[Federal Register Volume 60, Number 198 (Friday, October 13, 1995)]
[Notices]
[Pages 53448-53449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25365]



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[[Page 53449]]


SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36341; File No. SR-Phlx-95-51]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval To Proposed Rule Change and Notice of Filing 
and Order Granting Accelerated Approval of Amendment No. 1 To Proposed 
Rule Change Relating to Employee Trading Accounts

October 5, 1995.
    On July 17, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to increase the requirements placed on securities 
trading accounts of employees of member and participant organizations.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on August 18, 1995.\3\ No comments were received on the 
proposal. On September 14, 1995, the Phlx submitted Amendment No. 1 to 
the proposed rule change.\4\ This order approves the proposed rule 
change. Also, Amendment No. 1 is approved on an accelerated basis.

    \3\ Securities Exchange Act Release No. 36096 (Aug. 11, 1995), 
60 FR 43177.
    \4\ See letter from Gerald O'Connell, First Vice President, 
Phlx, to Glen Barrentine, Team Leader, SEC (Sept. 14, 1995). In 
Amendment No. 1, the Phlx added to the Rule a requirement that an 
employee of a member or participant organization who opens a 
securities trading account with a nonmember make arrangements for 
his employer to receive duplicate confirmation reports and monthly 
trading account statements.
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    Currently, Phlx Rule 751 requires a member organization to obtain 
prior written approval from the Business Conduct Committee (``BCC'') 
before it can take or carry an account of a clerk entitled to access to 
the Floor of the Exchange. The current rule applies to floor clerks 
only and does not require that the clerks' employers be informed of 
their employees' trading accounts.
    By amending Phlx Rule 751, the Exchange proposes to increase the 
safeguards placed on securities trading accounts of employees of member 
and participant organizations.\5\ Specifically, the proposed amendment 
would expand the Rule's coverage to include all employees associated 
with a member or participant organization; require the employer to 
consent in writing before such an account may be taken or carried by a 
member or participant organization; and require the member or 
participant organization that carries the account to provide the 
employer with duplicates of the employees' confirmation reports and 
trading account statements. The proposed amendment also would impose an 
obligation on employees who open trading accounts with a nonmember to 
make arrangements to provide their employers with duplicate 
confirmation reports and trading account statements. By increasing the 
employers' awareness of its employees' trading patterns through the use 
of employer consent and duplicate records relating to the account, the 
Exchange believes that member and participant organizations will be 
able to supervise their employees more effectively.

    \5\ A member organization includes member firms and member 
corporations. A participant organization refers to foreign currency 
options participant organizations.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange and, in 
particular, with the requirements of Section 6(b).\6\ Specifically, the 
Commission believes the proposal is consistent with the Section 6(b)(5) 
\7\ requirements that the rules of an exchange be designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts, and, in general, to protect investors and the 
public. The proposed amendments to Phlx Rule 751 should facilitate the 
supervisory efforts of a member or participant organization by 
providing it with information regarding its employees' private 
securities transactions. In addition, the proposed amendments should 
reveal existing and potential conflicts of interest as well as alert a 
member or participant organization when additional surveillance could 
be appropriate.

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission also considers the proposed rule change to be 
consistent with Section 6(b)(1) \8\ requirement that an exchange have 
the capacity to enforce compliance by its members and persons 
associated with its members with the Act, the rules thereunder, and the 
rules of the exchange. The proposed amendments should assist member and 
participant organizations in monitoring transactions by their employees 
that may violate the Act or the rules of the Exchange.

    \8\ 15 U.S.C. 78f(b)(1).
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    For the same reasons, the Commission also finds that it is 
consistent with the Act to expand the coverage of Phlx Rule 751 to 
include all of the employees of member and participant organizations.
    The Commission finds good cause for approving proposed Amendment 
No. 1 prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register. The Amendment merely 
addresses the situation of when an employee opens a trading account 
with a nonmember, thereby foreclosing a potential loophole in the Rule. 
Also, the Amendment conforms the proposal to similar rules of other 
self-regulatory organizations.\9\ For these reasons, the Commission 
finds good cause for accelerating approval of the proposed rule change, 
as amended.

    \9\ See Securities Exchange Act Release Nos. 33306 (Dec. 9, 
1993), 58 FR 65603 (approving amendments to American Stock Exchange 
Rule 415) and 30744 (May 27, 1992), 57 FR 24075 (approving 
amendments to New York Stock Exchange Rule 407).
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    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1. 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. Sec. 552, will be available for inspection and 
copying at the Commission's Public Reference Section, 450 Fifth Street, 
NW., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the Philadelphia 
Stock Exchange. All submissions should refer to File No. SR-Phlx-95-51 
and should be submitted by November 3, 1995.
    It therefore is ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Phlx-95-51), including 
Amendment No. 1, is approved.

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

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\

    \11\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-25365 Filed 10-12-95; 8:45 am]
BILLING CODE 8010-01-M