
[Federal Register: November 28, 2007 (Volume 72, Number 228)]
[Notices]               
[Page 67334-67335]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28no07-78]                         


[[Page 67334]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56827; File No. SR-Phlx-2007-75]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change as Modified by Amendment 
Number 1 Thereto Relating to Market Data Distribution Network Fees

November 20, 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 September 27, 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 the 
Phlx. On November 7, 2007, Phlx filed Amendment No. 1 to the proposed 
rule change. The Commission is publishing this notice, as modified by 
Amendment No. 1 thereto, to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to eliminate a fee assessed by the Exchange's 
wholly owned subsidiary, the Philadelphia Board of Trade (``PBOT''), on 
market data vendors for certain equity index values that subscribers 
receive over PBOT's Market Data Distribution Network (``MDDN''). The 
text of the proposed rule change is available at Phlx, the Commission's 
Public Reference Room, and 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 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 eliminate, effective 
January 1, 2008, one of the alternative fees charged by the PBOT for 
certain index market data disseminated over the MDDN.\3\ Specifically, 
the Phlx has licensed the current and closing index values underlying 
most of the Phlx's proprietary indexes to PBOT for the purpose of 
selling, reproducing, and distributing the index values over PBOT's 
MDDN. Similarly, Hapoalim Securities USA, Inc. has licensed the current 
and closing Hapoalim American Israeli Index\TM\ (HAI\SM\) values to 
PBOT for the purpose of selling, reproducing, and distributing those 
values over the MDDN. On each trading day, the Exchange or its third 
party designee calculates and makes available to PBOT a real-time index 
value every 15 seconds and a closing index value at the end of the day. 
In exchange for subscriber fees paid to PBOT, market data vendors 
(``Vendors'' or ``Market Data Vendors'') are allowed to widely 
disseminate this market data for all the values of Phlx's proprietary 
indexes and of HAI to their subscribers.\4\
---------------------------------------------------------------------------

    \3\ The MDDN is an internet protocol multicast network developed 
by PBOT and SAVVIS Communications.
    \4\ The PBOT has contracted with several major Market Data 
Vendors to receive real-time and closing index values over the MDDN 
and promptly redistribute such values. Approximately 96 Market Data 
Vendors, including for example Reuters Limited, Charles Schwab & 
Co., Bloomberg L.P., Telekurs Financial Information Ltd. and Thomson 
Financial, have entered into such market data agreements with PBOT. 
The fees described in this proposed rule change cover values of all 
the indexes disseminated over the MDDN.
---------------------------------------------------------------------------

    As approved by the Commission, the market data fees charged by PBOT 
currently include a monthly fee of $1.00 per Device,\5\ used by Vendors 
and their subscribers to receive and re-transmit Market Data on a real-
time basis (``device fee'') and also a $.0025 per request fee for 
``snapshot data,'' which is essentially market data that is refreshed 
no more frequently than once every 60 seconds, or $1,500 per month for 
unlimited snapshot data requests.\6\ Additionally, eligible Vendors may 
pay an Enterprise License Fee of $10,000 per year or $850 per month for 
unlimited real-time data as an alternative to the device fee.\7\
---------------------------------------------------------------------------

    \5\ 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. An ``End User'' is defined as 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. Market data vendors which provide market data to 
200,000 or more Devices in any month qualify for a 15% 
Administrative Fee credit for that month, to be deducted from the 
monthly Subscriber Fees that they collect and are obligated to pay 
PBOT under the Vendor/Subvendor Agreement.
    \6\ See Securities Exchange Act Release Nos. 53790 (May 11, 
2006), 71 FR 28738 (May 17, 2006) (SR-Phlx-2006-04) and 55111 
(January 16, 2007), 72 FR 3188 (January 24, 2007) (SR-Phlx-2006-59). 
The subscriber fees are set out in agreements that PBOT executed 
with various market data vendors for the right to receive, store, 
and retransmit the current and closing index values transmitted over 
the MDDN. In its original proposal, the Exchange stated that, under 
these vendor agreements PBOT may change any of the fees enumerated 
in the agreement by giving the Vendor or subvendor advance written 
notice of such changes. The Commission conditioned any such fee 
change on the submission by Phlx of a proposed rule change under 
Section 19(b) of the Act, and approval of such proposal. See 71 FR 
at 28740.
    \7\ A Vendor is eligible for the Enterprise License Fee if it 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 the firm distributes Market Data to predominately 
non-professional Market Data users with whom the firm has a 
brokerage relationship (``Eligible Firm''). 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. The 
Eligible Firm's Market Data distribution to professional users 
cannot exceed 10%. See Securities Exchange Act Release No. 55424 
(March 8, 2007), 72 FR 12242 (March 15, 2007) (SR-Phlx-2006-63).
---------------------------------------------------------------------------

    Of these alternatives, the Exchange is now proposing to eliminate 
the ability to access the market data on a ``snapshot'' basis and 
consequently will eliminate the snapshot data fee, effective January 1, 
2008.\8\ The purpose for the change is to reduce PBOT's operational and 
accounting expenses of administering the snapshot data fee, given the 
extremely limited number of Vendors making use of the snapshot data 
fee. Vendors of Market Data will continue to be able to access Market 
Data by paying the monthly fee of $1.00 per Device. Additionally, 
eligible Vendors may pay the Enterprise License Fee of $10,000 per year 
or $850 per month for unlimited real-time data as an alternative to the 
device fee. The Exchange anticipates that firms that currently receive 
and re-transmit snapshot data will qualify for the Enterprise License 
Fee for unlimited real-time Market Data.
---------------------------------------------------------------------------

    \8\ This proposed rule change also would correct an incorrect 
reference to the Commodity Futures Trading Commission in the table 
of MDDN fees set forth as Exhibit 5.

---------------------------------------------------------------------------

[[Page 67335]]

    Finally, as noted above, Market data vendors which provide market 
data to 200,000 or more Devices in any month qualify for a 15% 
Administrative Fee credit for that month, to be deducted from the 
monthly Subscriber Fees that they collect and are obligated to pay PBOT 
under the Vendor/Subvendor Agreement. The Exchange proposes to 
eliminate the applicability of the 15% Administrative Fee credit to the 
Enterprise License Fee because Vendors electing to receive Market Data 
pursuant to the Enterprise License Fee, unlike Vendors electing to 
receive Market Data pursuant to the device fee, are not required to 
bear the ongoing administrative expense of reporting the number of 
Devices to PBOT.\9\ Vendors paying the device fee must prepare and 
deliver to PBOT a detailed monthly accounting and report of devices. By 
contrast, a vendor paying the Enterprise License Fee is not required to 
submit any accounting to PBOT.\10\ Instead, to be eligible for the 
Enterprise License Fee, a Vendor must certify to PBOT that it qualifies 
for the Enterprise License Fee, including that market distribution is 
predominantly to non-professional users, and must immediately notify 
PBOT if it can no longer certify its qualification. The administrative 
costs to a firm associated with monitoring its ongoing eligibility for 
the Enterprise License Fee should be substantially less than the 
administrative costs to a firm subject to the device fee.
---------------------------------------------------------------------------

    \9\ Phlx clarified that the elimination of the 15% 
Administrative Fee credit for the Enterprise License Fee will be 
effective immediately upon Commission approval. As stated above, the 
snapshot data fee would be effective on January 1, 2008, subject to 
Commission approval. Telephone conference between Carla Behnfeldt, 
Director, Phlx; Brian Trackman, Special Counsel, Division of Trading 
and Markets (``Division''), Commission; and Jan Woo, Special 
Counsel, Division, Commission, on November 20, 2007.
    \10\ The Exchange notes that several large vendors are currently 
paying the Enterprise License Fee.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ 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, in that it will permit the MDDN to operate with greater 
efficiency while still permitting investors access to market data under 
the remaining alternative fee structures from which qualified Market 
Data Vendors will be permitted to choose. For the same reasons the 
Exchange also believes that the proposal is consistent with Section 
6(b)(4) of the Act,\13\ 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. The Exchange believes that the proposed fee changes are 
also consistent with Rule 603 under the Act.\14\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 17 CFR 242.603.
---------------------------------------------------------------------------

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-2007-75 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-2007-75. 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-2007-75 and should be 
submitted on or before December 19, 2007.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Nancy M. Morris,
Secretary.
[FR Doc. E7-23123 Filed 11-27-07; 8:45 am]

BILLING CODE 8011-01-P
