Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on February 18, 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. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. On March 13, 2000, the Exchange submitted Amendment No. 1 to the proposed rule change.
17 CFR 240.19b-4.
In Amendment No. 1, the Exchange corrected the Schedule of Dues and Fees contained in Appendix A to reflect the current status of recently proposed fees. See letter from Murray L. Ross, Secretary, Phlx, to Nancy Sanow, Senior Special Counsel, Division of Market Regulation (“Division”), SEC, dated March 10, 2000 (“Amendment No. 1”).
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 to increase the monthly examinations fee from $1,000 per month to $2,000 per month. The proposed increase in the Examinations Fee is to be effective as of March 1, 2000. The text of the proposed change is available at the Phlx and at the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and the 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 is proposing to increase from $1,000 per month to $2,000 per month the Examinations Fee paid by member organizations for which the Exchange is the Designated Examining Authority (“DEA”) and which do not meet any of the exemptions to the examinations fee. Those exemptions remain unchanged. Since the implementation of this fee in 1995, the number of member organizations for which the Exchange is the DEA, and which are subject to the Examinations Fee, has more than doubled.
The Examinations Fee was approved by the Commission on December 12, 1994 and made effective January 1, 1995. See Exchange Act Release No. 35091 (Dec. 12, 1994), 59 FR 65558 (Dec. 20, 1994).
The Exchange has experienced increased administrative costs incurred while conducting examinations of member organizations, not only due to increased travel and lodging costs for its examiners, but also because of an increase in the amount of staff time committed to undertake such examinations. The Exchange notes that a number of member organizations subject to the Examinations Fee operate as foreign-based registered broker-dealers.
Additionally, the Exchange has had to increase the amount of staff time devoted to the service function it performs for firms. This service function consists of initially advising firms on how to set up financial reporting records, comply with Exchange and Commission rules, and comply with supervisory procedures and controls required by the Exchange and the Commission. Moreover, the Exchange has undertaken increased administrative and regulatory responsibilities associated with member organizations and their off floor traders, including scheduling more frequent compliance inspections as part of the Examinations Department's audit plan.
The Exchange notes that the enumerated exemptions from the Examinations Fee remain unchanged. See note 2 to Appendix A. Moreover, the proposed change will not affect the current procedures pursuant to which the actual cost of an examination is passed through to members in the event a self-regulatory organization other than the Phlx conducts the examination. See Exchange Act Release No. 39744 (March 11, 1998), 63 FR 13294 (March 18, 1998).
In order to compensate for the extensive staff time, examination and regulatory administrative cost associated with examining off-floor firms that are not active participants in Phlx markets, the Exchange proposes to amend its fee schedule by increasing the Examinations Fee to $2,000 per month. The firms subject to the Examinations Fee are all located off the Exchange's trading floors.
See Appendix A attached hereto.
2. Statutory Basis
The Exchange represents that the proposed rule change is consistent with Section 6(b) of the Act in general and furthers the objectives of Section 6(b)(4) in particular because it provides for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities.
15 U.S.C. 78f(b)(4).
B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx does not believe that the proposed rule change will impose any inappropriate or unnecessary burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The foregoing rule change establishes or changes a due, fee or charge imposed by the exchange and, therefore, has become effective upon filing pursuant to Section 19(b)(3)(A) of the Act and paragraph (f)(2) of Rule 19b-4 thereunder.
17 CFR 240.19b-4(f)(2).
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 purpose of the Act.
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-00-18 and should be submitted by April 18, 2000.
In reviewing this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 USC 78c(f).
For the Commission by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
Appendix A
[FR Doc. 00-7588 Filed 3-27-00; 8:45 am]
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