

5The $1.00 fee is not eligible for the monthly

credit of up to $1,000 to be applied against certain

fees, dues, charges, and other amounts that certain

members owe to the Exchange. See Securities

Exchange Act Release No. 42791 (May 16, 2000), 65

FR 33606 (May 24, 2000).

6The Phlx has also filed a proposed rule change

to amend its payment for order flow program to

exclude, effective October 1, 2000, any transactions

between Phlx specialists or ROTs and broker-dealer

orders. See SR–PHLX–00–88 (October 2, 2000). The

Phlx also proposed to rebate the fees that were

imposed upon specialists and ROTs for transactions

of the type that would be excluded by virtue of SR–

PHLX–00–88. See SR–PHLX–00–89 (October 4,

2000).

7 15 U.S.C. 78f(b)(5).

8 15 U.S.C. 78f(b)(6).

9 15 U.S.C. 78s(b)(3)(A).

10 17 CFR 240.19b–4(f)(2).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Changes

In SR–PHLX–00–86, the Phlx

proposes to amend its payment for order

flow program 3 that imposed a fee,

effective, August 1, 2000, of $1.00 per

contract on transactions by Phlx

specialists and Registered Options

Traders (‘‘ROTs’’) in the Top 120

Options 4 traded on the Phlx. The effect

of the amendment would be to exclude

from the program, as of September 1,

2000, any transaction between a Phlx

specialist or a Phlx ROT and a Phlx

member firm trading in its proprietary

account. The proposed amendment is

effective as of September 1, 2000.5

In SR–PHLX–00–87, the Phlx

proposes to rebate the fees that the Phlx

ROTs and Phlx specialists incurred

during the period from August 1, 2000,

through August 31, 2000, when they

traded with Phlx member firms that

were effecting trades for their

proprietary accounts and not on behalf

of customers. The text of these proposed

rule changes is available at the principal

offices of the Phlx.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In its filing with the Commission, the

Phlx included statement concerning the

purpose of and basis for the proposed

rule changes and discussed any

comments it had received on them. 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

Changes

The purpose of SR–PHLX–00–86, is to

amend the Phlx’s payment for order

flow fee program such that, effective

September 1, 2000, the Phlx will not

assess the $1.00 per contract fee on

transactions in which a Phlx member

firm, trading for its proprietary account,

trade with a Phlx specialist or Phlx

ROT. In SR–PHLX–00–87, the Phlx

proposes to rebate the fees that Phlx

specialists and ROTs incurred in

executing such transactions with Phlx

member firms during the period from

August 1, 2000 through August 31,

2000.

The purpose of the Phlx’s payment for

order flow program is to generate a

source of revenue that specialists may

use to attract order flow in the Top 120

Options traded on the Phlx. The Phlx’s

payment for order flow program

originally imposed a $1.00 fee on all

transactions of specialists and ROTs in

the Top 120 Options, other than ROTto-ROT or specialist-to-ROT

transactions. The Phlx believes that it

was necessary for it to adopt this type

of fee in order to maintain and enhance

its competitive position. Effective

September 1, 2000, the proposed rule

change would exempt from the fee all

transactions between a specialist or an

ROT and a member firm trading for its

proprietary account.6

The Phlx believes that it would not

promote the goals of its payment for

order flow program to collect the $1.00

fee from ROTs and specialists when

they engage in transactions with Phlx

member firms trading for their

proprietary accounts. Any funds

collected in connection with those

trades would not be used to make

payments to member firms for their

proprietary order flow, because those

are not the kind of transactions that the

fee is designed to attract. The Phlx

proposes to rebate to specialists and

ROTs any fees that were imposed on

them for their transactions with respect

to the proprietary trading of Phlx

member firms during the period from

August 1, 2000 through August 31,

2000.

In sum, the Phlx’s payment for order

flow program, as amended by SR–

PHLX–00–86, would impose the $1.00

fee on all transactions by specialists and

ROTs in the Top 120 Options, with the

exception of: (1) Transactions between

ROTs; (2) transactions between a

specialist and an ROT; and (3)

transactions between a specialist or an

ROT and a member firm acting for its

proprietary account and not on behalf of

a customer. The Exchange envisions

that the persons who pay the fees will

also participate in the order flow

derived from the plan, amended as

proposed. The Exchange believes that

the plan, amended as proposed, will

provide for the equitable allocation of

reasonable fees among the Exchange’s

members because the specialists and

ROTs who pay the fee should also

receive the benefits of increased order

flow. Moreover, the Exchange believes

that the fee should promote just and

equitable principles of trade, remove

impediments to and perfect the

mechanism of a free and open market,

and protect investors and the public

interest by attracting more order flow to

the Exchange. In the Exchange’s view,

this should result in increased liquidity,

tighter markets, and more competition

among exchange members. Accordingly,

the Exchange believes that its proposals

are consistent with and further the

objectives of the Act, including sections

6(b)(4) 7 and 6(b)(5) 8 thereof.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule changes will impose

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Changes Received From

Members, Participants or Others

The Phlx neither solicited nor

received any written comments with

respect to the proposed rule changes.

III. Date of Effectiveness of the

Proposed Rule Changes and Timing for

Commission Action

Because the Phlx has designated the

foregoing proposed rule changes as fee

changes pursuant to section 19(b)(3)(A)

of the Act 9 and Rule 19b–4(f)(2)

thereunder,10 the proposals have taken

effect upon filing with the Commission.

At any time within 60 days of the filing

of the proposed rule changes, the

Commission may summarily abrogate

them if it appears to the Commission

that such action is necessary or

appropriate in the public interest, for

the protection of investors, or otherwise

Federal Register / Vol. 65, No. 214 / Friday, November 3, 2000 / Notices 66277

11 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 43177

(Aug. 18, 2000), 65 FR 51889 (Aug. 25, 2000).

4A Top 120 Option is defined as one of the 120

most actively traded equity options in terms of the

total number of contracts that were traded on all

U.S. options markets for the period January 1, 2000

through June 30, 2000, based on volume

information provided by The Options Clearing

Corporation. The Phlx will determine the Top 120

Options every six months, with the next measuring

period commencing June 1, 2000 and ending on

November 30, 2000. The proposed fee does not

apply to index or currency options.

5According to the Phlx, a broker-dealer order is

an order, entered from other than the floor of the

exchange, for any account: (i) In which the holder

of a 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 brokerdealer. This includes orders for the acount of an

ROT entered from off the floor.

6The $1.00 fee is not eligible for the monthly

credit of up to $1,000 to be applied against certain

fees, dues, charges, and other amounts that certain

members owe to the Exchange. See Securities

Exchange Act Release No. 42791 (May 16, 2000), 65

FR 33606 (May 24, 2000).

7See Securities Exchange Act Release No. 43177

(Aug. 18, 2000), 65 FR 51889 (Aug. 25, 2000). The

Phlx later filed a proposed rule change to amend

its payment for order flow program in order to

exclude from the program, as of September 1, 2000,

any transactions between Phlx specialists or ROTs

and Phlx member firms trading in their proprietary

accounts. See SR–PHLX–00–86 (September 11,

2000). The Phlx also proposed to rebate the fees that

were imposed upon specialists and ROTs for

transactions of the type that would be excluded by

virtue of SR–PHLX–00–86. See SR–PHLX–00–87

(September 11, 2000).

in furtherance of the purposes of the

Act.

IV. Solicitation of Comments

The Commission invites interested

persons to submit written data, views,

and arguments concerning the

foregoing, including whether the

proposed rules are 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 submissions, all

subsequent amendments, all written

statements with respect to the proposed

rule changes that are filed with the

Commission, and all written

communications between the

Commission and any person relating to

the proposed rule changes, 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 filings will also be

available for inspection and copying at

the principal offices of the Phlx. All

submissions should refer to File Nos.

SR–PHLX–00–86 and SR–PHLX–00–87,

and should be submitted by November

24, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28224 Filed 11–2–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43481; File Nos. SR–PHLX–

00–88 and SR–PHLX–00–89]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Changes by the

Philadelphia Stock Exchange, Inc.

Relating to an Amendment to the

Exchange’s Payment for Order Flow

Fee and a Rebate for Certain Fees

Incurred

October 25, 2000.

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 the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ or the ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) proposed

rule changes SR–PHLX–00–88 and SR–

PHLX–00–89 on October 2, 2000 and

October 4, 2000, respectively, as

described in Items I, II, and III below,

which Items the Phlx has prepared. The

Commission is publishing this notice to

solicit comments on the proposed rule

changes from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Changes

In SR–PHLX–00–88, the Phlx

proposes to amend its payment for order

flow program 3 that imposed a fee,

effective August 1, 2000 of $1.00 per

contract on transactions by Phlx

specialists and Registered Options

Traders (‘‘ROTs’’) in the Top 120

Options 4 traded on the Phlx. The effect

of the amendment would be to exclude

from the program, as of October 1, 2000,

any transaction between a Phlx

specialist or a Phlx ROT and a brokerdealer order.5 The proposed amendment

is effective as of October 1, 2000.6

In SR–PHLX–00–89, the Phlx

proposes to rebate the fees that the Phlx

ROTs and Phlx specialists incurred

during the period from August 1, 2000

through September 30, 2000, when they

engaged in a transaction with a brokerdealer order, and not with the order of

a customer. The text of these proposed

rule changes is available at the principal

offices of the Phlx.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In its filings with the Commission, the

Phlx included statements concerning

the purpose of and basis for the

proposed rule changes and discussed

any comments it received on them. 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

Changes

The purpose of SR-PHLX–00–88 is to

amend the Phlx’s payment for order

flow fee program such that, effective

October 1, 2000, the Phlx would not

assess the $1.00 per contract fee on

transactions in which a Phlx specialist

or Phlx ROT trades with a broker-dealer

order. Moreover, in connection with

SR–PHLX–00–89, the Phlx proposes to

rebate the fees that Phlx specialists and

ROTs incurred in executing such

transactions with broker-dealers during

the period from August 1, 2000 through

September 30, 2000.

The purpose of the Phlx’s payment for

order flow program is to generate a

source of revenue that specialists may

use to attract order flow to the Phlx. The

Phlx’s payment for order flow program

originally imposed a $1.00 fee on all

transactions of specialists and ROTs in

the Top 120 Options traded on the Phlx,

other than ROT-to-ROT or specialist-toROT transactions.7 The Phlx believes

that it was necessary for it to adopt this

type of fee in order to maintain and

enhance its competitive position.

Proposed rule change SR–PHLX–00–

88 would now exempt from the fee all

transactions between a specialist or an

ROT and a broker-dealer order. The

Phlx believes that it would not promote

the goals of the payment for order flow

program to collect the $1.00 fee from an

ROT or a specialist that engages in a

transaction with a broker-dealer order,

and not the order of a customer.

Therefore, any funds collected in

connection with those trades would not

be used to make payments to brokerdealers for their proprietary order flow,

because those are not the kind of

transactions that the fee is designed to

attract. Indeed, because the primary