01-14586. Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Waiving Equity Transaction Value Charges for PACE Orders

June 1, 2001.

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 21, 2001, 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 Phlx. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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

The Phlx proposes to waive equity transaction value charges for orders that are electronically routed to the Exchange through PACE.^[3] The proposed waiver of fees will be implemented on June 1, 2001.

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. 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 is to waive equity transaction value charges for orders that are electronically routed to the Exchange through PACE.^[4] Presently, orders routed to the Exchange through PACE are charged an equity transaction value charge, which is subject to a discount schedule based on the total value of monthly transactions.^[5] Accordingly, all related PACE trade discounts and credits would no longer apply.

The proposed amendment is designed to promote the Exchange's reputation as a cost-effective trading forum for PACE customers and traders transacting equity business. Furthermore, the Exchange believes that the proposed amendment should encourage electronic order flow to the Exchange, which in turn should promote a more liquid equities market.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,^[6] in general, and with Section 6(b)(4),^[7] in particular, by providing for the equitable allocation of reasonable dues, fees and other charges among participants. Eliminating certain charges for PACE transactions (1) alleviates a financial burden on PACE users and thus encourages the transaction of equities by the investing public, and (2) promotes competition among the various exchanges.

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) ^[8] of the Act and Rule 19b-4(f)(2) ^[9] thereunder. 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.

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-2001-57 and should be submitted July 2, 2001.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[10]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  PACE is the acronym for the Exchange's Automated Communication and Execution System. It is the Exchange's order routing, delivery, execution and reporting system for its equity trading floor. See Exchange Rule 229.

4.  Specialists would continue to be subject to the PACE Specialist Charge of $.20 per specialist trade against PACE executions (excluding PACE trades on the opening). Telephone conversation between Diana Tenenbaum, Counsel, Phlx, and Sonia Patton, Attorney, Division of Market Regulation, Commission (May 29, 2001).

5.  If the monthly transaction value of a particular customer is between $0-$25 million, a rate of $0.14 for every $1,000 of value will be charged. The rate decreases as the amount of the monthly transaction value increases. PACE users receive trade discounts based on trade size.

6.  15 U.S.C. 78f(b).

7.  15 U.S.C. 78f(b)(4).

8.  15 U.S.C. 78s(b)(3)(A).

9.  17 CFR 240.19b-4(f)(2).

10.  17 CFR 200.30-3(a)(12).