Document ID: SEC-2006-1420-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-11-02T05:00Z

[Federal Register: November 2, 2006 (Volume 71, Number 212)]
[Notices]               
[Page 64603-64604]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no06-88]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54659; File No. SR-Phlx-2006-67]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Cap Registered Options Trader and Specialist Equity Option Comparison 
and Transaction Charges When Certain Requirements Are Met

 October 27, 2006.
    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 October 19, 2006, 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 Exchange. The Phlx 
has designated this proposal as one establishing or changing a due, 
fee, or other charge imposed by a self-regulatory organization 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 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

    The Phlx proposes to adopt a cap on Registered Options Trader 
(``ROT'') comparison charges and ROT and specialist transaction charges 
\5\ in connection with non-AUTOM delivered equity option contracts \6\ 
when an ROT or specialist executes over 14,000 contracts calculated on 
a daily basis in all equity options overlying the same underlying 
security per day (``Qualifying Option''). This proposal will apply only 
to transactions when an ROT or specialist is the contra-party to a 
customer order. Therefore, after the 14,000 non-AUTOM delivered 
contract level is reached in a Qualifying Option, additional comparison 
and transaction charges will not be assessed on subsequent option 
contracts in excess of 14,000 that are executed on that day in that 
specific Qualifying Option when the ROT or specialist is the contra-
party to a customer order.\7\ In addition, even when the 14,000 cap is 
reached, the Exchange will continue to impose a license fee of $0.10 
per contract side on applicable ROTs and specialists for equity option 
transactions on those licensed products that carry a license fee.\8\ 
This proposal was designated to become effective for trades settling on 
or after October 20, 2006.
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    \5\ The Exchange does not currently assess a comparison charge 
on specialist transactions. Therefore, the proposed cap will apply 
to ROT comparison and transaction charges combined and separately to 
specialist transaction charges.
    \6\ For purposes of this fee, orders delivered via the Floor 
Broker Management System shall be deemed to be non-AUTOM delivered 
orders. See Phlx Rule 1063.
    \7\ For example, if an ROT executes a total of 35,000 non-AUTOM 
delivered customer SPY equity option contracts (puts and calls) in a 
given day, the transaction and comparison charges assessed for these 
transactions will be capped for that day at $3,080 (14,000 contracts 
* ($0.19 (transaction charge) + $0.03 (comparison charge)). In this 
example, additional transaction and comparison charges will continue 
to be assessed on all other option contracts executed by that ROT, 
except for those executed option contracts in other options that 
also meet the above requirements. For orders delivered 
electronically and transactions that are executed with a contra 
party other than a customer (i.e., another ROT), comparison and 
transaction charges will continue to be assessed even when the 
contracts are in the same option (i.e., SPY) that qualified for the 
cap described above.
    \8\ For a complete list of the licensed products that will be 
assessed a $0.10 license fee per contract side after the 14,000 
equity option contract cap is reached, see $60,000 ``Firm Related'' 
Equity Option and Index Option Cap on the Exchange's fee schedule.
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    The text of the proposed rule change is available on the Phlx's Web 
site, http://www.phlx.com, at the Phlx's Office of the Secretary, 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 Phlx included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposal. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposal is to create an incentive for ROTs and 
specialists to attract additional order flow to the Exchange and also, 
in connection with sizeable customer transactions, to create an 
incentive for ROTs and specialists to execute additional contracts 
knowing comparison and transaction fees are capped once the 14,000 
threshold is met. This proposal should also provide additional 
incentives for member organizations to increase liquidity and allow the 
Exchange to remain competitive.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \10\ in particular, in that it 
is an equitable allocation of reasonable fees and other charges among 
Exchange members.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx believes that the proposed rule change would impose no 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 64604]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange did not solicit or receive any written comments with 
respect to the proposal.

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 \11\ and Rule 
19b-4(f)(2) \12\ thereunder. Accordingly, the proposal is effective 
upon filing with the Commission. 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)(ii).
    \12\ 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-2006-67 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2006-67. 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 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-2006-67 and should be submitted on or before 
November 24, 2006.

    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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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-18484 Filed 11-1-06; 8:45 am]

BILLING CODE 8011-01-P