[Federal Register Volume 65, Number 134 (Wednesday, July 12, 2000)]
[Notices]
[Pages 43069-43070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17597]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43011; File No. SR-Phlx-00-28]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. to Divide Its 
Allocation, Evaluation and Securities Into Two Separate Committees

I. Introduction

    On March 28, 2000, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') submitted to 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 \2\ thereunder, a 
proposed rule change that would divide its Allocation, Evaluation and 
Securities Committee into two separate committees, one for equities and 
one for options. The proposed rule change was published for comment in 
the Federal Register on May 30, 2000.\3\ The Commission received no 
comments on the proposal. This order approves the Phlx's proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 42800 (May 19, 2000), 65 FR 
34521.
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II. Description of the Proposal

    The Exchange proposes to amend Phlx By-Law Article X, Section 10-7 
to divide its Allocation, Evaluation and Securities Committee into two 
separate committees: an Equity Allocation, Evaluation and Securities 
Committee and an Option Allocation, Evaluation and Securities 
Committee. The Exchange also proposes to amend Phlx Rule 500 to reflect 
the changes in the amended By-Law.
    Currently, the Allocation, Evaluation and Securities Committee is 
composed of one Public Governor, one Non-Industry Governor, three 
persons who conduct a public securities business, two persons who are 
active on the equity trading floor, and two persons who are active on 
the options trading floor.\4\ The committee is responsible for 
appointing specialist units on each floor,\5\ approving the transfer of 
equities and options among specialist units on each floor,\6\ 
allocating equities and options to specialist units on each floor; \7\ 
evaluating the performance of specialist units on each floor,\8\ 
reallocating equities and options from one specialist unit to another 
on each floor; \9\ and supervising questions pertaining to securities 
admitted to dealings on the Exchange.\10\
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    \4\ See Exchange Rule 500.
    \5\ See Exchange Rule 501.
    \6\ See Exchange Rule 508.
    \7\ See Exchange Rule 511(b).
    \8\ See Exchange Rules 511(c) to 511(e) and 515.
    \9\ See id.
    \10\ See Exchange Rules 800 to 899.
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    Under the proposal, each new committee will consist of nine 
members. Five persons will be members of both new committees: three 
off-floor persons who conduct a securities business, one Non-Industry 
Governor, and one Public Governor. Of the two Governors, one will chair 
both committees. The remainder of the Equity Allocation, Evaluation and 
Securities Committee will 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 will 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 will consist of core members, who will serve a 
three-year term that will be renewable once, and annual members, who 
will serve a one-year term that will be renewable twice. The core 
members of the Equity Allocation, Evaluation and Securities Committee 
will 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 will consist of the 
Public Governor, the Non-Industry Governor, and two persons who are 
active on the equity trading floor as specialists or floor brokers. The 
core members of the Option Allocation, Evaluation and Securities 
Committee will 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 
will consist of the Public Governor, the Non-Industry Governor, and two 
persons who are active on the options trading floor as specialists, 
registered options traders, or floor brokers.

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act.\11\ In 
particular, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act.\12\ Section 6(b)(5) requires, among other 
things, that the rules of an exchange be designed to promote just and 
equitable principles of trade and to protect investors and the public 
interest.
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    \11\ In approving this rule, the Commission has considered its 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange's proposal will split the existing Allocation, 
Evaluation and Securities Committee, which has some members who are 
active on the equities floor and some who are active on the options 
floor, into two new committees.

[[Page 43070]]

Currently, these floor members, along with the rest of the committee, 
evaluate specialists and vote to allocate securities to specialist 
regardless of whether their particular experience is in equities or 
options. After formation of the two new committees, persons who are 
active on one of the floors will be members only of the committee that 
governs their floor. The Commission believes that dividing the 
committees in this manner will bring greater expertise to the 
Exchange's allocation and evaluation function, while at the same time 
preserving independent views on each of the two committees. 
Accordingly, the Commission believes that the proposed rule change will 
promote just and equitable principles of trade and benefit investors by 
ensuring that each new committee includes individuals, with more 
specific expertise, responsible for allocating securities to, and 
evaluating the performance of, specialists.

IV. Conclusion.

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-Phlx-00-28) is approved.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-17597 Filed 7-11-00; 8:45 am]
BILLING CODE 8010-01-M