[Federal Register Volume 65, Number 104 (Tuesday, May 30, 2000)]
[Notices]
[Pages 34521-34523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13416]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42800; File No. SR-Phlx-00-28]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. To Divide Its 
Allocation, Evaluation and Securities Committee Into Two Separate 
Committees: the Equity Allocation, Evaluation and Securities Committee 
and the Option Allocation, Evaluation and Securities Committee

May 19, 2000.
    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 March 28, 2000, 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, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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 amend Exchange By-Law, Article X, Section 
10-7 and Exchange Rule 500, each concerning its Allocation, Evaluation 
and Securities Committee (``AESC''), to divide the AESC into two 
separate committees: the Equity Allocation, Evaluation and Securities 
Committee and the Option Allocation, Evaluation

[[Page 34522]]

and Securities Committee. The text of the proposed rule change is 
available at the Phlx and at the Commission.

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 Phlx 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 Phlx 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 proposed change to By-Law Article X, Section 10-7 is intended 
to divide the Exchange's current Allocation, Evaluation and Securities 
Committee into two separate committees, one for equities and one for 
options. The proposed change to Rule 500 is intended to allow the rules 
governing the Committees to conform to the new By-Law.
    Currently, the AESC is composed of persons who are active on both 
the equity and options trading floors, persons who conduct a public 
securities business, one Public Governor, and one Non-Industry 
Governor, and one Non-Industry Governor.\3\ The full AESC is 
responsible for appointment of specialist units on each floor; \4\ 
approving the transfer of equities and options among specialist units 
on each floor; \5\ allocating both equities and options to applicant 
specialist units on each floor; \6\ evaluating the performance of 
specialist units on each floor; \7\ reallocating equities and options 
when warranted due to performance issues from one specialist unit to 
another on each floor; \8\ and supervising questions pertaining to 
securities admitted to dealings on the Exchange.\9\
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    \3\ See Exchange Rule 500.
    \4\ See Exchange Rule 501.
    \5\ See Exchange Rule 508.
    \6\ See Exchange Rule 511(b).
    \7\ See Exchange Rules 511(c) to 511(e) and 515.
    \8\ See id.
    \9\ See Exchange Rules 800 to 899.
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    The proposal to divide the AESC into separate committees--the 
Equity Allocation, Evaluation and Securities Committee and the Option 
Allocation, Evaluation and Securities Committee--would serve to provide 
expertise on each new committee in allocating securities to, and 
evaluating performance of, specialist units on each trading floor on 
which the committee members work and have experience.
    Currently, AESC members evaluate specialists and vote to allocate 
securities to equity specialist units and to option specialist units, 
regardless of whether their particular experience is in equities or 
options. The proposed new committees would consist, in part, of members 
with experience specific to the type of security to be allocated and in 
the type of specialists to be evaluated.
    Each committee would consist of nine members. Five persons would be 
members of both new committees: three off-floor persons who conduct a 
securities business, one Non-Industry Governor, and one Public 
Governor. One of the Governors would chair both committees. The 
remainder of the Equity Allocation, Evaluation and Securities Committee 
would consist of four persons who are active on the equity trading 
floor as floor brokers or specialists. The remainder of the Option 
Allocation, Evaluation and Securities Committee would consist of one 
person who is active on the options trading floor as a floor broker and 
three persons who are active on the options trading floor as 
specialists, registered options traders, or floor brokers.
    Each new committee would consist of core members, who would serve a 
three-year term that would be renewable once, and annual members, who 
would serve a one-year term that would be renewable twice. The core 
members of the Equity Allocation, Evaluation and Securities Committee 
would consist of three persons who conduct a public securities business 
and two persons who are active on the equity trading floor as 
specialists or floor brokers. The annual members of the Equity 
Allocation, Evaluation and Securities Committee would consist of two 
persons who are active on the equity trading floor as specialists or 
floor brokers, the Public Governor, and the Non-Industry Governor. The 
core members of the Option Allocation, Evaluation and Securities 
Committee would consist of three persons who conduct a public 
securities business, one person who is active on the options trading 
floor as a floor broker, and one person who is active on the options 
trading floor as a specialist, registered options trader, or floor 
broker. The annual members of the Option Allocation, Evaluation and 
Security Committee would consist of two persons who are active on the 
options trading floor as specialists, registered options traders, or 
floor brokers; the Public Governor; and the Non-Industry Governor.\10\
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    \10\ The original proposal did not include a description of the 
core members and the annual members of each of the two new 
committees. However, the text of the proposed new Exchange rules 
describes the committees and that description was added to the 
proposal with the consent of the Phlx. Phone conversation between 
Richard S. Rudolph, Counsel, Phlx, and Michael Gaw, Attorney, 
Division of Market Regulation, Commission, on April 11, 2000.
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2. Statutory Basis
    The Phlx believes the proposed rule change is consistent with and 
furthers the objectives of Section 6(b)(5) of the Act.\11\ 
Specifically, the Phlx believes that the proposal would aid in the 
perfection of the mechanisms of a free and open market and a national 
market system, and would protect investors and the public interest, by 
appointing to an appropriate committee individuals who have specific 
experience and expertise relating either to equities or to options. By 
so doing, the two new committees would have greater expertise in 
allocating securities (either equities or options) and evaluating 
specialists than the single existing committee.
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    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that the proposed rule change would 
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 solicited or received with respect to the 
proposed rule change.

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 with 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 Exchange 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,

[[Page 34523]]

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. Copies of such filings will also be available for 
inspection and copying at the principal office of Phlx. All submissions 
should refer to File No. SR-Phlx-00-28 and should be submitted by June 
20, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-13416 Filed 5-26-00; 8:45 am]
BILLING CODE 8010-01-M