Document ID: SEC-2008-0758-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2008-05-30T04:00Z

[Federal Register: May 30, 2008 (Volume 73, Number 105)]
[Notices]               
[Page 31177-31179]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30my08-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57851; File No. SR-Phlx-2008-38]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Its Payment for Order Flow Pilot Program

May 22, 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 May 19, 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 substantially prepared by the 
Exchange. Phlx has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by Phlx under Section 
19(b)(3)(A)(ii) 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 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)(ii).
    \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

    The Phlx proposes to extend its payment for order flow pilot 
program, which is currently in effect until May 27, 2008, for an 
additional one-year period until May 27, 2009. The Exchange also 
proposes to make a minor clarifying amendment to the payment for order 
flow fee section of the Exchange's fee schedule. Other than extending 
the date of the pilot program for an additional year and making the 
minor technical amendment to the Exchange's fee schedule, no other 
changes to the Exchange's current payment for order flow program are 
being proposed at this time.
    The text of the proposed rule change is available at the principal 
office of the Exchange, the Commission's Public Reference Room, and 
http://www.phlx.com.

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. 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 states that the purpose of extending the Exchange's 
payment for order flow program for an additional year is to remain 
competitive with other

[[Page 31178]]

options exchanges that administer payment for order flow programs.\5\
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    \5\ See, e.g., Securities Exchange Act Release Nos. 57094 
(January 3, 2008), 73 FR 1653 (January 9, 2008) (SR-CBOE-2007-154); 
55895 (June 11, 2007), 72 FR 33549 (June 18, 2007) (SR-ISE-2007-38); 
55328 (February 21, 2007), 72 FR 9050 (February 28, 2007) (SR-Amex-
2007-16); and 53341 (February 21, 2006), 71 FR 10085 (February 28, 
2006) (SR-Amex-2006-15).
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    Currently, the following payment for order flow fees are in effect 
at the Exchange: \6\ (1) Equity options (other than those equity 
options that trade as part of the Exchange's Penny Pilot Program),\7\ 
options on the Russell 2000[supreg] Index \8\ traded under the symbol 
RUT, and options on the one-tenth value Russell 2000[supreg] Index 
traded under the symbol RMN, are all assessed $0.70 per contract; and 
(2) equity options that trade as part of the Exchange's Penny Pilot 
Program are assessed $0.25 per contract. Trades resulting from either 
Directed \9\ or non-Directed Orders that are delivered electronically 
and executed on the Exchange are assessed a payment for order flow 
fee,\10\ while non-electronically-delivered orders (i.e., represented 
by a floor broker) are not assessed a payment for order flow fee.\11\ 
Additionally, payment for order flow fees are not assessed on 
transactions executed on the Exchange that correspond with an outbound 
Linkage Principal Acting as Agent (``P/A'') order.\12\
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    \6\ See, e.g., Securities Exchange Act Release Nos. 53841 (May 
19, 2006), 71 FR 30461 (May 26, 2006) (SR-Phlx-2006-33); 54297 
(August 9, 2006), 71 FR 47280 (August 16, 2006) (SR-Phlx-2006-47); 
54485 (September 22, 2006), 71 FR 57017 (September 28, 2006) (SR-
Phlx-2006-56); 55290 (February 13, 2007), 72 FR 8051 (February 22, 
2007) (SR-Phlx-2007-05); 55473 (March 13, 2007), 72 FR 13338 (March 
21, 2007) (SR-Phlx-2007-12); and 55891 (June 11, 2007), 72 FR 33271 
(June 15, 2007) (SR-Phlx-2007-39).
    \7\ The current Penny Pilot Program, in effect through March 27, 
2009, permits certain options series to be quoted and traded in 
increments of $0.01. See Securities Exchange Act Release No. 56563 
(September 27, 2007), 72 FR 56429 (October 3, 2007) (SR-Phlx-2007-
62).
    \8\ The Exchange states that Russell 2000[supreg] is a trademark 
and service mark of the Frank Russell Company, used under license. 
Neither Frank Russell Company's publication of the Russell Indexes 
nor its licensing of its trademarks for use in connection with 
securities or other financial products derived from a Russell Index 
in any way suggests or implies a representation or opinion by Frank 
Russell Company as to the attractiveness of investment in any 
securities or other financial products based upon or derived from 
any Russell Index. Frank Russell Company is not the issuer of any 
such securities or other financial products and makes no express or 
implied warranties of merchantability or fitness for any particular 
purpose with respect to any Russell Index or any data included or 
reflected therein, nor as to results to be obtained by any person or 
any entity from the use of the Russell Index or any data included or 
reflected therein.
    \9\ See Securities Exchange Act Release No. 57094 (May 21, 2008) 
(SR-Phlx-2008-38) (approving the Exchange's Directed Order Program 
on a permanent basis).
    \10\ Specialists and Directed ROTs who participate in the 
Exchange's payment for order flow program are assessed a payment for 
order flow fee, in addition to ROTs. Therefore, the payment for 
order flow fee is assessed, in effect, on equity option transactions 
between a customer and an ROT, a customer and a Directed ROT, or a 
customer and a specialist.
    \11\ Electronically-delivered orders do not include orders 
delivered through the Floor Broker Management System pursuant to 
Exchange Rule 1063.
    \12\ See Securities Exchange Act Release No. 57313 (February 12, 
2008), 73 FR 9398 (February 20, 2008) (SR-Phlx-2008-10).
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    The Exchange states that the purpose of making the minor technical 
amendment to the payment for order flow section of the Exchange's fee 
schedule is to clarify that options on QQQQ are part of the Penny Pilot 
Program.\13\
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    \13\ See Securities Exchange Act Release No. 56563 (September 
27, 2007), 72 FR 56429 (October 3, 2007) (SR-Phlx-2007-62).
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    This proposal is scheduled to remain in effect as a pilot program 
until May 27, 2009.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \14\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \15\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. In particular, the Exchange 
believes that continuing the payment for order flow program should 
allow the Exchange to remain competitive, which should in turn, benefit 
the Exchange members who are assessed the payment for order flow fee.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 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 solicited or received with respect to the 
proposed rule change.

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 \16\ and Rule 
19b-4(f)(2) \17\ thereunder, because it establishes or changes a due, 
fee, or other charge imposed by the Exchange. Accordingly, the proposal 
will take effect upon filing with the Commission. At any time within 60 
days of the filing of such 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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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 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-2008-38 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-2008-38. 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.

[[Page 31179]]

Copies of such 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-2008-38 and should be submitted on 
or before June 20, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-12110 Filed 5-29-08; 8:45 am]

BILLING CODE 8010-01-P