[Federal Register Volume 59, Number 123 (Tuesday, June 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15609]


[Federal Register: June 28, 1994]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34244; File No. SR-Phlx-94-14]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to its Order 
and Decorum Regulations

June 22, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on March 
10, 1994, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the self-
regulatory organization. On March 31, 1994, the Exchange submitted to 
the Commission Amendment No. 1 to the proposed rule change.\1\ On June 
22, 1994, the Exchange submitted to the Commission Amendment No. 2 to 
the proposed rule change.\2\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\See letter from General D. O'Connell, Vice President, Market 
Surveillance, Phlx, to Sharon Lawson, Assistant Director, SEC, dated 
March 30, 1994. Amendment No. 1 clarified that in any instance where 
an act described in Regulation 4(a) is deemed particularly 
egregious, or where an individual has established a pattern of order 
violations, two floor officials may refer the matter to the Business 
Conduct Committee where additional fines and other sanctions may be 
imposed pursuant to Phlx Rule 960.
    \2\See letter from Gerald D. O'Connell, First Vice President, 
Phlx, to Sharon Lawson, Assistant Director, SEC, dated June 22, 
1994.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Regulation 4 (``Order'') as follows: 
(1) to adopt paragraph (b) permitting two Floor Officials to refer 
particularly egregious or repetitive violations to the Exchange's 
Business Conduct Committee; (2) to renumber the existing provisions as 
(a)(i)--(iii); (3) to add to the general prohibition against disorderly 
conduct a proscription against acting in an indecorous manner which is 
disruptive to the conduct of business on the trading floor; and (4) to 
adopt paragraph (a)(iv) imposing a fine ranging from $500 to $1,000 for 
each instance of abusive, derisive or harassing treatment directed at 
any person while on the floor, which, in the view of two Floor 
Officials, could constitute a public embarrassment to the Exchange.\3\
---------------------------------------------------------------------------

    \3\The text of the proposed amendment was attached as Exhibit B 
to File No. SR-Phlx-94-14 and is available at the locations 
specified in Item IV.
---------------------------------------------------------------------------

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 self-regulatory organization 
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 self-regulatory organization 
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

(a) Purpose
    Regulation 4 (``Order'') is the most fundamental of the Exchange's 
order and decorum regulations, which are adopted pursuant to Phlx Rule 
60 (``Assessments for Breach of Regulations''). Rule 60 permits 
Exchange officials and Floor Officials to assess fines, not exceeding 
$1,000, for violations of regulations pertaining to order, decorum, 
health, safety and welfare (``order and decorum'') on the Exchange, or 
to refer such violations to the Exchange's Business Conduct Committee 
where higher fines or other sanctions may be imposed, in accordance 
with Phlx Rule 960.\4\ Rule 60 also enumerates the procedural aspects 
of order and decorum fines, including the ability to contest a fine and 
request a hearing. The Exchange has adopted seven regulations of order 
and decorum pursuant to Rule 60, including regulation 4.\5\
---------------------------------------------------------------------------

    \4\Phlx Rule 960 governs disciplinary procedures at the 
Exchange. Rule 960 provides for, among other things, a statement of 
charges, answer, hearing, decision, petition for review of decision, 
and sanctions, which include expulsion, suspension, fine, censure, 
limitations or termination as to activities, functions, operations, 
or association with a member or member organization, or any other 
fitting sanction.
    \5\In addition to Regulation 4, the Exchange's Rule 60 
Regulations govern smoking; food, liquids, and beverages; 
identification badges and access cards, visitors and applicants, 
dress; and proper utilization of the security system. See Phlx Rule 
60 Regulations.
---------------------------------------------------------------------------

    In summary, Regulation 4 governs conduct on the trading floors of 
the Exchange by prohibiting disorderly conduct and imposing fines for 
violations thereof. In addition to a general prohibition against 
disorderly behavior, specific fines are also imposed for abuse of the 
paging system, possession of firearms, and various degrees of fighting, 
including inciting physical abuse, minor acts of physical abuse and 
major acts of physical abuse.
    At this time, the Exchange proposes to add a new paragraph (b) 
Stating that any acts described in paragraph (a) which are deemed 
particularly egregious, or where an individual has established a 
pattern or order violations, may be referred by two Floor Officials to 
the Business Conduct Committee where additional fines and other 
sanctions may be imposed pursuant to Phlx rule 960.\6\ As a result of 
this proposed language, similar language which currently follows the 
paragraph addressing physical abuse is proposed to be deleted in order 
for the new paragraph to apply to all violations of Regulation 4.
---------------------------------------------------------------------------

    \6\The Exchange stated that two Floor Officials could not impose 
a fine or sanction pursuant to both Rules 60 and 960 for the same 
conduct. The Exchange also stated that if a disciplinary proceeding 
pursuant to Rule 960 is initiated by the Exchange, all procedural 
rights contained in Rule 960 would apply. Conversation between 
Gerald D. O'Connell, Vice President, Market Surveillance, Phlx, and 
Louis A. Randazzo, Attorney, SEC, on March 25, 1994.
---------------------------------------------------------------------------

    In addition to adopting new paragraph (b), the proposal would also 
renumber the existing provisions of the regulation. The following 
language in the introductory paragraph is proposed to be deleted as 
redundant: instances determined by a Floor Official as violative of the 
``Order'' requirement may result in fines as described below. The first 
paragraph would be renumbered as (a), with the abuse of paging system, 
firearms and physical abuse provisions numbered (i)--(iii), 
respectively.
    The following prohibition is proposed to be added to paragraph (a) 
to expand upon the general prohibition against disorderly conduct: 
acting in an indecorous manner which is disruptive to the conduct of 
business on the trading floor. The new language explicitly prohibits 
behavior that results in a disruption of trading and provides a gauge 
by which a Floor Official may determine whether a certain act was 
disorderly (if an act caused floor traders to divert their attention 
from trading, the act could be construed as disorderly).
    The Exchange also proposes to adopt new paragraph (a)(iv) to 
prohibit instances of abusive, derisive or harassing treatment directed 
at any person while on the floor, which in the view of two Floor 
Officials, could constitute a public embarrassment to the Exchange, and 
impose a fine ranging from $500 to $1,000 for such violations. The 
Exchange believes that because such behavior is indecorous but not 
disruptive to trading in each case, it warrants a separate fine between 
$500 and $1,000 and direct prohibition. This provision is intended to 
specifically implement Exchange Rule 708 (``Acts Detrimental to the 
Interest or Welfare of the Exchange'').\7\ Specifically, Rule 708, 
Commentary .01(e) prohibits misconduct on the trading floor, in 
violation of the Exchange's Order and Decorum Regulations, that is 
repetitive, egregious of a publicly embarrassing nature to the Exchange 
rule 708 would specifically enable the Exchange's Business Conduct 
Committee to pursue formal disciplinary action for disorderly conduct 
on the trading floor. The purpose of the present proposal is to provide 
an established procedure by which referrals of such floor misconduct 
would be made to the Business Conduct Committee by Floor Officials.
---------------------------------------------------------------------------

    \7\Phlx Rule 708 was approved by the Commission on April 1, 
1994. See Securities Exchange Act Release No. 33850 (April 1, 1994) 
(order approving File No. SR-Phlx-93-53).
---------------------------------------------------------------------------

(b) Statutory Basis
    The proposed rule change is consistent with Section 6 of the Act in 
general, and in particular, with Section 6(b)(5), in that it is 
designed to promote just and equitable principles of trade, and protect 
investors and the public interest by ensuring an orderly and decorous 
environment on the trading floor for Exchange business to be conducted. 
The proposal is also consistent with Section 6(b)(6), in that 
Regulation 4, as amended, would continue to provide that members of the 
Exchange be appropriately disciplined for violations of the rules of 
the Exchange.

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 of 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

    Within 35 days of the publication of this notice in the Federal 
Register or within such other period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, DC 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. 552, will be available for inspection and copying at the 
Commission's Public Reference Room, 450 Fifth Street NW., Washington, 
DC 20549. Copies of the 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-94-14 and should be submitted by July 19, 
1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15609 Filed 6-27-94; 8:45 am]
BILLING CODE 8010-01-M