[Federal Register Volume 67, Number 113 (Wednesday, June 12, 2002)]
[Notices]
[Pages 40365-40366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14777]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46040 ; File No. SR-Phlx-2002-27]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Committee Voting Procedures

June 6, 2002.
    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 April 23, 2002, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the Phlx. 
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 modify the voting procedures followed by the 
standing and special committees of the Phlx's Board of Governors 
(``Committees'') to allow the Committees to take action in cases where 
a quorum attends a Committee meeting, but a majority of members recuse 
themselves or abstain from the vote of the Committee, provided that at 
least two Committee members vote. The text of the proposed rule change 
appears below. New language is italicized; deleted language is in 
brackets.

By-Law Article X, Section 10-3; Proceedings of Special and Standing 
Committees

    (a) Except as herein otherwise prescribed, and subject always to 
the control and supervision of the Board of Governors, each Standing 
Committee and Special Committee shall determine the manner and form in 
which its proceedings shall be conducted, and shall make such 
regulations for its government as it shall deem proper and may act at a 
meeting or without a meeting, and through a quorum composed of a 
majority of all its members then in office. Except as otherwise 
specifically provided in the by-laws or rules, the decision of a 
majority of those [present] voting at a meeting at which a quorum is 
present, provided at least two vote,[ or the decision of a majority of 
those participating when at least a quorum participates,] shall be the 
decision of the Committee.

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 Phlx represents that the purpose of the proposed rule change is 
to improve the functioning and efficiency of Committees. Specifically, 
the proposal will permit the Committees to take action in cases where a 
quorum attends a Committee meeting, but a majority of members recuse 
themselves or abstain from the vote of the Committee, provided that at 
least two Committee members vote.
    Currently, the Phlx By-laws state that ``a decision of a majority 
of those present at a meeting at which a quorum is present, or the 
decision of a majority of those participating when at least a quorum 
participates, shall be the decision of the Committee'' \3\ (together, 
the ``Present Approval Scenarios''). A quorum is ``a majority of all 
[of the Committee's] members then in office.'' \4\ The Present Approval 
Scenarios both require a majority of the Committee to vote on a motion 
for it to have any chance of approval.\5\ According to the Phlx, this 
may delay or preclude a Committee from taking action, thereby reducing 
the responsiveness of a Committee to rapidly changing market conditions 
and limiting overall Committee effectiveness.
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    \3\ See Phlx By-law Article X, Section 10-3(a).
    \4\ Id.
    \5\ For example, if five Committee members attend a meeting of a 
nine member Committee, those five members constitute a quorum 
because five is a majority of nine. If a proposal comes before the 
Committee and three of the members recuse themselves, then two 
Committee members are left to decide the matter. Under the Present 
Approval Scenarios, even though a quorum is present, (recused 
members count as present, but not participating) the Committee could 
not take action because it could not obtain an affirmative vote of 
the majority of the quorum because only two members may vote and 
three votes are needed to constitute a majority of the quorum. Under 
the proposed rule change, those two members could take action if 
both of them voted for the proposal because the Committee would be 
able to take action when a majority of those voting (two are voting 
and a majority of two is two) when a quorum is present and at least 
two vote.
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    The Phlx believes that the proposed rule change should help to 
increase Committee responsiveness and effectiveness by allowing for 
Committee action when a quorum attends a meeting, but the subject 
matter of the Committee action requires Committee members to recuse 
themselves or abstain from voting on the proposed action. However, in 
no case would Committee action result from the vote of one Committee 
member alone because the proposal requires at least two Committee 
members to vote to have a valid Committee action. Under the proposed 
rule change, the Exchange considers Committee members who recuse 
themselves or abstain from voting to be present for purposes of a 
quorum.

[[Page 40366]]

    The Phlx notes that the proposal is based on the rules of the 
Pacific Exchange, Inc. (``PCX'').\6\
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    \6\ See PCX Rule 11.2(a). See also Securities Exchange Act 
Release No. 43619 (November 27, 2000), 65 FR 75754 (December 4, 
2000) (notice of filing and immediate effectiveness of File No. SR-
PCX-00-44).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5),\8\ in particular, because it is designed 
to promote just and equitable principles of trade.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 solicited or received.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \9\ and subparagraph (f)(3) of Rule 19b-
4 thereunder \10\ because it is concerned solely with the 
administration of the Exchange. 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 furtherance of the purposes of 
the Act.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(3).
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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-2002-27 and 
should be submitted by July 3, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14777 Filed 6-11-02; 8:45 am]
BILLING CODE 8010-01-P