[Federal Register Volume 66, Number 91 (Thursday, May 10, 2001)]
[Notices]
[Pages 23962-23963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11802]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44259; File No. SR-Phlx-2001-41]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Eliminating Equity Trading Floor Specialist Fees for the 
Execution of PACE Orders on the Opening

May 4, 2001.

    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 April 18, 2001, 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, II, 
and III below, which Items have been prepared by the Phlx.\3\ The 
Commission is publishing this notice to solicit comments on proposed 
rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Phlx originally submitted the proposed rule change on 
April 2, 2001. On April 18, 2001, the Phlx submitted a new Form 19b-
4, which replaces and supersedes the original filing in its 
entirety. See letter from Diana Tenenbaum, Counsel, Phlx, to Nancy 
Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated April 17, 2001.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to eliminate equity trading floor specialist fees 
for each PACE transaction for orders entered before the opening of 
trading.\4\ Specifically, the PACE specialist charge of $.20 per Phlx 
specialist trade for PACE executions would be eliminated.
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    \4\ PACE is the Philadelphia Stock Exchange's Automated 
Communication and Execution System. It is the Exchange's order 
routing, delivery, execution, and reporting system for its equity 
trading floor. See Phlx Rule 229.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
the 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to alleviate fee burdens 
on specialists by eliminating specialist fees for PACE trades executed 
by the specialist on the opening. Presently, PACE orders, including 
those executed on the opening, are charged a PACE specialist fee of 
$.20 per trade, in addition to other costs, such as Stock Clearing 
Corporation of Philadelphia trade processing/clearing fees and Section 
31 fees.
    Exchange specialists have many responsibilities, including the 
maintenance of fair and orderly markets. Phlx specialists provide PACE 
orders specific guarantees enumerated in Phlx

[[Page 23963]]

Rule 229. The Phlx believes that the specialist's role is particularly 
important on the opening, where the specialist must determine the 
opening price while being mindful of single price openings in unlisted 
trading privileges securities, monitor Intermarket Trading System 
indications and commitments, and assess and address order imbalances. 
The Phlx believes that these responsibilities impose unique risks and 
costs on specialists. For instance, the automatic execution feature of 
PACE is not engaged until after the opening,\5\ which allows the 
specialist to better control the aforementioned duties, but also 
imposes unique manual burdens, such as matching against orders on the 
opening.
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    \5\ Telephone call between Edith Hallahan, Deputy General 
Counsel, Phlx, and Sonia Patton, Staff Attorney, Division, 
Commission (May 1, 2001).
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    Thus, the proposal would eliminate the Phlx transaction fees 
imposed on orders on the opening that are received through PACE and 
executed manually. The proposed amendment would enable the specialist 
to continue to provide prompt execution and participate in opening 
orders, without the additional burden of a transaction fee. The 
Exchange believes that this fee reduction should encourage specialists' 
efforts in attracting more order flow, which in turn should promote a 
more liquid market.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and with Section 
6(b)(4),\7\ in particular, in that they provide for the equitable 
allocation of reasonable dues, fees and other charges, by alleviating a 
financial burden on specialists. The Exchange notes that other equity 
fees apply only to certain market participants, and the Exchange has 
previously waived fees with respect to certain market participants.\8\
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ See Securities Exchange Act Release No. 43343 (Sep. 26, 
2000), 65 FR 59243 (Oct. 4, 2000) (SR-Phlx-00-80), regarding a 
waiver of all comparison and transaction charges for customers 
trading equity options.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that the proposed rule change, as 
amended, 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\9\ and Rule 19b-
4(f)(2) thereunder.\10\ Accordingly, the proposal will take effect upon 
the filing of the proposed rule change with the Commission on April 18, 
2001. 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    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 the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
D.C. 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 office of the Phlx. All submissions should refer to File No. 
SR-Phlx-2001-41 and should be submitted by May 31, 2001.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-11802 Filed 5-9-01; 8:45 am]
BILLING CODE 8010-01-M