Self-Regulatory Organizations; Stock Clearing Corporation of Philadelphia; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Reducing Certain Trade Recording Fees

[Federal Register Volume 64, Number 69 (Monday, April 12, 1999)]
[Notices]
[Pages 17711-17712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9015]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41251; File No. SR-SCCP-98-06]


Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Reducing Certain Trade Recording Fees

April 5, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 31, 1998, the 
Stock Clearing Corporation of Philadelphia (``SCCP'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which items have 
been prepared primarily by SCCP. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    SCCP proposes permanent implementation of a reduction in SCCP's fee 
schedule for trade recording fees for trades that match with PACE 
orders.\2\
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    \2\ PACE, an acronym for the Philadelphia Stock Exchange 
Automated Communication and Execution System, is a real time order 
routing and execution system.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule

    In its filing with the Commission, SCCP included statements 
concerning the purpose of and statutory basis for the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. SCCP has prepared summaries, set forth in 
sections (A), (B), and (C) below, of the most significant aspects of 
such statements.\3\
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    \3\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    SCCP proposes permanent implementation of its program that reduced 
SCCP's trade recording fees for trades that match with PACE orders. 
SCCP began providing reduced recording fees for trades that match with 
PACE for trades settling January 2, 1998, through April 30, 1998.\4\ 
Subsequently, the pilot program has been extended through December 31, 
1999.\5\
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    \4\ Securities Exchange Act Release No. 39630 (February 9, 
1998), 63 FR 7848.
    \5\ Securities Exchange Act Release Nos. 39948 (May 4, 1998), 63 
FR 25538, 40274 (July 22, 1998), 63 FR 40578 and 40885 (January 5, 
1999), 64 FR 1851.
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    Prior to the implementation of the pilot program, SCCP charged a 
trade recording fee of $.47 per side for regular trades. SCCP is not 
bifurcating the category of trade recording fees for regular trades 
into trades not matching with PACE orders and trades matching with PACE 
orders. The trade recording fees for trades not matching with PACE 
orders remains $.47 per side. SCCP's trade recording fees for trades 
matching with PACE orders are now (i) $.27 per side for the first 2,500 
trades per month and (ii) $.10 per side for trades in excess of 2,500 
per month.
    SCCP believes that the trade recording fee reduction is equitable 
and reasonable. SCCP states that the PACE System provides participants 
and their customers with automated order entry, execution, and 
processing. One of the benefits of small order entry systems, such as 
PACE, is that customers pay lower fees for the use of PACE as opposed 
to manual order entry. SCCP further states that another benefit of PACE 
is the increased efficiency associated with automated order processing. 
In fact, lower fees generally recognize the reduction of participant 
and exchange personnel involved in PACE transactions. Therefore, 
reducing the total cost of exchange trading, in an equitable fashion, 
should encourage additional PACE business, which in turn, extends the 
many benefits of PACE to additional customers.
    SCCP notes that trades matching with PACE trades require that SCCP 
expend fewer technological and manual resources to accept and record 
than if the trades arrived at SCCP from a source other than PACE. SCCP 
receives information on trades from many different sources and then 
processes this trade information for its participants. These trades 
take place on a number of different platforms. For example, SCCP clears 
trades executed on the PACE system, the Intermarket Trading System 
(``ITS''), and from the Securities Industry Automation Corporation 
(``SIAC'') over-the-counter system. In all, SCCP receives and records 
trades from approximately twelve different sources. All of these 
sources, except trades executed over PACE, require SCCP to expend 
additional technological and manual resources to process these trades.
    Trades executed over PACE are received by SCCP from the PHLX. PACE 
trades received from the PHLX are already in a format that SCCP systems 
can read and process without further technological and manual 
manipulation. Trades executed and received from another source require 
SCCP to create and interface, create additional programming to 
transform the data received into a source that SCCP systems can 
process, and potentially require SCCP personnel to enter trades 
manually from hand written tickets. In other words, SCCP states that it 
must expend additionally resources to transform the data it receives 
from non-PACE sources in a format comparable to PACE data received from 
PHLX. Therefore, SCCP believes that a reduction in fees for trades that 
match with PACE orders recognizes the reduced resources needed by SCCP 
to process and record these trades.
    For these reasons, SCCP believes that the proposed rule change is 
consistent

[[Page 17712]]

with Section 17A(b)(3)(D) of the Act,\6\ which requires that the rules 
of a registered clearing agency provide for equitable allocation of 
reasonable dues, fees, and other charges for services which it provides 
to its participants.
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    \6\ 15 U.S.C. 78q-1(b)(3)(D).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    SCCP 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

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by SCCP, it has become effective pursuant 
to Section 19(b)(3)(A)(ii) of the Act \7\ and Rule 19b-4(f)(2) 
thereunder.\8\ At any time within sixty 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(f)(2).
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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 submissions, 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 Section, 450 Fifth Street, NW, 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at SCCP. All submissions should refer to the 
File No. SR-SCCP-98-06 and should be submitted by May 3, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-9015 Filed 4-9-99; 8:45 am]
BILLING CODE 8010-01-M