[Federal Register Volume 67, Number 206 (Thursday, October 24, 2002)]
[Notices]
[Pages 65394-65396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27117]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46682; File No. SR-Phlx-2002-51]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 by the 
Philadelphia Stock Exchange, Inc. Relating to Amending Exchange Rule 
607, Registration Fee, and Deleting Exchange Rule 608, Charge for 
Making Transaction

October 17, 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 September 20, 2002, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Exchange filed an amendment to the proposed rule change 
on October 2, 2002.\3\ The Exchange has filed the proposal as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A)(iii) of the 
Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the proposal 
effective upon filing with the Commission.\6\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, 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 Cynthia K. Hoekstra, Counsel, Phlx, to 
Deborah Lassman Flynn, Assistant Director, Division of Market 
Regulation, SEC, dated October 1, 2002 (``Amendment No. 1''). In 
Amendment No. 1, the Exchange amended the basis upon which the 
proposal would become effective under the Act and requested that the 
Commission waive the five-day pre-filing notice requirement.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The Phlx asked the Commission to waive the 30-day operative 
delay. See Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx, pursuant to Rule 19b-4 of the Act, proposes to amend 
Exchange Rule 607, Registration Fee, to conform the rule to section 31 
of the Act,\7\ as amended by H.R. 1088, the Investor and Capital 
Markets Fee Relief Act (``Fee Relief Act'').\8\ In addition, the 
Exchange proposes to delete Exchange Rule 608, Charge for Making 
Transaction.
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    \7\ See 15 U.S.C. 78ee.
    \8\ See Pub. L. No. 107-123, 115 Stat. 2390 (2002).
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    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *
Rule 607. Transaction [Registration] Fee
    Every member and member organization shall pay to the Exchange in 
such manner and at such time as the Exchange shall direct, the fees 
specified in Section 31 of the Securities Exchange Act of 1934, and 
rules thereunder, for all sales upon the Exchange of securities 
specified in Section 31 of the Securities Exchange Act of 1934, and 
rules thereunder. [clearing transactions effected on the Exchange, 
shall pay to the Exchange the sum of one cent for each $500 or fraction 
thereof of the dollar volume of his or its sales upon the Exchange 
(other than securities which are direct obligations of or obligations 
guaranteed as to principal or interest by the United States or such 
securities issued or guaranteed by corporations in which the United 
States has a direct or an indirect interest as shall be designated for 
exemption from the provisions of this Section by the Secretary of the 
Treasury), in reimbursement to the Exchange of the Registration Fee 
imposed under Section 31 of the Securities Exchange Act of 1934, as 
amended, in accordance with such rules as the Committee may prescribe.]
[Rule 608. Charge for Making Transaction]
    [Every member or member organization who is required by Rule 607 to 
pay any sum to the Exchange in respect of any sale upon the Exchange 
shall charge and collect from the person for whom he was acting in 
making such transaction an amount, which shall be determined by Section 
31 of the Securities Exchange Act of 1934 as the sum of one cent for 
each $500 or fraction thereof of the dollar amount involved in such 
transaction.]
    [Supplementary Material:]
[Registration Fee]
    [.01 Every member and member organization engaged in clearing or 
settling transactions effected upon the Exchange shall maintain a daily 
record of the aggregate dollar amount of the sales of securities made 
upon the Exchange and cleared or settled by him or it. The amount of 
money shall be computed upon the actual sales price, disregarding 
commissions, taxes or accrued interest on bonds. Blotter dates shall be 
used throughout. All sales on the Exchange shall be included, whether 
the securities are tax-exempt or not, except securities which are 
direct obligations of or obligations guaranteed as to principal or 
interest by the United States or such securities issued or guaranteed 
by corporations in which the United States has a direct or an indirect 
interest as shall be designated for exemption from the provisions of 
this section by the Secretary of the Treasury. Odd-lot dealers shall 
record both the full lots and the odd lots which they sell on the 
Exchange. If a member organization clears and settles a transaction for 
a member or member organization that in turn clears it for another 
principal, only the member organization settling the transaction shall 
include it in its record. Monthly reports of the daily totals above 
referred to shall be submitted to the Secretary's office in the manner 
described below.
    .02 At or before 10:30 o'clock a.m. on the 10th day of each month 
each member or member organization required to report to the Exchange 
shall submit a report on a form supplied by the Exchange showing: 
aggregate dollar sales volume; the Registration Fee due thereon; 
principal amount of bonds; number of shares of stock and number of 
rights to subscribe.
    .03 Every such reporting member and member organization shall pay 
to the Exchange a sum equal to one cent for each $500 or fraction 
thereof of the total aggregate dollar sales volume reported monthly.
    .04 With respect to all transactions which are required by these 
directions to be included in the foregoing report, the member or member 
organization responsible for reporting any transaction to the Exchange 
shall charge to the account, as billed, for which such transaction was 
made the sum of one cent for each $500 or fraction thereof represented 
by such transaction.
    Whenever the account against which such charge is made is that of a 
member or member organization who is acting

[[Page 65395]]

for a principal, such member or member organization shall withhold from 
the sum credited to the account of such principal, as billed, an amount 
equal to one cent for each $500 or fraction thereof represented by the 
transaction made for such principal.
    .05 In rendering to customers confirmations of sales made on the 
Exchange for their account, the charge required by these directions 
either shall be shown separately or be treated in the same manner as 
transfer taxes. In either case the confirmation shall contain an 
explanatory legend.
    .06 Members or organizations that cease the clearing or settling of 
security transactions shall promptly render reports for any interim 
period resulting from such change, and shall pay promptly any sum due 
under the above directions.
    .07 When sales are made on the Exchange for a customer each item 
reported in writing to the customer must be separately used as the 
basis for computing the fee appertaining thereto. If the written report 
shows as a single item the sale of two or more lots of the same 
security at the same price on the same day, the fee may be computed 
upon the total of such lots as a unit; otherwise each sale, whether 
reported together with others or separately, must be independently made 
the basis for computing the fee relating thereto.
    .08 Members or organizations who settle transactions for other 
members or organizations, and who consequently are required to report 
sales on the Exchange and pay a fee thereon pursuant to paragraphs 1 
and 2 above, must charge the account of the member or organization for 
whom they act on the same basis as is prescribed above with respect to 
transactions made for customers. This applies also to organizations 
carrying accounts of Floor traders and non-clearing members or 
organizations both in Philadelphia and elsewhere.
    .09 The use of daily, weekly, or any similar totals of transactions 
made for a particular customer or for a particular account as a basis 
for computing the fee chargeable to such customer or account, whether 
member or nonmember, is prohibited.
    .10 When differences in the computation of the fee arise in good 
faith, such as when an organization has rendered to a customer a single 
report covering two or more lots of the same security at the same 
price, and, because of ``give-ups'' or otherwise, it is necessary to 
bill or record the transaction as two or more separate lots, or when 
similar differences arise between a main office and a branch office, 
such differences may be adjusted between the organizations or offices 
involved by mutual agreement.]
* * * * *

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 purpose of the proposed rule change is to amend Exchange Rule 
607 to conform the rule to section 31 of the Act, as amended by the Fee 
Relief Act. Section 31 of the Act provides for the assessment of 
transaction fees to be paid to the Commission by national securities 
exchanges and national securities associations. Among other things, the 
Fee Relief Act reduced the amount of the assessment of transaction fees 
under section 31 of the Act and required the Commission to make annual 
adjustments to the fee rates for certain fiscal years.
    In addition to conforming Exchange Rule 607 to recent Congressional 
changes, the proposal will allow for future adjustments to be made 
automatically to the rates as specified by the Commission and in 
section 31 of the Act. In addition, the Exchange proposes to delete 
Exchange Rule 608 because the requirements in Exchange Rule 608 are 
outdated and no longer necessary due to the fact that many of the 
procedures in Exchange Rule 608 have been automated. No such reporting 
is needed.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \9\ in general and furthers the objectives 
of sections 6(b)(4) \10\ and 6(b)(5) \11\ of the Act, in particular, in 
that it provides for the equitable allocation of reasonable dues, fees 
and other charges among its members, it promotes just and equitable 
principles of trade and it protects investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were either solicited or received.

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

    Because the proposed rule change: (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 (or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest) from the date on which it was filed, the proposed rule change 
has become effective pursuant to section 19(b)(3)(A) of the Act \12\ 
and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. Because the proposed rule change 
will codify the Exchange's current section 31 billing practice and 
allow the Exchange to conform Exchange Rule 607 to section 31 of the 
Act, the Exchange has requested that the Commission waive the pre-
filing notice requirement of at least five business days (or such 
shorter time as designated by the Commission) and the 30-day operative 
delay, as specified in Rule 19b-4(f)(6)(iii).\14\ The Commission, 
consistent with the protection of investors and the public interest, 
has determined to make the proposed rule change operative 
immediately.\15\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ 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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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate

[[Page 65396]]

such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.\16\
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    \16\ See section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C). 
For purposes of calculating the 60-day abrogation period, the 
Commission considers the period to commence on October 2, 2002, the 
date that the Exchange filed Amendment No. 1.
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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 proposal 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 number SR-Phlx-2002-51 and should be 
submitted by November 14, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-27117 Filed 10-23-02; 8:45 am]
BILLING CODE 8010-01-P