20500 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Notices

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

2 17 CFR 240.19b–4.

3Amendment No. 1 to the proposed rule change

made technical corrections to the Phlx’s fee

schedule. See letter from John Dayton, Assistant

Secretary and Counsel, Phlx, to Nancy Sanow,

Assistant Director, Division of Market Regulation

(‘‘Division’’), Commission, dated March 29, 2000

(‘‘Amendment No. 1’’).

4A fee is not charged for new installation of

computer equipment. Fees also are not charged to

participants on the foreign currency options trading

floor.

5The Commission first approved the pilot

program on December 23, 1999. See Securities

Exchange Act Release No. 42271 (December 23,

1999), 65 FR 154 (January 3, 2000) (File No. SR–

Phlx–99–45).

6Some component of this amount may reflect

Pennsylvania sales taxx.

7This proposed fee will apply to all such requests

with no distinction between intentional abuse and

normal wear and tear due to the difficulties

associated with categorizing the types of repairs.

8Telephone conversation between John Dayton,

Assistant Secretary and Counsel, Phlx, and Susie

Cho, Attorney, Division, Commission, March 30,

2000.

9For example, if two individuals take two hours

to relocate a work station, the member will be

charged $100 for the service call, plus $300 for

moving the equipment (i.e., $75 × 4 (2 people × 2

hours)). Again, some component of this amount

may reflect Pennsylvania sales tax.

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42654; File No. SR–Phlx–

00–24]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

Extending the Pilot Program To

Impose Fees for Computer Equipment

Services, Repairs or Replacements

and Relocation of Computer

Equipment

April 10, 2000.

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 March 14,

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.

On March 29, 2000, the Exchange filed

Amendment No. 1 to the proposed rule

change with the Commission.3 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, pursuant to Rule 19b–4 of

the Act, proposes to extend for a further

three months its pilot program that

requires all members on the options and

equity trading floors to pay a fee for

computer equipment services, repairs or

replacements and a fee for memberrequested relocation of computer

equipment.4 The Exchange proposes to

extend the current pilot program, which

expired on March 31, 2000, through

June 30, 2000.5

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 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 Phlx has requested an extension

through June 30, 2000 of a pilot program

that amends the Exchange’s fee

schedule in two ways. First, pursuant to

the current pilot program, the Phlx’s

schedule of dues, fees and charges was

amended to impose a fee on all

members on the options and equity

floors for computer equipment services,

repairs or replacements on the trading

floors. Specifically, Phlx charges $100

for every service calls plus $75 an hour,

with a minimum of two hours charged

per service calls.6 The Exchange

anticipates that the majority of

computer services, repairs or

replacements will continue to be

completed within two hours. Members

are not billed for computer equipment

services, repairs or replacements when

new or refurbished, equipment fails in

the normal and customary manner of

usage within 30 days of installation.

The Exchange represents that these

charges are intended to defray the cost

of servicing, repairing or replacing

computer equipment on the options and

equity floors, as well as to encourage

care in using the computer equipment.7

The Exchange represents that the bulk

of calls that are routinely received by its

Financial Automation Department are

requests to repair, replace or otherwise

service computer equipment at options

or equity floor members’ work stations.8

Second, the Exchange has amended

its schedule of dues, fees, and charges

to also impose a fee for memberrequested relocation of a member’s work

station or any piece of their computer

equipment on the options or equity

trading floor. Under the current pilot

program, the Exchange imposes a $100

service fee plus $75 per hour per person

moving the equipment, with a minimum

of two hours charged for each relocation

request.9 Members will continue to be

billed on a monthly basis for computer

equipment services, repairs or

replacements and for member-requested

relocations of computer equipment.

The Exchange represents that the

post/equipment relocation fee will assist

Phlx in defraying the costs associated

with the moving of computer

equipment. The relocations on the

options and equity floors can be very

time-consuming and costly since nearly

all relocations take place after hours or

on the weekends.

Under the current pilot program,

Exchange staff and trading floor

members complete a preprinted form

prior to requesting repair or relocation

service. A Notice to Members describing

the equipment repair and relocation

request procedures was sent to all floor

members prior to the implementation of

the current three-month pilot program

that was in effect from January 1, 2000

through March 31, 2000. The

procedures include instructions to

members and Exchange staff as to where

the service request forms are located,

directions as to how to complete the

form, and which department is required

to forward the forms to the accounting

department.

The Exchange proposes to extend the

pilot program for an additional three

months, through June 30, 2000. The

Exchange asserts that an extension

would allow it to fully review the fees

and procedures that were implemented

on January 1, 2000. The Exchange

would have an opportunity to determine

whether the fees for computer

equipment services, repairs or

replacements and member-requested

relocation of computer equipment that

are charged to members are appropriate

and reflect the costs for these services

that are incurred by the Exchange. An

extension of the pilot program would

further enable the Exchange to

determine whether the fees relating to

computer equipment services, repairs or

replacements and member-requested

relocation of computer equipment

should be applied to similar situations

to foreign currency options participants

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Notices 20501

10 15 U.S.C. 78f(b).

11 15 U.S.C. 78f(b)(4).

12 15 U.S.C. 78s(b)(3)(A)(ii).

13 17 CFR 240.19b–4(f)(2).

14 In reviewing this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

15 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3The Commission notes that the proposed rule

change would also eliminate the requirement that

FLEX equity call options follow the exercise price

intervals set out for standardized options in Phlx

Rule 1012.

4Section 1092(c)(4)(C) of the Code.

on the foreign currency options trading

floor. I would also give the Board of

Governors the opportunity to decide

whether this pilot program should be

implemented on a permanent basis.

2. Statutory Basis

The Exchange believes that the

proposed rule is consistent with Section

6(b) of the Act 10 in general, and furthers

the objectives of Section 6(b)(4) 11 in

particular, in that it provides for the

equitable allocation of reasonable dues,

fees and other charges among its

members and other persons using its

facilities.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange represents that the

proposed rule change will impose no

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 solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing proposed rule change

has become effective pursuant to

Section 19(b)(3)(A(ii) of the Act 12 and

Rule 19b–4(f)(2) thereunder 13 because it

involves a due, fee, or other charge. 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.14

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. 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 at

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 refer to File

No. SR–Phlx–00–24 and should be

submitted by May 8, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–9487 Filed 4–14–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42655; File No. SR–Phlx–

00–25]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

Eliminating the Restriction on Exercise

Prices for FLEX Equity Call Options to

Those Prices That Apply to

Standardized Equity Call Options

April 10, 2000.

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 March 15,

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 and II below, which Items

have been prepared by the Exchange.

The Commission is publishing this

notice to solicit comments on the

proposed rule change.

1. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Phlx proposes to delete the

provision in Exchange Rule 1079(a)(3)

that limits exercise prices for FLEX

equity call options to those that apply

to standardized equity call options.3

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

1. Purpose

The Exchange proposes to amend

Phlx Rule 1079(a)(3) to eliminate the

limitation of the exercise prices

available for FLEX equity call options to

those prices that are available for

standardized equity call options. Under

Phlx Rule 1079, FLEX call options allow

certain terms to be customized, such as

the underlying security, the type of

option, the exercise price, the exercise

style, and the expiration date. The

Exchange, however, restricted the strike

prices for FLEX equity call options to

those prices that are available for

standardized equity call options because

of a concern that the flexible strike price

feature could result in an available

standardized equity call option that

would not be classified as a ‘‘qualified’’

covered call under the Internal Revenue

Code (‘‘Code’’). The Exchange

represents that this would jeopardize

the modest tax treatment enjoyed by

writers of standardized equity call

options.

Currently under Section 1092(c)(4)(B)

of the Code, writers of such qualified

covered short positions in equity call

options receive advantageous tax

treatment if the options are exchangetraded and not ‘‘deep-in-the-money.’’

An option is ‘‘deep-in-the-money’’ if the

strike price of the option is lower than

the lowest qualified benchmark price for

stock.4 The Code defines this

benchmark price as generally the

highest strike price available for trading