[Federal Register Volume 60, Number 207 (Thursday, October 26, 1995)]
[Notices]
[Pages 54904-54905]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26543]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36395; File No. SR-PHLX-95-58]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Trader 
Registration and the Use of the Series 7A Examination

October 20, 1995.
    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 
September 22, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx'' of 
``Exchange'') 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 by the self-regulatory 
organization. On October 6, 1995 the Exchange submitted Amendment No. 1 
to the proposed rule change.\1\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.

    \1\ See letter from Gerald O'Connell, First Vice President 
Market Regulation and Trading Operations, Phlx, to Glen Barrentine, 
Senior Counsel, SEC, dated October 3, 1995. In Amendment No. 1 the 
Exchange explained the purpose of its proposed amendment to Rule 
604(c)(ii).
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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 adopt 
paragraph (d) to Rule 604, Registration and Termination of Registered 
Representatives, to require registration of persons who solicit or 
handle business in securities and are compensated by a member or 
participant organization for which the Phlx is the Designated Examining 
Authority (``DEA''). Only persons not otherwise required to register 
with the Exchange would be subject to Rule 604(d). Registration 
pursuant to the proposed rule would require filing Form U-4, Uniform 
Application for Securities Industry Registration or Transfer, with the 
Exchange. The Phlx also proposes to amend paragraph (c)(ii) of Rule 
604, which names the Series 7A as the examination appropriate for 
Limited Registration/Floor Members,\2\ to clarify that this is the 
appropriate examination for such members only, not all members who 
conduct a public business from the equity trading floor.

    \2\ A Limited Registration/Floor Member is a member who conducts 
a public business that is limited to accepting orders from 
professional customers for execution on the trading floor. The 
Series 7A examination is a module of the Series 7 (the General 
Securities Registered Representative Examination) developed to test 
the knowledge of relevant securities laws and Exchange rules 
required of such members. See Securities Exchange Act Release No. 
32698 (July 29, 1993), 58 FR 41539 (August 4, 1993) (File No. SR-
NYSE-93-10).
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    The text of the proposed rule change is as follows [new text is 
italicized]:
Rule 604 Registration and Termination of Registered Representatives
    (c) Limited Registration/Floor Members * * *
    (ii) The appropriate examination for a floor member to conduct a 
public business from the equity trading floor is the Series 7A 
examination.
    (d) Every person who is compensated directly or indirectly by a 
member or participant organization for which the Exchange is the 
Designated Examining Authority (``DEA'') for the solicitation or 
handling of business in securities, including trading securities for 
the account of the member or participant organization, whether such 
securities are those dealt in on the Exchange or those dealt in 
over-the-counter, who is not otherwise required to register with the 
Exchange by paragraph (a) of this rule or another rule shall file 
Form U-4, Uniform Application for Securities Industry Registration 
or Transfer, with the Exchange.

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

1. Purpose
    Currently, the 600 series of rules generally govern registration of 
members.\3\ Rule 604(a) requires Series 7 Registered Representatives to 
register with the Exchange on Form U-4. In addition, the Exchange 
requires Limited Registration/Floor Members to register pursuant to 
Rule 604(c). However, there is no requirement for proprietary 
``upstaires'' traders (i.e., those who trade for the firm's own 
account) to register with the Exchange. This proposal adopts such a 
requirement as Rule 604(d).

    \3\ See, e.g., Rule 600, Addresses of Members.
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    The Commission recently noted the absence of such a requirement 
during a Commission oversight examination of a Phlx participant 
organization. The Exchange has thus determined to require a firm's 
proprietary traders to register with the Exchange and believes that 
this requirement will enhance the Exchange's examination program. 
Specifically, Exchange files would contain a complete record of those 
trading for a member of participant organization, not just persons 
handling customer accounts. The Form U-4 would provide background 
information on such traders as well as a basis for further Exchange 
research if needed.
    Similar to Rules 604(a) and (c), the proposal would require 
registration on Form U-4. This form is currently used in the Exchange's 
membership application process for prospective members or participants, 
as well as the officers, shareholders and directors of such 
organizations. In order to prevent duplicative registration, the 
proposal would not apply to persons who are otherwise registered with 
the Exchange.
    The proposal also seeks to amend paragraph (c)(ii) of Rule 604. The 


[[Page 54905]]
purpose of the amendment is to add limiting language to Rule 604(c)(ii) 
to clarify that the Series 7A is the appropriate examination for 
Limited Registration/Floor Members, not all members conducting a public 
business from the equity trading floor. Although the organization and 
intent behind the adoption of Rule 604 indicate that paragraph (c) and 
sub-paragraph (ii) thereunder apply only to Limited Registration/Floor 
Members,\4\ on its face the text of 604(c)(ii) can be construed to 
apply to all members conducting a public business. The amendment would 
remove this ambiguity from Rule 604(c)(ii) by naming floor members 
specifically as the parties for whom the Series 7A is the appropriate 
examination.

    \4\ See Securities Exchange Act Release No. 35258 (January 20, 
1995), 60 FR 5449 (January 27, 1995) (File No. SR-Phlx-94-15) (order 
approving the Phlx's adoption of the Limited Registration/Floor 
Member status and its use of the Series 7A for such members).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act \5\ in that it is designed to promote just and equitable principles 
of trade, prevent fraudulent and manipulative acts and practices, as 
well as to protect investors and the public interest by enhancing the 
Exchange's examination process.

    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx 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

    Within 35 days of the publication of this notice in the Federal 
Register or within such longer 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, N.W., Washington, D.C. 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 Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. 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-95-58 and should be 
submitted by November 16, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-26543 Filed 10-25-95; 8:45 am]
BILLING CODE 8010-01-M