Federal Register: June 29, 2006 (Volume 71, Number 125)
DOCID: FR Doc 06-5792
SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-54036; File No. SR-Phlx-2005-61]
NOTICE: NOTICES
ACTION: Self-regulatory organizations; proposed rule changes:
SUBJECT CATEGORY:
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval of Proposed Rule Change, and Amendment Nos. 1 and 2 Thereto, Relating to the Deletion of Certain Exchange Rules
DOCUMENT SUMMARY:
June 23, 2006.
I. Introduction
On October 14, 2005, 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 19b4
thereunder,\2\ a proposed rule change to eliminate certain rules that
the Exchange believes are obsolete due to changes in the law or the
business methods employed by the Exchange. On March 10 and May 1, 2006,
respectively, the Exchange submitted Amendment Nos. 1 \3\ and 2 \4\ to
the proposed rule change. The proposed rule change, as amended, was
published for comment in the Federal Register on May 18, 2006.\5\ No
comments were received regarding the proposal, as amended. This order approves the proposed rule change, as amended.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ Amendment No. 1, which replaced the original filing in its
entirety, made clarifying changes to the proposed rule change and
sought to retain Phlx Rules 229 Supplementary Material .07(c)(ii) and 236.
\4\ Amendment No. 2, which replaced the original filing and
Amendment No. 1 in their entirety, made general clarifying changes
to the proposed rule change and sought to retain Phlx rule 219, as
well as Phlx rules 229 Supplementary Material .07(c)(ii) and 236.
Phlx states that it plans to propose to delete Phlx Rules 219, 229
Supplementary Material .07(c)ii), and 236 in a future proposed rule change regarding a change to Phlx systems.
\5\ See Securities Exchange Act Release No. 53795 (May 12, 2006), 71 FR 28893 (May 18, 2006) (``Notice'').
II. Description of the Proposed Rule Change
Phlx is proposing to remove from its rule book Phlx Rules 129, 241 248, and 923.
Phlx Rule 129: Withdrawal of Orders
Phlx rule 129 prohibits the withdrawal of an order from the Exchange, at the request of another member, for the purpose of the purchase or sale of the securities outside of the Exchange. Phlx Rules 241248: Rules for Special Offerings
Phlx Rules 241248 concern special offerings of securities on the Exchange. In 1942, the Commission amended Rule 10b2 under the Act to permit an exemption for special offerings under a plan filed with the Commission by an exchange.\6\ Phlx's Plan, contained in Phlx rules 241 248, permits special offerings, at a fixed price and for a fixed period of time, on the Exchange where the quantity of stock involved cannot be absorbed in the regular auction market within a reasonable time and at a reasonable price. Phlx rules 241248 permit a person making a special offering to pay a special commission to a broker for a purchasing customer.
Generally, Phlx Rules 241248 specify a minimum share size of 1,000
shares, with a value of $25,000. According to the Exchange, by today's
standards, 1,000 shares of stock with a value of $25,000 is not a
quantity of stock that cannot readily be absorbed in the regular
auction market. Phlx Rules 241248 predate Phlx crossing Rule 126,
which has special cross provisions for Trust Shares of 25,000 shares or
greater and all securities of 5,000 shares or greater, and PACE, which
is described in Phlx Rule 229 and which sets minimum automatic
execution sizes for securities on the system of 599 shares, noting that specialists may set higher levels.
\6\ Phlx filed its plan in 1943. See Securities Exchange Act Release No. 3487 (September 23, 1943).
In proposing the rescission of Rule 10b2, the Commission indicated
that it believed that the significant changes that have taken place in
the securities markets since Rule 10b2's adoption, and the coverage of
other antifraud and antimanipulation provisions of the Federal
securities laws, made it appropriate to rescind Rule 10b2.\7\ The
Exchange now proposes to delete Phlx Rules 241248, the plan adopted in
response to Rule 10b2, because it believes that these rules are
obsolete as the Commission rescinded Rule 10b2 and the Exchange has
not utilized Phlx Rules 241248 in the past twenty years.\8\
\7\ See Securities Exchange Act Release No. 32100 (April 2, 1993), 58 FR 18145 (April 8, 1993).
\8\ See also Securities Exchange Act Release No. 32822 (August 31, 1993), 58 FR 47484 (September 9, 1993) (SRNYSE9320)
(rescinding New York Stock Exchange (``NYSE'') Rule 391, which is similar to Phlx Rules 241248).
Phlx Rule 923: Member Officers
Phlx Rule 923 requires members associated with member corporations to be officers and voting stockholders of those member corporations, noting that the Exchange may waive the voting stock requirement of the rule.
III. Discussion
After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to a national
securities exchange. Specifically, the Commission finds that the
proposal is consistent with section 6(b)(5) of the Act,\9\ which
requires, in part, that the rules of an exchange be designed 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.\10\
\9\ 15 U.S.C. 78f(b)(5).
\10\ In approving this proposal, the Commission has considered
the proposed rule's impact of efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
As noted above, the Exchange proposes to clarify the Exchange's rules by eliminating provisions that no longer are necessary and are obsolete. The Commission believes these changes are consistent with the Act. With respect to the deletion of Phlx Rule 129, the Exchange notes that currently members, in exercising their duty to obtain best execution for orders entrusted to them, may remove orders from the Exchange and seek execution in other venues. With respect to the proposed deletion of Phlx Rules 241248, the Commission notes that these rules are substantially similar to former NYSE Rule 391, which was rescinded in 1993.\11\ In approving the NYSE's deletion of this rule, the Commission noted that it was appropriate for the Exchange rescind NYSE Rule 391 in light of the rescission of Rule 10b2. \11\ See Securities Exchange Act Release No. 32822, supra note 8.
Moreover, the Commission believes that it is consistent with the
Act for Phlx to delete Phlx Rule 923, to provide member corporations
additional flexibility to choose whom in their company to employ as
members of the Exchange. According to the Exchange, this rule was
adopted as least fifty years ago, when most member corporations were
small regional companies. The purpose of this rule at that time,
according to the Exchange, may have been to provide an additional means
of obtaining security for the debts of the member corporation by
requiring that the members who were trading the securities also be
officers and/or owners of the corporation. Today, Phlx has other rule
based means to require adequate financial security for the debts [[Page 37156]]
of member corporations and for ensuring that member corporations are generally financially solvent.\12\
\12\ See e.g., Phlx Rule 909 (requiring member organizations to
provide and maintain security for any claims owed to the Exchange
and other members and member organizations); and Phlx Rule 924
(making the member organization liable for the fees, fines, dues,
penalties and other amounts imposed by the Exchange on its members;
this provision applies regardless of the officer or ownership status
of the member). According to Phlx, member corporations are a subset
of member organizations. Therefore, Phlx Rules 909 and 924 apply to member corporations.
IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\13\ that the proposed rule change (SRPhlx200561), as amended, is approved.
\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\14\
\14\ 17 CFR 200.303(a)(12).
Nancy M. Morris,
Secretary.
[FR Doc. 065792 Filed 62806; 8:45 am]
BILLING CODE 801001M
SUMMARY:
Philadelphia Stock Exchange, Inc.,
DOCUMENT BODY 2:
June 23, 2006.
I. Introduction
On October 14, 2005, 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 19b4
thereunder,\2\ a proposed rule change to eliminate certain rules that
the Exchange believes are obsolete due to changes in the law or the
business methods employed by the Exchange. On March 10 and May 1, 2006,
respectively, the Exchange submitted Amendment Nos. 1 \3\ and 2 \4\ to
the proposed rule change. The proposed rule change, as amended, was
published for comment in the Federal Register on May 18, 2006.\5\ No
comments were received regarding the proposal, as amended. This order approves the proposed rule change, as amended.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ Amendment No. 1, which replaced the original filing in its
entirety, made clarifying changes to the proposed rule change and
sought to retain Phlx Rules 229 Supplementary Material .07(c)(ii) and 236.
\4\ Amendment No. 2, which replaced the original filing and
Amendment No. 1 in their entirety, made general clarifying changes
to the proposed rule change and sought to retain Phlx rule 219, as
well as Phlx rules 229 Supplementary Material .07(c)(ii) and 236.
Phlx states that it plans to propose to delete Phlx Rules 219, 229
Supplementary Material .07(c)ii), and 236 in a future proposed rule change regarding a change to Phlx systems.
\5\ See Securities Exchange Act Release No. 53795 (May 12, 2006), 71 FR 28893 (May 18, 2006) (``Notice'').
II. Description of the Proposed Rule Change
Phlx is proposing to remove from its rule book Phlx Rules 129, 241 248, and 923.
Phlx Rule 129: Withdrawal of Orders
Phlx rule 129 prohibits the withdrawal of an order from the Exchange, at the request of another member, for the purpose of the purchase or sale of the securities outside of the Exchange. Phlx Rules 241248: Rules for Special Offerings
Phlx Rules 241248 concern special offerings of securities on the Exchange. In 1942, the Commission amended Rule 10b2 under the Act to permit an exemption for special offerings under a plan filed with the Commission by an exchange.\6\ Phlx's Plan, contained in Phlx rules 241 248, permits special offerings, at a fixed price and for a fixed period of time, on the Exchange where the quantity of stock involved cannot be absorbed in the regular auction market within a reasonable time and at a reasonable price. Phlx rules 241248 permit a person making a special offering to pay a special commission to a broker for a purchasing customer.
Generally, Phlx Rules 241248 specify a minimum share size of 1,000
shares, with a value of $25,000. According to the Exchange, by today's
standards, 1,000 shares of stock with a value of $25,000 is not a
quantity of stock that cannot readily be absorbed in the regular
auction market. Phlx Rules 241248 predate Phlx crossing Rule 126,
which has special cross provisions for Trust Shares of 25,000 shares or
greater and all securities of 5,000 shares or greater, and PACE, which
is described in Phlx Rule 229 and which sets minimum automatic
execution sizes for securities on the system of 599 shares, noting that specialists may set higher levels.
\6\ Phlx filed its plan in 1943. See Securities Exchange Act Release No. 3487 (September 23, 1943).
In proposing the rescission of Rule 10b2, the Commission indicated
that it believed that the significant changes that have taken place in
the securities markets since Rule 10b2's adoption, and the coverage of
other antifraud and antimanipulation provisions of the Federal
securities laws, made it appropriate to rescind Rule 10b2.\7\ The
Exchange now proposes to delete Phlx Rules 241248, the plan adopted in
response to Rule 10b2, because it believes that these rules are
obsolete as the Commission rescinded Rule 10b2 and the Exchange has
not utilized Phlx Rules 241248 in the past twenty years.\8\
\7\ See Securities Exchange Act Release No. 32100 (April 2, 1993), 58 FR 18145 (April 8, 1993).
\8\ See also Securities Exchange Act Release No. 32822 (August 31, 1993), 58 FR 47484 (September 9, 1993) (SRNYSE9320)
(rescinding New York Stock Exchange (``NYSE'') Rule 391, which is similar to Phlx Rules 241248).
Phlx Rule 923: Member Officers
Phlx Rule 923 requires members associated with member corporations to be officers and voting stockholders of those member corporations, noting that the Exchange may waive the voting stock requirement of the rule.
III. Discussion
After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to a national
securities exchange. Specifically, the Commission finds that the
proposal is consistent with section 6(b)(5) of the Act,\9\ which
requires, in part, that the rules of an exchange be designed 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.\10\
\9\ 15 U.S.C. 78f(b)(5).
\10\ In approving this proposal, the Commission has considered
the proposed rule's impact of efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
As noted above, the Exchange proposes to clarify the Exchange's rules by eliminating provisions that no longer are necessary and are obsolete. The Commission believes these changes are consistent with the Act. With respect to the deletion of Phlx Rule 129, the Exchange notes that currently members, in exercising their duty to obtain best execution for orders entrusted to them, may remove orders from the Exchange and seek execution in other venues. With respect to the proposed deletion of Phlx Rules 241248, the Commission notes that these rules are substantially similar to former NYSE Rule 391, which was rescinded in 1993.\11\ In approving the NYSE's deletion of this rule, the Commission noted that it was appropriate for the Exchange rescind NYSE Rule 391 in light of the rescission of Rule 10b2. \11\ See Securities Exchange Act Release No. 32822, supra note 8.
Moreover, the Commission believes that it is consistent with the
Act for Phlx to delete Phlx Rule 923, to provide member corporations
additional flexibility to choose whom in their company to employ as
members of the Exchange. According to the Exchange, this rule was
adopted as least fifty years ago, when most member corporations were
small regional companies. The purpose of this rule at that time,
according to the Exchange, may have been to provide an additional means
of obtaining security for the debts of the member corporation by
requiring that the members who were trading the securities also be
officers and/or owners of the corporation. Today, Phlx has other rule
based means to require adequate financial security for the debts [[Page 37156]]
of member corporations and for ensuring that member corporations are generally financially solvent.\12\
\12\ See e.g., Phlx Rule 909 (requiring member organizations to
provide and maintain security for any claims owed to the Exchange
and other members and member organizations); and Phlx Rule 924
(making the member organization liable for the fees, fines, dues,
penalties and other amounts imposed by the Exchange on its members;
this provision applies regardless of the officer or ownership status
of the member). According to Phlx, member corporations are a subset
of member organizations. Therefore, Phlx Rules 909 and 924 apply to member corporations.
IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\13\ that the proposed rule change (SRPhlx200561), as amended, is approved.
\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\14\
\14\ 17 CFR 200.303(a)(12).
Nancy M. Morris,
Secretary.
[FR Doc. 065792 Filed 62806; 8:45 am]
BILLING CODE 801001M