[Federal Register Volume 65, Number 33 (Thursday, February 17, 2000)]
[Notices]
[Pages 8227-8228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-3747]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42408; File No. SR-Phlx-99-17]


Self Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving Proposed Rule Change and Notice of Filing and Order 
Granting Accelerated Approval to Amendments No. 1 and 2 to the Proposed 
Rule Change Relating to Trustees of Stock Exchange Fund

February 9, 2000.

I. Introduction

    On June 9, 1999, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''), 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 amend Article IX of its By-
Laws, concerning Trustees of Stock Exchange Fund. Notice of the 
proposal appeared in the Federal Register on July 9, 1999.\3\. The 
Commission received no comments on the proposal. The Phlx subsequently 
submitted Amendment No. 1 to the proposed rule change on August 16, 
1999 \4\ and Amendment No. 2 on November 5, 1999.\5\ The proposed 
change relates specifically to Section 9-5, concerning Agent of 
Trustees, and Section 9-6, concerning Reports. This notice and order 
approves the proposed rule change, as amended, and solicits comments 
from interested persons on Amendment Nos. 1 and 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Rel. No. 41591 (July 1, 1999), 
64 FR 37187.
    \4\ See Letter from Murray L. Ross, Vice President and 
Secretary, Phlx, to Michael Walinskas, Deputy Associate Director, 
Division of Market Regulation, Commission, dated August 11, 1999. 
The substance of Amendment No. 1 is discussed below.
    \5\ See Letter from Murray L. Ross, Vice President and 
Secretary, Phlx, to Michael Walinskas, Deputy Associate Director, 
Division of Market Regulation, Commission, dated November 4, 1999. 
The substance of Amendment No. 2 is discussed below.
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II. Description of the Proposal

    Section 9-5 of Article IX currently mandates that the Trustees of 
the Stock Exchange Fund, with the approval of the Board of Governors, 
appoint a Trust Company to act as their Agent to hold the securities of 
the Exchange for safeguarding and to collect the interests, dividends, 
and income from the Fund for the Treasurer of the Exchange. The Agent 
also is empowered to make deliveries of securities held for the 
Trustees of the Stock Exchange Fund from time to time as the Trustees 
of the Stock Exchange Fund direct.
    The proposed rule change, as amended, deletes reference to a Trust 
Company and mandates that the Trustees, with the approval of the Board 
of Governors, appoint as Agents for such purpose either a broker-dealer 
registered with the Commission under Section 15 of the Act \6\ or a 
bank as defined in Section 3(a)(6) of the Act.\7\ The reason for the 
change, according to Phlx, is that the Exchange no longer utilizes its 
subsidiary, the Philadelphia Depository Trust Co., for such services.
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    \6\ 15 U.S.C. 78o.
    \7\ 15 U.S.C. 78c(a)(6).
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    Section 9-6 of Article IX currently mandates that the Trustees of 
the Stock Exchange Fund submit to the Phlx Board of Governors at least 
quarterly a statement of the investments of the Exchange. The proposed 
rule change would mandate that the Trustees submit the quarterly 
statement to the Finance Committee of the Exchange, and that the 
Finance Committee then forward it to the Board of Governors with its 
recommendation.\8\ The Board believes that oversight by the Finance 
Committee of the Trustees of the Stock Exchange Fund is appropriate, 
since the Finance

[[Page 8228]]

Committee, pursuant to Article X of the Exchange's By-Laws, Section 10-
15, has charge of the funds of the Exchange and serves in an advisory 
capacity to the Board in the investment and sale of securities held by 
the Exchange.
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    \8\ Such recommendation may vary according to issues that may 
arise, including such matters as altering the portfolio mix and 
appointing a new Agent pursuant to Section 9-5 of Article IX as 
amended by this proposal. Telephone conservation between Murray L. 
Ross, Vice President and General Secretary, the Phlx, and Karl 
Varner, Special Counsel, and Ira L. Brandriss, Attorney, the 
Commission, on February 9, 2000.
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III. Discussion

    For the reasons discussed below, the Commission finds that the 
proposed rule change is consistent with the Act and the rules and 
regulations promulgated thereunder.\9\ Specifically, the Commission 
finds that the proposed rule change is consistent with the Section 
6(b)(5) \10\ requirements that the rules of a national securities 
exchange be designed to promote just and equitable principles of trade 
and protect investors and the public interest.
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    \9\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f). The Commission believes that the 
proposed rule change, which relates to internal organizational 
concerns of the Exchange with respect to the handling of its own 
investments, will have minimal impact, if any, on efficiency, 
competition, and capital formation.
    \10\ 15 U.S.C. 78f(b)(5).
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    The proposal, as amended, would require that the Trustees of the 
Stock Exchange Fund appoint either a registered broker-dealer or bank 
to act as their agent to hold the securities of the Exchange, to 
collect the interest, dividends, and income deriving from those 
securities, and from time to time to make deliveries of such securities 
as directed by the Trustees. The proposal thereby addresses a need 
created when the Exchange determined that it would no longer utilize 
the services of the trust company that had fulfilled this role in the 
past. The Exchange has also stated that it will notify the Commission 
when it replaces its agent with another one.\11\ The Commission finds 
that these proposed changes set in place an appropriate and reasonable 
arrangement for safeguarding the Exchange's securities and collecting 
the income derived from those securities.
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    \11\ See Amendment No. 1.
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    The proposed rule change would also require the Trustees of the 
Stock Exchange fund to submit a statement of the Exchange's investments 
to an additional level of review before they are presented to the Board 
of Governors. The Commission finds that this proposed change, by 
providing additional oversight of the financial arrangements of the 
Stock Exchange Fund, is consistent with the aim of protecting investors 
and the public interest.
    The Commission also finds good cause for approving proposed 
Amendment Nos. 1 and 2 prior to the thirtieth day after the date of 
publication of notice of filing in the Federal Register. Amendment Nos. 
1 and 2 add to the protections of the Exchange's securities embodied in 
the original proposal by providing that the agent appointed by the 
Trustees be either a registered broker-dealer or a bank and that the 
Exchange will notify the Commission as to changes in its agent.
    For these reasons, the Commission finds good cause for accelerating 
approval of the proposed rule change, as amended, to allow the Exchange 
to implement these protections without further delay.

IV. Solicitation Of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment Nos. 1 and 2, including whether the 
proposed rule change, as amended, is consistent with the Act. Persons 
making written submissions should file six copies thereof with the 
Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., 
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 in the Commission's Public 
Reference room. Copies of the filing will also be available for 
inspection and copying at the principal offices of the Phlx.
    Submissions should refer to File No. SR-Phlx-99-17 and should be 
submitted by March 9, 2000.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) \12\ of the 
Act, that the proposed rule change (SR-Phlx-99-17) is hereby approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-39(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-3747 Filed 2-16-00; 8:45 am]
BILLING CODE 8010-01-M