[Federal Register Volume 64, Number 125 (Wednesday, June 30, 1999)]
[Notices]
[Pages 35232-35233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16643]
[[Page 35232]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41553; File No. SR-PHLX-98-23]
Self-Regulatory Organizations: Philadelphia Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change and Amendment Nos. 1, 2
and 4 Thereto and Notice of Filing and Order Granting Accelerated
Approval to Amendment No. 3 to the Proposed Rule Change Relating to By-
Law Article XI, Sec. 11-1--Appeals; Article XII, Sec. 12-4--
Application; and Article XV, Sec. 15-3--Disposition of Proceeds of Sale
of Membership
June 23, 1999.
I. Introduction
On August 18, 1998, the Philadelphia Stock Exchange, Inc. (``PHLX''
or ``Exchange'') filed with 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 permit the Board of Governors (``Board'') to
review the validity and amount of claims asserted against a membership
and to hear appeals from adverse Admissions Committee decisions.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The proposal was originally submitted on June 24, 1998,
however, the PHLX failed to include the circulars as required by
Form 19b-4. See Form 19b-4, 3 Fed. Sec. L. (CCH) para. 33,351. The
Exchange subsequently submitted Amendment No. 1 that included the
circulars and made technical changes to the proposed rule language.
Letter from Murray L. Ross, Vice President and Secretary, PHLX, to
Michael Walinskas, Deputy Associate Director, Division of Market
Regulation (``Division''), Commission, dated August 17, 1998
(``Amendment No. 1''). In addition, the PHLX agreed to additional
technical changes to accurately reflect the differences between the
proposed rule language and the PHLX's current rule language.
Telephone conversation between Murray L. Ross, Vice President and
Secretary, PHLX and Karl Varner, Attorney, Division, Commission, on
September 1, 1998.
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On September 16, 1998, the proposed rule change, which included
Amendment No. 1, was published for comment in the Federal Register.\4\
No comments were received on the proposal. The PHLX submitted Amendment
No. 2 to the proposed rule change on October 22, 1998,\5\ Amendment No.
3 on May 25, 1999,\6\ and Amendment No. 4 on June 22, 1999.\7\ This
notice and order approves the proposed rule change, as amended, and
solicits comments from interested persons on Amendment No. 3.
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\4\ Securities and Exchange Act Release No. 40420 (Sept. 9,
1998), 63 FR 49627.
\5\ In Amendment No. 2, the Exchange agreed to additional
technical changes to accurately reflect the differences between the
proposed rule language and the PHLX's current rule language and to
grant an extension of time for Commission action on the proposed
rule change. Letters from Murray L. Ross, Vice President and
Secretary, PHLX, to Karl Varner, Special Counsel, Division,
Commission, dated October 21, 1998 (collectively ``Amendment No.
2''). The Act does not require notice and comment for technical
amendments.
\6\ In Amendment No. 3, the Exchange clarified that an advisory
committee of three governors, of whom at least two will be non-
industry governors, will examine the validity of claims asserted
against the membership and give an advisory opinion to the Board of
Governors. Letter from Murray L. Ross, Vice President and Secretary,
PHLX, to Karl Varner, Special Counsel, Division, Commission, dated
May 24, 1999 (``Amendment No. 3'').
\7\ In Amendment No. 4, the Exchange agreed to additional
technical changes to accurately reflect the differences between the
proposed rule language and the PHLX's current rule language. Letter
from Murray L. Ross, Vice President and Secretary, PHLX, to Karl
Varner, Special Counsel, Division, Commission, dated June 21, 1999
(``Amendment No. 4''). The Act does not require notice and comment
for technical amendments.
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II. Description of the Proposal
The PHLX has proposed a By-Law amendment to Article XV, Sec. 15-3,
Disposition of Proceeds of Sale of Membership, to permit the Board,
rather than the Arbitration Committee or a panel thereof, to determine
the validity and amount of claims asserted against a membership
pursuant to the specified order of claims enumerated in Section 15-3 of
the By-Laws. This proposed By-Law amendment, as recommended by the
Arbitration and Executive Committees of the Board, seeks to conform the
By-Law with procedures adopted by other registered national securities
exchanges \8\ and provides for Board oversight of seat proceeds
disposition.
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\8\ See Chicago Board Options Exchange (``CBOE'') Rule 3.15 and
New York Stock Exchange, Inc. (``NYSE''), Constitution, Article II,
Sec. 11.
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The Board will make its decision after an advisory committee
consisting of three governors, of whom at least two are non-industry
governors, examines the claims asserted against the membership and
gives an advisory opinion to the Board.\9\ The advisory committee will
examine the validity of claims based on the written submission of the
claimants and respondents.\10\ Claimants and respondents may, however,
request an oral argument before the advisory committee.\11\ The Board
will determine the payment of claims based upon the written record
before the advisory committee.\12\
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\9\ See Amendment No. 3, Supra Note 6.
\10\ Id.
\11\ Id.
\12\ Id.
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Additionally, the Exchange proposes to amend Article XI, Sec. 11-1,
Appeals, and Article XII, Sec. 12-4, Application, to provide that an
adverse Admissions Committee decision be appealed to the Board. These
proposed amendments seek to conform the By-Laws with procedures adopted
by other exchanges wherein appeals are taken to the Board or heard by a
panel of the Board subject to ratification, such as CBOE Rule 19.5 and
American Stock Exchange LLC ``AMEX''), Constitution, Article IV,
Sec. 1(g). Thus, the proposal creates a right of appeal from Admissions
Committee decisions.
III. Discussion
After careful review, the Commission finds that the proposed rule
change, as amended, is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\13\ Specifically, the Commission finds that the
proposal is consistent with the requirements of Section 6(b)(5) of the
Act,\14\ because it removes impediments to and perfects the mechanism
of a free and open market and a national market system protects
investors and the public interest, and is not designed to permit unfair
discrimination between customers, issuers, brokers or dealers. Because
the Board is vested with all of the powers necessary for the management
of the business and affairs of the Exchange and the regulation of the
business conduct of members of the Exchange,\15\ the Commission
believes that the Board, rather than the Arbitration Committee or a
panel thereof, is the most appropriate venue for making decisions
regarding the disposition of seat proceeds. In addition, the Commission
notes that the Board's oversight of the disposition of proceeds is
similar to the rules adopted by certain other self-regulatory
organizations (``SROs'').\16\
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\13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
\15\ PHLX Article IV, Sec. 4-4(a).
\16\ See CBOE Rule 3.15 and NYSE, Constitution, Article II, Sec.
11.
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The Commission also finds that the proposal is consistent with the
requirements of Section 6(b)(7) 17 in that the Board's
oversight of Admissions Committee decisions provides a fair procedure
for appealing decisions denying membership to any person seeking
membership therein. By providing the opportunity to appeal adverse
decisions, the proposal ensures that applicants have an additional
opportunity to be heard. The
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Commission also notes that the Board's oversight of Admissions
Committee decisions is similar to the rules adopted by certain other
SROs.\18\
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\17\ 15 U.S.C. 78f(b)(7).
\18\ See CBOE Rule 19.5 and AMEX, Constitution, Article IV,
Sec. 1(g).
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The Commission finds Amendment No. 3 consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange. Specifically, the
Commission finds that the proposal is consistent with the requirements
of Section 6(b)(5) of the Act, because it removes impediments to and
perfects the mechanism of a free and open market and a national market
system. Amendment No. 3 ensures that the advisory committee reviewing
the validity of claims and giving an advisory opinion to the Board is
balanced with the appointment of two non-industry governors to the
committee.
The Commission finds good cause to approve Amendment No. 3 to the
proposed rule change prior to the thirtieth day after the date of
publication of notice of filing of the amendment in the Federal
Register. Specifically, Amendment No. 3, merely clarifies the
administrative procedures for reviewing the validity of claims asserted
against the membership, thus, adding greater transparency to the review
process. Accordingly, the Commission believes that there is good cause,
consistent with Sections 6(b)(5) and 19(b) of the Act,\19\ to approve
Amendment No. 3 to the proposal on an accelerated basis.
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\19\ 15 U.S.C. 78(f)(5) and 78s(b).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning Amendment No. 3, including whether Amendment No. 3
is consistent with Act. Persons making written submissions should file
six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW, Washington, D.C. 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 at the
Commission's Public Reference Room. 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-98-23 and
should be submitted by July 21, 1999.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\20\ that the proposed rule change (SR-PHLX-98-23), as amended, is
approved.
\20\ 15 U.S.C. 78s(b)(2).
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For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3 (a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-16643 Filed 6-29-99; 8:45 am]
BILLING CODE 8010-01-M