[Federal Register Volume 73, Number 142 (Wednesday, July 23, 2008)]
[Notices]
[Pages 42873-42874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16758]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58175; File No. SR-Phlx-2008-12]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Granting Approval to a Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, Relating to an Exemption From Examination
Requirements for Off-Floor Traders
July 16, 2008.
On April 14, 2008, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Phlx Rule 604(e)(iii) to modify the
category of persons who are exempt from the requirement that Off-Floor
Traders \3\ complete the Series 7 General Securities Registered
Representative Examination (``Series 7''). On May 30, 2008, Phlx filed
Amendment No. 1 to the proposed rule change.\4\ The proposal was
published for comment in the Federal Register on June 12, 2008.\5\ The
Commission received no comments on the proposal. This order approves
the proposed rule change, as modified by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Phlx Rule 604(e)(i) defines an off-floor trader as a
``person who is compensated directly or indirectly by a member or
participant organization for which the Exchange is the DEA
[Designated Examining Authority], or any other associated person of
such member or participant organization, and who executes, makes
trading decisions with respect to, or otherwise engages in
proprietary or agency trading of securities, including, but not
limited to, equities, preferred securities, convertible debt
securities or options off the floor of the Exchange.''
\4\ Amendment No. 1 replaced and superseded the original filing
in its entirety.
\5\ See Securities Exchange Act Release No. 57923 (June 4,
2008), 73 FR 33479 (June 12, 2008).
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Phlx states that the Series 7 exemption meant to apply to persons
who traded on its equity trading floor and were associated with either
a specialist organization or a floor brokerage organization that
executed orders on an agency basis (``Former Floor Participants'').
When Phlx replaced its equity trading floor with XLE, an electronic
trading system, certain persons became Off-Floor Traders by definition,
and consequently subject to the requirement to pass the Series 7. Phlx
did not intend for this category of persons to be subject to the Series
7 requirement. Therefore, Phlx proposed to exempt these persons from
the Series 7 by expanding the exemption in Rule 604 to include Market
Maker Authorized Traders (MMATs) and Off-Floor Traders who only handle
and/or make trading decisions regarding agency orders and any bona fide
errors related to those agency orders.
Phlx believes the proposed rule change will make the administration
of the Series 7 requirements for Off-Floor Traders more efficient,
because under the current rule, the exemption applies to persons
``primarily engaged'' in submitting orders to XLE or making trading
decisions with respect to XLE, which requires the Former Floor
Participant and the Exchange's enforcement staff to make a judgment
call. Under the proposed rule, however, an XLE participant needs to
register with the Exchange in order to be an MMAT, so the determination
of MMAT status is straightforward. In addition, Phlx staff can examine
what type of orders (agency or proprietary) Off-Floor Traders handle
for net capital purposes and could identify whether Off-Floor Traders
would qualify for the proposed exemption. Finally for the same reasons,
the proposed rule change should improve Phlx's enforcement efforts,
because Phlx and its members will be able to more easily determine
which persons are subject to the Series 7 requirement.
After careful review of the proposal, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to
[[Page 42874]]
a national securities exchange.\6\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\7\
which requires, among other things, that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, 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. The Commission believes that this proposed rule change will
better capture the floor-based activities of Former Floor Participants
by focusing on the status of, or type of, activity performed by those
persons. In addition, it should provide a clearer standard that should
allow Exchange staff, as well as members and individuals, to better
determine who is subject to the Series 7 requirement. This should make
the administration, as well as compliance and enforcement, of the
Series 7 requirement more efficient.
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\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-Phlx-2008-12), as modified by
Amendment No. 1, be, and hereby is, approved.
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\8\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16758 Filed 7-22-08; 8:45 am]
BILLING CODE 8010-01-P