Document ID: SEC-2006-1708-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-12-28T05:00Z

[Federal Register: December 28, 2006 (Volume 71, Number 249)]
[Notices]               
[Page 78254-78255]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de06-134]                         

[[Page 78254]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54978; File No. SR-Phlx-2006-63]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendments No. 1 and 2 
Thereto Relating to a Philadelphia Board of Trade Enterprise License 
Fee For Dissemination of Certain Market Data

December 20, 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 September 28, 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 substantially prepared by the 
Phlx. The Phlx filed Amendment No. 1 to the proposed rule change on 
November 1, 2006.\3\ The Phlx filed Amendment No. 2 to the proposed 
rule change on December 20, 2006.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaces and supersedes the original filing 
in its entirety.
    \4\ Amendment No. 2 replaces and supersedes the original filing 
in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to add an Enterprise License Fee of $10,000 per 
year or $850 per month that would be assessed by the Exchange's wholly 
owned subsidiary, the Philadelphia Board of Trade (``PBOT''), on 
eligible market data vendors or subvendors (collectively ``Vendors'') 
for certain index values received over PBOT's Market Data Distribution 
Network (``MDDN'').\5\ The text of the proposed rule change is 
available at Phlx, the Commission's Public Reference Room, and http://www.phlx.com
.

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    \5\ The MDDN is an Internet protocol multicast network developed 
by PBOT and SAVVIS Communications for the purpose of transmitting 
index values.
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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 the proposed rule change is to add an Enterprise 
License Fee for eligible Vendors of market data disseminated over 
PBOT's MDDN. Phlx has licensed market data in the form of current and 
closing index values underlying most of Phlx's proprietary indexes to 
PBOT for the purpose of selling, reproducing, and distributing the 
index values over the MDDN (``Market Data''). The Exchange or its third 
party designee objectively calculates and makes available to PBOT real-
time index values every 15 seconds and closing index values at the end 
of each trading day. Pursuant to agreements with PBOT, Market Data 
Vendors will make the real-time Market Data widely available to 
subscribers.\6\
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    \6\ PBOT has contracted with one or more major Market Data 
Vendors to receive real-time and closing index values over the MDDN 
and promptly redistribute such values.
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    On May 11, 2006, the Commission approved the Exchange's proposal to 
allow PBOT to charge subscriber fees to Vendors of Market Data for all 
the values of Phlx's proprietary indexes disseminated by PBOT's 
MDDN.\7\ The subscriber fees are set out in agreements that PBOT 
executes with various Market Data Vendors for the right to receive, 
store, and retransmit the current and closing index values transmitted 
over the MDDN. The fees approved by the Commission in its May 11, 2006 
approval order include: a monthly fee of: (a) $ 1.00 per ``Device,'' as 
defined in the Market Data agreements,\8\ that is used by Vendors and 
their subscribers to receive and re-transmit Market Data on a real-time 
basis (``device fee''), and (b) $.00025 per request for snapshot data, 
which is essentially Market Data that is refreshed no more frequently 
than once every 60 seconds,\9\ or $1,500 per month for unlimited 
snapshot data requests (``snapshot fee'').\10\
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    \7\ See Securities Exchange Act Release No. 53790 (May 11, 
2006), 71 FR 28738 (May 17, 2006) (SR-Phlx-2006-04).
    \8\ The definition of ``Device'' in the agreements is complex 
and incorporates a number of other defined terms. The agreements 
provide that ``Device'' shall mean, in case of each Subscriber and 
in such Subscriber's discretion, either any Terminal or any End 
User. A Subscriber's Device may be exclusively Terminals, 
exclusively End Users or a combination of Terminals or End Users and 
shall be reported in a manner that is consistent with the way the 
Vendor identifies such Subscriber's access to Vendor's data. By way 
of further explanation, an ``End User'' is an individual authorized 
or allowed by a Vendor to access and display real-time market data 
that is distributed by PBOT over the MDDN; and a ``Terminal'' is any 
type of equipment (fixed or portable) that accesses and displays 
such market data.
    \9\ The Exchange has filed SR-Phlx-2006-59 proposing to increase 
the snapshot data fee to $.0025 per request. See Securities Exchange 
Act Release No. 54890 (December 7, 2006), 71 FR 74975 (December 13, 
2006) (SR-Phlx-2006-59).
    \10\ The index values may also be made available by Vendors on a 
delayed basis (i.e., no sooner than twenty minutes following receipt 
of the data by vendors) at no charge.
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    The Exchange now proposes to add an Enterprise License Fee that 
would be available to eligible Vendors as an alternative to the device 
fee or snapshot fee.\11\ Specifically, where a Vendor is a firm acting 
as a retail broker-dealer conducting a material portion of its business 
via one or more proprietary Internet Web sites by which such firm 
distributes Market Data to predominately non-professional Market Data 
users with whom such firm has a brokerage relationship (``Eligible 
Firm''),\12\ that Eligible Firm may pay an Enterprise License Fee of 
$10,000 per year or $850 per month for its receipt and re-transmittal 
of Market Data. An Eligible Firm may also distribute Market Data to 
professional users with whom such firm has a brokerage relationship, 
provided such Market Data distribution is predominantly to non-
professional users.\13\ Market Data distribution will be

[[Page 78255]]

considered to be ``predominantly to non-professional users'' so long as 
the Eligible Firm's Market Data distribution to professional users when 
compared to Market Data distribution to all (professional and non-
professional) users does not exceed 10%.\14\
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    \11\ A firm that qualifies for the Enterprise License Fee may 
instead choose to pay the device fee and/or the snapshot fee as 
appropriate.
    \12\ To be eligible for the Enterprise License Fee, the Exchange 
would view a retail broker dealer as conducting a material portion 
of its business via one or more Internet websites if at least twenty 
percent (20%) of the broker dealer's business were conducted via the 
Internet.
    \13\ A non-professional user is defined in the fee schedule as 
any natural person who is not: (a) registered or qualified in any 
capacity with the Commission, the Commodities Futures Trading 
Commission, any state securities agency, any securities exchange or 
association, or any commodities or futures contract market or 
association; (b) engaged as an ``investment advisor'' as that term 
is defined in Section 202(11) of the Investment Advisors Act of 
1940, 15 U.S.C. 80b-2(11), (whether or not registered or qualified 
under that Act); nor, (c) employed by a bank or other organization 
exempt from registration under federal or state securities laws to 
perform functions that would require registration or qualification 
if such functions were performed for an organization not so exempt.
    \14\ As an example, if data recipient ABC Corp. has 100 
customers that receive PBOT Market Data of which 10 are professional 
users and 90 are retail (non-professional) users the Enterprise 
License Fee would be available to the firm because 10 professional 
users / 100 total users = 10%.
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    To be eligible for the Enterprise License Fee, an Eligible Firm 
shall have to certify to PBOT that it qualifies for the Enterprise 
License Fee, including in regard to distribution to professional and 
non-professional users, and shall need to immediately notify PBOT if it 
can no longer certify its qualification.\15\
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    \15\ A firm that has entered into an agreement with PBOT to 
receive Market Data over the MDDN but is not qualified for the 
Enterprise License Fee may pay the device fee and/or the snapshot 
fee as appropriate.
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    In developing the Enterprise License Fee, PBOT considered inquiries 
from actual and potential broker dealer data recipients regarding the 
availability of an Enterprise License for data transmitted over the 
MDDN and considered that certain industry organizations have offered 
fee structures that are available to some but not all data recipients, 
similarly to the Enterprise License Fee.\16\ The Exchange believes that 
the proposed fee of $10,000 per year or $850 per month is fair and 
reasonable and consistent with industry practice.
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    \16\ For example, the Nasdaq Stock Market, Inc. (``Nasdaq''), a 
self regulatory organization, has fee schedules that are as much as 
twenty times higher for professional or corporate subscribers than 
for non-professional subscribers for UTP Level 1 fees, TotalView 
fees and Nasdaq MAX fees; and offers a TotalView Non-Professional 
Enterprise Fee License to qualified firms that distribute TotalView 
to their non-professional users with whom they have a professional 
relationship. The Options Price Reporting Authority (``OPRA''), a 
national market system, offers an Enterprise Professional Subscriber 
Fee to certain professional options data subscribers (these 
professional subscribers do not qualify for the reduced fees charged 
to nonprofessional subscribers) that is based on the number of 
professional users that the subscribers have instead of the number 
of devices. In addition, the Exchange believes that some industry 
data vendors offer different fee structures to qualified data 
recipients.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act\17\ in general, and furthers the objectives of Section 
6(b)(5) of the Act\18\ in particular, in that it is designed to promote 
just and equitable principles of trade, 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, 
by providing an alternate fee structure to market data recipients and 
thereby encouraging re-distribution of such data. The Exchange believes 
that its proposal, which is designed to encourage dissemination of 
market data, is likewise consistent with Section 6(b)(4) of the Act\19\ 
in that the proposed rule change provides for the equitable allocation 
of reasonable dues, fees, and other charges among the Exchange's 
members and issuers and other persons using its facilities as described 
herein.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 No. SR-Phlx-2006-63 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-2006-63. 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 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-2006-63 and should be submitted on or before 
January 18, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-22252 Filed 12-27-06; 8:45 am]

BILLING CODE 8011-01-P