[Federal Register Volume 65, Number 97 (Thursday, May 18, 2000)]
[Notices]
[Pages 31622-31623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-12515]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42773; File No. SR-Phlx-00-30]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Amending the Exchange's Certificate of Incorporation

May 11, 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 10, 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, III, below, which Items have been prepared by the 
Exchange. On May 3, 2000, the Phlx filed Amendment No. 1 to the 
proposed rule change.\3\ 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.
    \3\ See Letter from Cindy Hoekstra, Counsel, Phlx, to Nancy 
Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated May 2, 2000 (``Amendment No. 1''). Amendment No. 1 
defines the term ``owner'' for purposes of the Certificate of 
Incorporation. Because of the substantive nature of the amendment, 
the Commission deems the filing date of the proposed rule change to 
be the date the amendment was filed, May 3, 2000.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to amend Article Twentieth of its Certificate of 
Incorporation to add the words ``owner'' and ``member organization'' to 
the text of Article Twentieth and define the term ``owner.'' \4\ 
Article Twentieth authorizes the Phlx Board of Governors (``Board'') to 
(1) assess fees, dues, and other charges upon members, lessors and 
lessees of memberships, and holders of permits as the Board may adopt 
by resolution or set forth in the Rules of the Board, and (2) assess 
penalties for failure to pay any fees, dues, or other charges owed to 
the Exchange, including cancellation of a membership or permit and 
forfeiture of all rights as a member, lessor, lessee, or holder of a 
permit. Under Article Twentieth the Board may delegate its powers with 
respect to the assessment of fees, dues, other charges, and penalties 
to any committee of the Board or the Chairman of the Board. Article 
Twentieth also provides that fees, dues, other charges, and penalties 
authorized under the Article are in addition to any fees, dues, other 
charges or penalties imposed under the By-Laws of the Phlx.
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    \4\ The Commission approved the proposed rule change adopting 
Article Twentieth. See Securities Exchange Act Release No. 42317 
(January 5, 2000), 65 FR 2215 (January 13, 2000) (SR-Phlx-99-48).
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    The proposed amendment to Article Twentieth adds ``owners'' and 
``member organizations'' to the categories that will be subject to the 
Board's authority to assess fees, dues, and other charges. In addition, 
the amendment defines the term ``owner'' for purposes of the Phlx's 
Certificate of Incorporation and rules. As proposed, ``owner'' is 
defined as any person or entity who or which is a holder of equitable 
title to a membership in the Phlx.
    The Exchange represents that ``owners'' and ``member 
organizations'' are implicitly covered under the current text of 
Article Twentieth; however, the Exchange believes that a direct 
reference to owners and member organizations will nevertheless help 
clarify matters relating to the interpretation of those terms. For 
example, a leasing agreement may expire, resulting in a situation where 
an owner who formerly leased its membership is not currently leasing 
that membership. The Exchange believes that the owner remains 
classified as a ``lessor'' even though the membership currently is not 
leased,\5\ and, therefore, would be included in the current classes 
specified in Article Twentieth. However, the Exchange believes it is in 
the best interests of the members, owners and the Exchange to clarify 
the original intent of Article Twentieth by expanding the classes to 
include ``owners.''
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    \5\ See e.g., Phlx By-Law, Article I, Section 1-1(f): ``The term 
`lessor' means a holder of equitable title to a membership in the 
Exchange, including a former member of the Exchange, who has leased 
legal title to his membership to a lessee and has retained equitable 
title to such membership.'' See also Phlx Rule 17.
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    The Exchange also believes that it is desirable to clarify that 
``member organizations'' are intended to be within the scope of 
entities subject to fees, dues, and other charges imposed pursuant to 
Article Twentieth. For example, although member organizations are 
``owners'' for purposes of Article Twentieth, there may be situations 
where the Exchange may wish to charge fees, dues, or other charges 
under Article Twentieth that affect certain classes of owners, such as 
member organizations, but not others. In such circumstances, an 
explicit reference to member organizations in Article Twentieth would 
be helpful.

II. Self-Regulatory Organization's Statement Regarding the Purpose 
of, and the 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

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Certificate of Incorporation to specifically permit the Board to impose 
fees, dues, and other charges upon ``member organizations'' and 
``owners.'' The proposed rule change clarifies the Board's authority to 
allocate dues, fees, and other charges among the Exchange's various 
constituents, thereby ensuring appropriate distribution of costs 
relating to maintaining and enhancing the competitive operations of the 
Exchange.
    In addition, the amendment defines the term ``owner'' for purposes 
of the Exchange's Certificate of Incorporation and rules as any person 
or entity who or which is a holder of equitable title to a membership 
in the Exchange. The term ``owner'' is intended to encompass lessors 
and member organizations who are parties to A-B-C Agreements.\6\ 
Lessors and member organizations that have provided all or part of the 
funds for the purchase of a membership pursuant to an A-B-C Agreement, 
are sometimes referred to in the Certificate of Incorporation and rules 
of the Exchange as holders of equitable title.\7\ Therefore, defining 
the term ``owner'' as a holder of equitable title is consistent with 
the provisions relating to lessors and member organizations who are 
parties to A-B-C Agreements (both of whom are types of owners) and 
should

[[Page 31623]]

provide consistency throughout the Phlx's Certificate of Incorporation 
and rules.
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    \6\ The parties to an A-B-C Agreement are an employee, general 
partner, or officer, and the member organization with which such 
person is associated. See Phlx Rule 940.
    \7\ See e.g. Phlx Rules 17 and 940.
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2. Statutory Basis
    For these reasons, the Exchange believes that the proposed rule 
change is consistent with section 6(b) 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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.'' \12\

    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    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 Exchange represents that the operative date of this proposed 
rule change should be accelerated because the Exchange intends to 
implement the monthly capital funding fee on all seat owners as part of 
a long term financing plan.\13\ Prior to implementing this fee, the 
Exchange wants to ensure that it is clear exactly who will be subject 
to the fee by amending Article Twentieth to add the two categories, 
``owner'' and ``member organization,'' and defining ``owner.'' \14\
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    \13\ See Securities Exchange Act Release No. 42714 (April 24, 
2000), 65 FR 25782 (May 3, 2000).
    \14\ Telephone conversation between Cindy Hoekstra, Counsel, 
Phlx, and Marla Chidsey, Attorney, Division of Market Regulation, 
Commission (May 11, 2000).
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    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.\15\ Specifically, the Commission believes that adding the two 
additional categories and defining ``owner'' will clarify the original 
intent of Article Twentieth, and that it is appropriate to accelerate 
the operative date of the proposed rule change.
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    \15\ 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-00-30 and should be submitted by June 8, 
2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 240.19b-4(f)(6)(iii).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-12515 Filed 5-17-00; 8:45 am]
BILLING CODE 8010-01-M