03-18123. Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Philadelphia Stock Exchange, Inc. and Amendment No. 1 Thereto Relating to the Imposition of a 500 Contract Cap on Payment for Order Flow Fees

July 11, 2003.

On December 26, 2002, pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)^[1] and Rule 19b-4 thereunder,^[2] the Philadelphia Stock Exchange, Inc. (“Phlx”) filed with the Securities and Exchange Commission a proposal to impose a 500-contract cap on fees in connection with its payment for order flow program. On May 29, 2003, the Phlx filed Amendment No. 1 to the proposed rule change. Under the proposal, the applicable payment for order flow fee would be imposed only on the first 500 contracts per individual cleared side of a transaction.

The proposed rule change was published for comment in the Federal Register on June 6, 2003.^[3] The Commission received no comments on the proposal.

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, particularly section 6(b) of the Act ^[4] and the rules and regulations thereunder.^[5] The Commission finds that the proposed rule change provides for the equitable allocation of reasonable dues, fees, and other charges among Phlx members and other persons using the Phlx's facilities, consistent with Section 6(b)(4) of the Act.^[6]

It is therefore ordered, pursuant to section 19(b)(2) of the Act,^[7] that the proposed rule change (File No. SR-Phlx-2002-87) be, and it hereby is, approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[8]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  See Securities Exchange Act Release No. 47958 (May 30, 2003), 68 FR 34026 (June 6, 2003).

4.  15 U.S.C. 78f(b).

5.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

6.  15 U.S.C. 78f(b)(4).

7.  15 U.S.C. 78s(b)(2).

8.  17 CFR 200.30-3(a)(12).