Federal Register / Vol. 65, No. 111 / Thursday, June 8, 2000 / Notices 36493

3 15 U.S.C. 78f(b).

4 15 U.S.C. 78f(b)(5).

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(1). 7 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Letter to Michael Walinskas, Associate

Director, Division of Market Regulation (Division’’),

Commission, from John Dayton, Counsel, Phlx,

dated October 1, 1999 (‘‘Amendment 1’’).

Amendment No. 1 proposes certain technical

changes. Specifically, it amends Phlx Rule 930 to

reflect the fact that the Arbitration Committee is

being eliminated from the By-Laws. Amendment

No. 1 also proposes changes to Phlx Rule 950, §§ 1

and 2, to reflect the elimination of the Arbitration

Committee. The Phlx also submitted a letter

(hereinafter referred to as ‘‘Amendment No. 2’’),

confirming that the board will continue to engage

an independent auditing firm to administer all

elections. The contents of Amendment No. 2 were

substantively discussed in the notice.

4Securities Exchange Act Release No. 42464 (Feb.

28, 2000), 65 FR 11826.

adjust options prices in line with the

closing prices of the underlying

securities.

In addition, quarterly rotations allow

the execution at the end of the day of

orders at a single price more efficiently.

The closing rotation will also give

investors and other interested parties

more accurate closing prices for Phlx

options on these high volume days. The

Exchange believes that a specific rule

governing quarterly closing rotation acts

as notification to the investing public

that a quarterly rotation may take place.

However, the Exchange believes that the

procedure described above also allows

flexibility for those equity options series

which do not experience increased

activity, and, thus, will not be subject to

a closing rotation.

2. Statutory Basis

The Exchange represents that the

proposed rule change is consistent with

Section 6(b) of the Act 3 in general, and

furthers the objectives of Section

6(b)(5) 4 in particular, in that it is

designed to promote just and equitable

principles of trade and provide for a fair

and orderly market by codifying specific

provisions which allow the Exchange to

conduct quarterly rotations in order to

account for late prints and high amounts

of order flow.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Phlx represents that it does not

believe that the proposed rule change

will impose any burden on competition

that is not necessary or appropriate in

furtherance of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has become

effective pursuant to Section 19(b)(3)(A)

of the Act 5 and Rule 19b–4(f)(1) 6

thereunder because it constitutes a

stated policy, practice, or interpretation

with respect to the meaning,

administration, or enforcement of an

existing rule. Phlx Rule 1047 currently

provides the authority to floor officials

to direct trading rotations in specific

option classes, thus the Exchange

believes the proposal satisfies the

requirements of Rule 19b–4(f)(1). This

proposed rule change serves as

clarification to note that there may be

closing rotations in certain equity

options on the last day of the calendar

quarter.

At any time within 60 days of the

filing of the proposed rule change, the

Commission may summarily abrogate

the proposed rule change if it appears to

the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors

or otherwise in furtherance of the

purposes of the Act.

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 coping 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

No. SR–Phlx–00–27 and should be

submitted by June 29, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14403 Filed 6–07–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42868; File No. SR–Phlx–

99–26]

Self-Regulatory Organizations; Order

Approving Proposed Amendment to

the By-Laws and Corresponding

Changes to the Rules of the

Philadelphia Stock Exchange, Inc.,

Relating to Various Committees

May 31, 2000.

I. Introduction

On July 30, 1999, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) submitted to 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

amending the Exchange’s By-Laws and

corresponding Phlx Rules to streamline

its committee process. The Phlx filed

Amendments No. 1 and No. 2 to the

proposed rule change on October 4,

1999 3 and February 23, 2000,

respectively. The Federal Register

published the proposed rule change,

Amendment No. 1, and the substance of

Amendment No. 2, for comment on

March 6, 2000.4 The Commission

received no comments on the proposal.

This order approves the proposal, as

amended.

II. Description of Proposal

The Exchange has proposed By-Law

amendments to provide for streamlining

the committee process as follows: (i)

Dissolving the Arbitration Committee,

whose limited remaining functions

would be transferred to the Executive

committee, who will oversee ongoing

arbitrations filed before the transfer of

arbitration responsibilities to the

National Association of Securities

Dealers, Inc. (‘‘NASD’’) in October,

36494 Federal Register / Vol. 65, No. 111 / Thursday, June 8, 2000 / Notices

5See Securities Exchange Act Release No. 40517

(Oct. 1, 1998), 63 FR 54177 (Oct. 8, 1998) (SR–Phlx–

98–28).

6As of May 26, 2000, one case is currently

pending with the Arbitration Committee that would

be transferred to the Executive Committee.

Potentially twelve arbitration cases in federal court

could be transferred back to the Phlx. Phone call

between John Dayton, Counsel, Phlx, and Sonia

Patton, Attorney, Division, Commission, on May 26,

2000.

7The Commission notes that the Exchange

currently has a policy of engaging an independent

auditing firm to administer elections. This practice

will continue following the merger of the

Nominations Committee and the Elections

Committee. See Amendment No. 2, supra note 3. Of

course, any changes to the practice would have to

be submitted pursuant to Section 19(b)(1) of the

Act.

8Currently the Exchange has three separate

Quality of Markets Committees for each of the three

trading floors: equity, equity-index options, and

foreign currency options.

9See Proposed Phlx By-Law Art. X, § 10.20.

10 15 U.S.C. 78f(b)(5).

11 15 U.S.C. 78f(b)(3). 12 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f). 13See supra, note 6.

1998; 5 (ii) dissolving the Elections

Committee and transferring its

functions, along with those of the

Nominating Committee, to the

Nominating and Elections Committee;

and (iii) consolidating the three Quality

of Markets Committees into a single

Quality of Markets Committee with

responsibilities for all three Phlx trading

floors.

First, the Exchange has proposed to

amend its By-Laws to dissolve the

Arbitration Committee and transfer its

duties to the Executive Committee. The

Phlx states that it ceased accepting

arbitration cases on October 1, 1998 and

that jurisdiction for Phlx arbitration

cases now resides with the NASD.

Currently, the Exchange is processing

and closing the cases that were filed

prior to October 1, 1998.6 Following the

cessation of these cases, the arbitration

function at the Exchange will cease, as

will the need for any committee

oversight of these matters.

Second, the Exchange has proposed

several changes to the Nominating

Committee and the Elections

Committee, essentially collapsing them

into a single committee. The Exchange

proposes to eliminate the Elections

Committee, and move its powers to the

Nominating Committee. The Exchange

also proposes to amend its By-Laws to

change the name of the Nominating

Committee to the Nominating and

Elections Committee. The Exchange

believes this change will help to

streamline the functions of the two

committees.

The Elections Committee administers

membership elections. The Nominating

Committee submits nominations for

industry and non-industry Governors

who stand for election by the members.

Because these two Committees perform

functions related to the election and

appointment of Governors of the

Exchange, the Exchange believes that

the merging of the Elections Committee

with the Nominating Committee will

not impair the functioning of any of

their tasks.7 The Exchange believes that

merging these responsibilities should

improve efficiency as well as

coordination, as the same group of

committee members will oversee the

complete election-related process.

Finally, the Exchange has proposed to

reduce the number of Quality of Markets

Committees from three to one, also to

improve efficiency.8 In addition, the

Exchange proposes to amend its ByLaws to ensure that the Committee will

contain at least as many non-industry as

industry members. The proposed

language provides that ‘‘[t]he [Quality of

Markets] Committee will have broad

representation that shall include at least

as many non-industry as industry

Committee members.’’9 The current

language requires present committees to

be ‘‘equally balanced’’. The Exchange

believes that the proposed language will

give it more flexibility to constitute the

proposed Committee while retaining the

appropriate non-industry

representation.

The Exchange believes that the

consolidation of the Quality of Markets

Committees should also improve the

input of the committee on the overall

committee process by taking advantage

of the overlap in issues emanating from

each of the three trading floors, as well

as providing for more singular input.

The Exchange further believes that this

consolidation of committee functions

will be beneficial to the functioning of

the committee process by decreasing the

number of committee assignments for

some public, non-industry and industry

Governors, allowing them to concentrate

more of their energies to their remaining

assignments, as well as lowering the

costs associated with convening

meetings. The Exchange believes the

quality of information received from the

committees by the Board of Governors

will not be affected by the

consolidation.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange. In particular, the Commission

finds that the proposed rule change

meets the requirements of Section

6(b)(5) of the Act,10 which states that,

among other things, the rules of an

exchange must be designed to facilitate

securities transactions and to remove

impediments to and perfect the

mechanism of a free and open market,

and to protect investors and the public

interest. In addition, the Commission

finds that the proposed rule change

further the objectives of sectin 6(b)(3) 11

which requires an exchange’s rules,

among other things, to be designed to

assure a fair representation of its

members in the administration of its

affairs.12

The Commission believes that it is

reasonable for the Exchange to dissolve

the Arbitration Committee and transfer

its remaining duties to the Executive

Committee. The Commission notes that

the NASD has jurisdiction over Phlx

arbitration cases filed after October 1,

1998 and that following the completion

of cases filed before October 1, 1998, the

Exchange will have no arbitration

duties.13 In addition, the Commission

believes that the Executive Committee is

fully capable of overseeing the

adjudication of the remaining cases. The

Commission also notes that although the

Executive Committee contains more

members (9) than the current Phlx

Arbitration Committee (4), the members

of the Executive Committee represent

varying interests similar to the

Arbitration Committee and include onfloor, off-floor, and non-industry

(including one public) members.

The Commission also believes that it

is reasonable for the Exchange to

combine the Nominating Committee and

the Elections Committee into one

committee—the Nominating and

Elections Committee. These committees

perform distinct but related functions.

As noted above, the Elections

Committee oversees the election process

while the Nominating Committee

submits nominations for industry and

non-industry governors who stand for

election by the members. While the

Commission believes it is within the

Phlx’s business judgment in

determining that the merged committees

should be able to function more

efficiently as a single unit, we are

concerned about assuring that elections

are administered fairly and adequately

monitored. The Commission notes that

the Exchange has addressed this by

committing itself to continue its current

practice of engaging an independent

auditing firm to administer all Exchange

elections. The Commission believes that

this safeguard will help to ensure that

all Exchange elections, particularly

Federal Register / Vol. 65, No. 111 / Thursday, June 8, 2000 / Notices 36495

14 15 U.S.C. 78s(b)(2).

15 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

contested elections, will be

administered in a manner that is fair to

all participants in the election process.

Finally, the Commission believes that

it is reasonable for the Exchange to

consolidate all three of its Quality of

Markets Committees into one Quality of

Markets Committee responsible for all

three Phlx trading floors. The

COmmission does not disagree with the

Phlx’s conclusion that the resulting

committee could function more

efficiently by taking advantage of the

overlap in issues that face each of the

three current committees. The

Commission notes that the resulting

committee will be required to contain at

least as many non-industry as industry

members, which will ensure that the

committee will retain appropriate nonindustry representation. While current

rules require each of the Quality of

Markets Committees to be ‘‘equally

balanced,’’ the new language will, in the

Phlx’s view, give it more flexibility in

the new committee’s composition.

Without specifically addressing this

issue, the Commission simply notes that

by requiring the newly merged

committee to be comprised of broad

representation with at least the same

number of non-industry and industry

directors, the new rule language should

ensure that the composition of the new

Quality of Markets Committee is

consistent with the section 6(b)(3)

requirement for fair representation in

the administration of the Exchange.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,14 that the

proposed rule change (SR–PHLX–99–

26), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14404 Filed 6–7–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42883; File No. SR–Phlx–

00–40]

Self Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Philadelphia Stock

Exchange, Inc., Proposing To Amend

Phlx By-Law Article IV, Section 4–18

June 1, 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 April 21,

2000, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I and II below, which Items I

and II 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 and to

approve the proposal on an accelerated

basis.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend

Phlx By-Law Article IV, sections 4–18(a)

and (e) by expanding its

indemnification and insurance coverage

to directors and committee members of

the Exchange. Below is the text of the

proposed rule change. New language is

italicized.

By-Law Article IV

Indemnification

Sec. 4–18.(a) Right to Indemnification.

Each person who was or is made a party or

is threatened to be made a party to or is

otherwise involved in any action, suit or

proceeding, whether civil, criminal,

administrative or investigative (hereinafter a

‘‘proceeding’’), by reason of the fact that he

or she is or was Governor, officer, or

committee member of the Exchange or is or

was serving at the request of the Exchange as

an officer, director, employee or agent of

another corporation or of a partnership, joint

venture, trust or other enterprise, including

service with respect to an employee benefit

plan (hereinafter an ‘‘indemnitee’’), whether

the basis of such proceeding is alleged action

in an official capacity as a Governor, officer,

committee member, director, employee or

agent or in any other capacity while serving

as a Governor, officer, committee member,

director, employee or agent, shall be

indemnified and held harmless by the

Exchange to the fullest extent authorized by

the Delaware General Corporation Law, as

the same exists or may hereafter be amended

(but, in the case of any such amendment,

only to the extent that such amendment

permits the Exchange to provide broader

indemnification rights than permitted prior

thereto), against all expense, liability and loss

(including attorney’s fees, judgments, fines,

ERISA excise taxes or penalties and amounts

paid in settlement) reasonably incurred or

suffered by such indemnitee who has ceased

to be a Governor, officer, committee member,

director, employee or agent and shall inure

to the benefit of the indemnitee’s heirs,

executors and administrators; provided,

however, that, except as provided in

paragraph (c) hereof with respect to

proceedings to enforce rights to

indemnification, the Exchange shall

indemnify any such indemnitee in

connection with a proceeding (or part

thereof) initiated by such indemnitee only if

such proceeding (or part thereof) was

authorized by the Board of Governors of the

Exchange.

Section 4–18(b) through (d). No change.

Sec. 4–18.(e) Insurance. The Exchange may

maintain insurance, at its expense, to protect

itself and any Governor, officer, committee

member, director, employee or agent of the

Exchange or another corporation,

partnership, joint venture, trust or other

enterprise against any expense, liability or

loss, whether or not the Exchange would

have the power to indemnify such person

against such expense, liability or loss under

the Delaware General Corporation Law.

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 Phlx represents that the purpose

of the proposed rule change is to clarify

the original intent of the Exchange, by

expanding the Exchange’s

indemnification and insurance coverage

to include persons serving at the request

of the Exchange as a Governor, officer,

committee member, director, employee,

or agent of another corporation or of a

partnership, joint venture, trust or other

enterprise, including service with

respect to an employee benefit plan.

Although Governors, officers,