[Federal Register Volume 67, Number 167 (Wednesday, August 28, 2002)]
[Notices]
[Pages 55292-55293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21957]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46383; File No.SR-Phlx-2002-41]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. Relating to Capital Funding Fee Late 
Charge

August 20, 2002.
    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 July 16, 2002, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, and 
II below, which Items have been prepared by the Phlx. 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 amend the amount of the late charge that is 
imposed by the Exchange as set forth in Phlx Rule 51, Enforcement of 
Capital Funding Fee.\3\ Currently, the late charge is set at a monthly 
rate of 1 percent (simple interest) for each thirty-day period or 
fraction thereof, calculated on a daily basis, commencing with the 
twenty-first day. The Exchange now proposes to increase the amount of 
the late charge from 1 percent to 1.5 percent. In addition, the 
Exchange proposes to extend the invoice due date for the capital 
funding fee from twenty days to thirty days. Thus, the proposed rule 
change would require the capital funding fee to be paid within thirty 
days from the invoice date, with the new monthly late charge of 1.5 
percent commencing on the thirty-first day. All other provisions of 
Phlx Rule 51 would remain the same.
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    \3\ See Securities Exchange Act Release No. 44872 (September 28, 
2001), 66 FR 51084 (October 5, 2001)(SR-Phlx-99-52). The capital 
funding fee is currently a $1,500 fee imposed monthly on owners of 
Phlx memberships.
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    The text of the proposed rule change is set forth below. New text 
is italicized; deleted text is bracketed.

Rule 51. Enforcement of Capital Funding Fee

Notice and Late Charges
    (a) The Exchange shall issue invoices to each owner (for purposes 
of this Rule, an ``Obligor'') providing notice of the obligation to pay 
the capital funding fee within thirty [twenty] days from the invoice 
date. If an Obligor fails to pay the Exchange the capital funding fee 
by the due date, the Exchange shall provide a written Late Notice of 
such failure (the ``Late Notice'') and, subject to subsection (b), 
impose a late charge at a monthly rate of 1.5 [1] percent (simple 
interest) for each thirty-day period or fraction thereof, calculated on 
a daily basis, commencing with the thirty-first [twenty-first] day.
* * * * *
    The Exchange proposes that if approved, changes to Phlx Rule 51 
would become operative on September 1, 2002.\4\ Accordingly, proposed 
changes to Phlx Rule 51 would apply to all capital funding fee account 
receivable balances due to the Exchange on or after that date. For 
example, delinquent balances due to the Exchange in August 2002 at a 
rate of 1

[[Page 55293]]

percent would be charged a rate of 1.5 percent as of September 1, 2002.
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    \4\ Telephone conversation between Cynthia K. Hoekstra, Counsel, 
Phlx, and Steven G. Johnston, Special Counsel, Division of Market 
Regulation, Commission, July 30, 2002 (clarifying the Exchange's 
proposal to delay the operative date of proposed changes to Phlx 
Rule 51 until September 1, 2002).
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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 Phlx 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 Phlx 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 increase the amount 
of the late charge imposed by the Exchange pursuant to Phlx Rule 51 
from 1 percent to 1.5 percent and to extend the invoice due date to 
thirty days, thereby making these provisions more consistent with 
Exchange Rule 50, Late Charge.\5\ In addition, increasing the late 
charge and extending the invoice due date should encourage members to 
pay the capital funding fee to the Exchange on a timely basis. This, in 
turn, should deter the practice of late payments.
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    \5\ Current Phlx Rule 50 provides, in part, that a late charge 
of 1.5 percent simple interest for each thirty-day period or 
fraction thereof, calculated on a daily basis, during which accounts 
payable to the Exchange remain outstanding, is imposed upon any 
member, member organization, participant or participant organization 
or an employee thereof using the facilities or services of the 
Exchange, or enjoying any of the privileges therein for dues, 
foreign currency options users' fees, fees, other charges, fines, 
and/or other monetary sanctions or other monies due and owed the 
Exchange and not paid within 30 days after the date of the original 
invoice. The Exchange represents that an account is not subject to a 
late charge until the unpaid balance remains outstanding at least 31 
days. See Securities Exchange Act Release No. 45681 (April 2, 2002), 
67 FR 17098 (April 9, 2002) (File No. SR-Phlx-2002-19).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \6\ in general, and furthers the objectives of section 
6(b)(4) of the Act \7\ 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 who do not make 
timely payments to the Exchange. In addition, Phlx believes that the 
proposal should promote just and equitable principles of trade and 
protect investors and the public interest, consistent with section 
6(b)(5) of the Act,\8\ by imposing a higher interest rate and extending 
the invoice due date, which should, in turn, encourage prompt payment 
of capital funding fees to the Exchange by an owner of a Phlx 
membership.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    No written comments were either solicited or received with respect 
to the proposed rule change.

III. 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-2002-41 and 
should be submitted by September 18, 2002.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission has reviewed this proposed rule change and finds it 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
Specifically, the Commission finds the proposal to be consistent with 
section 6(b)(4) of the Act.\10\ Since the proposed provisions would be 
uniformly applied to all seat owners with outstanding balances, the 
amendment conforms to the requirement of the Act that the rules of a 
national securities exchange provide for the equitable allocation of 
reasonable dues, fees, and other charges among its members and issuers 
and other persons using its facilities.
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    \9\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Phlx has requested that the Commission approve the proposed 
rule change on an accelerated basis. The Exchange represents that 
accelerated approval of its proposal should encourage prompt payment of 
outstanding capital funding fee balances and should assist the Exchange 
with collecting funds owed to it in a timely fashion. Further, the Phlx 
states that the proposed increase in the late charge for the capital 
funding fee is similar to an increase it imposed recently on members 
with outstanding accounts payable.\11\ The Commission notes that Phlx 
Rule 51 requires the Exchange to give owners notice of each due date 
for the capital funding fee as well as written notice of late charges 
if payment is not made. Further, the proposed rule change extends the 
time after which the Exchange will impose late charges from 21 days to 
31 days. The Commission believes that the proposal will permit the 
Exchange to collect the capital funding fee in a more timely fashion. 
Accordingly, the Commission finds good cause for approving the proposed 
rule change (SR-Phlx-2002-41) prior to the thirtieth day after the date 
of publication of notice thereof in the Federal Register.
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    \11\ See note 5 supra.
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Phlx-2002-41) is hereby 
approved on an accelerated basis.
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    \12\ 15 U.S.C. 78s(b)(2).

    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. 02-21957 Filed 8-27-02; 8:45 am]
BILLING CODE 8010-01-P