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 Securities and Exchange Commission [Release No. 34-47647; File No. SR-Phlx-2003-20]
 Editorial Note: Due to numerous footnote errors, this document is being reprinted in its entirety. It was originally printed in the 
                        **Federal Register**
                         on Monday, April 14, 2003 at 68 FR 17979-17982.
 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 March 28, 2003, 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 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 Summary of Equity Charges to adopt a license fee of $0.00025 per share per trade side for sides greater than 500 shares, with no maximum fee per trade side charged to Non-PACE Customers [3]
                    
                     and Electronic Communications Networks (“ECNs”),[4]
                    
                     and a license fee of $0.0005 per share per trade side, with no maximum fee per trade side charged to specialists for transactions on the Phlx in the DIAMONDS® Exchange Traded Funds (“DIAMONDS”).[5]
                    
                     The Exchange also proposes to make minor, technical changes to its equity fee schedule to make corresponding references to the proposed fees. All other equity charges currently assessed by the Phlx will be imposed where applicable.[6] The Exchange proposes to implement this fee as of April 1, 2003, the date that 
                    ( print page 27614)
                    it began trading in the DIAMONDS.[7]
                    
                     Text of the proposed rule change is set forth below. New text is in italics. Deleted text is in brackets. **Summary of Equity Charges (p 1/3)*—Equity Transaction Charge I**[Based on total shares per transaction with the exception of specialist trades and PACE trades.1
                            ]Monthly transaction value                       Rate per shareFirst 500 shares                                        $0.00Next 2,000 shares                                      0.0075Next 7,500 shares                                      0.005Remaining shares                                     0.004$50 maximum fee per trade side.License FeeSPDRs, Standard & Poor's Depositary Receipts**Customer Non-PACE and Electronic Communications Network E
                             (“ECN”) License Fee:$0.00025 per share per trade side for sides greater than 500 sharesNo maximum fee per trade sideSpecialist License Fee:$0.00035 per share per trade sideNo maximum fee per trade side*DIAMONDS® Exchange Traded Funds****Customer Non-PACE and Electronic Communications Network*E
                             (“ECN”) License Fee:*$0.00025 per share per trade side for sides greater than 500 shares**No maximum fee per trade side**Specialist License Fee:**$0.0005 per share per trade side**No maximum fee per trade side*See Appendix A for additional fees.I denotes fee eligible for monthly credit of up to $1,000.* Not applicable to transactions in Nasdaq-100 Index Tracking StockSM
                             (see page 4 for fees).**Summary of Equity Charges (p 2/3)*—PACE Specialist Charge**
                             2**I**$.20 per PHLX Specialist Trade against PACE Executions (Not applicable to PACE trades on the opening)Equity Floor Brokerage Assessment I$250 monthly charge 3Equity Floor Brokerage Transaction Fee I$.05 per 100 shares or fraction thereof, for floor broker executing transactions for their own member firms.SEC FeeThe amount shall be determined by Section 31 of the Securities Exchange Act of 1934.Off-Exchange Trade Information Fee I$.10 per DOT tradeRemote Information Access Fee I$300.00 per monthElectronic Communications Network E
                             (“ECN”) Fee$2,500.00 per month (in lieu of equity transaction charges)Outbound ITS Fee I (also applicable to transactions in Nasdaq-100 Index Tracking StockSM) 4For PACE orders sent over ITS with the customer information attached:500 shares or less                       $0.60 per 100 shares501 to 4,999 shares                      0.30 per 100 shares**Summary of Equity Charges (p 3/3)**Net Inbound ITS Credit (also applicable to transactions in Nasdaq-100 Index Tracking StockSM) 5$0.30 per 100 shares on the excess, if any, of the number of inbound ITS shares executed over the number of outbound ITS shares sent and executed on a monthly basis.See Appendix A for additional fees.I denotes fee eligible for monthly credit of up to $1,000.* Not applicable to transactions in Nasdaq-100 Index Tracking StockSM
                         (see next page for fees).E
                         ECNs shall mean any electronic system that widely disseminates to third parties orders entered therein by an Exchange market maker or over-the-counter (“OTC”) market maker, and permits such orders to be executed against in whole or in part; except that the term ECN shall not include: Any system that crosses multiple orders at one or more specified times at a specified price set by the ECN, algorithm, or by any derivative pricing mechanism and does not allow orders to be crossed or executed against directly by participants outside of such times; or, any system operated by or on behalf of an OTC market-maker or exchange market-maker that executes customer orders primarily against the account of such market maker as principal, other than riskless principal. 
                        ( print page 27615)Any fees, credits, discounts and other charges in the Exchange's fee schedule which are based upon an equity specialist's specialist activity apply to competing specialists.**
                         “Standard & Poor's,®” “S&®”,“S&P 500®”, “Standard & Poor's 500®”, and “500” are trademarks of The McGraw-Hill Companies, Inc., and have been licensed for use by the Philadelphia Stock Exchange, Inc., in connection with the listing and trading of SPDRs, on the Phlx. These products are not sponsored, sold or endorsed by S&P, a division of The McGraw-Hill Companies, Inc., and S&P makes no representation regarding the advisability of investing SPDRs.**
                         
                        *Dow Jones®,**“The Dow**SM**,” “Dow 30**SM**,” “Dow Jones Industrial Average**SM**,” “Dow Jones Industrials**SM**,” “DJIA**SM**,” “DIAMONDS®” and “The Market's Measure®” are trademarks of Dow Jones & Company, Inc. (“Dow Jones”) and have been licensed for use for certain purposes by the Philadelphia Stock Exchange, Inc., pursuant to a License Agreement with Dow Jones. The DIAMONDS Trust, based on the DJIA, is not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in the DIAMONDS Trust.*1
                         However, this charge applies where an order, after being delivered to the Exchange by the PACE system is executed by the specialist by way of an outbound commitment, when such outbound ITS commitment reflects the PACE order's clearing information, but does not apply where a PACE trade was executed against an inbound ITS commitment.2
                         This charge does not apply to transactions in Nasdaq-100 Index Tracking StockSM
                         [and] SPDRs 
                        *and DIAMONDS®.*3
                         Applies to each member who derives at least 80% of gross income generated from Phlx floor based activities from his/her floor brokerage business conducted on the Exchange. Floor brokerage business conducted on the Exchange includes orders that are received on the Phlx, even if those orders are executed on an exchange other than the Phlx. The 5% floor brokerage assessment is waived until Dec. 31, 2003 and is scheduled to be reinstated Jan. 1, 2004.4
                         This fee will only apply when the specialist sends an order received over PACE to ITS and receives an execution, if the specialist used the PACE customer's clearing information on the outbound ITS commitment.5
                         This credit will include all inbound and outbound ITS executions, including both PACE and non-PACE and both proprietary and customer commitments.
 
 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 adopt a license fee that will apply to trading DIAMONDS on the Exchange. The Exchange recently determined to begin trading DIAMONDS. The license fees should help off-set licensing fees incurred by the Exchange associated with the trading of these products on the Exchange. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,[8]
                    
                     in general, and furthers the objectives of Section 6(b)(4) of the Act,[9]
                    
                     in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among Exchange members. The Exchange believes that charging members that trade these products a licensing fee is an equitable means of recovering a portion of the licensing fees incurred by the Exchange.[10] 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 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 [11]
                    
                     and Rule 19b-4(f)(2) thereunder.[12]
                    
                     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 available 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-2003-20 and should be submitted by May 5, 2003. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[13] Margaret H. McFarland, Deputy Secretary.
 [FR Doc. 03-9035 Filed 4-11-03; 8:45 am] Editorial Note: Due to numerous footnote errors, this document is being reprinted in its 
                        ( print page 27616)
                        entirety. It was originally printed in the 
                        **Federal Register**
                         on Monday, April 14, 2003 at 68 FR 17979-17982.


# Footnotes

1.
    
                         15 U.S.C. 78s(b)(1). Back to Citation
 2.
    
                         17 CFR 240.19b-4. Back to Citation
 3.
    
                         PACE is the acronym for the Exchange's Automated Communication and Execution System, which is the Exchange's order routing, delivery, execution and reporting system for its equity trading floor. 
                        *See*
                         Exchange Rules 229 and 229A. Back to Citation
 4.
    
                         ECNs shall mean any electronic system that widely disseminates to third parties orders entered therein by an Exchange market maker or over-the-counter (“OTC”) market maker, and permits such orders to be executed against in whole or in part; except that the term ECN shall not include: any system that crosses multiple orders at one or more specified times at a specified price set by the ECN, algorithm, or by any derivative pricing mechanism and does not allow orders to be crossed or executed against directly by participants outside of such times; or, any system operated by or on behalf of an OTC market-maker or exchange market-maker that executes customer orders primarily against the account of such market maker as principal, other than riskless principal. Back to Citation
 5.
    
                         Dow Jones®, “The DowSM,” “Dow 30SM,” “Dow Jones Industrial AverageSM,” “Dow Jones IndustrialsSM,” “DJIASM,” “DIAMONDS®” and “The Market's Measure®” are trademarks of Dow Jones & Company, Inc. (“Dow Jones”) and have been licensed for use for certain purposes by the Philadelphia Stock Exchange, Inc., pursuant to a License Agreement with Dow Jones. The DIAMONDS Trust, based on the DJIA, is not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in the DIAMONDS Trust. Back to Citation
 6.
    
                         These charges may include equity transaction charges, an equity floor brokerage assessment, an equity floor brokerage transaction fee, an off-Exchange trade information fee, an SEC fee, a remote information access fee, an Electronic Communications Network fee, an outbound Inter-Market Trading System (“ITS”) fee and a net inbound ITS credit. Additionally, the PACE Specialist charge does not apply because specialists are not eligible for further PACE volume discounts. 
                        *See*
                         Securities Exchange Act No. 44259 (May 4, 2001), 66 FR 23962 (May 10, 2001) (SR-Phlx-2001-41). Back to Citation
 7.
    
                         The license fees will not 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). Back to Citation
 8.
    
                         15 U.S.C. 78f(b). Back to Citation
 9.
    
                         15 U.S.C. 78f(b)(4). Back to Citation
 10.
    
                         With regard to the distinction between Customer PACE and Non-PACE license fees, the Exchange states that it is consistent with its current practice to not impose customer charges for equity transactions delivered through PACE, but to impose customer charges for Non-PACE executions. 
                        *See, e.g.,*
                         Securities Exchange Act Release Nos. 47385 (February 20, 2003), 68 FR 10295 (March 4, 2003) (SR-Phlx-2003-06); 44381 (June 1, 2001), 66 FR 31264 (June 11, 2001) (SR-Phlx-2001-57); and 43776 (December 28, 2000), 66 FR 1166 (January 5, 2001) (SR-Phlx-2000-103). Also, consistent with its current practice, the Exchange charges customer transaction fees and specialist transaction fees at different rates. 
                        *See, e.g.,*
                         Securities Exchange Act Release Nos. 44381 (June 1, 2001), 66 FR 31264 (June 11, 2001) (SR-Phlx-2001-57); 47109 (December 30, 2002), 68 FR 841 (January 7, 2003) (SR-Phlx-2002-78); and 42332 (January 12, 2000), 65 FR 3517 (January 21, 2000) (SR-Phlx-2000-59). Back to Citation
 11.
    
                         15 U.S.C. 78(s)(b)(3)(A)(ii). Back to Citation
 12.
    
                         17 CFR 240.19b-4(f)(2). Back to Citation
 13.
    
                             17 CFR 200.30-3(a)(12). Back to Citation


[FR Doc. R3-9035 Filed 5-19-03; 8:45 am] BILLING CODE 1505-01-D