[Federal Register Volume 68, Number 89 (Thursday, May 8, 2003)]
[Notices]
[Pages 24780-24782]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-11444]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47785; File No. SR-Phlx-2003-24]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. To Amend Its Rules Regarding the Calculation of Record 
Dates, Ex-Dividend Dates and Ex-Rights Dates

May 2, 2003.
    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 11, 2003, 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 Phlx. The Exchange 
has designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act.\3\ 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.
    \3\ 17 CFR 240.19b(f)(6).
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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 Phlx Rule 817 (``Record Date ``), 
Phlx Rule 825 (``Ex-dividend Procedure''), Phlx Rule 826 (``Ex-rights 
Procedure'') and Phlx Rule 831 (``Special Ex-dividend Rulings''). The 
proposed amendments are intended by the Exchange to update several 
archaic rules that specify how record dates, ex-dividend dates and ex-
rights dates are calculated. Below is the text of the proposed rule 
change. Proposed deleted text is [bracketed].
* * * * *

Rule 817. Record Date

    Rule 817. A company is not permitted to close its stock transfer 
books for any reason, including the declaration of a dividend. Rather, 
it must establish a record date for shareholders entitled to a dividend 
which is at least ten days after the date on which the dividend is 
declared (declaration date).
    [However, in the case of stock issues that do not have transfer 
facilities in the Philadelphia metropolitan area, the record date shall 
not be less than such number of additional days (in excess of ten) 
after the declaration date as is equal to the mailing time (regular 
mail) between Philadelphia and the city in which the Transfer Agent is 
located. The requirement for additional time between the declaration 
date and the record date would also apply in cases where there is an 
intervening holiday or where the record date falls on a weekend.]
    A company is also required to give the Exchange at least ten days 
notice in advance of a record date established for any other purpose, 
including meetings of shareholders.
* * * * *

Rule 825. Ex-Dividend Procedure

    Rule 825. [In the establishment and announcement of ex-dividend 
dates, the Exchange proceeds as follows:
    (a) The ``ex-dividend'' date established by the Exchange is based 
on the location of the transfer facilities either in, or nearest to, 
Philadelphia. Thus, if an issue transfers both in Philadelphia and 
outside of Philadelphia the ``ex'' date is based on the Philadelphia 
transfer facilities. If an issue does not transfer in Philadelphia, but 
transfers in two or more cities outside of that area, the ``ex'' date 
is based on the location of the transfer facilities closest to 
Philadelphia.
    (b) Transfer Facilities Located in Philadelphia--] Transactions in 
stocks (except those made for ``cash'') [for which there exists 
transfer facilities in Philadelphia] are ex-dividend on the second 
business day preceding the record date. If the record date selected is 
not a business day, the stock will be quoted ex-dividend on the third 
preceding business day. ``Cash'' transactions are ex-dividend on the 
business day following the record date.
    [(c) Transfer Facilities Located Outside Philadelphia--The Exchange 
will establish an ``Ex-dividend'' date for those stocks with transfer 
facilities only outside Philadelphia predicated on a theoretical 
``equivalent Philadelphia record date''. The equivalent Philadelphia 
record date is the last business day on which securities may be mailed 
in Philadelphia and reach the out-of-town transfer office, by regular 
mail, in time to effect transfer by the record date. ``Regular way'' 
transactions in these stocks are ex-dividend on the second business day 
preceding the equivalent Philadelphia record date. Transactions in such 
stocks made for ``cash'' are ex-dividend on the business day following 
such equivalent Philadelphia record date.
    (d) To avoid unnecessary claims for dividends, members receiving 
deliveries of stocks against ``dividend on'' transactions are urged to 
provide for the earliest mailing of such stocks which transfer out of 
town, in order to ensure receipt by the transfer agent by the record 
date.]
* * * * *

Rule 826. Ex-Rights Procedure

    Rule 826. In the establishment and announcement of ex-rights dates, 
the Exchange proceeds as follows:
    Subscription Price Established--Where the Subscription price and 
all other terms of the rights and subscription offering are established 
sufficiently in advance of the record date to determine the value of 
the rights (and the registration statement relating to the offering has 
been declared effective by the SEC sufficiently in advance of the 
record date), transactions in stocks to which the rights pertain are 
quoted ex-rights in a manner similar to that described in Rule 825 
above.
    Subscription Price Not Known--Where the subscription price and all 
other terms of the rights and subscription offering are not known 
sufficiently in advance of the record date to determine the value of 
the rights, the Exchange will rule the stock ex-rights on the day 
following the date the rights commence trading (which, in most 
instances, is a date subsequent to the record date for the subscription 
offering).
    Under such circumstances, the Exchange requires that all deliveries 
of stock made after the record date [(or ``equivalent Philadelphia 
record date'', where appropriate)] in settlement of transactions made 
prior to the ex-rights date, and on a ``rights on'' basis carry ``due 
bills'' for the rights.
* * * * *

[[Page 24781]]

Rule 831. Special Ex-Dividend Rulings

    Rule 831. If, as required by Exchange rules, the Exchange does not 
receive a notice of a dividend declaration sufficiently in advance of a 
record date to permit a stock to be quoted ``ex-dividend'' in the usual 
manner, the Exchange quotes the stock ``ex-dividend'' as soon as 
possible following receipt of notice of the dividend. The Exchange also 
rules that the ``dividend on'' purchaser (in transactions made during 
the interval between the date when the stock should have been quoted 
``ex'' and the date when the stock is actually quoted ``ex'') is 
entitled to receive the dividend from the seller. The seller in such 
transactions is required to give to the purchaser a due bill, covering 
the amount of the dividend, to be redeemed subsequent to the payment 
date for the dividend.
    Larger or Valuable Dividends, Dividends ``Not in Kind'', and Split-
ups Effected as Stock Distributions--When large or valuable cash or 
stock dividends (usually 25% or more), or a dividend ``not in kind'', 
(i.e., a distribution of securities of another issuer), or a split-up 
is declared, it is the policy of the Exchange to postpone the ``ex-
dividend'' or ``ex-distribution'' date until the dividend has been 
paid. The reason for this is so that the stock is not quoted at the 
substantially lower ``ex-dividend'' or ``ex-distribution'' price until 
the distribution is received by shareholders. If this were not the 
case, the collateral value of the stock would be reduced between the 
``ex'' date and payment date, and the shareholder might be required to 
provide additional collateral.
    In the case of dividends ``not in kind'' (regardless of its size in 
relation to the listed security), it will be necessary to postpone the 
``ex-dividend'' date in the event a market does not exist in the 
security to be distributed at the time the listed issue would normally 
be quoted ``ex-dividend''.
    In all of the above instances, the postponement of the ``ex'' date 
until after the payment date makes it possible for shareholders to sell 
all of their holdings at one time, on a ``dividend on'' basis (prior to 
the ``ex'' date). As a result of this ruling, purchasers of the stock 
prior to the ``ex'' date continue to pay a ``dividend on'' price, but 
will not receive the dividend payment from the company. Accordingly, 
the Exchange rules that the ``dividend on'' purchaser is entitled to 
receive the dividend from the seller. The seller, in turn, is required 
to give the purchaser a due bill, covering the amount of the dividend, 
to be redeemed on the date fixed by the Exchange.
    ``Cash'' Transactions--The Ex-Dividend Rule of the Exchange 
specifies that ``cash'' transactions (in which delivery of the security 
must be made on the date of the transaction) [in the case of stocks 
transferring in the Philadelphia Metropolitan area,] shall be ``ex-
dividend'' on the business day following the record date[, and in the 
case of stocks transferring only outside of that area shall be ``ex-
dividend'' on the business day following the ``equivalent Philadelphia 
record date''].
* * * * *

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 and is set forth in sections A, B, and C below.

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

1. Purpose
    The Exchange states that the purpose of the proposed rule change is 
to amend several archaic rules that specify how record dates, ex-
dividend dates and ex-rights dates are to be calculated. Phlx Rules 
817, 825, 826 and 831 specify that a longer record date, ex-dividend or 
ex-rights date, as the case may be, may be used where the issuer has a 
transfer agent located outside the Philadelphia metropolitan area. 
Given the current state of communication networks and electronic 
interaction among issuers, the Exchange, transfer agents and investors, 
the Exchange believes that these additional time periods are no longer 
necessary. The Exchange also states that these rules, as amended, are 
similar to Rules 510, 512, 513 and 521 of the American Stock Exchange, 
LLC. The proposed changes to the Exchange's rules are discussed below.
    Phlx Rule 817. Currently, Phlx Rule 817 provides generally that a 
company listed on Phlx must establish a record date for shareholders 
entitled to a dividend, which is at least ten days after the date on 
which the dividend is declared. For issuers that do not have transfer 
facilities in the Philadelphia metropolitan area, however, current Phlx 
Rule 817 provides that the record date may be extended by the time 
equal to the mailing time between Philadelphia and the city in which 
the transfer agent is located. Because today most communication among 
issuers, the Exchange, transfer agents and investors is conducted 
electronically, the Exchange believes it no longer makes sense to 
distinguish between issuers with transfer agents located in 
Philadelphia and those with transfer agents located outside the 
Philadelphia metropolitan area when calculating a record date. As 
amended, Phlx Rule 817 will apply a uniform ten-day rule for 
establishing a record date to all Phlx issuers.
    Phlx Rule 825. Similarly, Phlx Rule 825 currently provides that 
issuers with transfer agent facilities located outside the Philadelphia 
metropolitan area can have a longer period between the declaration of a 
dividend and the establishment of an ``ex-dividend'' date. This longer 
period is based on the time equal to the mailing time between 
Philadelphia and a transfer facility located outside Philadelphia. 
Again, since most communications in the securities industry no longer 
rely on regular mail, the Exchange believes that it is reasonable to 
put Philadelphia issuers and non-Philadelphia issuers on equal footing 
when it comes to establishing an ``ex-dividend'' date. As amended, Phlx 
Rule 825 will uniformly provide that all stock dividends are ``ex-
dividend'' on the second business day preceding the record date and all 
cash dividends are ``ex-dividend'' on the day following the record 
date.
    Phlx Rule 826. Phlx Rule 826 provides that the transactions in 
stocks to which rights attach are quoted ``ex-rights'' in a manner 
similar to that described in Phlx Rule 825. This reference to Phlx Rule 
825 should remain, subject to the changes to Phlx Rule 825 discussed 
above. The last paragraph of Phlx Rule 826 is proposed to be amended, 
however, because of the explicit reference to ``equivalent Philadelphia 
record date,'' which is being eliminated along with the other 
geographical references from Phlx Rule 825.
    Phlx Rule 831. Phlx Rule 831 repeats the ex-dividend date rule set 
forth in Phlx Rule 825 as it pertains to cash transactions (i.e., where 
an issuer pays a dividend in cash). Because Phlx Rule 825 is being 
amended to eliminate distinctions between Philadelphia and non-
Philadelphia issuers, Phlx Rule 831 must also be amended so that the 
rules are consistent.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with

[[Page 24782]]

section 6(b) of the Act \4\ in general, and furthers the objectives of 
section 6(b)(5) \5\ in particular, in that it is designed to facilitate 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest by removing 
outdated provisions.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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.

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

    The proposed rule change has been filed by the Exchange as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act 
\6\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\7\ Because the 
foregoing proposed rule change: (1) Does not significantly affect the 
protection of investors or the public interest; (2) does not impose any 
significant burden on competition; and (3) does not become operative 
for thirty days from the date on which it was filed, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, it has become effective pursuant 
to section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ 
thereunder.\10\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240-19b-4(f)(6).
    \10\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change at least five business days prior to the 
filing date or such shorter period as designated by the Commission.
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to thirty days after the date of 
filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Phlx has requested 
that the proposed rule change become operative immediately upon filing 
so that the Exchange may remain competitive with other exchanges with 
similar rules in effect.
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    \11\ 17 CFR 240.19b-4(f)(6).
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    The Commission believes that it is consistent with the protection 
of investors and the public interest to designate the proposed rule 
change immediately operative. Accelerating the operative date should 
permit the Exchange's rules to reflect current business practices.\12\ 
At any time within 60 days of the filing of such proposed rule change, 
the Commission may summarily abrogate such proposed 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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    \12\ For purposes of only accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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 proposal 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-2003-24 and should be 
submitted by May 29, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-11444 Filed 5-7-03; 8:45 am]
BILLING CODE 8010-01-P