[Federal Register: January 17, 2008 (Volume 73, Number 12)]
[Notices]
[Page 3306-3307]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ja08-108]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57134; File No. SR-Phlx-2005-68]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Granting Approval of a Proposed Rule Change and Amendment No. 1
Thereto Relating to Deletion of Rule 702, Carrying Accounts
January 11, 2008.
I. Introduction
On November 9, 2005, the Philadelphia Stock Exchange, Inc.
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and 19b-4
thereunder,\2\ a proposal to delete Phlx Rule 702. regarding Carrying
Accounts. Phlx filed Amendment No. 1 to the proposed rule change on
January 18, 2007. Notice of the proposal, as amended, was published for
comment in the Federal Register on February 14, 2007.\3\ The Commission
received no comments regarding the proposal. This order approves the
proposed rule change, as amended.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Exchange Act Release No. 55256 (Feb. 8, 2007), 72 FR 7106
(Feb. 14, 2007).
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II. Description of the Proposal
The purpose of the proposed rule change to delete Rule 702,
Carrying Accounts, is to eliminate an unnecessary and confusing
Exchange rule. Currently, Rule 702 provides that ``[n]o member, doing
business as an individual, shall carry accounts for customers, except
as provided in Rule 903.'' \4\
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\4\ The reference to Rule 903 is clearly an incorrect reference
which should be to Rule 904, Use of a Partnership Name, which
provides that ``[n]o member shall conduct business under a
partnership firm name unless he has at least one general partner,
provided, however, that if by death or otherwise a member becomes
the sole general partner in a member organization that is a
partnership he may continue business under the partnership name for
such period as may be allowed by the Committee.''
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Rule 702 is unnecessary because a Phlx member's ability to carry
customer accounts is dictated by its ability to comply with relevant
securities laws and regulations, including Exchange Act Rules 15c3-1
and 15c3-3, which do not make distinctions on the basis of a broker-
dealer's organizational and corporate structure.
Rule 702 creates confusion because virtually all ``members'' are
individuals. The term ``member'' (as opposed to ``member
organization'') is defined in Exchange Rules as a permit holder which
has not been terminated in accordance with the by-laws of the
Exchange.\5\ Currently, the only issued and outstanding Exchange
permits are Series A-1 Permits, the terms and conditions of which are
governed by Rule 908. Among other things, section (b) of Rule 908
provides that a Series A-1 permit shall only be issued to an
individual.\6\ Pursuant to Rule 908, all Series A-1 permit holders must
maintain an affiliation with a ``member organization,'' which are not
subject to Rule 702.
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\5\ See Exchange By-Law Article I, Section 1(t) and Exchange
Rule 1(n). Exchange By-Law Article XII, Section 1(b) provides in
part that ``[e]xcept as otherwise set forth in the rules of the
Exchange or any resolution of the Board of Governors authorizing a
specific class or series of permits, a permit will confer upon and
subject the holder thereof to all the privileges and obligations of
a member pursuant to these By-Laws and the rules of the Exchange, *
* * and to conduct business on the Exchange as provided in these By-
Laws and such rules.''
\6\ Rule 908 does contain one exception, which is not relevant
to this analysis, that provides that a Series A-1 Permit may also be
issued to ``a corporation meeting the requirements of Section 12-4
of the By-Laws.'' Section 12-4 of the By-Laws, Admission of
Corporation, provides that ``[a] corporation may be issued a permit
by the Exchange, provided such corporation is incorporated under the
laws of the Commonwealth of Pennsylvania, and all of its capital
stock is owned by the Exchange.'' This By-Law provision was intended
to permit Exchange membership for the Exchange's subsidiary, Stock
Clearing Corporation of Philadelphia.
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III. Discussion
The Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\7\ In particular, the Commission finds that the proposal is
consistent with Section 6(b)(5) of the Act, which requires, among other
things, 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, in general, to protect
investors and the public interest.
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\7\ 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).
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The Commission believes it is reasonable and consistent with the
Act for the Exchange to eliminate an unnecessary and confusing Exchange
rule.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-Phlx-2005-68) 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,
Deputy Secretary.
[FR Doc. E8-733 Filed 1-16-08; 8:45 am]
BILLING CODE 8011-01-P