[Federal Register Volume 61, Number 148 (Wednesday, July 31, 1996)]
[Notices]
[Pages 40058-40059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19470]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37472; File No. SR-Phlx-96-28]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc., Relating to the Listing of Hybrid Securities

July 23, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 19, 1996, the 
Philadelphia Stock Exchange, Inc. (``Phlx'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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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

    The Exchange is proposing to amend Phlx Rule 803(f) in order to 
conform the Exchange's listing criteria for hybrid securities to those 
of the New York Stock Exchange (``NYSE'') and the American Stock 
Exchange (``Amex'').
    The text of the proposed rule change is available at the Exchange 
and the Commission.

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
    In March 1992, the Commission approved the adoption of subsection 
(f) under Phlx Rule 803 containing guidelines for listing securities 
that have features common to both equity and debt securities, yet do 
not fit within the traditional definitions of such securities.\2\ 
Sometimes referred to as ``hybrids,'' these securities can take a 
variety of forms. Although the Exchange has not listed any hybrid 
securities to date, it does trade certain ones pursuant to unlisted 
trading privileges (``UTP''); \3\ for example, PERCS and trust 
convertible preferred securities.
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    \2\ See Securities Exchange Act Release No. 30466 (March 11, 
1992), 57 FR 9301 (March 17, 1992). At the time the rule was 
approved, it was denoted as Supplementary Material .02 to Rule 803 
and was subsequently reapproved in the same form as renumbered 
subsection (f) when the Exchange's two tiered listing standards were 
approved. See Securities Exchange Act Release No. 34235 (June 17, 
1994), 59 FR 32736 (June 24, 1994).
    \3\ Rule 12f-5 under the Act provides that an exchange must have 
in effect rules providing for transactions in the class of type of 
security to which it extends unlisted trading privileges.
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    In reviewing its hybrid security listing rules, the Exchange 
noticed that certain provisions which initially were also included in 
the NYSE and Amex rules have since been removed. Because the Exchange 
may in the future trade other hybrid securities listed on either the 
NYSE or the Amex pursuant to UTP, the Exchange believes it is 
unnecessary for its rules to be more onerous than those of the NYSE or 
the Amex. Accordingly, the Phlx seeks to conform its rules therewith.
    Phlx Rule 803(f) currently specifies the minimum issuer 
qualifications, the minimum public distribution and aggregate market 
value of the security and other criteria to assist the Exchange in its 
case by case review and determination of the suitability of each 
security prior to its approval for listing. The Exchange now proposes 
to remove current provisions that prohibit the listing of (1) any cash 
settled product that is settled in any currency other than U.S. 
dollars, or (2) any product that has a mandatory redemption price of 
less than three dollars.\4\ Additionally, the Exchange proposes to 
delete the provision requiring only 100 public holders if the security 
is traded in thousand dollar denominations, thereby requiring 400 
holders regardless of the denomination.
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    \4\ The Commission recently approved similar amendments to 
Amex's rules. See Securities Exchange Act Release No. 37165 (May 3, 
1996), 61 FR 21215 (May 9, 1996).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
in general and furthers the objectives of Section 6(b) in particular in 
that it is designed to promote just and equitable principles of trade 
and to protect investors and the public interest in that it conforms 
the Exchange's listing standards for hybrid securities to those of the 
NYSE and the Amex.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on 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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2)does not impose any significant burden on competition; (3) 
does not become operative for 30 days from July 19, 1996, the date on 
which it was filed, and (4) the Exchange provided the Commission with 
written notice of its intent to file the proposed rule change at least 
five business days prior to the filing date, it has become effective 
pursuant to Section 19(b)(3)(A)

[[Page 40059]]

of the Act \5\ and Rule 19b-4(e)(6) thereunder.\6\
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(e)(6).
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    The Commission notes that although it is reasonable for the 
Exchange to remove the affected provisions as mandatory listing 
standards,\7\ proposals that deviated from these standards might raise 
novel or significant regulatory issues that would require a proposed 
rule change to list the product.\8\
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    \7\ The affected provisions currently prevent the listing of (1) 
any cash settled product settled in any currency other than U.S. 
dollars or (2) any product that had a mandatory redemption price of 
less than three dollars.
    \8\ See e.g., Securities Exchange Act Release No. 27753 (March 
1, 1990), 55 FR 8626 (March 8, 1990) (order approving File-No. SR-
Amex-89-29). For example, a stock index-linked note that was payable 
in a foreign currency would raise important regulatory issues among 
which might include the need to address appropriate product term and 
risk disclosure, customer suitability, and settlement procedures. 
Accordingly, the Commission expects the Phlx to consult with it on 
the need to file a Section 19(b) rule change to list a product with 
such terms under the Rule 803(f) listing standards.
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    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. 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 Exchange. All 
submissions should refer to File No. SR-Phlx-96-28 and should be 
submitted by August 21, 1996.
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    \9\ 17 CFR 220.30-3(a)(12).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-19470 Filed 7-30-96; 8:45 am]
BILLING CODE 8010-01-M