Document ID: SEC-2007-1138-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-08-15T04:00Z

[Federal Register: August 15, 2007 (Volume 72, Number 157)]
[Notices]               
[Page 45855-45856]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15au07-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56221; File No. SR-Phlx-2007-48]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto To Adopt a Monthly Fee for Stock Execution 
Clerks That Handle Stand-Alone Equity Orders

August 8, 2007.
    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 June 28, 2007, 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 Phlx. On 
August 7, 2007, Phlx amended the proposed rule change.\3\ The Exchange 
filed the proposal pursuant to Section 19(b)(3)(A)(ii) of the Act \4\ 
and Rule 19b-4(f)(2) \5\ thereunder, as establishing or changing a due, 
fee, or other charge applicable to a member, which renders the proposed 
rule change effective upon filing with the Commission.\6\ 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\ See Amendment No. 1.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
    \6\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the period to have commenced on August 7, 
2007, the date the Exchange filed Amendment No. 1.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Phlx proposes to adopt a monthly fee of $500.00 for stock execution 
clerks that handle stand-alone equity orders, such as to hedge traders' 
options positions. Those stock execution clerks who are assessed the 
$500.00 monthly fee will no longer pay the $25.00 Trading Floor 
Personnel Registration Fee, as the $500.00 monthly fee will encompass 
the $25.00 Trading Floor Personnel Registration Fee. The text of the 
proposed rule change is available at http://www.phlx.com, the Phlx, and 

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 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. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    A stock execution clerk is currently defined in Exchange Rule 1090 
as any clerk other than a specialist clerk on the Exchange trading 
floor who functions as an intermediary in a transaction (i) Consummated 
on the Exchange; (ii) entered verbally for execution other than on the 
Exchange; or (iii) entered into a third party system designed to 
execute transactions other than on the Exchange.\7\ All stock execution 
clerks must register as such with the Exchange.\8\
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    \7\ See Exchange Rule 1090, Commentary .01(a).
    \8\ See Exchange Rule 620(b).
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    Generally, ``stock execution'' refers to the service used by 
options traders to hedge their options trades with the underlying 
stock. Although stock execution today is often done electronically, 
stock execution clerks provide a service to Exchange members on the 
options floor by accepting orders for the purchase and sale of 
securities underlying options transactions. Once such orders are 
accepted, the stock execution clerk forwards such orders to the 
appropriate marketplace for execution. The transactions executed are 
typically hedging transactions in underlying stocks for Exchange 
specialists and Registered Options Traders. The transaction may be 
contingent on an options transaction \9\ or

[[Page 45856]]

may stand independently (``stand-alone equity orders'').
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    \9\ A contingency order is a limit or market order to buy or 
sell that is contingent upon a condition being satisfied while the 
order is at the post. For certain options contingency orders, the 
contingency involves buying or selling the underlying security 
(generally called ``stock'' in this proposal). See Exchange Rule 
1066(c).
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    The purpose of this proposal is to assess fees commensurate with 
the activities of stock execution clerks that handle stand-alone equity 
orders (i.e. orders that are not contingent on an options transaction). 
For those stock execution clerks that handle orders that are contingent 
on an options transaction, i.e. orders that are packaged with an 
options trade, the Exchange currently assesses charges associated with 
those contingency orders, such as options floor brokerage assessment 
and option transaction charges. The Exchange, however, does not assess 
fees in connection with stand-alone equity orders, which may be handled 
by a variety of intermediaries and which may be executed on different 
equity markets. The Exchange believes it is appropriate to charge a fee 
for stock execution clerks performing this function on the options 
floor because such clerks and such businesses generally are not subject 
to fees for doing business from the Exchange's options floor.
2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of 
fees is consistent with Section 6(b) of the Act \10\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \11\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members. The Exchange believes that it 
is equitable and reasonable to charge a fee for stock execution clerks 
that handle stand-alone equity orders because such clerks are generally 
not subject to Exchange fees for doing business from the Exchange's 
options floor. The Exchange believes that the $500.00 monthly fee, 
which encompasses the $25.00 Trading Floor Personnel Registration Fee, 
is a reasonable amount to charge stock execution clerks for the ability 
to perform this service on the options floor. In addition, the monies 
received as a result of the $500 monthly fee should help raise revenue 
for the Exchange.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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

    A written comment was received by the Exchange.\12\
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    \12\ A written comment in the form of an e-mail message from 
Larry Johnson at Wedbush Morgan Securities was sent to Kevin Kennedy 
(an Exchange employee) on May 29, 2007. In the e-mail message, Mr. 
Johnson stated, in part, that the $500 fee was ``in no way an 
impediment for us.'' This written comment was received in connection 
with various discussions between Exchange staff and Wedbush, which 
related in part to what types of activity (including stock execution 
business) would be allowed on the Exchange's options floor due to 
the fact that the Exchange was closing its physical equity trading 
floor and migrating to XLE, the Exchange's new equity trading 
system. The Exchange was addressing this issue, in general, in order 
to notify former equity floor members who may have been considering 
establishing some form of operation on the Exchange's options 
trading floor and possibly connecting to XLE.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has become effective upon filing 
with the Commission pursuant to Section 19(b)(3)(A)(ii) of the Act \13\ 
and Rule 19b-4(f)(2) thereunder,\14\ in that the proposed rule change 
establishes or changes a member due, fee, or other charge imposed by 
the self-regulatory organization. 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2007-48 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-2007-48. 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-2007-48 and should be 
submitted on or before September 5, 2007.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-15935 Filed 8-14-07; 8:45 am]

BILLING CODE 8010-01-P