[Federal Register Volume 65, Number 110 (Wednesday, June 7, 2000)]
[Notices]
[Pages 36209-36210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14261]



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SECURITIES AND EXCHANGE COMMISSION

[(Release No. 34-42860; File No. SR-Phlx-00-07)]


Self Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Disclosure 
of Securities Accounts

May 30, 2000.
    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 January 31, 2000, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to adopt new Rule 757 (``Disclosure of 
Securities Accounts''), which would require Exchange members, member 
organizations, foreign currency options participants, and foreign 
currency options participant organizations (``Exchange members and 
organizations'') to report to the Exchange all securities accounts in 
which they have any financial interest or power to make investment 
decisions. In addition, the rule would require that Exchange members 
and organizations notify the institution that services the accounts, or 
at which the accounts are located, that the Exchange members and 
organizations are members of the Exchange. Below is the text of the 
proposed rule change, which is entirely new.
* * * * *

Rule 757--Disclosure of Securities Accounts

    (a) Every member, member organization, participant, and participant 
organization shall promptly report to the Exchange any securities 
account, including any error account, in the name of the member, member 
organization, participant, or participant organization or in which the 
member, member organization, participant, or participant organization 
has, directly or indirectly, any financial interest or power to make 
investment decisions.
    (b) Every report shall, at a minimum, include the name of the 
account, the account number, the type of account, the current 
securities position(s) in the account, and the name, address, and 
telephone number of the institution that services the account or at 
which the account is maintained. A report shall contain such additional 
information as the Exchange may from time to time require.
    (c) Every member, member organization, participant, or participant 
organization having a reportable account for purposes of this rule 
shall notify each institution that services an account or at which an 
account is maintained that the member, member organization, 
participant, or participant organization is a member of the Exchange.
    Commentary:
    .01 Purchases of a security of a publicly traded registered 
investment company directly from the issuer or the principal 
underwriter shall not be deemed a reportable security for the purposes 
of this section. Interest in a non-publicly traded investment vehicle, 
including a hedge fund, is a reportable security for purposes of this 
section.
* * * * *

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
    Proposed new Rule 757 would require Exchange members and 
organizations to report to the Exchange information about all 
securities accounts in which they have any financial interest or power 
to make investment decisions.\3\ The Phlx states that this proposed 
rule change would aid the investigative efforts of the other exchanges, 
as well as its own efforts, by assisting the Intermarket Surveillance 
Group (``ISG'') in creating a floor member securities account 
database.\4\ The Phlx would transmit information it receives about 
accounts of Exchange members and organizations to the Securities 
Industry Automation Corporation, which would maintain the information 
on behalf of the ISG.\5\
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    \3\ Proposed new Rule 757 does not impose an obligation on 
Exchange members and organizations to report the securities 
positions in their accounts on an ongoing basis. Telephone 
conversation between Jurij Trypupenko, Counsel, Phlx, and Ira 
Brandriss, Attorney, Division of Market Regulation (``Division''), 
Commission, February 22, 2000.
    \4\ The ISG is an organization formed by representatives of 
exchanges in the United States (and certain international exchanges) 
to address surveillance issues.
    \5\ Telephone conversation between Jurij Trypupenko, Counsel, 
Phlx, and Ira Brandriss, Attorney, Division, Commission, and Joshua 
Kans, Special Counsel, Division, Commission, March 9, 2000.
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    Under the proposed rule, each report would include, at a minimum, 
the name of the account, the account number, the type of account, the 
current securities position(s) in the account, and the name, address, 
and telephone number of the institution that services the account or at 
which the account is maintained.\6\ In addition, the rule requires 
every Exchange member and organization that has a reportable account to 
inform each institution that services the account, or at which the 
account is maintained, that the Exchange member or organization is a 
member of the Exchange. Also, a report shall contain such additional 
information as the Exchange may from time to time require. The proposed 
commentary to new Rule 757 states that purchases of a security of a 
publicly traded registered investment company directly from the issuer 
or the principal underwriter shall not be deemed a reportable security 
for the purposes of the rule. Interest in a non-publicly traded 
investment vehicle, including a hedge fund, would be a reportable 
security.
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    \6\ The term ``institution'' includes a non-member brokerage 
firm, investment adviser firm, bank, or other financial institution. 
Telephone conversation between Jurij Trypupenko, Counsel, Phlx, and 
Ira Brandriss, Attorney, Division, Commission, February 22, 2000.
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    The Exchange represents that proposed new Rule 757 would also 
enhance Exchange surveillance and regulatory efforts by expanding 
current account reporting requirements. Phlx Rule 751 presently 
requires employees of Exchange members and organizations to report 
certain account information to the Exchange members and organizations 
that employ them, but there is no corresponding obligation on Exchange 
member and organization employers to report their account information 
to the Exchange. The

[[Page 36210]]

Exchange believes that proposed new Rule 757's requirement that 
Exchange members and organizations report securities accounts to the 
Exchange should provide the Exchange with the capability to monitor and 
investigate quickly the trading of securities by personnel that trade 
on the equity, options, and foreign currency floors of the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6 of the Act \7\ in general, and furthers the objectives 
of section 6(b)(5) \8\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, and to protect 
investors and the public interest by requiring disclosure of securities 
accounts in which Exchange members have a financial interest or power 
to make investment decisions.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange did not solicit or receive written comments on the 
proposed rule change.

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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-Phlx-00-07 and 
should be submitted by June 28, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14261 Filed 6-6-00; 8:45 am]
BILLING CODE 8010-01-M