[Federal Register Volume 64, Number 61 (Wednesday, March 31, 1999)]
[Notices]
[Pages 15391-15393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7808]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41201; File No. SR-PHLX-99-06]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc., Relating to Mandatory Trading Floor 
Training Requirements

March 22, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 12, 1999, 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 and to 
grant accelerated approval to the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to adopt new Phlx Rule 625, Options Trading 
Floor Training. The proposed rule requires that all equity option and 
index option floor members and their respective personnel complete 
mandatory training related to that employee's function on the trading 
floor. The Exchange is also proposing to adopt new Option Floor 
Procedure Advice, F-30, Options Trading Floor Training and an 
accompanying fine schedule, such that a minor rule plan citation could 
be issued.\3\ The text of the proposed new rule and new Option Floor 
Procedure Advice is as follows in italics:
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    \3\ The Phlx's minor rule violation enforcement and reporting 
plan (``Minor Rule Plan''), codified in Phlx Rule 970, contains 
floor procedure advices with accompanying fine schedules. Rule 19d-
1(c)(2) of the Act authorizes national securities exchanges to adopt 
minor rule violation plans for summary discipline and abbreviated 
reporting; Rule 19d-1(c)(1) requires prompt filing with the 
Commission of any final disciplinary actions. However, minor rule 
violations not exceeding $2,500 are deemed not final, thereby 
permitting periodic, as opposed to immediate, reporting.
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Equity Option and Index Option Only

F-30--Options Trading Floor Training

    All new equity option and index option floor members, whether 
specialists, floor brokers or Registered Options Traders, and their 
respective personnel, shall successfully complete mandatory training 
related to that employee's function on the trading floor. All 
current members and their respective personnel shall be subject to 
continuing mandatory training requirements in order to instruct 
these individuals on changes in existing automated systems or any 
new technology that is utilized by the Exchange.
    Failure to attend the scheduled mandatory training described 
above may result in the issuance of a fine in accordance with the 
fine schedule below.
    Fine Schedule (Implemented on a three year running calendar 
basis).

F-30

1st Occurrence: $250.00
2nd Occurrence: $350.00
3rd Occurrence: $500.00
4th Occurrence: Sanction is discretionary with Business Conduct 
Committee

Rule 625--Options Trading Floor Training

    All new equity option and index option floor members, whether 
specialists, floor brokers or Registered Options Traders, and their 
respective personnel, shall successfully complete mandatory training 
related to that employee's function on the trading floor. All 
current members and their respective personnel shall be subject to 
continuing mandatory training requirements in order to instruct 
these individuals on changes in existing automated systems or any 
new technology that is utilized by 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 III 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

    The purpose of the proposed rule is to require all new option floor 
members, whether specialists, floor brokers, or

[[Page 15392]]

Registered Options Traders (``ROTs''), and their respective personnel, 
to attend mandatory training related to that employee's function on the 
trading floor. In addition, all current equity option and index option 
floor members and their respective personnel shall be subject to 
continuing training requirements. Currently, the Exchange believes that 
continued training requirements are necessary in order to instruct 
these individuals on changes in existing automated systems or new 
technology that is utilized by the Exchange. In this way, the proposed 
rule change will ensure that all members are familiar with any new 
technology or changes in existing technology.
    Technology advances are ever-changing. In order to benefit users 
and remain competitive, the Exchange believes that it is imperative to 
continue to implement technology improvements and system enhancements. 
Moreover, these improvements and enhancements often provide for more 
efficient and quicker dissemination of information to the markets, 
thereby allowing investors to receive information on a more timely 
basis. Furthermore, technology improvements and system enhancements 
generally reduce the risk of clerical error. Therefore, mandated 
training will ensure that Exchange members and their respective 
personnel are proficient in using the new technology and will promote a 
more efficient trading environment.
    Additionally, the training requirement would be incorporated as a 
Floor Procedure Advice, such that a minor rule plan citation could be 
issued.\4\ Using the minor rule plan will enable the Exchange to 
quickly sanction members for non-compliance.\5\ For example, if the 
staff discovers that an Exchange member has not participated in 
mandatory or continuing training requirements, a fine could be issued 
immediately. The issuance of a fine could alleviate situations where 
failure to participate in mandatory training is a recurring problem, 
because violations by a member organization would result in escalating 
fines, and, eventually, possible disciplinary action by the Exchange's 
Business Conduct Committee (``BCC''). For failure to attend an Exchange 
mandated training class, the Exchange proposes a fine of $250 for a 
first offense, $350 for a second offense, and $500 for a third offense. 
The sanction is discretionary with the BCC for a fourth offense. The 
Exchange believes that this type of violation is appropriate for the 
minor rule plan because it is objective and, thus violations are 
readily subject to verification.
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    \4\ The Phlx is also proposing to amend its minor rule plan to 
include the new advice.
    \5\ In a telephone conversation on March 19, 1999 between 
Cynthia Hoekstra, Counsel, Phlx, and Joseph Morra, Attorney, 
Division of Market Regulation, Commission, the Exchange explained 
the concept of a three-year running calendar basis as used in the 
Fine Schedule. The Exchange will impose sanctions on a three-year 
running cycle, by which a violation of the training requirements 
which occurs within three years of the first violation of the 
training requirements will be treated as a second occurrence, and 
any subsequent violation within three years of the previous 
violation of the training requirements will be subject to the next 
highest sanction specified in the Fine Schedule.
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    For these reasons, the Exchange believes that the proposal to 
require attendance at training sessions is consistent with Section 6 of 
the Act,\6\ in general, and with Section 6(b)(5),\7\ in particular, in 
that it is designed to facilitate transactions in securities and to 
promote just and equitable principles of trade. Specifically, the 
Exchange believes that the proposal should promote a more efficient 
trading environment by (i) educating personnel regarding the use of 
improved technology and system enhancements; (ii) providing for quicker 
dissemination of information because the Exchange can train personnel 
as soon as changes are made; and (iii) lessen the risk of clerical 
errors. Moreover, mandatory training for equity option and index option 
floor members and their respective personnel is consistent with the 
provisions of Section 6(c)(3)(B) of the Act,\8\ which makes it the 
responsibility of an exchange to prescribe standards of training, 
experience, and competence of persons associated with self-regulatory 
organization members.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(c)(3)(B).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule 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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission 450 Fifth Street, NW, Washington, DC 20549-0609. 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 in the Commission's 
Public Reference Room. Copies of such 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-99-06 and should be 
submitted by April 21, 1999.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission has reviewed carefully the Phlx's proposed rule 
change and believes, for the reasons set forth below, that the Phlx 
proposal is consistent with the requirements of the Act and the rules 
and regulations thereunder applicable to a national securities 
exchange. Specifically, the Commission finds that, consistent with 
Section 6(b)(5) of the Act,\9\ requiring members and those associated 
with members to attend continuing education classes on the operation of 
new technology will both promote just and equitable principles of trade 
and benefit investors. The proposed rule change will ensure that equity 
option and index option floor members, and their respective personnel, 
are trained on an ongoing basis to competently perform their duties 
using the latest technology employed by the Exchange. In this regard, 
the Exchange's efforts are consistent with the Securities Industry 
Continuing Education Program, which seeks to promote the protection of 
investors through periodic training of securities professionals.
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    \9\ 15 U.S.C. 78f(b)(5) requires, among other things, that the 
rules of an exchange be designed to promote just and equitable 
principles of trade and, in general, to protect investors and the 
public interest.
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    Moreover, the Commission finds that mandating continuing education 
training for members and persons associated with members is consistent 
with the provisions of Section 6(c)(3)(B) of the Act,\10\ which makes 
it the responsibility of an exchange to prescribe standards of 
training,

[[Page 15393]]

experience, and competence for persons associated with self-regulatory 
organization members.
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    \10\ 15 U.S.C. 78f(c)(3)(B).
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    The Commission therefore finds good cause for approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register.\11\
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    \11\ In approving this rule, the Commission notes that it has 
also considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Phlx-99-06), be, and hereby 
is, approved.

    \15\ U.S.C. 78s(b)(2).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority\13\.
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    \17\ CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-7808 Filed 3-30-99; 8:45 am]
BILLING CODE 8010-01-M