[Federal Register Volume 65, Number 209 (Friday, October 27, 2000)]
[Notices]
[Pages 64469-64471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27648]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43467; File No. SR-Phlx-00-32]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Amending Rule 748, 
Supervision

October 20, 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 July 31, 2000, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with 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. On 
October 11, 2000, the Exchange submitted Amendment No. 1 to the 
proposed rule

[[Page 64470]]

change. \3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Jurij Trypupenko, Director of Litigation and 
Operations, Phlx, to Nancy Sanow, Assistant Director, Division of 
Market Regulation (``Division''), Commission (October 11, 2000). 
Amendment No. 1 corrected structural errors that appeared in the 
proposed rule language.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 748, Supervision, in several 
respects. \4\ First, the proposed amendment to Rule 748 would expand 
the definition of who must be supervised to include employees and 
associated persons of members, member organizations, participants, or 
participant organizations. The proposed amendment to Rule 748 would 
also require that all officers, locations, departments, and business 
activities of members, member organizations, participants, and 
participant organizations (``members and related organizations'') be 
supervised.
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    \4\ Exchange Rule 748, which is generally based on NYSE Rule 
342, was originally filed in 1993 and amended once in 1994. See 
Securities Exchange Act Release Nos. 33303 (Dec. 8, 1993), 58 FR 
65609 (Dec. 15, 1993) and 34842 (Oct. 14, 1994), 59 FR 53002 (Oct. 
20, 1994).
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    Second, the proposed amendment to Rule 748 would add an additional 
requirement for periodic compliance reviews and office inspections. 
Members and related organizations for which the Exchange is the 
Designated Examining Authority (``DEA'') would have to conduct 
compliance meetings with their personnel at least on an annual basis. 
In addition, members and related organizations for which the Exchange 
is the DEA would have to conduct office inspections according to an 
inspection cycle established in their written supervisory procedures.
    Third, the proposed amendment to Rule 748 would require that 
members and related organizations have written supervisory procedures 
that set forth the specific supervisory system and other essential 
information regarding supervisory personnel.
    Fourth, the proposed amendment to Rule 748 would contain standards 
for supervision and for written supervisory procedures. Written 
supervisory procedures and the system for applying such procedures 
would have to be reasonably designed to prevent and detect, insofar as 
practicable, violations of the applicable securities laws and 
regulations, including the by-laws and rules of the Exchange. A similar 
standard for supervision would be applicable to those entrusted with 
the duty to supervise others. \5\
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    \5\ The standard for supervision and standard for written 
supervisory procedures found in the proposed rule change are based 
generally on Section 15(b)(4)(E)(i) of the Act. 15 U.S.C. 
78o(b)(4)(E)(i).
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    The text of the proposed rule change is available at the Phlx or 
the Commission.

II. Self-Regulatory Organization's Statements of the Purpose of, 
and the Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 purpose of the proposed rule change is to enhance Rule 748 and 
thereby provide the Exchange with better tools to monitor and enforce 
proper supervision. The Exchange believes that the proposed rule change 
should significantly strengthen the ability of the Exchange to carry 
out its oversight responsibilities as a self-regulatory organization, 
especially over branch offices of member firms conducting business away 
from the floor of the Exchange.
    In addition, the Exchange believes that enhancements to Rule 748, 
such as the requirements to conduct periodic compliance meetings and 
office inspections and to keep records of the same, should help the 
Exchange carry out its compliance and surveillance functions. The 
proposed supervisory standards should also help both the Exchange and 
its members carry out their respective duties.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \6\ in general, and in particular, with 6(b)(5) 
of the Act,\7\ in that it is designed to promote just and equitable 
principles of trade, prevent fraudulent and manipulative acts and 
practices, and protect investors and the public interest by augmenting 
the supervisory procedures found in Exchange Rule 748.\8\
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ The Exchange notes that, although options activity and 
personnel (including foreign currency options) are subject to Rule 
748, additional supervisory requirements apply to the trading of 
options. See Phlx Rule 1024 (regarding Conduct of Accounts For 
Options Trading); see also Phlx Rule 1025 (regarding Supervision of 
Accounts).
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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.

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

    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 in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at

[[Page 64471]]

the principal office of the Phlx. All submissions should refer to File 
No. SR-Phlx-00-32 and should be submitted by November 17, 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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-27648 Filed 10-26-00; 8:45 am]
BILLING CODE 8010-01-M