[Federal Register Volume 63, Number 52 (Wednesday, March 18, 1998)]
[Notices]
[Pages 13294-13295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6976]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39744; File No. SR-PHLX-98-11]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. to Amend its Examination Fees to Pass Through Costs
March 11, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 17, 1998, 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 self-regulatory organization (``SRO'').
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. Sec. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange, pursuant to Rule 19b-4,\2\ proposes to amend its
examination fee to include a provision which will allow the Phlx to
pass through to a member or participant organization the costs incurred
from contracting with another SRO to conduct an examination on behalf
of the Phlx. The text of the proposed rule change is available at the
Office of the Secretary, the Phlx or at the Commission.
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\2\ 17 CFR 240.19b-4.
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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 SRO 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 SRO has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
[[Page 13295]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Pursuant to Section 17(b) of the Act,\3\ the Exchange administers
its examination program, which requires broker-dealers designated to an
SRO to be examined for compliance with applicable financial
responsibility rules on a periodic basis. The Exchange conducts reviews
of organizations for which the Exchange is the Designated Examining
Authority. The reviews focus on an organization's compliance with
applicable financial and recordkeeping requirements including net
capital, books and records maintenance, Regulation T and financial
reporting requirements. Effective January 1, 1995, the Phlx adopted a
$1,000 per month examination fee applicable to member and participant
organizations for which the Phlx acts as a Designated Examining
Authority.\4\ The fee was adopted due to the substantial expense and
time involved in conducting a proper examination of the member
firms.\5\
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\3\ 15 U.S.C. Sec. 78q(b).
\4\ See Securities Exchange Act Release No. 35091 (December 12,
1994), 59 FR 65558 (December 20, 1994) (SR-PHLX-94-66).
\5\ There are a number of exemptions to the fee including,
inactive organizations, organizations that operate from the trading
floors, organizations that incur Phlx or Stock Clearing Corporation
transaction fees on a monthly basis and organizations affiliated
with an exempt active organization. Any organization that can
demonstrate that it has derived at least 25% of its revenues in a
calendar quarter from floor trading activity will be deemed to be
``operating from the trading floors'' and therefore, is exempt from
the $1,000 per month examination fee. See Securities Exchange Act
Release No. 38416 (March 18, 1997), 62 FR 14176 (March 25, 1997)
(SR-PHLX-97-10).
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In the past, the Exchange has entered into agreements with other
SROs to conduct examinations of firms that are solely members of the
Phlx.\6\ The Exchange may contract with another SRO to perform an
examination for various reasons, such as the location of the firm or
where the type of business in which the firm is engaged may be more
suited to another SRO's area of expertise. Generally, the Exchange only
enters into such agreements where the firm designated to the Phlx has a
retail customer base. Certain SROs have the resources and the expertise
to examine firms that carry out customer accounts. Therefore, those
SROs have a higher degree of experience in examination requirements
pertinent to carrying customer accounts (e.g., sales practices, reserve
and possession/control requirements).
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\6\ These agreements are entered into pursuant to Rule 17d-2
under the Act. 17 CFR 240.17d-2.
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However, these arrangements typically require that the Phlx pay 2.5
times the median salary for examiners and supervisors of the contracted
SRO, resulting in a significant cost to the Exchange. Therefore, in the
event that the Phlx determines to refer an examination to another SRO,
the proposal would allow the Exchange to collect its costs directly
from the member or participant organization. Members who are required
to pay the pass through costs of an examination would not be required
to pay the $1,000 examination fee charged to those members for which
the Exchange conducts the examination.
2. Statutory Basis
The Exchange represents that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Section 6(b)(4) \8\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among the Exchange's members and other persons using its
facilities.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
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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
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 constitutes or changes a due, fee, or
other charge imposed by the Exchange and, therefore, has become
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and
subparagraph (e)(2) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 17 CFR 240.19b-4(e)(2).
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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.
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, N.W., Washington, D.C. 20549.
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. Sec. 552, will be available for inspection and copying at
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 submissions should refer to File No. SR-Phlx-98-11 and should
be submitted by April 8, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 15 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-6976 Filed 3-17-98; 8:45 am]
BILLING CODE 8010-01-M
