[Federal Register Volume 63, Number 74 (Friday, April 17, 1998)]
[Notices]
[Pages 19282-19283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10182]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39851; File No. SR-PHLX-97-35]
April 10, 1998.
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Approving Proposed Rule Change To Amend Its By-Law Article XII,
Section 12-10, With Respect to the Eligibility of Persons To Serve as
Inactive Nominees
On December 15, 1997, the Philadelphia Stock Exchange,Inc.
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder \2\ to amend its By-Law Article
XII, Section 12-10, with respect to the eligibility of persons to serve
as inactive nominees. On January 14, 1998, the Exchange submitted
Amendment No. 1 to the filing, in which it proposed a new rule, Phlx
Rule 21, defining ``Inactive Nominee,'' and explained the role of an
Inactive Nominee on the Phlx.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Murray L. Ross, Vice President and
Secretary, Phlx, to Richard Strasser, Assistant Director, Division
of Market Regulation, Commission, dated January 14, 1998. Amendment
No. 1 is described further below.
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Notice of the proposed rule change, including Amendment No. 1, was
published in the Federal Register.\4\ The Commission received no
comment letters in response to the filing. This order approves the
proposed rule change, as amended.
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\4\See Securities Exchange Act Release No. 39622 (Feb. 4, 1998)
63 FR 7488 (Feb. 13, 1998).
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I. Description of the Proposal
Phlx's proposal would amend its By-Law Article XII, Section 12-10,
with respect to the eligibility of persons to serve as Inactive
Nominees.\5\
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\5\ In Amendment No. 1 to the filing, the Phlx proposed a new
rule, to be designated as Rule 21, which would define an Inactive
Nominee as follows:
The term inactive nominee shall mean a natural person associated
with and designated by a member organization who has applied for and
been approved by the Admissions Committee for such status and is
registered as such with the Office of the Secretary. An inactive
nominee shall have no rights or privileges of membership unless and
until said inactive nominee becomes a member of the Exchange
pursuant to the By-Laws and Rules of the Exchange. An inactive
nominee merely stands ready to assume legal title to a membership
upon notice by the member organization to the Office of Secretary to
be transferred intra-firm on an expedited basis.
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Phlx By-Law Article XII, Section 12-10, sets forth the eligibility
requirements
[[Page 19283]]
with respect to persons designated to serve as Inactive Nominees. An
Inactive Nominee must be a person affiliated with a member organization
who has submitted a membership application and has met all membership
qualification requirements, including an examination administered by
the Phlx's Market Surveillance Department. The amendment to By-Law
Article XII, Section 12-10, will allow an approved Inactive Nominee to
assume the legal title to a membership on an intra-firm and expedited
basis in the event of an emergency due to illness or other factors. In
Amendment No. 1, the Phlx stated that an Inactive Nominee would serve
in the ``event of an emergency due to illness or other factors,'' and
``would allow a member organization to have a full compliment of
traders or specialists available to conduct business on the Exchange
trading floors by transferring legal title intra-firm to the inactive
nominee thereby making that person an Exchange member.'' \6\
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\6\ For example, an Inactive Nominee might serve on behalf of a
trader who needs to take leave for surgery, or could serve when
specialist take vacation leave. It is anticipated that Inactive
Nominees would be used particularly following ``triple-witching''
days to assist firms in processing the greater number of
transactions during those periods. Telephone conversation between
Murray L. Ross, Vice President and Secretary, Phlx, and Marie
D'Aguanno Ito, Special Counsel, Division of Market Regulation,
Commission, April 8, 1998.
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The rule change will subject a person designated as an Inactive
Nominee to the existing membership application process, including fees.
Additionally, the member organization with whom an Inactive Nominee is
affiliated will be subject to a fee for the privilege of maintaining an
Inactive Nominee's status.
A member organization seeking to designate an affiliated person as
an Inactive Nominee shall submit a membership application on behalf of
a proposed Inactive Nominee, who would go through the existing
membership application process. Upon meeting all membership
requirements and after posting for a two-week period in the membership
Bulletin, this person will be registered as an Inactive Nominee. Upon
notice filed with the Phlx Office of the Secretary in writing prior to
9:00 A.M. on any business day that the Exchange is open, an Inactive
Nominee may assume the legal title to a membership on an intra-firm
basis and would be eligible to transact business on the Exchange that
day or for such longer period consistent with the seat lease or
membership title and use agreement (ABC agreement).
II. Discussion
The Commission finds that the proposed rule change is consistent
with Section 6 of the Act in general, and in particular, with Section
6(b)(5). Under Exchange Act Section 6(b)(5), the rules of an exchange
must be designed, among other things, to promote just and equitable
principles of trade and to prevent fraudulent and manipulative acts and
practices. By creating a pool of eligible individuals who can
substitute for traders or specialists on the trading floor, the
proposal should assist the Exchange in facilitating the smooth
functioning of its market operations, consistent with Exchange Act
Section 6(b)(5). Such an effort to have a prepared and available roster
of substitute traders should help to facilitate transactions in
securities and remove impediments to, and perfect the mechanism of, a
free and open market, also consistent with Exchange Act Section
6(b)(5).
III. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-PHLX-97-45), as amended, is
approved.
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\7\ 15 U.S.C. 78S(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-10182 Filed 4-16-98; 8:45 am]
BILLING CODE 8010-01-M