[Federal Register Volume 65, Number 171 (Friday, September 1, 2000)]
[Notices]
[Pages 53257-53259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22483]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43213; File No. SR-Phlx-00-04]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to the 
Issuance of Equity Trading Permits and Establishment of Related Fees 
and Amendment No. 1 Thereto

August 25, 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 January 12, 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. On May 30, 2000, the Exchange filed Amendment No. 1 to the 
proposal.\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 Carla Behnfeldt, Counsel, Phlx, to Sonia 
Patton, Attorney, Division of Market Regulation, Commission, dated 
May 25, 2000. (``Amendment No. 1''). In Amendment No. 1, among other 
things, the Exchange clarified the circumstances under which, and to 
whom, the Application Fee and the Initiation Fee will be charged.
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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 in connection with its proposal to issue equity trading 
permits. A copy of the proposed schedule is available at the Exchange 
and at the Commission.

[[Page 53258]]

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

1. Purpose
    The Exchange has proposed, in a separate filing with the 
Commission, to adopt new Rule 23 relating to the issuance by the 
Exchange of equity trading permits (``ETPs'').\4\ ETPs would confer 
access privileges to the Exchange's equity trading floor and certain of 
the rights of members of the Exchange to ETP holders. In this filing, 
the Exchange proposes to apply the Exchange's existing application fee 
to all applicants for ETPs, and to apply an initiation fee to those 
applicants who become ETP holders who are not Exchange members at the 
time of application.\5\ The Exchange also proposed to amend its 
schedule of fees, dues and other charges to include monthly ETP 
fees.\6\
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    \4\ SeeSR-Phlx-00-03, filed with the Commission concurrently 
with this filing. In connection with proposed Rule 23, the Exchange 
has also proposed to add Article Twenty-First (``Article Twenty-
First'') to the Exchange's Certificate of Incorporation which would 
generally authorize the issuance of permits to conduct business on 
the Exchange. See SR-Phlx-00-02.
    \5\ The Exchange currently charges a $200 application fee for 
membership and foreign currency options participation applications. 
An initiation fee of $1,500 is imposed on members upon their 
election to membership and on non-member foreign currency options 
participants upon the purchase of foreign currency options 
participations.
    \6\ The Commission recently granted permanent approval to the 
$1,500 monthly capital funding fee. See Securities Exchange Act 
Release No. 42993 (June 29, 2000), 65 FR 42415 (July 10, 2000).
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    Backbground. In SR-Phlx-00-03, the Exchange proposes to issue two 
classes of ETPs: Regular Equity Trading Permits (``Regular ETPs'') and 
Off-Floor Equity Trading Permits (``Off-Floor ETPs''). Regular ETPs 
would confer the rights held by members of the Exchange without options 
privileges, except as provided in Rule 23 or in other Exchange rules. 
Consequently, Regular ETPs would permit their holders to trade equity 
securities on any facility of the Exchange, including as a specialist. 
Off-Floor ETPs would confer the same rights as Regular ETPs, except for 
physical access to the Exchange floor. Holders of ETPs would have no 
voting rights, and ETPs would be transferable except as provided in 
proposed Rule 23.
    Application Fee. The Exchange proposes to charge a $200 application 
fee for every ETP application submitted to the Exchange. This charge 
would apply whether the application is made by a current Exchange 
member, foreign currency options participant (``FCO Participant''), or 
by an individual with no pre-existing relationship with the Exchange.
    Initiation Fee. The Exchange further proposes to charge ETP 
applicants who are not Exchange members when the ETP application is 
submitted, a $1,500 initiation fee. The initiation fee will be charged 
if the applicant is admitted as an ETP holder pursuant to the 
Exchange's established procedures in place for new members.\7\ The 
$1,500 initiation fee will be imposed on ETP holders when admitted, to 
the same extent it is imposed on members when elected to membership. 
\7\
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    \7\ See SR-Phlx-00-03 proposing the issuance of ETPs pursuant to 
proposed Rule 23, and Phlx By-law 12-4 which describes the process 
of application for election to membership.
    \8\ See Phlx By-law 12-8(a) which imposes the $1,500 initiation 
fee on members upon their election to membership.
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    Monthly ETP Fee. The Exchange proposes to charge a monthly fee of 
$2,000 for each Regular ETP and $500 for each Off-Floor ETP (``Monthly 
ETP Fee''). To limit the Exchange's administrative costs in connection 
with ETPs, the Monthly ETP Fee would not be prorated in the event an 
ETP is issued or terminated in the middle of a month. The review from 
the Monthly ETP Fee is intended to help fund the Exchange's costs of 
providing a marketplace for its members and other qualified persons 
using its trading facilities. The Exchange believes that the higher 
Monthly ETP Fee for Regular ETP holders is appropriate in view of the 
greater privileges conferred by a Regular ETP (including the right to 
apply for specialist privileges) and because the Exchange will incur 
higher costs in connection with those ETP holders who may be physically 
present on the trading floor while conducting their Exchange business.
    Other Fees and Charges. ETP holders would be subject to the same 
fees as other Phlx members except for membership dues and the 
technology fee.\9\ Additionally, ETP holders would not be subject to 
any capital assessments the Exchange may impose.\10\ The Exchange notes 
that all Exchange fees may be modified from time to time in accordance 
with Exchange procedures and the provisions of the Act.
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    \9\ Membership dues would not be assessed on ETP holders because 
they would not have a voting membership interest in the Exchange. 
Also, the Exchange's technology fee was intended to cover system 
software modifications, Year 2000 modifications, specific system 
development and maintenance costs, SIAC and OPRA communication 
charges, and ongoing system maintenance charges. See Securities 
Exchange Act Release No. 38349 (March 12, 1997), 1997 SEC LEXIS 576 
(March 12, 1997). ETP holders would not be assessed the technology 
fee because the Exchange intends the Monthly ETP Fee to be a single 
charge covering all overhead costs attributable to ETP holders.
    \10\ The Exchange notes that ETP holders would not, by virtue of 
the ETP, be holders of equitable title to Exchange memberships and 
thus would not be subject, by virtue of the ETP, to the Exchange's 
$1,500 capital funding fee. See Securities Exchange Act Release No. 
42993 (June 29, 2000), 65 FR 42415 (July 10, 2000). An ETP holder by 
definition cannot be an owner-member, lessee or party to an A-B-C 
Agreement with a member organization. Therefore, ETP holders will 
not be entitled to the monthly credit of up to $1,000 to be applied 
against certain fees, dues, charges and other amounts owed to the 
Exchange in connection with the ETP. See Securities Exchange Act 
Release No. 42791 (May 16, 2000), 65 FR 33606 (May 24, 2000).
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2. Statutory Basis
    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, fees and other charges among members and 
other persons using Phlx's facilities. The proposed rule change takes 
into account the nature of the differing interests of holders of legal 
and equitable titles to exchange memberships and ETP holders.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that the proposed rule change 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

    Written comments were neither solicited nor received from members, 
participants or others regarding this proposed amendment to the 
schedule of dues, fees and other charges.\13\
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    \13\ Written comments were received in connection with the 
Exchange's proposal to issue ETPs and have been provided to the 
Commission as part of SR-Phlx-00-03, filed concurrently with this 
filing.

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[[Page 53259]]

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

    Within 35 days of the date of 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 Phlx consents, the Commission will:
    (A) By order approve such 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. 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-00-04 and should 
be submitted September 22, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-22483 Filed 8-31-00; 8:45 am]
BILLING CODE 8010-01-M