Federal Register / Vol. 62, No. 196 / Thursday, October 9, 1997 / Notices 52801

14 17 CFR 200.30–3(a)(12).

1 In response to comment letters and membership

concerns, the NYSE has submitted three

amendments to this proposed rule change. See

letter from James E. Buck, Senior Vice President

and Secretary, NYSE, Inc., to Ms. Katherine A.

England, Assistant Director, Division of Market

Regulation, SEC, dated April 24, 1997 (responding

to comment letters)(‘‘Amendment No. 1’’); Letter

from James E. Buck, Senior Vice President and

Secretary, NYSE, Inc., to Ms. Katherine A. England,

Assistant Director, Division of Market Regulation,

SEC, dated June 9, 1997 (amending the rule

language to clarify the proposed interpretation and

stipulating to a one year phase-in period for

implementation of the Rule’s

requirements)(‘‘Amendment No. 2’’); Letter from

James E. Buck, Senior Vice President and Secretary,

NYSE, Inc., to Ms. Katherine A. England, Assistant

Director, Division of Market Regulation, SEC, dated

September 18, 1997 (eliminating redundant

provisions in the interpretation)(‘‘Amendment No.

3’’). These amendments are technical in nature and

do not need to be published for comment.

2 15 U.S.C. § 78s(b)(1).

3 17 CFR 240.19b–4.

4Securities Exchange Act Release No. 38106

(December 31, 1996), 62 FR 1353 (January 9, 1997).

5Letter from Sarah A. Miller, Senior Government

Relations Counsel, Trust and Securities, American

Bankers Association, to Jonathan G. Katz, Secretary,

SEC, dated January 30, 1997 (‘‘ABA Letter’’); Letter

from Deborah H. Kaye, Vice President and Assistant

General Counsel, Retail Banking and Securities, The

Chase Manhattan Bank, to Jonathan G. Katz,

Secretary, SEC, dated January 28, 1997 (‘‘Chase

Letter’’); Letter from Thomas W. Evans, Vice

President, Citibank, to Secretary, SEC, dated

January 29, 1997 (‘‘Citibank Letter’’); Letter from

Steven J. Freiberg, Chairman and Chief Executive

Officer, Citicorp Investment Services, to Secretary,

SEC, dated January 29, 1997 (‘‘CIS Letter’’); Letter

from Monica M. Barbour, Vice President and Legal

Counsel, First Chicago NBD, to Margaret H.

McFarland, Deputy Secretary, SEC, dated January

31, 1997 (‘‘First Chicago Letter’’).

6See First Chicago Letter.

7See ABA Letter, Chase Letter, Citibank Letter,

and CIS Letter.

8Columns, coloring or other distinct forms of

demarcation may be used to clearly distinguish

assets. The Interpretation requires only that a

physical distinction of assets be made on the

summary page. It was not intended to mandate the

manner in which such identification is made. see

infra note 13, at pg. 4.

9Where the customer account number and

telephone number for customer service at each

entity are included on each entity’s respective

customer account statement, such account and

telephone numbers need not be included on the

summary statement. See also note 26, infra.

10See supra note 1, Amendment No. 2.

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

Section, 450 Fifth Street, NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

CBOE. All submissions should refer to

File No. SR–CBOE–97–38 and should be

submitted by October 30, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–26724 Filed 10–8–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39190; File No. SR–NYSE–

96–27]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

New York Stock Exchange, Inc.

Relating to an Interpretation of Rule

409 (‘‘Statements of Accounts to

Customers’’)

October 2, 1997.

I. Introduction

On December 5, 1996, 1 the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 2 and Rule 19b–4

thereunder, 3 a proposed rule change

interpreting Exchange Rule 409. A

notice of the proposed rule change

appeared in the Federal Register on

January 9, 1997.4

The Commission received five

comment letters addressing the

proposed rule change.5 One commenter

endorsed the proposed amendments,6

while the remaining commenters

opposed the proposal.7 This order

approves the proposed rule change.

The proposed rule change sets forth

an interpretation of Exchange Rule 409

with respect to the establishment of

standards regarding the distribution of

‘‘summary statements’’ and the use of

‘‘third party agents’’ to prepare or

distribute customer account statements.

The proposed interpretation also

codifies existing Exchange policy as to

certain information that must be

disclosed on account statements. Other

items addressed in the proposed

interpretation include account

statements that reflect assets not in the

possession or control of a member

organization and the use of logos and

trademarks on account statements by an

entity other than the carrying or

introducing organization.

II. Description of the Proposal

Exchange Rule 409 addresses the

responsibility of member organizations

carrying customer accounts to send

statements of these accounts to their

customers. Currently, the rule requires

member organizations to send their

customers account statements showing

security and money positions and

entries at least quarterly to all accounts

having an entry, money or security

position during the preceding quarter.

As amended, the rule will allow

Exchange member organizations, jointly

with other financial institutions (e.g.,

banks and investment companies), to

formulate and distribute to common

customers a ‘‘summary statement’’ of

the customers’ accounts with the

respective institutions. These

consolidated statements will reflect

information from entities that are part of

a financial services ‘‘group’’ or ‘‘family,’’

which could include an Exchange

member organization that carries

accounts for another broker-dealer.

Specifically, the Exchange will

require that the summary statement:

indicate that the statement is

informational and includes assets held

at different entities; identify each entity,

their relationship to each other and their

respective functions; distinguish clearly

between assets held by each entity; 8

identify the customer’s account

numbers at each entity and provide a

customer service telephone number at

each; 9 disclose which entity holds each

of the different assets on the summary;

and identify each entity that is a

member of the Securities Investor

Protection Corporation (‘‘SIPC’’).10

Additionally, any aggregation of account

values must be recognizable as having

been derived from the separately stated

totals; the beginning and end of each

separate underlying statement must be

clearly distinguishable; and there must

be a written agreement between the

parties jointly distributing the

statements that each has developed

procedures and controls for testing the

accuracy of its own information on the

summary statement. Furthermore, the

member organization must indicate on

the summary statement that it is not

responsible for any information derived

from the customer or other external

source relating to externally-held assets.

The proposed interpretation also

clarifies that certain information must

be disclosed on the front of account

statement, i.e., the identity of the

introducing and carrying organizations,

where customer assets included on the

statement are held, whether such

customer assets are covered by SIPC,

and the opening and closing account

balances. Moreover, the interpretation

requires that where the account

statement includes assets not within the

possession or control of the member
52802 Federal Register / Vol. 62, No. 196 / Thursday, October 9, 1997 / Notices

11See supra note 5.

12First Chicago Letter at pg. 2.

13See supra note 1, Amendment No. 1.

14Chase Letter, pp. 2–3, Citibank Letter, p. 3, and

CIS Letter p. 4.

15Chase Letter, p. 3.

16 Id. See also Citibank Letter, (stating that the

NYSE has no authority to access customer account

numbers or information or to require customer

service numbers at a bank or other financial entity),

p. 3.

17CIS Letter, pp. 3–4.

18Amendment No. 1, p. 2.

19 Id.

20 Id.

21Amendment No. 1, p. 5.

22 Id.

23 Id.

24Amendment No. 1, p. 4.

25 Id.

26 If an alternate number is used, the customer

must be able to receive assistance concerning his

inquiries or be directed to the appropriate person

or department for assistance.

organization, such assets must be clearly

separated on the statement. In addition,

the statement must clearly indicate that

such externally held assets: are not

within the possession or control of the

member organization and are included

on the statement solely as a service to

the customer; and are not covered by

SIPC.

Concerning the use of logos and

trademarks, the proposed interpretation

provides that where the logo, trademark

or other identification of an entity (other

than that of the carrying or introducing

organization) appears on an account

statement, the identity of such entity

and the relationship to the introducing,

carrying or other organization must be

provided on the statement. With respect

to the summary statement, the location

of the name of the entity may not be

misleading or cause customer

confusion. The proposed interpretation

codifies that carrying firms are

responsible for sending statements to

customers and for ensuring the accuracy

of such statements. However, because in

many cases ‘‘third party agents’’ (e.g.,

service bureaus or other independent

entities) prepare or transmit customer

account statements, the proposed

interpretation to Rule 409 would also

establish Exchange policy regarding use

of ‘‘third party agents’’ to prepare or

transmit statements of accounts and to

set forth certain representations which

must be made in writing by the member

organization to the Exchange when

employing their party agents.

Specifically, the member organization

must represent that the third party is

acting as agent for the member

organization, that the member

organization retains responsibility for

compliance with Rule 409(a), that the

member organization has developed

procedures and implemented controls

for reviewing and testing the accuracy of

statements, and that it will retain copies

of all such statements. In addition, the

interpretation states that an introducing

organization that is a provider of

services included in a member

organization’s statements of accounts

may not function as a ‘‘third party

agent’’ and may neither prepare nor

transmit such statements itself.

III. Summary of Comments

The Commission received five

comment letters in response to the

proposed rule change.11 The First

Chicago Letter generally endorsed the

proposed rule change as a ‘‘significant

step in meeting customer needs by

creating a more efficient and less costly

delivery system of customer

statements.12 The remaining letters,

however, raised several issues that the

Commission believes should be

addressed. The Exchange, at the

Commission’s request, has proffered a

response.13

The remaining commenters argued

that the Exchange lacked the authority

to regulate how non-Exchange members

communicate with their customers and

the type of information disseminated to

their customers.14 One commenter,

Chase, noted that if the NYSE member

firm must develop procedures and

controls for reviewing the accuracy of

statements of accounts prepared by

third party agents then this implies that

the Exchange member must have access

to bank records and statements.15 Chase

questioned whether the NYSE has the

authority to require NYSE member firms

to review bank statements.16 Another

commenter suggested that requiring

banks (or other financial entities) to

possibly establish and make accessible a

customer service department was an

indirect attempt by the Exchange to

regulate banking activity and as such,

was beyond the Exchange’s purview.17

The NYSE states that its proposed

Interpretation is directed only to those

persons or entities that themselves are

subject to the jurisdiction of the

Exchange.18 The Exchange believes that

its interpretation will apply generically

to the practice of formulating and

disseminating summary statements

together with combined statements of

various entities, regardless of whether

these entities are members.19 The

Exchange states that it is not seeking to

directly impose regulation on third

parties; however, to the extent that

member organizations enter into

contractual arrangements with third

parties, these relationships will

necessarily be affected by Exchange

regulation.20

In its response, the NYSE has clarified

its intent concerning specific

jurisdictional issues raised by several

commenters. First, the requirement that

a member firm develop procedures and

controls for reviewing the accuracy of

statements of accounts prepared by

third party agents only applies to the

customer account statement of a

member organization.21 For example, ‘‘if

a third party agent prepares account

statements which include assets held at

the member organization broker-dealer,

there must be a system in place to

ensure the accurate receipt by the third

party agent of such information and the

transmission of accurate information to

customers.’’ 22 The Interpretation does

not seek to address the responsibility for

the preparation of statements or

accuracy of information related to assets

not held at the broker-dealer.23 Thus,

concerning customer information

provided by non-member entities, the

responsibility of ensuring the accuracy

and transmission of their information

lies solely with them.

Another concern most commonly

raised addressed the requirement that

each entity provide a customer service

number on its respective customer

account statement. In its response, the

NYSE stated that the summary page

must also identify the relevant

customers’ account numbers at each

entity and provide a customer service

number for each such entity, ‘‘but only

if such information is not included on

each entity’s underlying customer

account statement.’’ 24 According to the

Exchange, indicating the customer

service telephone numbers will allow

customers to contact the appropriate

entity for assistance in regard to the

information presented on the summary

page or any of the attached statements.25

The Commission believes the

requirement that a customer service

number be provided from each entity

will ensure that inquiries concerning an

asset or account are directed to the

entity controlling the same. If a

subsidiary does not have a customer

service number, it may use the customer

service number of its parent company or

other affiliate.26 With respect to the

jurisdictional issues, the Commission

recognizes that the development and

distribution of these joint customer

account statements would be a

voluntary undertaking between the

parties involved. If a broker-dealer

affiliate chooses not to distribute joint

account statements with the brokerdealer, then it would not be subject to

the Interpretation.

Several comments took exception to

the requirement that the summary
Federal Register / Vol. 62, No. 196 / Thursday, October 9, 1997 / Notices 52803

27Chase Letter, p. 4, Citibank Letter, pp. 1–2, CIS

Letter, p. 2, and ABA Letter, p. 4.

28 Id. The banking regulators’ requirements are

outlined in the Interagency Statement on Retail

Sales of Non-deposit Investment Products, dated

February 15, 1997 (‘‘Interagency Statement’’). See

also Joint Interpretations of the Interagency

Statement, dated September 12, 1995, (indicating

that the banking agencies may seek to apply the

Interagency Statement more broadly outside the

bank than they do within the bank).

29Chase Letter, p. 4, Citibank, p. 1, and ABA

Letter, p. 4.

30Citibank Letter, pp. 1–2.

31CIS Letter, (requiring additional disclosures

will have an anti-competitive effect because NYSE

Rule 409 will disproportionately affect banks, thus

disadvantaging a class of NYSE competitors) at p.

2.

32ABA Letter, pp. 3–4.

33Amendment No. 1, p. 4.

34Amendment No. 2, p. 2.

35Chase Letter, p. 1, Citibank Letter, p. 3, CIS

Letter, p. 2, and ABA Letter, p. 3.

36Chase Letter, p. 3, Citibank Letter, p. 3, CIS

Letter, p. 3 and ABA Letter, p. 3.

37Chase Letter, p. 5 and Citibank Letter, pp. 3–

4.

38Citbank Letter, p. 4.

39Chase Letter, p. 6 and Citibank Letter, p. 4.

40Amendment No. 1, p. 3.

41Section 6(b)(5) requires the Commission to

determine that a registered national securities

exchange’s rules are designed to promote just and

equitable principles of trade, and, in general, to

protect investors and the public interest.

42Pursuant to Section 3(f) of the Act, the

Commission has considered the proposed rule’s

impact on efficiency, competition, and capital

formation. 15 U.S.C. 78c(f).

43The Commission notes that this approval order

addresses the procedures that members and

associated persons must follow to disseminate this

customer information. The Commission, however,

is not addressing the various entities’ legal status

or rights concerning this information.

statement identify and distinguish

between those accounts and assets

covered and not covered by SIPC.27

According to these commenters, most

financial entities have already

addressed insurance disclosure and

have established procedures to comply

with the banking regulators’

requirements.28 Thus, requiring banks

to specifically disclose to customers that

deposit accounts, insured by the Federal

Deposit Insurance Corporation

(‘‘FDIC’’), are not insured by SIPC

would create unnecessary customer

confusion 29 and may create the illusion

that the two types of coverage are

comparable.30 One commenter noted

that this requirement imposes a

disproportionate impact 31 on financial

entities because they would be

burdened with distinguishing between

FDIC and SIPC coverage and educating

the customer about the differences.32

In its response, the NYSE notes that

it intended that member organizations

be required to make the standard SIPC

disclosures on their customer account

statements and on summary statements

where brokerage assets are included.33

The NYSE understands that if read

literally, the proposal could be

construed as requiring summary

statement participants to make

‘‘negative’’ disclosures (i.e., specific

identification of account assets or

accounts not covered by SIPC);

however, this was not its intent. Thus,

with respect to SIPC disclosures on the

summary statement, the Exchange has

amended the proposed Interpretation to

require that an entity disclose its

membership status, not the status of the

accounts or assets.34

Finally, most commenters expressed

concern about the additional costs and

burdens financial institutions will incur

in attempting to comply with the

summary statement aspect of this

proposal.35 These commenters contend

that expanding the disclosure

requirements to include, among other

things, identifying each entity from

which information is provided or where

the assets are held and explaining the

relationship between the various

entities on the summary statement,

would not only increase the cost of

producing the statement,36 but would

defeat the purpose of a statement

summary by increasing its length.37 If

the proposal is approved, the

commenters suggest that those entities

currently disseminating summary

statements pursuant to NYSE rules

either be grandfathered 38 or provided

with a grace period to implement the

changes.39

The NYSE has agreed that some

flexibility in implementation is

warranted. Thus, the Exchange has

agreed to a one year phase-in period,

commencing with Commission

approval.40

IV. Discussion

The Commission believes that the

proposed rule change is consistent with

the Act and the rules and regulations

promulgated thereunder. Specifically,

the Commission believes that approval

of the proposed rule change is

consistent with section 6(b)(5) 4 of the

Act. Pursuant to Section 6(b)(5), the

proposed rule change benefits the

public 42 by codifying the information to

be disclosed and delineating the criteria

for the use of third party agents in

formulating and disseminating

statements of accounts to customers.

Exchange Rule 409 also benefits the

public by establishing requirements for

related financial entities to consolidate

account information and distribute this

information in a ‘‘summary statement’’

to their common customers. These

summary statements will provide

customers not only with an overview of

their accounts at the separate entities,

but with concise, detailed information

that is easily accessible.43

Codifying the information to be

disclosed on statements of accounts

assures customers of consistency in the

type of information received on their

statements. It also establishes uniform

standards which will be applicable to

all Exchange members. The rule

language establishes adequate

procedures for members to follow if

they chose to use third party agents to

disseminate statements of accounts to

their customers. The rule safeguards

against possible conflicts of interest and

requires that members who exercise this

option, monitor the activity of the third

party agents, to ensure accuracy of the

information transmitted. Having

members develop the requisite

procedures and controls to monitor their

agents’ compliance with this rule

should prevent the misuse of customer

information.

A summary statement consolidating a

customer’s accounts from various

related financial entities will provide

the customer with convenient access to

the information in a single document.

The Commission agrees that if these

statements are currently being produced

and disseminated, then uniform

requirements need to be established for

member and non-member participants

to follow. The Commission applauds the

Exchange’s efforts in establishing

requirements that attempt to provide the

customer with as much information as

possible. However, the Commission

believes there is a fine line between a

useful summary statement and one that

could prove misleading and could cause

customer confusion. Consequently, we

urge the Exchange to be sensitive to any

concerns that may arise after the

proposal is implemented.

The Commission also believes that

allowing a one year phase-in period for

implementation of the Interpretation

will provide entities adequate time to

comply with the requirements of the

rule. Once the Interpretation is fully

implemented, the resulting summary

statement should achieve the

Exchange’s objectives while benefiting

the customer through increased

disclosure.

V. Conclusion

For the above reasons, the

Commission believes that the proposed

rule change is consistent with the
52804 Federal Register / Vol. 62, No. 196 / Thursday, October 9, 1997 / Notices

44 15 U.S.C. 78s(b)(2).

45 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 30597

(April 16, 1992), 57 FR 14855.

4Securities Exchange Act Release No. 33008

(October 4, 1993), 58 FR 52518.

5 15 U.S.C. 78f.

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

provisions of the Act, and in particular

with Section 6(b)(5).

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,44 that the

proposed rule change (SR–NYSE–96–

27) be, and hereby is approved, as

amended.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.45

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–26723 Filed 10–8–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39178; File No. SR–PHLX–

97–39]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Regarding ITSFEA Supervisory

Procedures

October 1, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

August 18, 1997, 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, II, and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

PHLX, pursuant to Rule 19b–4 2 of the

Act, proposes to amend Exchange Rule

761, Supervisory Procedures Relating to

the Insider Trading and Securities Fraud

Enforcement Act of 1988 (‘‘ITSFEA’’),

and Floor Procedure Advice F–13, in

order to broaden the scope of their

applicability. The text of the proposed

rule change may be examined at the

places specified in Item IV below.

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

self-regulatory organization 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 self-regulatory organization 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

On April 16, 1992, the Exchange

received approval to implement

Exchange Rule 761 3 which imposed

supervisory procedures on its floor units

respecting ITSFEA. In 1993, the

Exchange revised the rule in order to

make minor changes for the sake of

clarity.4 The rule currently requires

PHLX floor units to have every

employee sign an attestation that he or

she has read the most current version of

the Exchange’s ‘‘Notice of Insider

Trading’’ and will ensure that the

employer firm directly receives a

duplicate account statement for all

accounts in which the employee

maintains a beneficial interest. Further,

the rule requires all floor units to make

and keep current an ‘‘ITSFEA Account

List’’ and review all accounts listed with

a view towards identifying possible

misuse of material non-public

information.

Currently, the rule only applies to

PHLX floor units. Now, however, the

PHLX has become the designated

examining authority (‘‘DEA’’) for

approximately eighteen firms over the

past few years which do not have a floor

presence. These firms are not now

subject to the rule, and because no other

self regulatory organization (‘‘SRO’’) is

their DEA, they are exempt from these

requirements entirely. In order to rectify

this situation, the Exchange is proposing

to change the phrase ‘‘PHLX floor unit’’

to ‘‘PHLX member organization’’ in the

rule. That way, the rule will apply to all

PHLX member organizations, with the

caveat that any member organization

which is required to have ITSFEA

supervisory procedures pursuant to

rules of another SRO which is its DEA,

will not also be subject to PHLX Rule

761. Thus, all PHLX member firms for

which the Exchange is the DEA will be

subject to this rule, regardless of

whether they conduct business on the

floor of the Exchange or not.

The second purpose of this rule

change is to add commentary .01, which

will provide that for the purpose of the

rule, an employee will include ‘‘every

person who is compensated directly or

indirectly by the member organization

for the solicitation or handling of

business in securities, including trading

securities for the account of the member

organization, whether such securities

are those dealt in on the Exchange or

those dealt over-the-counter.’’ Thus,

independent contractors as well as

actual ‘‘employees’’ will be subject to

the requirements of the rule. This

language is similar to the language in

Exchange Rule 604(d).

Finally, Floor Procedure Advice F–13,

which mirrors the language of Rule 761,

with the addition of a fine schedule

under the Exchange’s minor rule plan,

also will be revised in the same manner

as Rule 761.

2. Statutory Basis

The proposed rule change is

consistent with Section 6 of the Act in

general,5 and particular, with Section

6(b)(5),6 in that it is designed to promote

just and equitable principles of trade,

prevent fraudulent and manipulative

acts and practices, to foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in

securities, to remove impediments to

and perfect the mechanism of a free and

open market and a national market

system, as well as to protect investors

and the public interest by assuring that

the requirements of the ITSFEA rule are

equally applied to all broker dealers and

all persons who conduct a securities

business for such broker dealers

whether they are considered employees

or independent contractors.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The PHLX does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were either

solicited or received.

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