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 November 26, 1999, 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.
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 charge each of the 505 Exchange set owners a monthly capital funding fee of $1,500 per seat owned. The Commission previously approved implementation of the capital funding fee on a pilot basis until April 5, 2000; the Exchange is now requesting permanent approval of the fee. This proposed rule change replaces SR-Phlx-99-43.
For the purposes of this filing, the term “owner” is defined as any person or entity who or which is a holder of equitable title to a membership in the Exchange.
Although the term “seat owner” is not defined in Phlx's Bylaws or the Certificate of Incorporation, the term seat owner is the equivalent of a “membership owner” as referenced in Phlx's Bylaws and Certificate of Incorporation. However, a seat owner is not per se a member of the Phlx. Telephone conversation between Marla Chidsey, Attorney, Division of Market Regulation, Commission, and Bob Ackerman, Senior Vice President, Chief Regulatory Officer, Phlx (January 5, 2000).
On January 5, 2000, the Commission approved Phlx's proposal to implement the capital funding fee on an accelerated basis until April 5, 2000. Securities Exchange Act Release No. 42318 (January 5, 2000), 65 FR 2216 (January 13, 2000) (SR-Phlx-99-49).
On October 1, 1999, the Exchange filed a proposal to charge this $1,500 capital funding fee. See Securities Exchange Act Release No. 42058 (October 22, 1999), 64 FR 58878 (December 15, 1999). However, on November 17, 1999, the Exchange withdrew SR-Phlx-99-43. See supra note 5.
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
The purpose of the proposed rule change is to amend Phlx's schedule of dues, fees, and charges to charge a monthly capital funding fee of $1,500 per Exchange seat to seat owners.
Under Phlx's rules, seat owners who lease out their seats are not deemed members of the Exchange. See Phlx Rules of Board of Governors, Rules 3, 5, 17, and 18.
The $1,500 capital funding fee will be imposed on each of the 505 Exchange seat owners on the last business day of the calendar month. Thus, the owner is responsible for paying the entire subsequent month's fee on the last business day of the prior month. The Exchange intends to segregate the funds generated from the $1,500 fee from Phlx's general funds.
For example, owners of record on September 30 will be billed $1,500 for the month of October.
The monthly $1,500 fee is part of the Exchange's long-term financing plan. This monthly fee will provide funding for technological improvements and other capital needs. Specifically, it is intended to fund capital purchases, including hardware for capacity upgrades, development efforts for decimalization, and trading floor expansion. The revenue raised from the fee will be utilized over a three-year period. At that time the Exchange intends to reevaluate its financing plan to determine whether this fee should continue. The revenue generated from the fees will assist the Exchange in remaining competitive in the capital markets environment.
This fee is distinguished from the Exchange's technology fee in that the technology fee was intended to cover system software modifications, Year 2000 modifications, specific system development (maintenance) costs, SIAC and OPRA communication charges, and ongoing system maintenance charges. The technology fee became effective upon filing in March 1997. See Securities Exchange Act Release No. 38394 (March 12, 1997), 62 FR 13204 (March 19, 1997) (SR-Phlx-97-09).
In addition, the exchange has separately proposed to amend its schedule of fees, dues, and charges to allow for a monthly credit of up to $1,000 to be applied against certain fees, dues, charges and other amounts owed to the Exchange by an owner who is also a member of the Exchange (SR-Phlx-99-54).
For these reasons, the Exchange believes that the proposed rule change is consistent with Section 6 of the Act, in general, and with Section 6(b)(4), in particular, in that it provides for the equitable allocation of reasonable dues, fee and other charges among its members and issuers and other persons using its facilities.
15 U.S.C.. 78f(b).
15 U.S.C. 79f(b)(5).
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule imposes no burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others
The Exchange received written comments.
In connection with SR-Phlx-99-43, see supra note 6, the Exchange received comments form the following parties: Bloom Staloff, Robert W. Baird & Co., Inc., William J. Kramer, Doris Elwell, Benton Partners, Karen D. Janney, Robert Leff, and Vanasco, Wayne & Genelly.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
With 35 days of the 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 self-regulatory organization consents, the Commission will:
(A) By order approve the proposed 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 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, 450 Fifth Street, NW, Washington, DC 20549. 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-99-51 and should be submitted by March 9, 2000.
For the Commission by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-3745 Filed 2-16-00; 8:45 am]
BILLING CODE 8010-01-M