Document ID: SEC-2006-0015-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-01-06T05:00Z

[Federal Register: January 6, 2006 (Volume 71, Number 4)]
[Notices]               
[Page 959-961]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06ja06-73]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53043; File No. SR-Phlx-2005-72]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Remote Streaming Quote Trader 
Permit Fees

December 29, 2005.
    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 November 10, 2005, 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. On December 
19, 2005, the Phlx submitted Amendment No. 1 to the proposed rule 
change.\3\ The Exchange has designated

[[Page 960]]

the proposed rule change as one establishing or changing a due, fee, or 
other charge imposed by the Phlx pursuant to Section 19(b)(3)(A)(ii) of 
the Act \4\ and Rule 19b-4(f)(2) thereunder,\5\ which renders the 
proposal effective upon filing with the Commission.\6\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange revised the proposed rule 
text to clarify that RSQTs and SQTs will be included in the ROT 
permit fee category. The Exchange also amended the purpose section 
to clarify that, by including RSQTs in the ROT permit fee category, 
the Exchange will be assessing a new permit fee on RSQTs.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
    \6\ The effective date of the original proposed rule change is 
November 10, 2005, and the effective date of Amendment No. 1 is 
December 19, 2005. For purposes of calculating the 60-day period 
within which the Commission may summarily abrogate the proposed rule 
change under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on December 19, 2005, the date on 
which the Exchange submitted Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend its permit fee schedule to assess a 
permit fee on Remote Streaming Quote Traders (``RSQTs'') \7\ under the 
Registered Options Trader (``ROT'') permit fee category. In addition, 
the Exchange proposes to amend its permit fee schedule to clarify that 
Streaming Quote Traders (``SQTs'') \8\ are currently included in the 
ROT permit fee category.\9\ The text of the proposed rule change is 
available on the Exchange's Web site (http://www.phlx.com), at the 

Phlx, and at the Commission's Public Reference Room.
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    \7\ An RSQT is an Exchange ROT that is a member or member 
organization of the Exchange with no physical trading floor presence 
who has received permission from the Exchange to generate and submit 
option quotations electronically through the Exchange's Automated 
Options Market in eligible options in which such RSQT has been 
assigned. An RSQT may only trade in a market making capacity in 
classes of options in which he is assigned. An RSQT may only submit 
such quotations electronically from off the floor of the Exchange. 
See Phlx Rule 1014(b)(ii)(B).
    \8\ An SQT is a ROT who has received permission from the 
Exchange to generate and submit option quotations electronically 
through an electronic interface with the Exchange's automated 
options market (``AUTOM'') via an Exchange approved proprietary 
electronic quoting device in eligible options to which the SQT is 
assigned. See Exchange Rule 1014(b)(ii).
    \9\ Currently, SQTs are assessed a permit fee under the ROT (on 
any trading floor) category, but are not specifically referred to on 
the Exchange's fee schedule.
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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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Phlx recently adopted equity option fees applicable to RSQTs.\10\ 
In addition to the equity options fees assessed on RSQTs, RSQTs must 
also pay a monthly permit fee. Presently, RSQTs do not pay a ROT permit 
fee because they are not on any trading floor \11\ and are thus not 
included in the ROT permit fee category on the Exchange's fee schedule. 
However, RSQTs pay a permit fee under another category of permit fees 
such as a specialist or an order flow provider.\12\ Currently, monthly 
permit fees are assessed as follows:

    \10\ See Securities Exchange Act Release No. 51428 (March 24, 
2005), 70 FR 16325 (March 30, 2005) (SR-Phlx-2005-12).
    \11\ See definition of ``RSQT,'' supra note 7.
    \12\ The Exchange assesses permit fees on its members. Monthly 
permit fees are assessed based on how each permit is used, for 
example, order flow provider, specialist or floor broker. However, 
any member who qualifies a member organization in more than one 
category of permit fees pays the higher of the applicable fees for 
such permit. For example, if an RSQT permit holder qualifies a 
member organization as an order flow provider and the RSQT permit 
holder associated with the member organization then registered as a 
floor broker on the Exchange for that or another member 
organization, that RSQT permit holder would be subject to a permit 
fee of $1,200, the higher of $200 (the order flow provider permit 
fee) and $1,200 (the floor broker permit fee), but not both fees.
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Permit Fees \13\
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    \13\ The Exchange has established the date of notification of 
termination of a permit as the date that permit fee billing will 
cease. Additionally, a permit holder will be billed only one monthly 
permit fee if the holder transfers from one member organization to 
another previously unrelated member organization as a result of a 
merger, partial sale or other business combination during a monthly 
permit fee period in order to avoid double billing in the month the 
merger or business combination occurred. 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.
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Order Flow Provider Permit Fee \14\
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    \14\ This fee applies to a permit held by a permit holder who 
does not have physical access to the Exchange's trading floor, is 
not registered as a Floor Broker, Specialist or ROT (on any trading 
floor) or Off-Floor trader, and whose member organization submits 
orders to the Exchange. Phlx Rule 620(a) requires such registration.
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    a. Permits used only to submit orders to the equity, foreign 
currency options, or options trading floor (one floor only): $200.00 
per month.
    b. Permits used only to submit orders to more than one trading 
floor: $300.00 per month.

Floor Broker, Specialist, or ROT (on any trading floor) or Off-Floor 
Trader Permit Fee
    a. First Permit: $1,200.00 per month.
    b. Additional permits for members in the same organization: 
$1,000.00 per month.

Excess Permit Holders: $200.00 per month.
Other Permit Holders: \15\ $200.00 per month.
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    \15\ A permit holder or the member organization they solely 
qualify must apply for ``other'' status in writing to the Membership 
Services Department. This status requires that a permit holder or 
the member organization have no transaction activity for the 
applicable monthly billing period. Should a permit holder actively 
transact business during a particular month, the highest applicable 
monthly permit fee will apply to such permit holder and member 
organization for that monthly period. The ``other'' status only 
applies to permit holders who solely qualify their member 
organization. These policies were effective as of February 2, 2004.

Any member who is associated with one or more member organizations and 
uses a permit in more than one category pays the higher of the 
applicable fees for such permit.
    Because RSQTs do not have a physical presence on the trading floor, 
but are a subset of ROTs, the Exchange proposes to assess the same 
permit fees on RSQTs as ROTs on any trading floor. As such, the 
Exchange proposes to replace the words ``on any trading floor'' that 
appear after the ROT category with ``including RSQTs and SQTs.'' \16\
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    \16\ As a practical matter, the effect of including RSQTs in the 
ROT permit fee category should not increase overall costs to the 
RSQTs due to the fact that RSQTs receive a permit credit, which is 
applied against a member organization's RSQT fees. Specifically, 
pursuant to the Exchange's fee schedule, RSQTs are assessed an RSQT 
fee based on the number and type of option issues in which an RSQT 
is assigned. A credit is given to RSQTs based on the total number of 
permits held by the RSQT in a particular calendar month. For 
example, currently an RSQT may receive a monthly credit of $200 
(which is the same amount as the permit fee) because the permit 
holder qualifies a member organization as an order flow provider. 
Now, under this proposal, the RSQT will be charged a higher permit 
fee of $1,200, but receive a permit credit of $1,200 to be applied 
against the RSQT fee. See Securities Exchange Act Release No. 51428 
(March 24, 2005), 70 FR 16325 (March 30, 2005) (SR-Phlx-2005-12).
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    In addition, although SQTs have a physical presence on the trading 
floor and are thus currently included in the ROT (on any trading floor) 
permit fee

[[Page 961]]

category, the Exchange proposes to specifically refer to SQTs on the 
fee schedule in order to help clarify that SQTs are also included in 
the ROT category.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\18\ in 
particular, in that it is an equitable allocation of reasonable fees 
among Exchange members.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition 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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \19\ and Rule 
19b-4(f)(2) \20\ thereunder. Accordingly, the proposal will take effect 
upon filing with the Commission. At any time within 60 days of the 
filing of Amendment No. 1 to 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.\21\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 17 CFR 240.19b-4(f)(2).
    \21\ See supra note 6.
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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 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 Number SR-Phlx-2005-72 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-Phlx-2005-72. 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 the filing 
also will be available for inspection and copying at the principal 
office of the Exchange. 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-2005-72 and should be submitted on or before January 27, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E6-21 Filed 1-5-06; 8:45 am]

BILLING CODE 8010-01-P