Document ID: SEC-2008-0533-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2008-04-08T04:00Z

[Federal Register: April 8, 2008 (Volume 73, Number 68)]
[Notices]               
[Page 19128-19129]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08ap08-100]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57608; File No. SR-Phlx-2008-22]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change, 
and Amendment No. 1 Thereto, Relating to Floor Broker Charge and 
Specialist Unit Credit in Connection With Linkage P/A Orders

April 2, 2008.
    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 12, 2008, 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 substantially prepared by the 
Exchange. On April 1, 2008, Phlx submitted Amendment No. 1 to the 
proposed rule change. The Exchange filed the proposed rule change 
pursuant to Section 19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Phlx proposes to charge floor brokers an amount equal to the 
transaction fee(s) assessed on options specialist units by another 
exchange in connection with customer orders that are delivered to the 
limit order book via the Exchange's Options Floor Broker Management 
System (``FBMS'')\5\ and subsequently executed via the Intermarket 
Option Linkage (``Linkage'') \6\ as a Principal Acting as Agent (``P/
A'') order.\7\ The Exchange also proposes to provide to options 
specialist units a credit in an amount equal to the transaction fee(s) 
assessed on them by another exchange in connection with executing 
customer orders that are delivered to the limit order book via FBMS and 
executed via Linkage as P/A orders.
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    \5\ FBMS is designed to enable floor brokers and/or their 
employees to enter, route, and report transactions stemming from 
options orders received on the Exchange. FBMS also is designed to 
establish an electronic audit trail for options orders represented 
and executed by floor brokers on the Exchange such that the audit 
trail provides an accurate, time-sequenced record of electronic and 
other orders, quotations, and transactions on the Exchange, 
beginning with the receipt of an order by the Exchange, and further 
documenting the life of the order through the process of execution, 
partial execution, or cancellation of that order. See Exchange Rule 
1080, Commentary .06.
    \6\ Linkage is governed by the Options Linkage Authority under 
the conditions set forth under the Plan for the Purpose of Creating 
and Operating an Intermarket Option Linkage (``Linkage Plan''). The 
registered U.S. options markets are linked together on a real-time 
basis through a network capable of transporting orders and messages 
to and from each market.
    \7\ A P/A order is an order for the principal account of a 
specialist (or equivalent entity on another participant exchange 
that is authorized to represent public customer orders), reflecting 
the terms of a related unexecuted public customer order for which 
the specialist is acting as agent. See Linkage Plan Section 2(16)(a) 
and Exchange Rule 1083.
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    While changes to the fee schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated the changes to be in 
effect for transactions settling on or after March 17, 2008, through 
July 31, 2008.\8\ The text of the proposed rule change is available at 
Phlx, the Commission's Public Reference Room, and http://www.phlx.com.
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    \8\This proposal is scheduled to be in effect for the same time 
period as fees for Linkage Principal and P/A orders. See Securities 
Exchange Act Release No. 56166 (July 30, 2007), 72 FR 43312 (August 
3, 2007) (SR-Phlx-2007-52).
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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 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 IV 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 Exchange proposes to charge floor brokers an amount equal to 
the transaction fee(s) \9\ assessed on options specialist units by 
another exchange in connection with customer orders that are delivered 
to the limit order book via FBMS and executed via Linkage as P/A 
orders. The Exchange also proposes to provide to options specialist 
units a credit in an amount equal to the transaction fee(s) assessed on 
them by another exchange in connection with executing customer orders 
that are delivered to the limit order book via FBMS and executed via 
Linkage as P/A orders.
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    \9\ Transaction fees do not include fees assessed by The Options 
Clearing Corporation or the Covered Sales Fee. The Covered Sale Fee 
is assessed on Phlx members in connection with the sales of 
securities on the Exchange with respect to which Phlx is obligated 
to pay a fee to the Commission under Section 31 of the Act. Other 
exchanges refer to this fee by different names.
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    The purpose of this proposal is to assist specialist units in 
offsetting the costs they incur in routing orders to other exchanges in 
order to obtain the National Best Bid or Offer (``NBBO''). By giving a 
corresponding credit to specialist units who bear the direct costs of 
routing these orders, the Exchange believes that the undue financial 
burden of multiple transaction charges imposed on Exchange specialist 
units in connection with orders that are executed at an away market 
will be lessened. Additionally, the purpose of assessing a fee on floor 
brokers who send customer orders that are delivered to the limit order 
book via FBMS and executed via Linkage as P/A orders is to more 
equitably assess the applicable transaction fee(s) on the member 
originally entering the order to be executed. Floor brokers may choose 
to route these orders through other systems and not place such orders 
on the limit order book.
    The Exchange represents that when members do not want an order to 
be routed away through Linkage (thereby avoiding the transaction fees 
discussed above), that member may mark the order with an Immediate or 
Cancel (``IOC'') designation. IOC orders are not routed to other market 
centers. Instead, if they cannot be executed on Phlx, they are 
cancelled.
    While changes to the fee schedule pursuant to this proposal were 
effective upon filing, the Exchange designated the changes operative 
for trades settling

[[Page 19129]]

on or after March 17, 2008 through July 31, 2008.\10\
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    \10\ See supra note 8.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act,\11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\12\ in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among Exchange 
members. The Exchange believes that assessing a fee on floor brokers 
and giving a corresponding credit to specialist units as described 
herein allows for the transaction fee(s) to be assessed on the member 
who submits the order and for the credit to be given to the specialist 
unit that routed the order to another exchange in order to obtain the 
NBBO.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 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.

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

    The foregoing proposed rule change is effective upon filing 
pursuant to Section 19(b)(3)(A)(ii) \13\ of the Act and Rule 19b-
4(f)(2) \14\ thereunder, because it establishes or changes a due, fee, 
or other charge applicable only to a member imposed by the Exchange. 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.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
    \15\ For purposes of calcualting 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 that period 
to commence on April 1, 2008, the date the Exchange filed Amendment 
No. 1 to the proposed rule change. See 15 U.S.C. 78s(b)(3)(C).
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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. 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-2008-22 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2008-22. 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, on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing will 
also 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 No. SR-Phlx-
2008-22 and should be submitted on or before April 29, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7312 Filed 4-7-08; 8:45 am]

BILLING CODE 8011-01-P