[Federal Register Volume 68, Number 120 (Monday, June 23, 2003)]
[Notices]
[Pages 37192-37193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15714]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48034; File No. SR-Phlx-2003-41]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to an Increase in the Technology Fee

June 16, 2003.
    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 May 30, 2003, 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, II 
and III 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend its schedule of dues, fees, and charges 
to increase its technology fee from $150 per month to $950 per month 
for Phlx members. The text of the proposed rule change is available at 
the Office of the Secretary, the Phlx, and the Commission.

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 IV below and is set forth in sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Phlx proposes to amend its schedule of dues, fees, and charges 
to increase its technology fee from $150 per month to $950 per month 
for Phlx members. The technology fee is currently assessed on members 
as well as on foreign currency options participants who do not also 
hold legal title to a Phlx membership.\3\ The current proposal will 
assess the $950 proposed technology fee on Phlx members. A foreign 
currency options participant who does not also hold legal title to a 
Phlx membership will continue to be assessed the current technology fee 
of $150 per month, and not the increased fee of $950 per month.
---------------------------------------------------------------------------

    \3\ A foreign currency options participant who also holds legal 
title to a Phlx membership is only assessed the fee once--in his or 
her capacity as a Phlx member. For example, a foreign currency 
options participant who also holds legal title to a Phlx membership 
is currently assessed a total of $150 per month for the technology 
fee. Under this proposal, a total of $950 per month would be 
assessed for the technology fee. Equity Trading Permit holders/
organizations are not assessed the technology fee. See Securities 
Exchange Act Release No. 45480 (February 26, 2002), 67 FR 10029 
(March 5, 2002) (SR-Phlx-2002-10).
---------------------------------------------------------------------------

    In addition, the Exchange intends to amend a footnote related to 
its technology fee, which appears on its schedule of dues, fees, and 
charges, to clarify that foreign currency options participants that 
hold legal title to an Exchange membership are assessed the technology 
fee in their capacity as a Phlx member and not additionally in their 
capacity as a foreign currency options participant.\4\ The Exchange 
intends to implement this fee effective June 1, 2003.\5\
---------------------------------------------------------------------------

    \4\ The Phlx revised the footnote in its schedule of dues, fees, 
and charges from what it had originally proposed in this rule 
filing. The footnote relating to the technology fee will now state 
the following: ``Foreign currency options participants who also hold 
legal title to a Phlx membership are assessed the technology fee in 
their capacity as a Phlx member, for that membership, and not 
additionally in their capacity as a foreign currency options 
participant. ETP holders/organizations are not assessed the 
technology fee.'' Telephone conversation between Cynthia Hoekstra, 
Counsel, Phlx, and Mia C. Zur, Attorney, Division of Market 
Regulation (``Division''), Commission, on June 12, 2003.
    \5\ The technology fee had heretofore been eligible for a 
monthly credit of up to $1,000 to be applied against certain fees, 
dues and charges and other amounts owed to the Exchange by certain 
members. See Securities Exchange Act Release No. 44292 (May 11, 
2001), 66 FR 27715 (May 18, 2001) (SR-Phlx-2001-49). This credit 
program expired effective May 2003. The Exchange intends to file a 
separate proposed rule change to remove references to the member 
credit throughout the entire schedule of dues, fees and charges.
---------------------------------------------------------------------------

    The Phlx states that the technology fee was originally instituted 
to reflect the costs of needed upgrades to the operating systems on the 
Exchange's trading floors, system software modifications, year 2000 
modifications, and hardware upgrades. Also, system development costs 
for new risk management systems, order handling rule revisions, 
specialized quote feeds, and new products were captured by this fee.\6\ 
Now, in addition to its original purpose, the Exchange believes the 
revenue generated from the technology fee should provide for a source 
of general funds to be used, for example, in connection with other 
technology-related capital and expenses, such as the purchasing, 
leasing, and maintenance of equipment and software, programming costs, 
outside vendor charges, communications costs, and debt service for 
funds borrowed in relation to the foregoing.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release Nos. 45289 (January 16, 
2002), 67 FR 3525 (January 24, 2002) (SR-Phlx-2001-117), and 38394 
(March 12, 1997), 62 FR 13204 (March 19, 1997) (SR-Phlx-97-09).
---------------------------------------------------------------------------

    The Exchange believes an increase in the technology fee is 
reasonable and necessary to support the ongoing efforts and deployment 
of technology to facilitate trading and remain competitive. In 
addition, the Exchange believes that assessing the $950 per month 
technology fee on members and the $150 per month technology fee on 
foreign currency options participants who do not hold legal title to a 
Phlx membership is equitable in that the additional revenue generated 
from the increased technology fee is intended to be mainly used to 
facilitate trading on the equity and options floors, and not the 
foreign currency options trading floor.
    The purpose of amending the footnote that accompanies the 
technology fee entry on the fee schedule is to clarify that foreign 
currency options participants that hold legal title to a Phlx 
membership are assessed the

[[Page 37193]]

technology fee in their capacity as a Phlx member and not additionally 
in their capacity as a foreign currency options participant. The 
Exchange believes this clarification should help to avoid member 
confusion relating to the application of the technology fee.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with section 6(b) of the Act \7\ in general, and furthers the 
objectives of section 6(b)(4) of the Act \8\ in particular, in that it 
is an equitable allocation of reasonable dues, fees, and other charges 
among Exchange members, as all members (except foreign currency options 
participants who do not hold legal title to a Phlx membership) \9\ will 
be subject to the increased fee.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ The Exchange does not believe that it is appropriate to 
apply the proposed fee increase to foreign currency options 
participants who do not also hold legal title to a Phlx membership 
because such participants are unlikely to benefit from the 
technology-related expenditures that the proposed fee increase is 
intended to address. The Exchange believes that the number of 
foreign currency option contracts currently traded on the Exchange 
is an insignificant part of the Exchange's overall options trading 
program.
---------------------------------------------------------------------------

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.

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to section 19(b)(3)(A)(ii) of the Act \10\ and Rule 
19b-4(f)(2) thereunder.\11\ Accordingly, the proposal will take effect 
upon filing with the Commission. At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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 No. SR-Phlx-2003-41 and should be 
submitted by July 14, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15714 Filed 6-20-03; 8:45 am]
BILLING CODE 8010-01-P