Document ID: SEC-2007-0912-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-07-06T04:00Z

[Federal Register: July 6, 2007 (Volume 72, Number 129)]
[Notices]               
[Page 37069-37070]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jy07-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55972; File No. SR-Phlx-2007-47]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Automating the Rebate Request Process for Dividend, Merger 
and Short Stock Interest Strategies

 June 28, 2007.
    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 June 15, 2007, 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 substantially prepared by Phlx. 
Phlx has designated this proposal as one constituting a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(1) 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 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)(1).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to eliminate the members' requirement to 
manually submit rebate request forms and to automate the rebate request 
process for dividend, merger, and short stock interest strategies, 
effective for transactions settling on or after July 1, 2007.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.phlx.com/exchange/phlx_rule_fil.html), at the 

Exchange's principal office, and at the Commission's Public Reference 
Room.

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
    Currently, the Exchange provides a rebate for certain contracts 
executed in connection with transactions occurring as part of a 
dividend,\5\ merger,\6\ or short stock interest \7\ strategy. 
Specifically, for these option contracts executed pursuant to a 
dividend strategy, the Exchange rebates $0.08 per contract side for 
Registered Options Trader (``ROT'') executions and $0.07 per contract 
side for specialist executions transacted on the day prior to the date 
on which the underlying stock goes ex-dividend. The Exchange also 
provides for a rebate of $0.08 per contract side for ROT executions and 
$0.07 per contract side for specialist executions made pursuant to a 
merger or short stock interest strategy.\8\
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    \5\ For purposes of this proposal, the Exchange defines a 
``dividend strategy'' as transactions done to achieve a dividend 
arbitrage involving the purchase, sale, and exercise of in-the-money 
options of the same class, executed prior to the date on which the 
underlying stock goes ex-dividend.
    \6\ For purposes of this proposal, the Exchange defines a 
``merger strategy'' as transactions done to achieve a merger 
arbitrage involving the purchase, sale, and exercise of options of 
the same class and expiration date, executed prior to the date on 
which shareholders of record are required to elect their respective 
form of consideration, i.e., cash or stock.
    \7\ For purposes of this proposal, the Exchange defines a 
``short stock interest strategy'' as transactions done to achieve a 
short stock interest arbitrage involving the purchase, sale, and 
exercise of in-the-money options of the same class.
    \8\ See, e.g., Securities Exchange Act Release Nos. 54174 (July 
19, 2006), 71 FR 42156 (July 25, 2006) (SR-Phlx-2006-40) and 53094 
(January 10, 2006), 71 FR 2975 (January 18, 2006) (SR-Phlx-2005-75).
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    The Exchange currently uses a manual procedure to process rebate 
requests. To qualify a transaction for the rebate process, a written 
rebate request form, along with supporting documentation, must be 
submitted to the Exchange within three business days following the end 
of the previous month.
    The Exchange proposes to eliminate the manual rebate process and 
replace it with an automated process. In order to capture the necessary 
information electronically, the Exchange has modified its trade tickets 
to allow for members to designate on the trade ticket whether the trade 
involves a dividend, merger, or short stock interest strategy.
    The purpose of eliminating the manual procedure is to increase 
efficiency in connection with the processing of the dividend, merger, 
and short stock interest rebate request forms.
    For transactions settling in June 2007, members must continue to 
submit the required written rebate request forms as described above. 
Beginning with transactions settling on or after July 1, 2007, written 
rebate request forms will no longer be accepted by the Exchange as the 
rebates will be processed automatically.
2. Statutory Basis
    The Exchange believes that its proposal to automate its procedures 
relating to processing the rebate request forms for dividend, merger, 
or short stock interest strategies as described above is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \10\ in particular, as the 
proposal is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster

[[Page 37070]]

cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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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

    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 has become effective pursuant to Section 
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(1) thereunder,\12\ 
because it constitutes a stated policy, practice, or interpretation 
with respect to the meaning, administration, or enforcement of an 
existing rule. 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(1).
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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-2007-47 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-2007-47. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of 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-2007-47 and should be 
submitted on or before July 27, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-13067 Filed 7-5-07; 8:45 am]

BILLING CODE 8010-01-P