Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Notices 5883

7 In approving this rule, the Commission notes 

that it has considered its impact on efficiency, 

competition, and capital formation. 15 U.S.C. 78c(f).

8 15 U.S.C. 78f(b).

9 15 U.S.C. 78f(b)(4).

10 15 U.S.C. 78s(b)(2).

11 Id.

12 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Letter from Edith Halihan, Deputy General 

Counsel, Phlx, to Nancy Sanow, Assistant Director, 

Division of Market Regulation, Commission, dated 

January 16, 2004 (‘‘Amendment No. 1’’). In 

Amendment No. 1, the Phlx made minor changes 

to the section of the proposed rule change 

describing its text to clarify the fee obligations for 

members associated with more than one member 

organization.

4 In its proposed demutualization, the Phlx is 

seeking to convert from a non-stock corporation 

into a stock corporation. The Exchange has 

submitted a separate proposed rule change relating 

to the proposed demutualization. See Securities 

Exchange Act Release No. 48847 (November 26, 

2003), 68 FR 67720 (December 3, 2003) (SR–Phlx–

2003–73). The Commission notes that it approved 

the demutualization in Securities Exchange Act 

Release No. 49098 (January 16, 2004) (SR–Phlx 

2003–73). As part of the demutualization, the 

Exchange intends to eliminate existing Exchange 

memberships; following demutualization, access to 

trading on the Exchange will be pursuant to permits 

rather than by ownership or leasing of Phlx 

memberships. The only class or series of permits to 

be outstanding initially will be denominated as 

‘‘Series A–1 Permits.’’ Until such time (if ever) as 

additional classes or series of permits are issued, 

the Series A–1 Permits will be referred to as 

‘‘permits’’ on the Exchange’s fee schedule.

and other charges among its members 

and other persons using its facilities for 

the purpose of executing P/A Orders or 

P Orders that are routed to the Exchange 

from other market centers.

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. 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. 

Comments may also be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR-PCX–2004–03. 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, comments 

should be sent in hardcopy or by e-mail 

but not by both methods. 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 Exchange. All 

submissions should be submitted by 

February 26, 2004. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of 

Proposed Rule Change and Amendment 

No. 1 

After careful consideration, the 

Commission finds that the proposed 

rule change, as amended, is consistent 

with the requirements of the Act and the 

rules and regulations thereunder, 

applicable to a national securities 

exchange,7 and, in particular, with the 

requirements of section 6(b) of the Act 8

and the rules and regulations 

thereunder. The Commission finds that 

the proposed rule change, as amended, 

is consistent with Section 6(b)(4) of the 

Act,9 which requires that the rules of the 

Exchange provide for the equitable 

allocation of reasonable dues, fees, and 

other charges among its members and 

other persons using its facilities. The 

Commission believes that the extension 

of the Exchange’s Linkage fee pilot 

program until July 31, 2004 will give the 

Exchange and the Commission further 

opportunity to evaluate whether such 

fees are appropriate.

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Act,10 for approving the proposed rule 

change, as amended, prior to the 

thirtieth day after the date of 

publication of the notice of the filing 

thereof in the Federal Register. The 

Commission believes that granting 

accelerated approval of the proposed 

rule change, as amended, will preserve 

the Exchange’s existing pilot program 

for Linkage fees without interruption as 

the PCX and the Commission further 

consider the appropriateness of Linkage 

fees.

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,11 that the 

proposed rule change (SR-PCX–2004–

03), as amended, is hereby approved on 

an accelerated basis for a pilot period to 

expire on July 31, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–2554 Filed 2–5–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49157; File No. SR–Phlx–

2004–02] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change and 

Amendment No. 1 Thereto by the 

Philadelphia Stock Exchange, Inc. 

Relating to Post-Demutualization Fees 

January 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 January 7, 

2004, the Philadelphia Stock Exchange, 

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III, below, which the 

Phlx has prepared. On January 20, 2004, 

the Exchange submitted 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.

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 

adopt permit fees in connection with 

the Exchange’s proposed 

demutualization.4 The fees relating to 

the issuance of Series A–1 Permits will 

5884 Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Notices 

5This fee applies to a permit held by a permit 

holder who does not have physical access to the 

Exchange’s trading floor, is not registered as a Floor 

Broker, Specialist or ROT (on any trading floor) or 

Off-Floor Trader, and whose member organization 

submits orders to the Exchange. See Phlx Rule 620.

6For example, if a member organization with 

only one permit was an order flow provider and the 

permit holder associated with the member 

organization then registered as a floor broker on the 

Exchange for that or another member organization, 

that permit would be subject to a permit fee of 

$1,200 (the higher of $200 and $1,200, but not both 

fees).

7The other sections of the fee schedule will 

continue to apply, including transaction fees.

8Currently, Membership Dues are $166.67 per 

month.

9The Exchange intends to terminate ETPs at the 

time of the demutualization. See Securities 

Exchange Act Release No. 48847 (November 26, 

2003), 68 FR 67720 (December 3, 2003).

10Currently, members are assessed a technology 

fee of $950. See Securities Exchange Act Release 

No. 48034 (June 16, 2003), 68 FR 37192 (June 23, 

2003) (SR–Phlx–2003–41).

11The monthly capital funding fee and monthly 

credit were previously in effect for an aggregate 

period of 36 months, which expired in May 2003. 

See Securities Exchange Act Release Nos. 42993 

(June 29, 2000), 65 FR 42415 (July 10, 2001) (SR–

Phlx–99–51); and 44292 (May 11, 2001), 66 FR 

27715 (May 18, 2001) (SR–Phlx–2001–49).

12See current Phlx By-Law Article I, Section 1–

1(m).

13Pursuant to the Exchange’s proposed 

demutualization, permits may not be transferred 

from one Exchange member organization to another, 

thus a Transfer Fee is inapplicable for permits. In 

addition, the Exchange does not intend, at this time, 

to charge a Transfer Fee for permit transfers within

a member organization under the limited 

circumstances under which such transfers will be 

permitted under the Exchange’s proposed rules.

14The Exchange anticipates that this will occur 

in mid to late January 2004. However, should the 

closing occur other than on the last day of a month, 

in order to avoid double charging then current 

members and member organizations or increasing 

fees for foreign currency option participants 

(‘‘participants’’) and participant organizations 

(collectively referred to as ‘‘current members’’), 

mid-month for membership/participant-related fees 

that are currently in effect, permit fees, as well as 

other fees that take effect post-demutualization, the 

demutualization fee changes scheduled to be 

implemented for then current members upon the 

issuance of permits will be implemented the first 

day of the next full calendar month after the closing 

of the demutualization occurs (and permits are 

issued). Therefore, if permits are issued in midJanuary, the post-demutualization fee changes for 

then current members will be implemented 

beginning February 2004. That is, current 

membership/participant-related fees, dues, and 

other charges will remain in effect for the full 

month in which closing occurs and permit fees and 

other post-demutualization fee changes will take 

effect as of the first day of the following month. 

Similarly, in this example, if demutualization 

becomes effective in January, permit fees will be 

assessed that month for anyone who is not a current 

member prior to demutualization.

15See supra note 11. 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(4).

be assessed based on how each permit 

is used.

The Exchange proposes the following 

fees: 

Order Flow Provider Permit Fee 5

a. Permits used only to submit orders 

to the equity, foreign currency options 

or options trading floor (one floor 

only)—$200 per month. 

b. Permits used only to submit orders 

to more than one trading floor—$300 

per month. 

Floor Broker, Specialist or ROT (on any 

trading floor) or Off-Floor Trader Permit 

Fee 

a. First permit—$1,200 per month. 

b. Additional permits for members in 

the same organization—$1,000 per 

month.

Any member who is associated with 

one or more member organizations and 

uses a permit in more than one category 

will pay the higher of the applicable 

fees for such permit.6

In light of the proposed 

demutualization, the Exchange also 

proposes to make other necessary 

changes to Appendix A of the fee 

schedule.7 Specifically, the following 

charges will be deleted from Appendix 

A: (1) Membership dues;8 (2) charges 

relating to equity trading permits 

(‘‘ETPs’’);9 (3) the Foreign Currency 

Options Participations (‘‘FCOP’’) Fee of 

$166.67 per month; (4) the technology 

fee for Exchange members;10 (5) the 

Technology Fee of $150 per month 

assessed on Foreign Currency Options 

Participants who do not hold legal title 

to a Phlx membership; and (6) the 

capital funding fee of $1500 per month. 

Also, the notation ‘‘I,’’ which appears on 

the Exchange’s fee schedule, including 

Appendix A, and denotes that a fee 

qualified for a monthly credit of up to 

$1,000, will be deleted.11 In addition, 

the following changes will be made to 

Appendix A: (1) The Foreign Currency 

User Fee will increase from $166.67 per 

month to $1,200 per month; and (2) the 

Transfer Fee of $500 will be clarified to 

reflect that FCOP 12 transfers will 

continue to be charged a Transfer Fee of 

$500.13

The Exchange also intends to make 

other minor technical amendments to its 

fee schedule relating to the renumbering 

of its footnotes to reflect that certain 

footnotes marked as ‘‘reserved’’ have 

now been deleted. 

The proposed changes are to become 

effective upon the issuance of permits 

when the Exchange’s proposed 

demutualization becomes effective.14

The text of the proposed rule change 

is available at the Commission and at 

the Phlx. 

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 had 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 the 

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 amend Appendix A of the 

Exchange’s schedule of dues, fees, and 

charges to incorporate changes that are 

to become effective in connection with 

the Exchange’s proposed 

demutualization. Specifically, the 

Exchange is adopting a permit fee 

structure and deleting certain other fees 

discussed above to accommodate 

trading on the Exchange postdemutualization. The Exchange also 

intends to make changes to its fees 

relating to FCOPs to generate revenue 

for the Exchange in order to enable it to 

continue to provide a marketplace for its 

foreign currency options and to simplify 

and clarify the billing for FCOPs. In 

addition, the Exchange proposes to 

delete the capital funding fee, which 

appears in Appendix A, and the 

references to the monthly credit of up to 

$1,000 that appear throughout the 

Exchange’s schedule of dues, fees, and 

charges, as this fee is no longer imposed 

and the credit is no longer offered, by 

the Exchange.15 The Exchange intends 

to renumber the footnotes that appear 

on its schedule of dues, fees, and 

charges to reflect that certain footnotes 

designated as ‘‘reserved’’ have now been 

deleted to avoid member confusion.

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its schedule of dues, 

fees and charges is consistent with 

Section 6(b) of the Act 16 in general, and 

furthers the objectives of Section 6(b)(4) 

of the Act 17 in particular, in that it is 

an equitable allocation of reasonable 

dues, fees, and other charges among 

Exchange members. The Exchange 

believes that the proposed permit fee 

structure is reasonable, because $1,000–

$1,200 per month per permit holder 

approximates the membership-related 

fees currently charged by the Exchange 

for most members ($950 technology fee 

Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Notices 5885

18Similarly, the Exchange’s current fee schedule 

reflects that ETP fees are discounted for multiple 

memberships. The fee respecting ETPs is $3,500 per 

month per ETP (‘‘Regular ETP’’), however a Regular 

ETP 3-Seat Fee of $1,350 per month per ETP is 

charged for Regular ETP holders and ETP 

organizations in lieu of the Regular ETP Fee if the 

ETP organization has at all times at least three 

associated persons who are members of the 

Exchange by virtue of a membership, whether 

owned or leased. See Securities Exchange Act 

Release No. 45480 (February 26, 2002), 67 FR 10029 

(March 5, 2002) (SR–Phlx–2002–10).

19This is similar to the current Off-Floor ETP fee 

of $500 per month per ETP, which is charged to OffFloor ETP holders, while Regular ETPs are $3,500 

per month per ETP, the Regular ETP 3-Seat Fee is 

$1,350 per month per ETP and the Regular ETP RS 

Fee is $1,000 per month per ETP. See Securities 

Exchange Act Release Nos. 45480 (February 26, 

2002), 67 FR 10029 (March 5, 2002) (SR–Phlx–

2002–10) and 48925 (December 15, 2003), 68 FR 

70855 (December 19, 2003) (SR–Phlx–2003–78).

20 Id.

21 In terms of membership-type fees, currently, 

FCOPs who do not hold legal title to a Phlx 

membership are assessed a technology fee of $150 

monthly in lieu of the $950 monthly technology fee. 

In addition, they are assessed a Foreign Currency 

User fee of $166.67 and a FCOP fee of $166.67 per 

month. Of course, as stated above, other nonmembership fees, such as transaction fees, may 

apply to FCOPs.

22FCOPs may, of course, determine to dispose of 

their FCOP and apply for a permit instead.

23 15 U.S.C. 78(s)(b)(3)(A)(ii).

24 17 CFR 240.19b–4(f)(2).

25 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See letter from Angela Saccomandi Dunn, 

Counsel, Phlx to Nancy J. Sanow, Assistant 

Director, Division of Market Regulation 

(‘‘Division’’), Commission, dated January 23, 2004. 

(‘‘Amendment No. 1’’). Amendment No. 1 replaced 

and superceded the original proposed rule change 

in its entirety.

4See letter from Angela Saccomandi Dunn, 

Counsel, Phlx to Nancy J. Sanow, Assistant 

Director, Division of Market Regulation 

(‘‘Division’’), Commission, dated January 29, 2004. 

(‘‘Amendment No. 2’’). Amendment No. 2 replaced 

and superceded Amendment No. 1 in its entirety.

plus approximately $167 for 

membership dues). Moreover, the 

Exchange believes that charging $200 

more for the first permit in each member 

organization is reasonable and 

equitable, in light of the administration 

of a member organization’s registration; 

the first ‘‘membership’’ or permit 

qualifies a member organization, which 

requires certain registration, filing and 

processing by the Exchange.18 The 

Exchange believes that the $200–$300 

monthly fee for order flow providers 

should attract order flow providers as 

well as reflect their limited, order entry 

access.19 Order flow providers will not 

take up space and resources on the Phlx 

trading floor or use floor services to the 

same extent as Phlx floor-based 

members. The Exchange believes that 

this proposal to impose permit fees 

depending on how a permit is used is 

both reasonable and equitable, similar to 

its current ETP structure.20 The 

Exchange also believes that the 

proposed increased Foreign Currency 

User Fee is reasonable and equitable 

because, although the fee will increase 

substantially from current membership 

fees for FCOPs who do not also hold 

legal title to a Phlx membership,21 it 

will be more closely aligned with permit 

fees, such that access to Phlx products 

will be similarly priced.22

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 Phlx neither solicited nor 

received written comments on this 

proposal. 

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)(ii) of the 

Act 23 and Rule 19b–4(f)(2) 

thereunder.24 Accordingly, the proposal 

has taken effect upon filing with the 

Commission. At any time within 60 

days after the filing of the proposed rule 

change, the Commission may summarily 

abrogate the 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, as amended, 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. Comments may also be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR–Phlx–2004–02. 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, comments 

should be sent in hardcopy or by e-mail 

but not by both methods. 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–2004–02, and should be 

submitted by February 27, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.25

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–2552 Filed 2–5–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49163; File No. SR–Phlx–

2003–89] 

Self-Regulatory Organizations; Notice 

of Filing and Order Granting 

Accelerated Approval of Proposed 

Rule Change and Amendments No. 1 

and 2 Thereto by the Philadelphia 

Stock Exchange, Inc. Relating to the 

Extension of a Linkage Fee Pilot 

Program 

January 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 December 

31, 2003, the Philadelphia Stock 

Exchange, Inc. (‘‘Exchange’’ or ‘‘Phlx’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. On 

January 26, 2004, the Exchange 

submitted Amendment No. 1 to the 

proposed rule change.3 On January 29, 

2004, the Exchange submitted 

Amendment No. 2 to the proposed rule 

change.4 The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons and is approving the 

proposed rule change, as amended, on 

an accelerated basis.