[Federal Register Volume 65, Number 44 (Monday, March 6, 2000)]
[Notices]
[Pages 11826-11827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5383]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42464; File No. SR-Phlx-99-26]


Self-Regulatory Organizations; Notice of Filing of Proposed 
Amendment to the By-Laws and Corresponding Changes to the Rules of the 
Philadelphia Stock Exchange, Inc., Relating to Various Committees

February 28, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on July 30, 1999, the Philadelphia Stock Exchange, 
Inc. (``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the self-regulatory organization. The Phlx filed an amendment to the 
proposed by-law change on October 4, 1999.\3\ The Commission is 
publishing this notice to solicit comments on the proposed by-law 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter to Michael Walinskas, Associate Director, 
Division of Market Regulation, Commission, from John Dayton, 
Counsel, Phlx, dated October 1, 1999 (``Amendment No. 1''). 
Amendment No. 1 proposes certain technical changes. Specifically, it 
amends Phlx Rule 930 to reflect the fact that the Arbitration 
Committee is being eliminated from the by-laws. Amendment No. 1 also 
proposes changes to Phlx Rule 950, Secs. 1 and 2, to reflect the 
elimination of the Arbitration Committee.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed By-Law Change

    The Phlx proposes to amend its By-laws as follows: (i) By-Law 
Article III, Sec. 3-5, 3-6, 3-7, 3-8, 3-9, 3-12, Article IV, Sec. 4-7, 
Article V, Sec. 5-5, Article X, Sec. 10-1, 10-4 and 10-11, combining 
the Nominating and Elections Committees; (ii) By-Law Article X, 
Sec. 10-8 and 10-14 eliminating the Arbitration Committee and 
transferring its functions to the Executive Committee; and (iii) By-Law 
Article XI, Sec. 11-1, to create a single Quality of Markets Committee. 
The Phlx also proposes to make technical changes to certain of its 
rules to reflect the changes to the by-laws.\4\
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    \4\ See Amendment No. 1.
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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 IV 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

1. Purpose
    The Exchange has proposed By-law amendments to provide for 
streamlining the committee process as follows: (i) Dissolving the 
Arbitration Committee, whose limited remaining functions would be 
transferred to the Executive Committee, who will oversee ongoing 
arbitrations filed before the transfer of arbitration responsibilities 
to the National Association of Securities Dealers, Inc. (``NASD'') in 
October, 1998; \5\ (ii) dissolving the Elections Committee whose 
functions would be transferred to the Nominating Committee; and (iii) 
consolidating the three Quality of Markets Committees into a single 
Quality of Markets Committee with responsibilities for all three Phlx 
trading floors.
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    \5\ See Securities Exchange Act Release No. 40517 (October 1, 
1998), 63 FR 54177 (October 8, 1998) (SR-Phlx-98-28).
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    First, the Exchange proposes to dissolve the Arbitration Committee 
and transfer its duties to the Executive Committee. Specifically, the 
Exchange proposes to rescind By-Law Article X, Sec. 10-8, entitled 
Arbitration Committee, and move its remaining powers to the Executive 
Committee by By-Law Article X, Sec. 10-14(d). Additiionally, the 
Exchange proposes to delete reference to the Arbitration Committee in 
By-Law Article XI, Sec. 11-1(a). These changes are intended to 
eliminate a standing committee, while transferring its 
respoinsibilities to the Executive Committee whose powers are broadly 
provided for in By-Law Article X, Sec. 10-14.
    By way of background, the Exchange ceased accepting arbitration 
cases on October 1, 1998. Jurisdiction for Phlx arbitration cases now 
resides with the NASD. Currently, the exchange is processing and 
closing the cases that were filed prior to October 1, 1998. Following 
the cessation of these cases, the arbitration function at the Exchange 
will cease, as will the need for any committee oversight of these 
matters. In addition, based on the experience since October 1, 1998 to 
the present, the Exchange believes that any remaining questions 
requiring committee oversight will be minimal.
    Second, the Exchange proposes several changes to the Nominating 
Committee and the Elections Committee, essentially collapsing them into 
a single committee. The Exchange proposes to rescind By-Law Article X, 
Sec. 10-13, entitled Elections Committee, and moves its powers to the 
Nominating Committee in By-Law Article III, Sec. 3-5(e). The Exchange 
proposes changing the name of the Nominating Committee to the 
Nominating and Elections Committee in By-Law Article II, Sec. 3-5, 3-6, 
3-7, 3-8, 3-9 and 3-12, Article IV, Sec. 4-7, Article VI Sec. 5-5, 
Article X, Sec. 10-1 and 10-4 and Article XI, Sec. 11-1. These changes 
are intended to streamline the functions of these two committees, as 
described more fully below.
    The Elections Committee performs the limited, yet important 
function of administering membership elections. The Nominating 
Committee submits nominations for industry Governors who stand for 
election by the members. It also submits nominations for non-industry 
Governors. Because these two Committees perform functions related to 
the election and appointment of Governors of the Exchange, the Exchange 
believes that the merging of the Elections Committee with the 
Nominating Committee will not impair the functioning of any of their 
tasks.\6\ In fact, merging these responsibilities should improve 
efficiency as well as coordination, as the same group of committee 
members will oversee the complete election-related process.
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    \6\ The Commission notes that the Exchange currently has a 
policy of engaging an independent auditing firm to administer 
elections. This practice will continue following the merger of the 
Nominations Committee and the Elections Committee. Phone call 
between John Dayton, Phlx, and Christine Richardson, Division of 
Market Regulation, Commission, February 23, 2000.
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    Finally, the Exchange proposes to reduce the number of Quality of 
Markets Committees from three to one, also to improve efficiency. 
Specifically, the

[[Page 11827]]

Exchange proposes to amend By-Law Article X, Sec. 10-20 to reduce the 
number of these Committees from three (one respecting each of the three 
trading floors) to one, as well as to ensure that the Committee will 
contain at least as many non-industry as industry members. The current 
language requires that the present Committees are ``equally balanced''. 
The proposed language gives the Exchange more flexibility to constitute 
the proposed Committee while retaining the appropriate non-industry 
representation.\7\ The exchange proposes to amend By-Law Article X, 
Sec. 10-16, 10-17 and 10-19 to conform the language contained therein 
to the existence of only one Quality of Markets Committee. The Exchange 
believes that these changes should also improve the input of the 
Quality of Markets Committee on the overall committee process by taking 
advantage of the overlap in issues emanating from each of the three 
trading floors, as well as providing for more singular input. In 
summary, these proposed amendments are designed to create a more 
efficient committee process and save the Exchange certain costs related 
to convening committees.
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    \6\ The proposed language provides that ``[t]he [Quality of 
Markets] Committee will have broad representation that shall include 
at least as many non-industry as industry Committee members'' See 
Proposed Phlx By-Law Art. X, Sec. 10.20.
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    Given the composition requirements of the Committees and the 
scheduling problems associated with convening meetings in Philadelphia 
for a significant number of public, non-industry as well as industry 
Governors not associated with Philadelphia-based member organizations, 
the proposed amendments are designed to make the Committee process more 
efficient, while lowering costs. The Exchange believes that this 
consolidation of committee functions will be beneficial to the 
functioning of the committee process by decreasing the number of 
committee assignments for some public, non-industry and industry 
Governors, allowing them to concentrate more of their energies to their 
remaining assignments. The Exchange believes the quality of information 
received from the committees by the Board of Governors will not be 
affected by the consolidation.
2. Basis
    The Exchange believes that the proposal is consistent with Section 
6 and, specifically with Section 6(b)(3) of the Act, in that it 
continues to assure Phlx members fair representation in the 
administration of the Exchange's affairs by providing a committee 
structure that is more efficient and accessible in achieving the goals 
of the Exchange and the membership.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of this Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change 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, located at the above address. 
Copies of such filing will also be available for inspection and copying 
at the principal office of the self-regulatory organization. All 
submissions should refer to File No. SR-Phlx-99-26 and should be 
submitted by March 27, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\ 17 CFR 200.30-3(a)(12)

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-5383 Filed 3-3-00; 8:45 am]
BILLING CODE 8010-01-M