[Federal Register Volume 65, Number 33 (Thursday, February 17, 2000)]
[Notices]
[Pages 8226-8227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-3745]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42405; File No. SR-Phlx-99-51]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Assessing a Monthly 
Capital Funding Fee on a Permanent Basis

February 8, 2000.
    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 November 26, 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. The Commission is publishing this notice 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 amend its schedule of dues, fees, and charges 
to charge each of the 505 Exchange set owners \3\ a monthly capital 
funding fee of $1,500 per seat owned.\4\ The Commission previously 
approved implementation of the capital funding fee on a pilot basis 
until April 5, 2000; \5\ the Exchange is now requesting permanent 
approval of the fee. This proposed rule change replaces SR-Phlx-99-
43.\6\
---------------------------------------------------------------------------

    \3\ For the purposes of this filing, the term ``owner'' is 
defined as any person or entity who or which is a holder of 
equitable title to a membership in the Exchange.
    \4\ Although the term ``seat owner'' is not defined in Phlx's 
Bylaws or the Certificate of Incorporation, the term seat owner is 
the equivalent of a ``membership owner'' as referenced in Phlx's 
Bylaws and Certificate of Incorporation. However, a seat owner is 
not per se a member of the Phlx. Telephone conversation between 
Marla Chidsey, Attorney, Division of Market Regulation, Commission, 
and Bob Ackerman, Senior Vice President, Chief Regulatory Officer, 
Phlx (January 5, 2000).
    \5\ On January 5, 2000, the Commission approved Phlx's proposal 
to implement the capital funding fee on an accelerated basis until 
April 5, 2000. Securities Exchange Act Release No. 42318 (January 5, 
2000), 65 FR 2216 (January 13, 2000) (SR-Phlx-99-49).
    \6\ On October 1, 1999, the Exchange filed a proposal to charge 
this $1,500 capital funding fee. See Securities Exchange Act Release 
No. 42058 (October 22, 1999), 64 FR 58878 (December 15, 1999). 
However, on November 17, 1999, the Exchange withdrew SR-Phlx-99-43. 
See supra note 5.
---------------------------------------------------------------------------

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

    The purpose of the proposed rule change is to amend Phlx's schedule 
of dues, fees, and charges to charge a monthly capital funding fee of 
$1,500 per Exchange seat to seat owners.\7\
---------------------------------------------------------------------------

    \7\ Under Phlx's rules, seat owners who lease out their seats 
are not deemed members of the Exchange. See Phlx Rules of Board of 
Governors, Rules 3, 5, 17, and 18.
---------------------------------------------------------------------------

    The $1,500 capital funding fee will be imposed on each of the 505 
Exchange seat owners on the last business day of the calendar month. 
Thus, the owner is responsible for paying the entire subsequent month's 
fee on the last business day of the prior month.\8\ The Exchange 
intends to segregate the funds generated from the $1,500 fee from 
Phlx's general funds.
---------------------------------------------------------------------------

    \8\ For example, owners of record on September 30 will be billed 
$1,500 for the month of October.
---------------------------------------------------------------------------

    The monthly $1,500 fee is part of the Exchange's long-term 
financing plan. This monthly fee will provide funding for technological 
improvements and other capital needs.\9\ Specifically, it is intended 
to fund capital purchases, including hardware for capacity upgrades, 
development efforts for decimalization, and trading floor expansion. 
The revenue raised from the fee will be utilized over a three-year 
period. At that time the Exchange intends to reevaluate its financing 
plan to determine whether this fee should continue. The revenue 
generated from the fees will assist the Exchange in

[[Page 8227]]

remaining competitive in the capital markets environment.\10\
---------------------------------------------------------------------------

    \9\ This fee is distinguished from the Exchange's technology fee 
in that the technology fee was intended to cover system software 
modifications, Year 2000 modifications, specific system development 
(maintenance) costs, SIAC and OPRA communication charges, and 
ongoing system maintenance charges. The technology fee became 
effective upon filing in March 1997. See Securities Exchange Act 
Release No. 38394 (March 12, 1997), 62 FR 13204 (March 19, 1997) 
(SR-Phlx-97-09).
    \10\ In addition, the exchange has separately proposed to amend 
its schedule of fees, dues, and charges to allow for a monthly 
credit of up to $1,000 to be applied against certain fees, dues, 
charges and other amounts owed to the Exchange by an owner who is 
also a member of the Exchange (SR-Phlx-99-54).
---------------------------------------------------------------------------

    For these reasons, the Exchange believes that the proposed rule 
change is consistent with Section 6 of the Act,\11\ in general, and 
with Section 6(b)(4),\12\ in particular, in that it provides for the 
equitable allocation of reasonable dues, fee and other charges among 
its members and issuers and other persons using its facilities.
---------------------------------------------------------------------------

    \11\ 15 U.S.C.. 78f(b).
    \12\ 15 U.S.C. 79f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule imposes no burden on 
competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange received written comments.\13\
---------------------------------------------------------------------------

    \13\ In connection with SR-Phlx-99-43, see supra note 6, the 
Exchange received comments form the following parties: Bloom 
Staloff, Robert W. Baird & Co., Inc., William J. Kramer, Doris 
Elwell, Benton Partners, Karen D. Janney, Robert Leff, and Vanasco, 
Wayne & Genelly.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    With 35 days of the 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 self-regulatory organization consents, the Commission will:
    (A) By order approve the 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. 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, 450 Fifth Street, NW, Washington, 
DC 20549. 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-99-51 and should be submitted by March 9, 
2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-3745 Filed 2-16-00; 8:45 am]
BILLING CODE 8010-01-M