Document ID: SEC-2008-1071-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2008-08-04T04:00Z

[Federal Register: August 4, 2008 (Volume 73, Number 150)]
[Notices]               
[Page 45263-45265]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04au08-80]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58234; File No. SR-Phlx-2008-55]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to an Extension of Pilot Programs in Connection With Linkage 
P/A Orders

July 25, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on 
July 18, 2008, 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 Phlx. 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.

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[[Page 45264]]

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Phlx, pursuant to Section 19(b)(1) of the Act \3\ and Rule 19b-
4 thereunder,\4\ proposes to extend for a one-year period until July 
31, 2009, its current pilot programs relating to: (1) An option 
transaction charge credit of $0.21 per contract for Exchange options 
specialist units \5\ that incur Phlx option transaction charges when a 
customer order is delivered electronically via Phlx XL \6\ or via the 
Exchange's Options Floor Broker Management Systems (``FBMS''),\7\ and 
is then executed via the Intermarket Option Linkage (``Linkage'') \8\ 
as a Principal Acting as Agent Order (``P/A Order''); and (2) the Floor 
Broker Linkage P/A fee and Options Specialist Unit Credit, which 
charges 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 
FBMS and executed via Linkage as P/A Orders. The Exchange then provides 
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. There are no 
substantive changes to the pilot programs as they currently operate, 
other than to extend their operation through July 31, 2009.\9\
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 7 CFR 240.19b-4.
    \5\ The Exchange uses the terms ``specialists'' and ``specialist 
units'' interchangeably herein.
    \6\ See Exchange Rule 1080.
    \7\ 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.
    \8\ 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 (the ``Plan'') approved 
by the Commission. 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.
    \9\ See e-mail dated July 24, 2008 to the Commission from 
Cynthia Hoekstra, Vice President, Phlx.
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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 July 31, 2008.\10\ The 
text of the proposed rule change is available at www.phlx.com, the 
Exchange, and the Commission's Public Reference Room.
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    \10\ This proposal is scheduled to be in effect for the same 
time period as a pilot program relating to fees for Linkage 
Principal Orders and P/A Orders. See Securities Exchange Act Release 
No. 58144 (July 11, 2008), 73 FR 41394 (July 18, 2008) (SR-Phlx-
2008-49).
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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
    The Exchange currently provides for an option transaction charge 
credit of $0.21 per contract for Exchange options specialist units that 
incur Phlx option transaction charges when a customer order is 
delivered electronically via Phlx XL or via FBMS and then is executed 
via Linkage as a P/A Order. In addition, the Exchange charges 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 FBMS and executed via 
Linkage as P/A Orders. Options specialist units are then credited 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 
a P/A Order.
    The purpose of extending the current pilot programs discussed above 
is to encourage the use of Linkage, remain competitive with other 
exchanges with respect to the assessment of Linkage-related fees and to 
help alleviate the potential economic burden of multiple transaction 
charges imposed on Exchange specialist units in connection with routing 
these types of Linkage orders. 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 these orders 
on the limit order book.
    The above-referenced pilot programs are currently scheduled to 
expire on July 31, 2008.\11\ This proposal would extend the pilot 
programs for another year, through July 31, 2009.
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    \11\ See Securities Exchange Act Release Nos. 57608 (April 2, 
2008), 73 FR 19128 (April 8, 2008) (SR-Phlx-2008-22); 57434 (March 
5, 2008), 73 FR 13269 (March 12, 2008) (SR-Phlx-2008-19); and 56101 
(July 19, 2007), 72 FR 40920 (July 25, 2007) (SR-Phlx-2007-50).
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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 \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. These pilot programs, in 
part, help alleviate the undue financial burden of multiple transaction 
charges that are incurred by specialist units in connection with P/A 
orders executed via Linkage. Assessing a fee on floor brokers and 
giving a corresponding credit to specialist units 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 National Best Bid or 
Offer.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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

    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)(ii) of the Act \14\ and

[[Page 45265]]

subparagraph (f)(2) of Rule 19b-4 thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 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 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-2008-55 on the subject line.

Paper Comments

     Send paper comments in triplicate to Florence E. Harmon, 
Acting Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Phlx-2008-55. 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-2008-55, and should be 
submitted on or before August 25, 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,
Acting Secretary.
[FR Doc. E8-17760 Filed 8-1-08; 8:45 am]

BILLING CODE 8010-01-P