[Federal Register Volume 66, Number 244 (Wednesday, December 19, 2001)]
[Notices]
[Pages 65525-65526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31225]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45150; File No. SR-Phlx-2001-110]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc., Permitting Inactive Nominees To Become Effective 
Members on December 5, 2001

December 12, 2001.
    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 December 4, 2001, 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 proposed to allow Inactive Nominees,\3\ upon request, to 
act as effective members of the Phlx on Wednesday, December 5, 2001 on 
the Phlx Equity Trading Floor. The text of the proposed rule change is 
available at the Office of the Secretary, the Exchange, and the 
Commission.
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    \3\ Inactive Nominees are designated by Phlx member 
organizations to serve as such. They have been approved by the Phlx 
for membership in accordance with the Phlx Rules, but will not have 
the rights and privileges of membership until made effective by the 
Exchange. See Phlx By-law Article XII, Section 12-10 and Phlx Rule 
21.
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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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at

[[Page 65526]]

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 purpose of the proposed rule change is to allow Inactive 
Nominees, upon request, to act as effective members of the Phlx on 
Wednesday, December 5, 2001 on the Phlx Equity Trading Floor. 
Wednesday, December 5, 2001 is the 6th Annual McNamara Trading Day 
benefiting St. Jude Children's Research Hospital. McNamara Trading 
Company, the largest floor brokerage member organization on the Equity 
Floor, donates all commissions from the day's trading to the St. Jude 
Children's Research Hospital. The Equity Floor typically experiences a 
very large increase in volume that day. The Exchange believes that 
making Inactive Nominees effective members upon their request on that 
day should better enable the Exchange and its members to maintain fair 
and orderly markets in securities due to the expected increased 
volume.\4\
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    \4\ For example, trading volume on November 11, 1999, the 1999 
McNamara Trading Day, was over 18.1 million shares, triple Phlx's 
then average daily volume.
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    The Phlx has authority to make Inactive Nominees effective members. 
Phlx By-law Article XII, Sections 12-10(a) and (b) state that an 
Inactive Nominee is ``an individual * * * approved for membership'' in 
the Exchange, but ``shall have no rights or privileges of membership 
unless and until said Inactive Nominee becomes an effective member.'' 
One way that an Inactive Nominee becomes an effective member is by 
assuming, pursuant to Phlx Rule 21, legal title to a membership through 
an intra-firm transfer. This allows an Inactive Nominee to become an 
effective member of the Exchange through the transfer of a membership 
from another member, associated with the Inactive Nominee's firm, to 
the Inactive Nominee. Consequently, the member leaving the membership 
goes on Inactive Nominee status.
    The Exchange now proposes to permit an Inactive Nominee to become 
an effective member on December 5, 2001 without receiving transfer of 
membership from the Inactive Nominee's associated member.\5\ To become 
an effective member on that date, an Inactive Nominee need only request 
to be made an effective member to the Exchange's Membership Services 
Department.\6\ In order to address the anticipated high volume of 
trading on December 5, 2001, both the Inactive Nominee and the 
associated member of the Inactive Nominee's firm would be permitted to 
trade as Exchange members on the Phlx equity trading floor on that 
date.\7\
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    \5\ Telephone conversation between John Dayton, Assistant 
Secretary & Counsel, Phlx, and Steven Johnston, Special Counsel, 
Division of Market Regulation, Commission, on December 10, 2001 
(clarifying effect of proposal on transfer of membership).
    \6\ Such Inactive Nominees will return to Inactive Nominee 
status at the close of business on Wednesday, December 5, 2001. In 
addition, Inactive Nominees may choose to become an effective member 
pursuant to Phlx Rule 21.
    \7\ Telephone conversation between John Dayton, Assistant 
Secretary & Counsel, Phlx, and Steven Johnston, Special Counsel, 
Division of Market Regulation, Commission, on December 10, 2001 
(clarifying combined participation of members and associated 
Inactive Nominees in trading, as well as purpose of combined 
participation).
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(2) Statutory Basis
    The Exchange believes that the current proposal should allow the 
Exchange to continue to maintain fair and orderly markets on the Phlx 
Equity Floor on Wednesday, December 5, 2001 in light of the expected 
increase in trading activity that day. As such, the Exchange believes 
the proposed rule change is consistent with Section 6(b) of the Act,\8\ 
in general, and furthers the objectives of Section 6(b)(5) of the 
Act,\9\ in particular, because it should promote just and equitable 
principles of trade, facilitate transactions in securities, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and protect investors and the public 
interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 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)(i) of the Act\10\ and subparagraph (f)(1) of Rule 19b-4\11\ 
thereunder because it constitutes a stated policy, practice, or 
interpretation with respect to the administration of Phlx By-law 
Article XII, Section 12-10(b); namely that Inactive Nominees could, 
upon request, be made effective members for trading on the Phlx Equity 
Floor on Wednesday, December 5, 2001. At any time within 60 days of the 
filing of such proposed rule change, the Commission may summarily 
abrogate such rule change 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 furthance of the purposes of 
the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(i).
    \11\ 17 CFR 240.19b-4(f)(1).
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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. 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-2001-110 and 
should be submitted by January 9, 2002.

    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. 01-31225 Filed 12-18-01; 8:45 am]
BILLING CODE 8010-01-M