[Federal Register Volume 65, Number 1 (Monday, January 3, 2000)]
[Notices]
[Pages 153-154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-34016]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42272; File No. SR-Phlx-99-42]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving Proposed Rule Change on an Accelerated Basis Relating 
to Exchange Rule 98, Emergency Committee

December 23, 1999.
    On October 13, 1999 the Philadelphia Stock Exchange. (``PHLX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 relating to Exchange Rule 98, 
Emergency Committee. The proposed rule change was published for comment 
in the Federal Register on November 29, 1999.\3\ The Commission 
received no comments on the proposal. On December 22, 1999 the Exchange 
submitted to the Commission Amendment No. 2 to the proposed rule 
change, requesting that the proposed rule be approved for a 120 day 
pilot to expire on April 21, 2000.\4\ This order approves the proposal, 
as amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-42156 (November 19, 
1999), 64 FR 66684.
    \4\ See letter from Richard S. Rudolph, Counsel, Exchange, to 
Rebekah Liu, Special Counsel, Division of Market Regulation 
(``Division''), Commission, dated December 22, 1999. Because 
Amendment No. 2 only requests that the proposed rule be approved for 
a 120-day pilot, the Amendment is non-substantive in nature. 
Therefore, the Commission will not solicit comments on Amendment No. 
2.
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II. Description of the Proposal

    The Exchange proposes to amend Exchange Rule 98, Emergency 
Committee (``Emergency Committee'') to update certain of its 
provisions. First, the composition of the Emergency Committee is to be 
updated to correspond with previous revisions to the Exchange's 
governance structure. In 1997, various amendments to the Exchange's 
Certificate of Incorporation and By-Laws dealing with the governance 
structure of the Exchange were approved by the Commission.\5\ Among 
other things, a provision was added authorizing the Board of Governors 
to appoint a Chairman of the Board who would be the full-time, paid 
Chief Executive Officer of the Exchange, and the President position was 
eliminated.\6\ The proposed rule change, therefore, would replace the 
``Chairman of the Exchange'' with the current ``Chairman of the Board'' 
designation; delete the word ``President'' from the rule as the 
Exchange no longer has a ``President''; and include the Exchange's On-
Floor Vice Chairman \7\ as a member of the Emergency Committee.\8\
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    \5\ See Securities Exchange Act Release No. 38960 (August 22, 
1997), 62 FR 45904 (August 29, 1997).
    \6\ Id. Other corresponding amendments to the By-Laws were made 
in connection with the 1997 changes to the Exchange's governance 
structure. For example, references to ``President'' were changed to 
``Chief Executive Officer'' or ``Chairman of the Board.'' See PHLX 
By-law Article IV, Section 4-1 and PHLX By-Law Article V, Section 5-
1.
    \7\ See PHLX By-Law, Article IV, Section 4-2.
    \8\ Thus, under the proposed rule, the Emergency Committee would 
include five individuals: the Chairman of the Board of Governors; 
the On-Floor Vice Chairman of the Board of Governors; and the 
Chairmen of the Floor Procedure Committee, the Options Committee, 
and the Foreign Currency Options Committee .
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    Second, the proposed rule change deletes a provision authorizing 
the Emergency Committee to take action regarding CENTRAMART, an equity 
order entry system which is no longer used on the Exchange's equity 
trading floor.
    Finally, the Exchange is proposing to clarify that the Emergency 
Committee is authorized to take action if any emergency condition is 
created by the Year 2000 date change.

[[Page 154]]

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with Section 6 of the Act \9\ and the rules and regulations thereunder 
applicable to a national securities exchange. In particular, the 
Commission finds the proposed rule change is consistent with the 
requirements of Section 6(b)(5) of the Act \10\ which requires, among 
other things, that the rules of an exchange be designed to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
and, in general, to protect investors and the public interest.\11\
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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    The proposed rule change is consistent with the requirements of the 
Act because by conforming the composition of the Emergency Committee to 
structural amendments that were made to the Exchange's governance 
structure, the proposed rule will help to ensure that the Emergency 
Committee can operate in times of emergency, which will foster investor 
and public interest, and promote just and equitable principles of 
trade.
    The proposed rule is making one new change to the structure of the 
Emergency Committee by replacing the President, which the Exchange no 
longer has, with the On-Floor Vice Chairman. While this means that the 
Emergency Committee will have, at a minimum, two On-Floor 
representatives--the On-Floor Vice Chairman and the Chairman of the 
Floor Procedure Committee--the Commission believes that the Exchange 
has justified the change.\12\ The Exchange notes that addition of the 
On-Floor Vice Chairman will preserve the five-member structure of the 
Emergency Committee, minimizing the possibility of a tie vote on the 
Emergency Committee, and provides the Emergency Committee with the most 
qualified replacement for the President; that is, a member that can 
contribute direct knowledge of any potential or existing emergencies 
existing on the trading floor.\13\ In addition, while the Commission 
would be concerned about any committee structure that is dominated by 
one Exchange interest, the Commission believes that the Chairman of the 
Board, as well as the other remaining members of the Emergency 
Committee, which may or may not be from the floor, should help to 
controvert any such concerns. The Commission is granting accelerated 
approval to this proposed rule change for a 120-day pilot basis to 
allow the Exchange to further consider whether the overall Emergency 
Committee structure ensures that all Exchange interests are fairly 
represented.\14\
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    \12\ The Commission notes that previously, the President could 
have been a floor member.
    \13\ Letter from Richard S. Rudolph, Counsel, Exchange, to 
Rebekah Liu, Special Counsel, Division, Commission, dated November 
16, 1999.
    \14\ The Commission requests that the Exchange report back to 
the Commission 45 days prior to the expiration of the 120-day pilot 
on its views as to whether the Emergency Committee structure ensures 
that all Exchange interests, including On-Floor and Off-Floor, are 
fairly represented on the committee.
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    By clarifying that the Emergency Committee has the authority to 
take action if ``extraordinary market conditions or other emergencies'' 
arise due to the Year 2000 date change, the proposed rule also removes 
possible impediments to the Exchange's market that may arise due to the 
Year 2000 date change, thereby perfecting the mechanism of a free and 
open market and a national market system. As noted by the Exchange, the 
proposed Rule was submitted as part of the Year 2000 contingency plan 
designed by the Exchange's Year 2000 Task Force. The Commission notes 
that the current rule gives the Emergency Committee the power to act in 
any ``emergency condition,'' which in the Commission's opinion, would 
include one created by the Year 2000 date change.\15\ While the 
Exchange desired to clarify this, the Commission notes that the Rule 
proposal does not go beyond true emergency situations. Accordingly, not 
every problem that arises from the Year 2000 date change would 
necessarily rise to the level of an emergency warranting action by the 
Emergency Committee.
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    \15\ Previously, the Exchange described ``extraordinary market 
or emergency conditions'' as, among other things, a declaration of 
war, a presidential assassination, an electrical blackout, or events 
such as the 1987 market break or other highly volatile trading 
conditions that require intervention for the market's continued 
efficient operation. Letter from William W. Uchimoto, General 
Counsel, Exchange, to Sharon L. Itkin, Division, Commission, dated 
March 15, 1989.
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    Finally, by deleting references to CENTRAMART, the proposed rule 
makes clear that this equity order system is no longer in use at the 
Exchange. Taken together, then, the provisions of the proposed rule 
change should protect investors and the public interest.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. Accelerated approval of the 
proposed rule change should help the Emergency Committee to be ready to 
take action on issues related to the Year 2000 date change prior to 
January 1, 2000. The Commission notes that the Exchange's proposal was 
published in the Federal Register for the full statutory period and no 
comments were received. Therefore, the Commission believes it is 
consistent with Section 6(b)(5) and Section 19(b)(2) of the Act to 
grant accelerated approval to the proposed rule change.\16\
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    \16\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-PHLX-99-42), as amended, is 
approved on an accelerated basis.

    \17\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 99-34016 Filed 12-30-99; 8:45 am]
BILLING CODE 8010-01-M