[Federal Register Volume 65, Number 225 (Tuesday, November 21, 2000)]
[Notices]
[Pages 69983-69984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29713]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43546; File No. SR-Phlx-00-47]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. (``Phlx'') Relating to Requirement That Certain Members 
and Member Organizations for Whom the Phlx is the Designated Examining 
Authority Give Prior Written Notice to the Phlx's Examinations 
Department of Any Changes in Business Operation

November 9, 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 November 3, 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 Phlx proposes to adopt Rule 610 to require that members and 
member organizations for which the Exchange is the Designated Examining 
Authority (``DEA''), that operate as a specialist, floor broker and/or 
Registered Options Trade (``ROT'') and that have changed their business 
operations, or engaged in new business (for example, an ROT engages in 
off-floor proprietary trading), which materially affects the net 
capital, examinations and registration requirements to which the member 
or member organization is subject, to provide prior written notice to 
the Exchange's Examinations Department of any such changes in business 
operations. Below is the complete text of the proposed rule change. 
Proposed new text is in italics.
* * * * *
Philadelphia Stock Exchange, Inc.
* * * * *
Regulation of Members and Member Organizations
* * * * *

Rule 610. Notification of Changes in Business Operations

    Any member or member organization for which the Exchange is the 
Designated Examining Authority (``DEA''), that operates as a 
specialist, floor broker and/or Registered Options Trader (``ROT''), 
shall provide prior written notification to the Examinations Department 
of any change in the business operations of such member or member 
organization which would cause the member or member organization to be 
subject to additional or modified net capital requirements, examination 
schedules or other registration, examination or regulatory 
requirements.
* * * * *

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 Exchange 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 Exchange has prepared summaries, set forth in 
sections A, B and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Orgnaization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule is to provide notification to the 
Exchange's Examinations Department of changes in the business 
operations of member and

[[Page 69984]]

member organizations to bolster the examinations function. 
Specifically, pursuant to Section 19(g)(1) of the Act,\3\ self-
regulatory organizations (``SROs'') are required to enforce member 
compliance with the provisions of the Act and the SRO's own rules. 
Conducting cycle examinations of member firms for whom they are DEA is 
one method used by SROs to assess such compliance. Currently, the Phlx 
conducts examinations of its member firms on a periodic basis. The type 
of business a firm conducts is determinate of the interval between 
examinations as to any one particular firm. For example, the Phlx may 
examine specialist firms and proprietary trading firms annually, floor 
brokerage firms once every other year and ROTs once every three years. 
If a Phlx member would change its business operations, the change may 
affect the examination cycle for that particular firm. Further, new 
business operations often trigger both subtle changes in various 
regulatory requirements as well as larger issues of applicability of 
new provisions and obligations of which a firm may not be aware.
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    \3\ See 15 U.S.C. 78s(g)(1).
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    As stated above, the proposed rule change would require any member 
or member organization operating as a specialist, floor broker, and/or 
ROT and whose DEA is the Phlx, to notify, in writing, the Phlx 
Examinations Department of any change in its business operations which 
would cause it to be subject to additional or modified net capital 
requirements. The Examinations Department could then adjust the 
examination cycle as to the particular firm, as well as to advise such 
firm of new reporting and net capital requirements, if applicable. This 
information will also assist the Examinations Department in better 
focusing its examinations.
    The Exchange believes that the proposed rule change should 
facilitate more efficient and effective periodic and systematic 
assessment of its member firms' compliance with the Act, consistent 
with its mandate under Section 19(g) of the Act.
2. Statutory Basis
    The Phlx believes that the proposal is consistent with Section 6 of 
the Act,\4\ in general, and furthers the objectives of Section 6(b)(1) 
of the Act \5\ in particular, in that it is designed to ensure that 
Phlx is so organized and has the capacity to be able to carry out the 
purposes of the Act and to comply, and to enforce compliance by its 
members and persons associated with its members, with the provisions of 
the Act, the rules and regulations thereunder, and the rules of the 
Phlx. The proposed rule change is also consistent with Section 6(b)(5) 
of the Act,\6\ in that it is designed to ensure member firm compliance 
with federal securities laws and the rules of the Phlx, which should 
protect investors and the public interest.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(1).
    \6\ 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 will 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 either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) thereunder \8\ because 
the rule change will become operative 30 days after the date of filing 
with the Commission, and because this proposal: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) the Exchange provided written notice to the Commission with a 
brief description and the text of the proposed rule change on July 12, 
2000. At any time within 60 days of this filing, the Commission may 
summarily abrogate this proposal if it appears to the Commission that 
such action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, view 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 at the 
Commission's Public Reference Room, 450 Fifth Street, NW., Washington, 
DC. Copies of such filing will also be available for inspection and 
copying at the principal office of the Phlx. All submissions should 
refer to File No. SR-Phlx-00-47 and should be submitted by December 12, 
2000.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\9\
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    \9\ 17 CFR 200.03-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-29713 Filed 11-20-00; 8:45 am]
BILLING CODE 8010-01-M