Document ID: SEC-2006-0616-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-05-12T04:00Z

[Federal Register: May 12, 2006 (Volume 71, Number 92)]
[Notices]               
[Page 27768-27770]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12my06-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53761; File No. SR-Phlx-2006-20]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 2 Thereto Establishing a Pilot Option Transaction 
Charge Credit for Specialists That Send Certain Principal Acting as 
Agent Orders for Execution Via the Intermarket Option Linkage

May 5, 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 March 31, 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. On April 
25, 2006, the Exchange filed Amendment No. 1 to the proposed rule 
change, and withdrew Amendment No. 1 on May 4, 2006. On May 5, 2006, 
the Exchange filed Amendment No. 2.\3\ The Exchange 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)(ii) of the Act \4\ and Rule 19b-4(f)(2) thereunder,\5\ 
which renders the proposal 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\ In Amendment No. 2, the Exchange clarified that the proposed 
rule change is a pilot that will expire on July 31, 2006. In 
Amendment No. 2, the Exchange also clarified the purpose of the 
proposed rule change and made technical changes to the proposed rule 
change, including the proposed rule text.
    \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 period within which 
the Commission may summarily abrogate the proposed rule change the 
Commission considers the period to commence on May 5, 2006, the date 
on which the Exchange filed Amendment No. 2. See 15 U.S.C. 
78s(b)(3)(C).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to establish an option transaction charge 
credit of $0.21 per contract for Exchange options specialist units\7\ 
that incur Phlx option transaction charges when a customer order is 
delivered to the limit order book via the Exchange's Options Floor 
Broker Management System (``FBMS'') \8\ and is then sent to an away 
market and executed via the Intermarket Option Linkage (``Linkage'') 
under the Plan for the Purpose of Creating and Operating an Intermarket 
Option Linkage ( ``Plan'') \9\ as a Principal Acting as Agent Order 
(``P/A Order'').\10\
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    \7\ The Exchange uses the terms ``specialist'' and ``specialist 
unit'' interchangeably in its proposed rule change.
    \8\ The FBMS is a component of the Exchange's Automated Options 
Market (AUTOM) System designed to enable Floor Brokers and/or their 
employees to enter, route and report transactions stemming from 
options orders received on the Exchange. The Options FBMS also is 
designed to establish an electronic audit trail for options orders 
represented and executed by Floor Brokers on the Exchange, such that 
the audit trial provides an accurate, time-sequenced record of 
electronic and other orders, quotations and transactions on the 
Exchange, beginning with the receipt of an order by the Exchange, 
and further documenting the life of the order through the process of 
execution, partial execution, or cancellation of that order. See 
Phlx Rule 1080, Commentary .06.
    \9\ See Securities Exchange Act Release Nos. 43086 (July 28, 
2000), 65 FR 48023 (August 4, 2000); and 43573 (November 16, 2000), 
65 FR 70851 (November 28, 2000) (order approving Phlx as a 
participant in the Plan).
    \10\ A P/A Order is an order for the principal account of a 
specialist (or equivalent entity on another participant exchange 
that is authorized to represent public customer orders), reflecting 
the terms of a related unexecuted public customer order for which 
the specialist is acting as agent. See Phlx Rule 1083(k)(i).
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    This proposal is a pilot that will expire on July 31, 2006, is in 
connection

[[Page 27769]]

with an existing pilot program that is currently scheduled to expire on 
July 31, 2006,\11\ and applies to transactions settling on or after 
April 3, 2006.
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    \11\ Fees for Linkage P and P/A orders are currently subject to 
a pilot program scheduled to expire on July 31, 2006. See, e.g., 
Securities Exchange Act Release No. 52095 (July 21, 2005), 70 FR 
43733 (July 28, 2005) (SR-Phlx-2005-46).
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    The text of the proposed rule change is available at the 
Commission's Public Reference Room, at the Office of the Secretary of 
the Exchange, and on the Exchange's Web site at 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. 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
    The purpose of this proposed rule change is to alleviate the 
potential economic burden of multiple transaction charges imposed on 
Exchange specialist units by establishing a credit for Exchange option 
transaction charges incurred by an Exchange specialist unit when a 
customer limit order placed on the limit order book by a Floor Broker 
\12\ results in an execution of a P/A Order that is sent to another 
exchange via Linkage.
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    \12\ A Floor Broker who wishes to place a limit order on the 
limit order book must submit such a limit order electronically 
through the FBMS. See Exchange Rule 1063, Commentary .01. See also, 
Exchange Rule 1080, Commentary .02(b).
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    Currently, when an Exchange specialist sends a P/A Order through 
Linkage to an away market, the specialist unit ultimately pays fees to 
execute the order at both the Exchange and the away market center. The 
Exchange believes that the imposition of both fees may place an 
economic burden on Exchange specialist units. The purpose of this 
proposal is to credit the specialist for the fee that is charged by the 
Exchange. The Exchange believes that an options transaction charge 
credit of $0.21 per contract should encourage the use of the Linkage 
and reduce the potential economic burden of multiple fees that may be 
incurred by specialist units when a customer order is delivered to the 
limit order book via the FBMS and is then sent and executed via the 
Linkage. In addition, this proposal should allow the Exchange to remain 
competitive with other exchanges with respect to the assessment of 
Linkage-related fees.\13\
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    \13\ See Securities Exchange Act Release Nos. 53526 (March 21, 
2006), 71 FR 15794 (March 29, 2006) (SR-PCX-2006-19) (rebate of the 
transaction fees charged to Market Makers when they use the Linkage 
to send a P/A Order to another options exchange); and 53372 
(February 24, 2006), 71 FR 11003 (March 3, 2006) (SR-CBOE-2006-10) 
(rebate of certain transaction fees to Designated Primary Market 
Makers related to the execution of outbound P/A Orders).
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    This proposal is a pilot that will expire on July 31, 2006, is in 
connection with an existing pilot program that is currently scheduled 
to expire on July 31, 2006,\14\ and applies to transactions settling on 
or after April 3, 2006.
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    \14\ See supra at note 11.
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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 \15\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \16\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members and issuers and other persons 
using its facilities.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 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 establishes or changes a due, 
fee, or other charge applicable only to a member pursuant to Section 
19(b)(3)(A)(ii) of the Act \17\ and Rule 19b-4(f)(2) thereunder.\18\ 
Accordingly, the proposal took effect upon filing with the Commission.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 17 CFR 240.19b-4(f)(2).
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    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.\19\
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    \19\ See supra at note 6.
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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-2006-20 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-2006-20. 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

[[Page 27770]]

you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2006-20 and should be submitted on or before June 
2, 2006.

    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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Nancy M. Morris,
Secretary.
 [FR Doc. E6-7246 Filed 5-11-06; 8:45 am]

BILLING CODE 8010-01-P