Philadelphia Stock Exchange To File With Securities And Exchange Commission To Eliminate Exchange-Based Payment For Order Flow Fee

The Philadelphia Stock Exchange announced Thursday that its Executive Committee has authorized the chairman to file papers with the Securities and Exchange Commission to eliminate its exchange-based payment for order flow fee.

The decision does not mean the PHLX is abolishing payment for order flow, a business practice that is conducted by specialist firms. The exchange's decision eliminates the exchange's involvement in administering payment for order flow and also eliminates "the tax" on market makers.

If the suspension of payment for order flow puts the PHLX at a competitive disadvantage, the exchange's chairman has been authorized to reinstate a payment for order flow fee up to twice its current level.

The PHLX established a payment for order flow program in August 2000 as a competitive response to another exchange's decision to introduce exchange-sponsored payment for order flow. As part of the program, the PHLX levied a $1 payment for order flow fee against specialists and market makers each time they executed customer orders in the 120 most-actively traded equity options classes.