Document ID: SEC-2007-0386-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-03-15T04:00Z

[Federal Register: March 15, 2007 (Volume 72, Number 50)]
[Notices]               
[Page 12242-12244]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr07-116]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55424; File No. SR-Phlx-2006-63]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Amendment No. 3 to the Proposed Rule Change, and 
Order Granting Accelerated Approval of Proposed Rule Change as Amended, 
Relating to a Philadelphia Board of Trade Enterprise License Fee for 
Dissemination of Certain Market Data

March 8, 2007.

I. Introduction

    On September 28, 2006, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposal to add an Enterprise License Fee of $10,000 
per year or $850 per month that would be assessed by the Exchange's 
wholly owned subsidiary, the Philadelphia Board of Trade (``PBOT''), on 
eligible market data vendors or subvendors (collectively ``Vendors'') 
for certain index values that subscribers receive over PBOT's Market 
Data Distribution Network (``MDDN''). The Phlx filed Amendment No. 1 to 
the proposed rule change on November 1, 2006 and filed Amendment No. 2 
on December 20, 2006. The proposed rule change, as amended, was 
published for comment in the Federal Register on December 28, 2006.\3\ 
The Phlx filed Amendment No. 3 to the proposed rule change on March 2, 
2007.\4\ The Commission received no comments regarding the proposal. 
The Commission hereby issues notice of the filing of Amendment No. 3 
and simultaneously grants accelerated approval to the proposed rule 
change as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 54978 (December 20, 
2006), 71 FR 78254.
    \4\ In Amendment No. 3, Phlx clarified (1) in its fee schedule 
that a retail broker dealer is conducting a material portion of its 
business via one or more Internet Web sites if at least 20% of the 
broker-dealer's business were conducted via the Internet; and (2) 
that the current and closing index values underlying all of Phlx's 
proprietary indexes are being disseminated through PBOT.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Phlx proposes to add an Enterprise License Fee for eligible 
Vendors of market data disseminated

[[Page 12243]]

over PBOT's MDDN.\5\ The Phlx has licensed the current and closing 
index values underlying all of the Phlx's proprietary indexes to PBOT 
for the purpose of selling, reproducing, and distributing the index 
values over PBOT's MDDN (``Market Data''). On each trading day, the 
Exchange or its third party designee calculates and makes available to 
PBOT a real-time index value every 15 seconds and a closing index value 
at the end of each trading day. In exchange for subscriber fees paid to 
PBOT, market data vendors are allowed to widely disseminate all the 
values of Phlx's proprietary indexes to their subscribers.\6\
---------------------------------------------------------------------------

    \5\ The MDDN is an internet protocol multicast network developed 
by PBOT and SAVVIS Communications.
    \6\ PBOT has contracted with one or more major Market Data 
Vendors to receive real-time and closing index values over the MDDN 
and promptly redistribute such values.
---------------------------------------------------------------------------

    As approved by the Commission, PBOT charges the following 
subscriber fees to Vendors of Market Data for all the values of Phlx's 
proprietary indexes disseminated by PBOT's MDDN: \7\ a monthly fee of: 
(a) $1.00 per ``Device,'' \8\ that is used by Vendors and their 
subscribers to receive and re-transmit Market Data on a real-time basis 
(``device fee''), and (b) $.0025 per request for snapshot data,\9\ 
which is essentially Market Data that is refreshed no more frequently 
than once every 60 seconds, or $1,500 per month for unlimited snapshot 
data requests (``snapshot fee'').\10\ All market data vendors which 
provide market data to 200,000 or more Devices in any month qualify for 
a 15% Administrative Fee credit for that month, to be deducted from the 
monthly Subscriber Fees that they collect and are obligated to pay PBOT 
under the Vendor/Subvendor Agreement.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 53790 (May 11, 
2006), 71 FR 28738 (May 17, 2006) (``Original Approval Order''). The 
subscriber fees are set out in agreements that PBOT executed with 
various market data vendors for the right to receive, store, and 
retransmit the current and closing index values transmitted over the 
MDDN.
    \8\ The agreements provide that ``Device'' shall mean, in case 
of each Subscriber and in such Subscriber's discretion, either any 
Terminal or any End User. A Subscriber's Device may be exclusively 
Terminals, exclusively End Users or a combination of Terminals or 
End Users and shall be reported in a manner that is consistent with 
the way the Vendor identifies such Subscriber's access to Vendor's 
data. An ``End User'' is defined as an individual authorized or 
allowed by a Vendor to access and display real-time market data that 
is distributed by PBOT over the MDDN; and a ``Terminal'' is any type 
of equipment (fixed or portable) that accesses and displays such 
market data.
    \9\ See Securities Exchange Act Release No. 55111 (January 16, 
2007), 72 FR 3188 (January 24, 2007) (increasing the snapshot fee to 
$.0025 per request).
    \10\ The index values may also be made available by Vendors on a 
delayed basis (i.e., no sooner than twenty minutes following receipt 
of the data by vendors) at no charge.
---------------------------------------------------------------------------

    The Exchange proposes to add an Enterprise License Fee of $10,000 
per year or $850 per month that would be available to eligible Vendors 
as an alternative to the device fee or snapshot fee.\11\ A Vendor is 
eligible for the Enterprise License Fee if it is a firm acting as a 
retail broker-dealer conducting a material portion of its business via 
one or more proprietary Internet Web sites by which the firm 
distributes Market Data to predominately non-professional Market Data 
users with whom the firm has a brokerage relationship (``Eligible 
Firm'').\12\ An Eligible Firm may also distribute Market Data to 
professional users with whom such firm has a brokerage relationship, 
provided such Market Data distribution is predominantly to non-
professional users.\13\ As stated in the proposed fee schedule, the 
Eligible Firm's Market Data distribution to professional users cannot 
exceed 10%.\14\ The 15% Administrative Fee credit discount also applies 
to the Enterprise License Fee.
---------------------------------------------------------------------------

    \11\ A firm that qualifies for the Enterprise License Fee may 
instead choose to pay the device fee and/or the snapshot fee as 
appropriate.
    \12\ To be eligible for the Enterprise License Fee, the 
Exchange's fee schedule states that an Eligible Firm will be 
considered to conduct a material portion of its business via one or 
more Internet Web sites if at least twenty percent (20%) of the 
firm's business were conducted via the Internet.
    \13\ A non-professional user is defined in the fee schedule as 
any natural person who is not: (a) registered or qualified in any 
capacity with the Commission, the Commodities Futures Trading 
Commission, any state securities agency, any securities exchange or 
association, or any commodities or futures contract market or 
association; (b) engaged as an ``investment advisor'' as that term 
is defined in Section 202(11) of the Investment Advisors Act of 
1940, 15 U.S.C. 80b-2(11), (whether or not registered or qualified 
under that Act); nor, (c) employed by a bank or other organization 
exempt from registration under federal or state securities laws to 
perform functions that would require registration or qualification 
if such functions were performed for an organization not so exempt.
    \14\ As an example, if data recipient ABC Corp. has 100 
customers that receive PBOT Market Data of which 10 are professional 
users and 90 are retail (non-professional) users the Enterprise 
License Fee would be available to the firm because 10 professional 
users/100 total users = 10%.
---------------------------------------------------------------------------

    To be eligible for the Enterprise License Fee, an Eligible Firm 
must certify to PBOT that it qualifies for the Enterprise License Fee, 
including that market distribution is predominantly to non-professional 
users, and must immediately notify PBOT if it can no longer certify its 
qualification.\15\
---------------------------------------------------------------------------

    \15\ A firm that has entered into an agreement with PBOT to 
receive Market Data over the MDDN but is not qualified for the 
Enterprise License Fee may pay the device fee and/or the snapshot 
fee as appropriate.
---------------------------------------------------------------------------

III. 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. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File No. SR-Phlx-2006-63 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2006-63. 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 (http://www.sec.gov/rules/sro.shtml
). 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 also will be available for inspection and copying at the 
principal office of the Phlx.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-Phlx-2006-63 
and should be submitted on or before April 5, 2007.

IV. Discussion

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to

[[Page 12244]]

a national securities exchange \16\ and, in particular, the 
requirements of Section 6 of the Act.\17\ Specifically, the Commission 
finds that the proposed rule change is consistent with Section 6(b)(5) 
of the Act,\18\ which requires, among other things, that the rules of a 
national securities exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \16\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that the reduced alternate fee structure 
available through the Enterprise License Fee to eligible market data 
recipients should help to encourage a wider distribution of market 
data, especially to non-professional customers. The Commission notes 
that other industry organizations have similar fee structures which 
make various market data available to non-professional subscribers for 
a discounted fee relative to professional subscribers. For example, the 
Nasdaq Stock Market, Inc. (``Nasdaq'') has fees schedules that are 
higher for professional or corporate subscribers than for non-
professional subscribers for UTP Level 1 fees, TotalView fees, and 
Nasdaq MAX fees.\19\ The Options Price Reporting Authority (``OPRA''), 
a national market system plan, also offers a reduced fee to 
nonprofessional subscribers, which is not available to professional 
options data subscribers.\20\
---------------------------------------------------------------------------

    \19\ Nasdaq offers a TotalView Non-Professional Enterprise Fee 
License to qualified firms that distribute TotalView to their non-
professional users with whom they have a professional relationship. 
A description of Nasdaq market data fees is available at http://www.nasdaqtrader.com/trader/mds/nasdaqother/pricing.stm
 (last 

visited on January 17, 2007).
    \20\ A description of OPRA market data fees is available at 
http://www.opradata.com/pdf/prof_pub_fee_schd_revised.pdf (last 

visited on January 17, 2007).
---------------------------------------------------------------------------

    The Commission also believes that Phlx's eligibility standards in 
determining the type of retail broker-dealers who can use the new 
Enterprise License Fee appears to be reasonably related to its purpose 
of providing a discount to those retail broker-dealers who have 
primarily a proprietary Internet based business to non-professional 
users.\21\ As noted above, eligible firms are also free to pay, as an 
alternative, the device fee or snapshot fee should they so choose.
---------------------------------------------------------------------------

    \21\ See supra notes 12-15 and accompanying text for eligibility 
standards for the Enterprise License Fee.
---------------------------------------------------------------------------

    Based on the above, the Commission believes that the proposal is 
consistent with Section 6(b)(4) of the Act,\22\ in that the proposed 
rule change provides for the equitable allocation of reasonable dues, 
fees, and other charges among the Exchange's members and issuers and 
other persons using its facilities. The Commission also continues to 
believe that PBOT's MDDN fee structure is consistent with Rule 603 
under the Act \23\ regarding the distribution, consolidation, and 
display of information with respect to quotations for and transactions 
in NMS stocks.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(4).
    \23\ 17 CFR 242.603.
---------------------------------------------------------------------------

    The Commission finds good cause for approving Amendment No. 3 to 
the proposed rule change prior to the thirtieth day after the notice is 
published for comment in the Federal Register pursuant to Section 
19(b)(2) of the Act.\24\ Amendment No. 3 clarifies the Exchange's 
proposal and does not raise any new regulatory issues. Further, the 
materiality standard in the Eligible Firm definition drafted into the 
fee schedule pursuant to Amendment No. 3 was the same standard 
published for comment with the filing and no comments were received. 
Finally, the Commission believes that it is appropriate to accelerate 
approval of the proposed rule change so that the Exchange can 
immediately provide the discounted fee to eligible firms that will 
disseminate the index values of Phlx's proprietary index options. 
Accordingly, the Commission finds good cause to approve Amendment No. 3 
prior to the thirtieth day after the notice is published for comment in 
the Federal Register.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\25\ that the proposed rule change (SR-Phlx-2006-63), as amended, 
be, and it hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-4722 Filed 3-14-07; 8:45 am]

BILLING CODE 8010-01-P