45902 Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices

2The Commission has modified the text of the

summaries prepared by OCC.

3To distinguish the title of the current Vice

Chairman from the staff position of Management

Vice Chairman, the modifier ‘‘Member’’ has been

added to the office’s title. Conforming changes have

also been made to several other sections of OCC’s

by-laws to reflect addition of the modifier

‘‘Member’’ to the office’s title. 4 17 CFR 200.30–3(a)(12) (1995).

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The proposed rule change will amend

Article IV, Section 1 to clarify that the

existing Vice Chairman is elected by the

Board of Directors from among OCC’s

Member Directors 3 and will be renamed

the Member Vice Chairman. Article IV,

Section I will also be amended to create

the position of Management Vice

Chairman which will be elected at the

discretion of the Board of Directors, but

the board will not be required to fill this

position. Only OCC staff members will

be eligible to serve as the Management

Vice Chairman, and any person serving

in this office shall not be eligible to

serve concurrently in any other OCC

office.

Article IV, Section 7 will be amended

to provide for the duties and

responsibilities of the Management Vice

Chairman and to clarify the duties and

responsibilities of the Member Vice

Chairman. The duties of the

Management Vice Chairman will

include assuming all of the Chairman’s

responsibilities in the absence or

disability of the Chairman, including

presiding over meetings of the Board of

Directors and the shareholders. The

Member Vice Chairman will preside at

such meetings and assume all of the

Chairman’s responsibilities only in the

absence of the Chairman and

Management Vice Chairman. The

Member Vice Chairman will remain the

chair of any committee responsible for

evaluating the performance of OCC or

the compensation of OCC’s officers.

The proposed rule change also will

amend Article III, Section 15(e) to add

the office of Management Vice

Chairman to the list of officers who may

be granted emergency powers and who

may be empowered to act on behalf of

any other officer who is unable to fulfill

any emergency powers granted to such

office. Accordingly, the Management

Vice Chairman position will add

another person to OCC’s line of

succession, which should reduce the

risk that OCC would be without

qualified leadership. OCC believes it is

important that a clear line of succession

be established and be as routine and

trouble-free as possible. The addition of

the office of Management Vice

Chairman is intended to accomplish this

goal. In addition, a conforming

amendment to Article IV, Section 8 will

be made to clarify that the President’s

duty to act in the place of the Chairman

will arise only in the absence of the

Chairman, the Management Vice

Chairman, and the Member Vice

Chairman.

Finally, a technical correction to

Article IV, Section 1 is proposed. This

section currently requires that the Board

of Directors elect a senior management

officer of OCC to be in charge of each

OCC office that is (i) responsible for

20% or more of the volume of exchange

transactions cleared through OCC or (ii)

located in the same city as an exchange

on which 20% or more of the volume

of the exchange’s transactions are

cleared through OCC. OCC proposes to

delete this provision because it believes

that it is no longer necessary due to

advances in systems design. OCC

represents that the relevant exchanges

are aware of this proposed change and

concur with it.

OCC believes the proposed rule

change is consistent with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder because adding the position

of Management Vice Chairman should

strengthen the line of succession in the

absence of the Chairman of the Board

and will ease any transition from an

existing Chairman of the Board to his or

her successor.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

OCC does not believe that the

proposed rule change will impose any

burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments were not and are

not intended to be solicited with respect

to the proposed rule change, and none

have been received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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

ninety 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 OCC 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.

Persons making written submission

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington D.C. 20549. Copies of the

submissions, 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 in

the Commission’s Public Reference

Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filings will also be available for

inspection and copying at the principal

office of OCC. All submissions should

refer to the file number SR–OCC–97–08

and should be submitted by September

19,1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23012 Filed 8–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38955; File No. SR–PCX–

97–12]

Self-Regulatory Organizations; Pacific

Exchange, Inc.; Order Approving

Proposed Rule Change Modifying

Rules on Disclosure of Financial

Arrangements of Members and Notice

of Filing and Order Granting

Accelerated Approval of Amendment

Thereto

August 20, 1997.

I. Introduction

On April 23, 1997, the Pacific

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’),

filed with the Securities and Exchange

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

pursuant to Section 19(b)(1) of the
Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices 45903

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

2 17 CFR 240.19b–4.

3Letter from Michael D. Pierson, Senior Attorney,

Regulatory Policy, PCX, to Margaret J. Blake,

Division of Market Regulation, Commission (June

27, 1997).

4See supra note 3.

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

6 15 U.S.C. 78f(b)(5).

7 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f). 8See supra note 3.

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a

proposed rule change modifying rules

on disclosure of financial arrangements

of Members. The proposed rule change

was published for comment in

Securities Exchange Act Release No.

38623 (May 13, 1997), 62 FR 27640

(May 20, 1997). The Commission

received no comments on the proposal.

On June 27, 1997, the Exchange

amended the proposed rule change

(‘‘Amendment No. 1’’) to clarify certain

aspects of the filing.3 This order

approves the proposed rule change and

grants accelerated approval to

Amendment No. 1.

II. Description of the Proposal

The Exchange is proposing to make

various changes to the PCX Rule 4.18,

‘‘Disclosure of Financial Arrangements

of Members.’’ Currently, Rule 4.18(a)

requires disclosure of financial

arrangements between Members only. In

its filing, the Exchange proposed

amending Rule 4.18(a) to require that a

Market Maker, Floor Broker, Specialist

or Member Organization that enters into

a financial arrangement with any other

Member or Non-Member shall disclose

to the Exchange the name of such

Member or Non-Member and the terms

of the arrangement.

Second, Subsection (a) currently

defines ‘‘financial arrangement’’ for

purposes of Rule 4.18 as ‘‘(1) the direct

financing of a Member’s dealing upon

the Exchange; or (2) any direct equity

investment or profit sharing

arrangement; or (3) any consideration

over the amount of $5,000.00 that

constitutes a gift, loan, salary or bonus.’’

The Exchange is proposing to clarify

and expand the third clause to provide:

‘‘any consideration over the amount of

$5,000.00, including, but not limited to,

gifts, loans, annual salaries or bonuses.’’

Third, the Exchange is proposing to

eliminate Subsection (b), which

currently provides that each market

Maker shall inform the Exchange

immediately of the intention of any

party (1) to change any financial

arrangement as defined in this Rule; or

(2) to issue a margin call. It further

provides that on a form prescribed by

the Exchange, a Market Maker shall

submit to the Exchange a monthly

report of his use or extension of credit

pursuant to this Section.

Fourth, the Exchange is proposing to

eliminate Subsection (c), which

provides that the disclosure of financial

arrangements pursuant to this Rule shall

be the responsibility of all parties

involved.

Finally, Subsection (d) currently

provides that unless otherwise agreed,

an Exchange Member shall submit to the

Exchange notification of the initiation or

termination of financial arrangements

within ten business days of the effective

date of such arrangements. It further

provides that failure to disclose the

terms of any financial arrangement to

the Financial Compliance Department

may result in disciplinary action by the

Exchange. The Exchange is proposing to

modify subsection (d) to provide that

Exchange Members with financial

arrangements must submit to the

Exchange notification of the initiation,

modification or termination of such

financial arrangements within ten

business days of the effective date of

such arrangements or within such

shorter period of time as the Exchange

may require.4 It further states that

failure to disclose the terms of such

financial arrangements to the Exchange

may result in disciplinary action. The

Exchange believes that the proposal is

consistent with Section 6(b) of the Act,

and Section 6(b)(5) of the Act 5 in

particular, in that it promotes just and

equitable principles of trade and

protects investors and the public

interest.

III. Discussion

The Commission believes PCX’s

proposed rule change is consistent with

Section 6(b)(5) of the Act.6 Section

6(b)(5) requires, among other things,

that the rules of an exchange be

designed to promote just and equitable

principles of trade, and, in general, to

further investor protection and the

public interest.7

PCX proposes requiring disclosure of

financial arrangements between

Members and Non-Members. The

Commission believes it is appropriate to

require reporting of financial

arrangements between Members and

Non-Members, as such arrangements

may be significant and if left unreported

will have an impact on the Exchange’s

ability to monitor the financial status of

Members.

The Commission believes that the

Exchange’s proposal to change the

definition of ‘‘financial arrangement’’ to

include ‘‘any consideration over the

amount of $5,000.00, including, but not

limited to, gifts, loans, annual salaries or

bonuses’’ is reasonable. The

Commission believes that expanding

and clarifying the definition will ensure

that certain arrangements, previously

outside of the enumerated items in the

definition of financial arrangement, will

now be included, resulting in more

accurate monitoring of Member

financial arrangements.

The Exchange is proposing to

eliminate Rule 4.18(b) which currently

provides that Market Makers must

inform the Exchange of the intention of

any party to change financial

arrangements or to issue a margin call.

The Commission believes that

elimination of this subsection is

reasonable as Members are already

required to provide notification of

changes to financial arrangements after

they occur pursuant to 4.18(b) as

amended. The Commission believes that

pre-notification of such changes is

unnecessary and wasteful of Exchange

resources. The Commission also

believes it is appropriate to eliminate

the requirement that a Market Maker

notify the Exchange of the intention of

any party to issue a margin call. Based

on the Exchange’s representations, the

Commission believes that requirement

is unnecessary, as the Exchange

currently receives prompt notification

from a clearing Member whenever a

Market Maker’s trading account

liquidates to a deficit.8 Exchange

clearing Members also provide the

Exchange with capital information on

lead Market Makers on a daily basis. For

these reasons the Commission believes

the notification by Market Makers of the

intention of any party to issue a margin

call is uninformative and therefore

unnecessary.

The Commission believes the

elimination of subsection 4.18(c),

providing that the disclosure of

financial arrangements pursuant to the

rule is the responsibility of all parties

involved, is reasonable. The

Commission believes that this

requirement is stated clearly in Rule

4.18(a), and is therefore redundant.

Finally, the Commission believes the

Exchange’s proposal requiring Exchange

Members with financial arrangements to

submit to the Exchange notification of

the initiation, modification or

termination of such financial

arrangements within ten business days

of the effective date of such

arrangements or within such shorter

period of time as the Exchange may
45904 Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices

9See supra note 3.

10 15 U.S.C. 78s(b)(2).

11 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3Securities and Exchange Act Release No. 38809

(July 1, 1997), 62 FR 37109.

4 In accordance with Phlx By-Law Article XXII,

Section 22–2, the membership was notified of the

proposed amendment by a memorandum dated

June 4, 1997, and no written request for a special

meeting of the Exchange membership was filed

within the 10 day period allowed by the By-Law.

Thereafter, on June 18, 1997, a membership petition

was received by the Board pursuant to Phlx By-Law

Article XXII, Section 22–1, which offered, in

writing, certain proposed amendments to the ByLaws. On August 1, 1997, the petition was

submitted to the membership for vote. The petition

failed for lack of the required quorum.

5See By-Law Article I, Section 1–1 (defining

‘‘industry,’’ ‘‘non-industry,’’ and ‘‘public’’).

6See By-Law Article IV, Section 4–1 and By-Law

Article V, Section 5–1. Various other amendments

to the By-Laws have been made in connection with

these changes. For instance, references to

‘‘President’’ have been changed to refer to the

‘‘Chief Executive Officer’’ or ‘‘Chairman of the

Board’’ and revisions to the number of Board

members necessary to effect certain Board actions

have been made, e.g., in most cases where the

affirmative vote of 15 of the current 30 Governors

was required, the By-Law is changed to state that

a majority vote is required.

7See By-Law Article IV, Section 4–1.

8See By-Law Article IV, Section 4–3.

require, is reasonable.9 The proposal

sets forth an absolute time frame within

which information must be provided to

the Exchange, while allowing the

Exchange a certain level of flexibility in

acquiring information in certain

instances. The Commission believes

such flexibility is necessary for adequate

oversight of Member financial

arrangements and will allow the

Exchange to obtain information

immediately, if necessary. The

Commission further believes that it is

reasonable for the Exchange to have the

authority to subject Members to

disciplinary action where they have

failed to disclose the terms of financial

arrangements to the Exchange. The

Commission believes that such

disclosure is necessary for appropriate

monitoring of Market Maker activity.

The Commission believes that the

proposal will promote investor

protection, as failure to disclose such

arrangements could result in reliance on

inaccurate information to the detriment

of the Exchange and its Members.

The Commission finds good cause to

approve Amendment No. 1 to the filing

prior to the 30th day after the

publication of the notice of filing

because the Amendment does not affect

the substantive rights of Members and

accelerated approval will facilitate the

uninterrupted implementation of the

proposed rule change.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment No.

1. Persons making written submission

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. 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 changes 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 the filing will also be

available at the principal office of the

Exchange. All submissions should refer

to File No. SR–PCX–97–12 and should

be submitted by September 19, 1997.

V. Conclusion

For the foregoing reasons, the

Commission finds that the proposed

rule change and Amendment No. 1 are

consistent with the Act and the rules

and regulations thereunder applicable to

the PCX, and in particular Section

6(b)(5).

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,10 that the

proposed rule change (File No. SR–

PCX–97–12) be and hereby is approved,

and that Amendment No. 1 filed thereto

be and hereby is approved on an

accelerated basis.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23048 Filed 8–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38960; File No. SR–PHLX–

97–31]

Self-Regulatory Organizations;

Philadelphia Stock Exchange, Inc.;

Order Granting Approval to Proposed

Rule Change Relating to Amendments

to Certificate of Incorporation and ByLaws

August 22, 1997.

I. Introduction

On June 25, 1997, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

Exchange’’), pursuant to Section 19(b)(1)

of the Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

filed with the Securities and Exchange

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

a proposed rule change to amend its

Certificate of Incorporate and By-Laws.

The proposed rule change was

published for comment in the Federal

Register on July 10, 1997.3 No

comments were received on the

proposal. This order approves the

proposed rule change.

II. Description of the Proposal

On May 21, 1997, the Phlx Board of

Governors approved draft amendments

to the Phlx Certificate of Incorporation

and By-Laws that are designed to

promote an enhanced governance

structure for the Exchange. Thereafter,

with the Phlx Board’s endorsement, the

amendments were announced to the

membership in accordance with

Exchange By-Law Article XXII, Section

22–2.4

As no written request was made

requesting a special meeting of the

Exchange membership to consider the

amendments, the Phlx Board on June

18, 1997 unanimously approved the

proposed amendments for filing with

the Commission.

Two of the most significant proposed

changes to the By-Laws are reducing the

size of the Board from 30 to 22

Governors and changing the

composition of the Board to: 11 nonindustry Governors, of whom at least 5

must be public Governors; 10 industry

Governors; 5 and a Chairman of the

Board who will be the full time, paid

Chief Executive Officer of the

Exchange.6

The proposed By-Law amendments

specify the composition of the 10

industry Governors as follows: 2 Equity

Floor Industry Governors, 1 Equity

Options Floor Specialist Governor and 1

Equity Options Floor Registered Options

Trader Governor (all of whom must

work on the Exchange Floor or be a

general partner, executive officer or

member associated with a member

organization primarily engaged in

business on the Exchange Floor); 1

Equity Options Floor Broker Governor

(who must work on the Equity Options

Floor); and 5 Off-Floor Governors.7

Except for the Chairman of the Board,

all Governors are subject to term limits

of two consecutive three year terms.8

The manner in which the ViceChairmen of the Board are selected also

has been changed. Instead of the Vice-