[Federal Register Volume 69, Number 151 (Friday, August 6, 2004)]
[Notices]
[Pages 47970-47971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18002]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50129; File No. SR-Phlx-2004-39]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change, and Amendment No. 1 thereto, by the Philadelphia Stock 
Exchange, Inc. Relating to Retroactive Application of Permit Holder 
Fees

July 30, 2004.
    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 June 30, 2004, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
the ``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 Phlx. 
On July 12, 2004, 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, as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Murray L. Ross, Phlx, to Nancy Sanow, 
Assistant Director, Division of Market Regulation, SEC, dated July 
9, 2004 (``Amendment No. 1''). In Amendment No. 1, the Exchange 
removed references in two footnotes to the proposed date that the 
retroactive fees would take effect.
---------------------------------------------------------------------------

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

    The Phlx proposes to retroactively apply its recent amendment to 
its schedule of fees and Charges (``Fee Schedule Amendment'').\4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 49856 (June 15, 
2004), 69 FR 3441 (June 21, 2004) (SR-Phlx-2004-32) (adopting a new 
category of permit holders for billing purposes; establishing the 
date of notification of terminating a permit as the date that permit 
fee billing will cease; and establishing that only one monthly 
permit fee would be assessed in certain limited situations where two 
monthly permit fees would otherwise be imposed).
---------------------------------------------------------------------------

    In the Fee Schedule Amendment, the Exchange adopted an ``other'' 
permit fee category to address the limited situations where a permit 
holder might not fit within any of the existing permit fee 
categories.\5\ The Exchange had found that a few permit holders did not 
fit in any existing permit fee categories, and, consequently, no permit 
fee was applicable. For example, a member organization may be holding 
its permit solely to be able to reflect its status as a Phlx member 
organization on its letterhead, which is common in the securities 
industry. That member organization would not have qualified for any of 
the existing permit fee categories and, therefore, would not have been 
subject to a permit fee at all. The Exchange is proposing to 
retroactively apply the ``other'' permit fee category from February 2, 
2004 through April 30, 2004, the period prior to the adoption of the 
``other'' permit fee category, in order to collect permit fees from 
member organizations that previously had not been subject to a permit 
fee.
---------------------------------------------------------------------------

    \5\ The ``other'' permit fee category is intended to apply to 
permit holders who solely qualify their respective member 
organization.
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to retroactively apply its 
billing policy set forth in the Fee Schedule Amendment, which set the 
date of notification for terminating a permit as the date that the 
permit fee billing would cease. From February 2, 2004 through April 30, 
2004, the period prior to the Fee Schedule Amendment, the effective 
date of the posting period was used to determine the termination date 
for a permit, resulting in some member organizations being billed for 
an extra month.
    Further, the Exchange is proposing to retroactively assess only one 
monthly permit fee in certain limited situations where two monthly 
permit fees otherwise would be imposed. Prior to the Fee Schedule 
Amendment, if a permit was transferred, other than if the transfer 
occurred within the permit holder's member organization,\6\ both member 
organizations would have been assessed a billing fee. For example, if 
the permit holder transferred from one member organization to another 
unrelated member organization in the same month, both member 
organizations were assessed a permit fee in the same billing period. In 
addition, when a permit holder became associated with another member 
organization as a result of a merger, partial sale of the current 
member organization, or other business combination, a new permit was 
issued but a monthly permit fee for the new permit would have also been 
assessed in these limited situations. This policy of assessing only one 
permit fee when a permit holder becomes associated with another member 
organization is noted in the Fee Schedule Amendment and, pursuant to 
the proposed rule change, would be retroactively applied from February 
2, 2004 to April 30, 2004.
---------------------------------------------------------------------------

    \6\ If the permit holder transfers the permit to another 
individual within the same member organization, only one monthly 
permit fee is assessed for that permit.
---------------------------------------------------------------------------

    The text of the proposed rule change, as amended, is available at 
the Exchange and at the Commission.

I. 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, as 
amended. The text of these statements may be examined at the places 
specified in Item IV 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, as amended, is to 
retroactively apply the ``other'' permit fee category and the other 
recently adopted permit fee billing practices back to the initiation of 
permit fee billing on February 2, 2004 to more fairly apply Exchange 
permit fee policies to each permit holder and their respective member 
organizations. Retroactively applying the recently effective ``other'' 
category of permit fees should ensure that each permit holder has been 
billed an appropriate permit fee from February 2, 2004, the initial 
date of permit fee billing. Additionally, allowing monthly billing of 
permit fees to cease at the time a member notifies the Exchange, as 
opposed to waiting for the effective date of the posting and notice 
requirements, should avoid unnecessarily billing a member for permit 
fees for a month during which their permit was terminated. Also, 
charging only one permit fee for the month in which a merger or other 
business combination occurs should avoid unfairly double billing for a 
permit fee to a permit holder changing affiliation due to a merger or 
other business organizational changes.
2. Statutory Basis
    The Exchange believes that its proposal to retroactively apply its

[[Page 47971]]

amended schedule of dues, fees and charges is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Sections 
6(b)(4) \8\ and 6(b)(5) \9\ of the Act in particular, in that it is an 
equitable allocation of reasonable dues, fees, and other charges among 
Exchange members and is designed to perfect the mechanism of a free and 
open market and a national market system, and to protect investors and 
the public interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that the proposed rule change, as 
amended, will result in any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.

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.

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 Exchange consents, the Commission shall: (a) by order approve 
such 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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Phlx-2004-39 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-Phlx-2004-39. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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, as amended, 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 also will be available for inspection and copying 
at the principal office of the Phlx. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2004-39 and should be submitted on 
or before August 27, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-18002 Filed 8-5-04; 8:45 am]
BILLING CODE 8010-01-P