[Federal Register Volume 65, Number 86 (Wednesday, May 3, 2000)]
[Notices]
[Pages 25782-25783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11006]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42714; File No. SR-Phlx-00-29]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Extending Pilot Program Assessing a Monthly Capital 
Funding Fee

April 24, 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 April 7, 2000, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to extend its three-month pilot program, which 
imposed on each of the 505 Exchange seat owners \3\ a monthly capital 
funding fee of $1,500 per seat owned.\4\ The Exchange is requesting 
that the current pilot program, which expired on April 5, 2000, be 
extended for an additional three-month period.\5\
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    \3\ For the purposes of this filing, an ``owner'' shall mean 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 
By-laws or Certificate of Incorporation, the term ``seat-owner'' is 
the equivalent of an owner of a ``membership'' as referenced in 
Phlx's By-laws and Certificate of Incorporation.
    \5\ The Commission approved the original pilot program on 
January 5, 2000. See Securities Exchange Act Release No. 42318 
(January 5, 2000), 65 FR 2216 (January 13, 2000) (SR-Phlx-99-49). On 
November 24, 1999, the Exchange filed a proposal seeking permanent 
approval of the $1,500 capital funding fee. See Securities Exchange 
Act Release No. 42405 (February 8, 2000), 65 FR 8226 (February 17, 
2000) (SR-Phlx-99-51). The proposal is pending.
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II. Self-Regulatory Organization's Statement for 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 III 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 for the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to extend the 
applicability of the Exchange's current monthly capital funding fee of 
$1,500 for a three-month period, until July 6, 2000. As it did during 
the initial phase of the pilot program, the Exchange intends to charge 
each seat owner a monthly capital funding fee of $1,500 per Exchange 
set.
    The $1,500 capital funding fee will be imposed on each of the 505 
Exchange seat owners at the beginning of each month. In order to be 
charged the fee, a seat owner must own a seat on the last business day 
of the month preceding the month that is being billed. Thus, at the 
beginning of each month, the seat owner will be billed for that entire 
month.\6\ The Exchange intends to segregate the funds generated from 
the $1,500 fee from Phlx's general funds.
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    \6\ For example, a seat owner on September 30th will be billed 
$1,500 for the month of October.
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    The monthly $1,500 fee is part of the Exchange's long-term 
financing plan. This monthly fee is intended to provide funding for 
technological improvements and other capital needs.\7\ Specifically, it 
is intended to fund capital purchases, including hardware for capacity 
upgrades, development efforts for decimalization and trading floor 
expansion. The revenue generated from the fee will assist the Exchange 
in remaining competitive in the capital markets environment.
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    \7\ 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. See Securities Exchange Act 
Release No. 38394 (March 12, 1997), 62 FR 13204 (March 19, 1997) 
(SR-Phlx-97-09).
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2. Statutory Basis
    For these reasons, the Exchange believes that the proposed rule 
change is consistent with Section 6 of the Act,\8\ in general, and with 
Section 6(b)(4),\9\ in particular, in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
its members, issuers, and other persons using its facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will not impose 
any 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 22 written comments on the proposal, which it 
forwarded to the Commission on December 23, 1999.

[[Page 25783]]

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

    The proposed rule change has been filed by the Exchange pursuant to 
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\ The Exchange represents that the proposed rule change:
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).

    (i) Does not significantly affect the protection of investors or 
the public interest;
    (ii) Does not impose any significant burden on competition; and
    (iii) Does not become operative for 30 days after the date of 
the filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest; 
provided that the Exchange has given the Commission written notice 
of its intent to file the proposed rule change at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.

    The Exchange has requested that the Commission accelerate the 
operative date of the proposal. In addition, the Exchange provided the 
Commission with written notice of its intent to file the proposed rule 
change, along with a brief description of the proposed rule change, 
more than five business days prior to the date of filing the proposed 
rule change.
    The Commission finds that it is appropriate to designate this 
proposal to become operative today because such designation is 
consistent with the protection of investors and the public 
interest.\12\ Specifically, the proposal is an across-the-board 
assessment on all seat owners intended to raise revenues to provide 
capital improvements to the Exchange. The Phlx represent that the fee 
is necessary to help the Phlx remain competitive with other markets by 
enabling it to make technological and capital improvements. The 
Exchange represents that the revenue raised from this fee is necessary 
to fund capital purchases, including hardware for capacity upgrades, 
development efforts for decimalization, trading floor expansion, and 
communication enhancements. Moreover, absent acceleration of the 
operative date, the Phlx's ability to collect these fees will lapse, 
because the initial phase of the pilot program has expired. 
Accordingly, based on the representations of the Exchange, the 
Commission deems it appropriate to approve the proposed rule change on 
an accelerated basis until July 6, 2000.
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    \12\ 17 CFR 240.19b-4(f)(6)(iii). For purposes only of 
accelerating the operative date of this proposal, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 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, 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-00-29 and should be submitted by May 24, 
2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12)
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-11006 Filed 5-2-00; 8:45 am]
BILLING CODE 8010-01-M