[Federal Register Volume 68, Number 160 (Tuesday, August 19, 2003)]
[Notices]
[Pages 49833-49835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21132]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48313; File No. SR-Phlx-2003-49]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Member 
Voting

August 8, 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 July 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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend its Certificate of Incorporation, 
Article Fifth (e) as well as Exchange By-Law Article III, Sections 3-
7(a), 3-10(c), and 3-13; Article XII, Section 12-1(b); and Article 
XXII, Sections 22-1 and 22-2, to provide that for each matter submitted 
to a vote of the membership,\3\ except as provided by Article 
Thirteenth of the Certificate of Incorporation, each regular member 
shall be entitled to one vote for each regular membership, the legal 
title \4\ of which is registered in the name of such regular member. 
The text of the proposed rule change is below. Additions are 
italicized; deletions are in brackets.
---------------------------------------------------------------------------

    \3\ For instance, members vote for industry governors. See Phlx 
By-Law Article 3-2.
    \4\ Legal title is registered in the name of a member pursuant 
to a lease agreement or under an A-B-C agreement (membership title 
and use agreement) pursuant to Phlx Rules 930 and 940.
---------------------------------------------------------------------------

* * * * *

Certificate of Incorporation of Philadelphia Stock Exchange

    First-Fourth: No change.
    Fifth (a)-(d): No change.
    (e) Except as otherwise provided in Article Thirteenth hereof, on 
each matter submitted to a vote of the membership, each Regular Member 
shall be entitled to one vote for each Regular Membership the legal 
title of which is registered in the name of such Regular Member.
* * * * *

By-Laws of Philadelphia Stock Exchange

Article III--Nominations-Annual Election-Meetings
    Sec. 3-1-3-6: No change.
Members May File Independent Nominations--Requirements
    Sec. 3-7. (a) Independent nominations for the positions of On-
Floor, and Off-Floor Governors on the Board of Governors may be made by 
a written petition filed with the Secretary of the Exchange in a sealed 
envelope within two (2) weeks after the posting of the report of the 
Nominating and Elections Committee. No such nomination shall be valid 
unless it is signed by [not less than fifty (50)] members holding legal 
title to not less than fifty (50) regular memberships. No member shall 
endorse more than one (1) nominee; provided, however, that [seventy-
five (75)] members holding legal title to seventy-five (75) regular 
memberships may, by petition, propose an entire ticket, or any portion 
thereof, for the vacancies on the Board of Governors to be filled at 
the ensuing election. A person is not eligible for an independent 
nomination for a position on the Board of Governors if one (1) or more 
persons associated with his member or participant organization, as 
defined in By-Law Section 3-6(c), would be serving an unexpired term or 
terms on the Board upon the commencement of his term of office. No more 
than one (1) person associated with the same member or participant 
organization, as defined in Section 3-6(c), shall be certified by the 
Nominating and Elections Committee for independent nomination to a 
position on the Board of Governors. In the event more than one such 
nomination is received, the Nominating and Elections Committee shall 
not certify any such candidates. A person who has previously accepted 
nomination by the Nominating and Elections Committee for one (1) 
category of Governor (e.g. On-Floor or Off-Floor Governor) is not 
eligible to qualify as an independent candidate in any category. There 
may be no independent nominations of incumbent Governors whose terms do 
not expire following the next election. The Nominating and Elections 
Committee and the Secretary of the Exchange shall open such envelopes, 
and if found eligible for election, the persons nominated by petition 
conforming with the foregoing provisions shall be deemed nominees for 
such positions on the Board of Governors. The names of all nominees for 
membership on the Board of Governors, whose nominations conform with 
By-Law requirements, shall be sent to all members of the Exchange by 
the Secretary as promptly after the third Monday of February as is 
reasonably possible. The order of nominees' names on notices and on the 
ballot shall be determined through a drawing by lot conducted by the 
Nominating and Elections Committee.
    Sec. 3-7 (b)-(c): No change.
    Sec. 3-8-3-9: No change.
Special Meetings
    Sec. 3-10. Except as otherwise specifically provided by law, 
special meetings of the members may be called at any time:
    (a) By the Chairman of the Board of Governors; or
    (b) By a majority of the Board of Governors; or
    (c) By members holding legal title to a majority of all regular 
memberships entitled to vote.
    Upon the written request of any person entitled to call a special 
meeting, which request shall set forth the purpose for which the 
meeting is desired, it shall be the duty of the Secretary to give 
prompt written notice of such meeting to be held at such time as the 
Secretary may fix, subject to the provisions of Section 3-11 hereof. If 
the Secretary shall fail to fix such date and give such notice within 
ten (10) days

[[Page 49834]]

after receipt of such request, the person or persons making such 
request may do so.
    Sec. 3-11: No change.
    Sec. 3-12: No change
Quorum
    Sec. 3-13. At all meetings of the Exchange for the transaction of 
business other than dealings in securities, each member may vote in 
person or by proxy[; provided that no action shall become effective 
unless the number of members participating therein exceeds one-half of 
the number of voting memberships outstanding and any proposed action is 
approved]. At any such meeting of the Exchange, the members holding 
legal title to a majority of the regular memberships entitled to vote 
at the meeting, present in person or by proxy, shall constitute a 
quorum for all purposes, unless or except to the extent that the 
presence of a larger number may be required by law, and all matters 
shall be determined by a majority of the votes cast. The members 
present at a duly organized meeting can continue to do business until 
adjournment, notwithstanding the withdrawal of enough members to leave 
less than a quorum. If a meeting cannot be organized because of the 
absence of a quorum, those present may, except as otherwise provided by 
law, adjourn the meeting to such time and place as they may determine. 
In the case of any meeting for the election of Governors, those members 
who attend the second of such adjourned meetings, although less than a 
quorum as fixed in this Section, shall nevertheless constitute a quorum 
for the purpose of electing Governors.
Article XII--Membership-Eligibility-Election-Initiation-Fee Membership
Membership
    Sec. 12-1.
    (a): No Change.
    (b) A regular membership confers upon and subjects the holder to 
all the privileges and obligations of active membership. Only regular 
members shall be entitled to vote and to conduct business on the 
exchange facility conducted by the Exchange. Except as otherwise 
provided in Article Thirteenth of the Certificate of Incorporation of 
the Exchange, on each matter submitted to a vote of the membership, 
[E]each regular member shall be entitled to one vote [on] for each 
[matter submitted to a vote of the membership] regular membership the 
legal title of which is registered in the name of such regular member.
    Sec. 12-1 (c)-(f): No change.
    Sec. 12-2-12-11: No change.
Article XXII--Amending The By-Laws
Amendments to By-Laws
    Sec. 22-1. Whenever [seventy-five] members holding legal title to 
seventy-five regular memberships [of the Exchange] shall offer, in 
writing, any amendment to the By-Laws, it shall be submitted to the 
Secretary of the Exchange, who shall submit it to the membership for 
vote thereon by ballot. The vote shall be conducted within four weeks 
of the date of such submission. The record date for determining members 
entitle to vote on such amendment shall be set as the date of the 
submission. Each member of the Exchange in good standing may vote in 
person or by proxy. If [the number of] members holding legal title to a 
majority of the regular memberships entitled to vote thereon 
participate[ing] in the balloting [exceeds one-half of the number of 
memberships then outstanding] and the proposed amendment is approved by 
the affirmative vote of a majority of the votes cast, it shall 
thereupon become a part of the By-Laws.
How Proposed
    Sec. 22-2. Any amendment to the By-Laws originating in the Board of 
Governors shall be proposed at a regular or special meeting of the 
Board. If approved by twelve of the Governors, it shall be announced to 
the members of the Exchange forthwith by sending copies thereof to each 
member of the Exchange.
Special meeting
    If, within a period of ten days, a written request of members 
holding legal title to not less than seventeen regular memberships of 
the Exchange is filed with the Secretary for a special meeting of the 
Exchange to consider the amendment, the Chairman of the Board shall 
call such meeting, at which meeting each member of the Exchange in good 
standing may vote in person or by proxy. If [the number of] members 
holding legal title to a majority of the regular memberships entitled 
to vote thereon participate[ing] in the balloting [exceeds one-half of 
the number of memberships then outstanding,] and the proposed amendment 
is approved by the affirmative vote of a majority of the votes cast, it 
shall thereupon become a part of the By-Laws.
Method of adoption
    In the absence of such request for a special meeting of the 
Exchange, the Board of Governors, after the expiration of such period 
of ten days, may consider the proposed amendment at any regular or 
special meeting of the Board, and, if the proposed amendment is adopted 
by a vote of fifteen members of the Board, it shall thereupon become a 
part of the By-Laws.
    All changes in the By-Laws shall be printed and posted for ten 
days, and copies thereof shall be sent to each member of the Exchange.
    Sec. 22-3: No change.
* * * * *

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 Exchange 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 make the voting 
process more fair by entitling each member to cast one vote for each 
regular membership to which he or she holds legal title. The result of 
the proposed amendments would be that any one member would be entitled 
to cast multiple votes if he or she held legal title to more than one 
regular membership. Today, a regular member is permitted to cast only 
one vote, regardless of the number of memberships to which he or she 
holds legal title. This is due to the current language in the By-Laws 
and the Certificate of Incorporation, as well as the applicable 
provisions of the Delaware General Corporate Law.
    The Exchange believes that the proposed amendment to Article Fifth 
of the Exchange's Certificate of Incorporation would better enfranchise 
all legal titleholders with respect to each regular membership to which 
they hold legal title, thereby allowing them the opportunity to 
participate fully in Exchange governance with respect to each such 
regular membership. The Exchange believes that this is a desirable 
result as the Exchange will allow all legal titleholders to cast 
ballots

[[Page 49835]]

and/or give proxies \5\ for each and every membership. Additionally, 
the amendments would allow titleholders to sign multiple times 
representing each regular membership they hold legal title to with 
respect to independent nominations for industry governors, to be 
counted for quorum purposes, to be counted for purposes of calling a 
special membership meeting, and to be counted for purposes of offering 
any amendment to the By-Laws or requesting the calling of a special 
meeting of the membership to vote on a proposed By-Law amendment. 
Finally, the Exchange believes that these amendments would allow all 
legal titleholders to participate fully in Exchange governance 
opportunities whereas under current interpretation of the By-Laws legal 
titleholders with multiple legal titles to regular memberships 
registered in their name are allowed only one vote.
---------------------------------------------------------------------------

    \5\ Exchange By-Law Article III, Section 3-12 (Right to Vote) 
provides as follows: Each regular member of the Exchange in good 
standing shall be entitled to vote at any election of the Exchange. 
Each such member may vote in person or by proxy under such 
regulations as the Nominating and Elections Committee, with the 
approval of the Board of Governors, may direct.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Section 
6(b)(3) of the Act \7\ in particular, in that the rules of the Exchange 
assure a fair representation of its members in the selection of its 
directors and administration of its affairs by providing for legal 
titleholders that own more than one regular membership to participate 
more fully in Exchange governance.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 number SR-Phlx-2003-49 and 
should be submitted by September 9, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-21132 Filed 8-18-03; 8:45 am]
BILLING CODE 8010-01-P