[Federal Register Volume 65, Number 1 (Monday, January 3, 2000)]
[Notices]
[Pages 154-156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-34017]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 42271; File No. SR-PHLX-99-45]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to a Pilot Program to Impose Fees For Computer 
Equipment Services, Repairs or Replacements and Relocation of Computer 
Equipment

December 23, 1999.
    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 October 29, 1999, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. On December 16, 1999, the Exchange

[[Page 155]]

submitted Amendment No. 1 \3\ to the proposed rule change.\4\
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    \1\ 15 USC 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange provided, among other 
things, the dates during which the pilot program will be in effect, 
clarified why the fees are being imposed, to whom they apply, and 
represented that it will circulate a Notice to Members announcing 
the pilot program. See Letter from Cynthia K. Hoeskstra, Counsel, 
Phlx, to Jennifer Colihan, Attorney, Division of Market Regulation 
(``Division''), SEC, dated December 16, 1999 (``Amendment No. 1'').
    \4\ Because of the substantive nature of Amendment No. 1, the 
Commission deems the proposal to be filed and effective as of 
December 16, 1999, the date on which Amendment No. 1 was filed.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its schedule of dues, fees, and 
charges to require all members on the options and equity floors to pay 
a new fee for computer equipment services, repairs or replacements and 
a fee for member-requested relocation of computer equipment.\5\ These 
fees will be imposed on a three-month pilot basis beginning on January 
1, 2000 and ending on March 31, 2000.
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    \5\ A fee will not be charged for new installation of computer 
equipment.
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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. 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 proposed rule change amends the Phlx's fee schedule in two 
ways. First, the Exchange would amend its schedule of dues, fees and 
charges to impose a new fee on all members on the options and equity 
floors for computer equipment services, repairs or replacements on the 
trading floors. Specifically, the Exchange proposes to charge $100 for 
every service call plus $75 an hour, with a minimum of two hours 
charged.\6\ However, members will not be billed for computer equipment 
services, repairs or replacements when new or refurbished equipment 
fails in the normal and customary manner of usage within 30 days of 
installation.
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    \6\ Some component of this amount may reflect Pennsylvania sales 
tax.
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    The Exchange represents that these charges will cover the cost of 
servicing, repairing or replacing computer equipment on the options and 
equity floors.\7\ The Exchange receives 90 percent of calls on a 
routine basis to repair, replace or otherwise service keyboards, track 
balls, printers and other computer equipment from options or equity 
floor members' work stations. The Exchange represents that this new fee 
is intended to help cover the costs associated with the maintenance and 
replacement of computer equipment, as well as to encourage care in 
using the computer equipment.
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    \7\ This proposed fee will apply to all such requests with no 
distinction between intentional abuse or normal wear and tear due to 
the difficulties associated with categorizing the types of repairs.
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    Second, the Exchange would amend its schedule of dues, fees, and 
charges to also impose another new fee for member-requested relocation 
of a member's work station or any piece of their computer equipment on 
the options or equity floor. In this case, the Exchange proposes to 
charge a $100 service fee plus $75 per hour per person moving the 
equipment, with a minimum of two hours charged for each relocation 
request.\8\ The Exchange represents that the proposed fees are similar 
to provisions adopted by the Pacific Exchange, Inc. (``PCX'') and the 
Chicago Board Options Exchange (``CBOE'').\9\
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    \8\ For example, if two individuals take two hours to relocate a 
work station, the member will be charged $100 for the service call, 
plus $300 for moving the equipment ($75  x  four (two people  x  two 
hours)). Again, some component of this amount may reflect 
Pennsylvania sales tax.
    \9\ See Securities and Exchange Act Release Nos. 41567 (June 28, 
1999), 64 FR 36417 (July 6, 1999) (SR-PCX-99-19) and 29482 (July 24, 
1999), 56 FR 36180 (July 31, 1999) (SR-CBOE-91-27).
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    The Exchange represents that the post/equipment relocation fee will 
assist in defraying the costs associated with the moving of computer 
equipment. The Exchange states that on the options and equity floors, 
the relocations can be very time-consuming and costly since nearly all 
relocations take place after hours or on the weekends.
    The Exchange intends to prepare pre-printed forms that floor 
members can complete prior to requesting repair or relocation service. 
A Notice to Members describing the equipment repair and relocation 
request procedures will be sent to all floor members prior to 
implementation.\10\
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    \10\ This paragraph was clarified pursuant to a telephone 
conversation between Cynthia Hoekstra, Counsel, Phlx, and Jennifer 
Colihan, Attorney, SEC on December 21, 1999.
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    The Exchange proposes to impose these new fees, to be billed 
monthly, effective January 1, 2000 through March 31, 2000, to give the 
Exchange the ability to monitor, and re-evaluate if necessary, the 
procedures. These procedures include instructions to members as to 
where the service request forms will be located, directions as to how 
to complete the form and which department is required to forward the 
forms to the accounting department. The procedures will also include a 
provision that states that members will not be billed for computer 
equipment services, repairs or replacements when new or refurbished 
equipment fails in the normal and customary manner of usage within 30 
days of installation. In addition, the three-month pilot program will 
give the Exchange the opportunity to determine whether the fees for 
computer equipment services, repairs or replacements and member-
requested relocation of computer equipment that are charged to member 
are appropriate and reflect the costs for these services that are 
incurred by the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \11\ in general, and furthers the 
objectives of Section 6(b)(4),\12\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among its members and other persons using its facilities.
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    \11\ 15 USC 78f(b).
    \12\ 15 USC 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 will impose 
any inappropriate burden on competition.

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 rule change establishes or changes a due, fee or 
charge imposed by the Exchange and, therefore, has become effective 
upon filing pursuant to Rule 19(b)(3)(A) of the Act \13\ and Rule

[[Page 156]]

19b-4(f)(2) \14\ thereunder.\15\ At any time within 60 days of the 
filing of such 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 USC 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).
    \15\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 USC 
78c(f).
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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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
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 will also be 
available for inspection and copying at the principal office of the 
Phlx. All submissions should refer to File No. SR-Phlx-99-45 and should 
be submitted by January 24, 2000.

    4For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-34017 Filed 12-30-99; 8:45 am]
BILLING CODE 8010-01-M