Document ID: SEC-2006-0186-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc
Posted Date: 2006-02-13T05:00Z

[Federal Register: February 13, 2006 (Volume 71, Number 29)]
[Notices]               
[Page 7602-7604]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13fe06-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53226; File No. SR-Phlx-2005-92]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Cancellation Fees

February 3, 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 December 30, 2005, 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 
Phlx. On January 27, 2006, the Phlx submitted an amendment to the 
proposed rule change (``Amendment No. 1'').\3\ The Phlx has filed the 
proposed rule change as one establishing or changing a due, fee, or 
other charge imposed by the Phlx under Section 19(b)(3)(A)(ii) \4\ and 
Rule 19b-

[[Page 7603]]

4(f)(2) thereunder,\5\ 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\ In Amendment No. 1, Phlx clarified the manner in which the 
fee will be assessed and made technical changes to the rule text.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 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 cancellation fee of $1.10 per order to 
be assessed on member organizations for each cancelled AUTOM-delivered 
\6\ order in excess of the number of orders executed on the Exchange by 
that member organization in a given month. The proposed cancellation 
fee will not be assessed in a month in which fewer than 500 AUTOM-
delivered orders are cancelled. Simple cancels and cancel-replacement 
orders are the types of orders that will be counted when calculating 
the number of AUTOM-delivered orders.\7\ The text of the proposed rule 
change is available on the Exchange's Internet Web site (http://www.phlx.com
), at the principal office of the Phlx, and at the 

Commission's Public Reference Room.
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    \6\ AUTOM is the Exchange's electronic order delivery, routing, 
execution and reporting system, which provides for the automatic 
entry and routing of equity option and index option orders to the 
Exchange trading floor. See Exchange Rules 1014(b)(ii) and 1080.
    \7\ A cancel-replacement order is a contingency order consisting 
of two or more parts which require the immediate cancellation of a 
previously received order prior to the replacement of a new order 
with new terms and conditions. If the previously placed order is 
already filled partially or in its entirety the replacement order is 
automatically canceled or reduced by such number. For example, if an 
contracts get filled, leaving a remaining balance of 80 contracts, 
and a cancel-replacement order is received with instructions to 
the replacement order would be for 40 contracts with a price of 
$1.80 (because 20 contracts were already executed at the price of 
$1.70). See Exchange Rule 1066(c)(7).
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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 purpose of assessing $1.10 per order for each cancelled AUTOM-
delivered order in excess of the number of orders that the executing 
member organization executes on the Exchange in a given month is to 
discourage excessive use of cancellations.\8\ The Exchange believes 
this proposed fee is necessary given the often disproportionate number 
of order cancellations received relative to order executions and the 
increased costs associated with the practice of canceling orders 
immediately after they are routed electronically to the Exchange. The 
Exchange believes that a cancellation fee should help to deal with the 
various operational problems and costs resulting from this practice.
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    \8\ As represented by the Phlx, this proposal does not cover 
orders delivered through the Floor Broker Management System 
(``FBMS'') because, at this time, FBMS orders are entered and 
cancelled manually from the floor and do not create the capacity 
issues that are created in connection with excessive electronically-
delivered cancelled orders, as described above. See Exchange Rule 
1063. Telephone conversation between Edith Hallahan, Deputy General 
Counsel, and Cynthia K. Hoekstra, Director, Phlx, and Nancy J. 
Sanow, Assistant Director, and Ira L. Brandriss, Special Counsel, 
Division of Market Regulation, Commission, February 1, 2006.
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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,\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 
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 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 either solicited or received.

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

    The foregoing proposed rule change, as amended, 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 will take 
effect 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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ The effective date of the original proposed rule change is 
December 30, 2005 and the effective date of the amendment is January 
27, 2006. For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, as 
amended, under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on January 27, 2006, the date on 
which the Exchange submitted Amendment No. 1. 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-2005-92 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-2005-92. 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

[[Page 7604]]

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 the filing also will be 
available for inspection and copying at the principal office of the 
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-2005-92 and should be submitted on or before March 6, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-1961 Filed 2-10-06; 8:45 am]

BILLING CODE 8010-01-P