71192 Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Notices

41 15 U.S.C. 78f(b).

42 15 U.S.C. 78f(b)(4).

43Written comments were received in connection

with the initial proposed rule change relating to the

credit, which is currently in effect. These comments

are described in the previous Commission release

noticing the filing and immediate effectiveness of

the initial proposal. See Securities Exchange Act

Release No. 42791 (May 16, 2000) 65 FR 33606

(May 24, 2000) (SR–Phlx–00–44).

44 15 U.S.C. 78s(b)(3)(A)(ii).

45 17 CFR 240.19b–4(f)(2).

46 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. 43415

(October 4, 2000), 65 FR 61014 (File No. SR–PHLX–

00–52).

aligned to allow the lessee member the

benefit of the credit.

(D) Members Who Lease From Owners

or Their Affiliates Who Provide Order

Flow to the Exchange Member

Similar to member-owners and other

eligible members discussed above,

members who lease from owners or

their affiliates who provide order flow

to the Exchange through the member or

member organization have a direct

contractual relationship with that

owner. For example, a floor broker who

executes orders entered by the owner

from whom the member leases his or

her seat has a fiduciary relationship

with that owner. The member derives

income, by way of commissions, from

the order flow provider and the order

flow provider, in turn, provides revenue

to the Exchange mainly by way of

transaction fees (and indirectly via tape

revenues). Giving a credit to members in

this situation should encourage the

member to fully maximize the business

relationship between the floor broker

and order flow provider by encouraging

the member to get more order flow,

which in turn equates to an increase in

fees paid by the floor broker to the

Exchange. The Exchange believes that

by extending the credit to this category

of members who are closely associated

with the owner, it is encouraging

behavior that is beneficial to the longterm interests of the Exchange, e.g.,

providing more order flow.

(E) Members who Lease From a Clearing

Firm or a Related Entity of the Clearing

Firm That Provides Clearing Services to

the Leasing Member

Members who lease from a clearing

firm or related entity of the clearing firm

that provides clearing services to the

leasing member should also be eligible

to receive the credit. Members have a

close connection to their clearing firms,

or a related entity of the clearing firms,

in that the clearing firms provide

important and essential services by

contractual agreement with such

members; for instance, they guarantee

members’ trades. In addition, clearing

firms lend money and extend credit;

they also manage risk by way of tracking

positions and other monitoring

functions. Moreover, the clearing firm

offers various ancillary services to the

members, including stock executions

services, office space and other business

amenities. Therefore, given this close

connection between the members and

clearing firms or their affiliates, the

Exchange believes that the credit is

appropriate and should further their

joint interest in the well-being of the

Exchange.

2. Statutory Basis

For these reasons, the Exchange

believes that the proposed rule change

is consistent with Section 6(b) of the

Act,41 in general, and with Section

6(b)(4) 42 in that it provides for the

equitable allocation of reasonable dues,

fees and other charges.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed rule change imposes no

inappropriate 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 neither

solicited nor received regarding an

extension of the monthly credit.43

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The Exchange has designated the

proposed rule change as a fee change

pursuant to Section 19(b)(3)(A)(ii) of the

Act 44 and Rule 19b–4(f)(2) thereunder 45

because it establishes a due, fee or other

charge. Accordingly, the proposal will

take effect upon filing with the

Commission. At any time within 60

days of the filing of the proposed rule

change, the Commission may summarily

abrogate such 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 copying in

the Commission’s Public Reference

Room, 450 Fifth Street NW.,

Washington DC 20549. 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–

100, and should be submitted by

December 20, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.46

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30380 Filed 11–29–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43584; File No. SR–PHLX–

00–52]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

Relating to Review of Decisions of the

Exchange’s Business Conduct

Committee

November 17, 2000.

On August 18, 2000, the Philadelphia

Stock Exchange Inc. (‘‘PHLX’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), a proposed rule change

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

Securities Exchange Act of 1934

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

The Exchange proposed amendments to

its rules concerning appeals from

decisions in disciplinary proceedings.

The proposed rule change was

published for comment in the Federal

Register on October 13, 2000.3 The

Commission received no comments on

the proposal. This order approves the

proposed rule change.

I. Description of the Proposal

The Exchange proposes to amend the

text of Phlx Rule 960.9 to incorporate

specific procedures for appeals from

decisions rendered in disciplinary

Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Notices 71193

4Review of appeals initiated by the Exchange’s

Enforcement staff will be conducted in accordance

with the procedure set forth in paragraph (b) of the

proposed rule. Telephone conversation between

Charles Falgie, Director of Enforcement, Phlx, and

Anitra Cassas, Special Counsel, Division of Market

Regulation, Commission, on October 3, 2000.

5 15 U.S.C. 78f(b)(6) and (b)(7).

6 17 CFR 200.30–3(a)(12).

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

2 17 U.S.C. 240.19b–4.

proceedings by the Exchange’s Business

Conduct Committee pursuant to Phlx

Rules 960.6(c) and 960.8. Currently,

decisions made in disciplinary

proceedings are appealed in accordance

with Phlx By-Law Article XI. The

procedures set forth in the Phlx’s ByLaws, however, were not strictly

formulated for disciplinary matters, and,

as a result, are often silent on unique

issues that apply to disciplinary matters.

To ensure that appeals in disciplinary

proceedings are accomplished in a

consistent and orderly manner, the

Exchange expanded the procedures in

Phlx Rule 960.9 into four categories: (a)

Petition by Respondent; (b) Conduct of

Review; (c) Review on Motion by Board

of Governors; and (d) Petition by

Enforcement Staff.

The proposed amendment to

paragraph (a) of Phlx Rule 960.9 is

intended to provide time guidelines for

requesting an appeal. The Respondent’s

petition for appeal must be in writing

and filed with the Secretary of the

Exchange within 10 days after service of

notice and a copy of the decision of the

Business Conduct Committee. The

petition must specify the findings and

conclusions that are the subject of the

petition, along with the reasons the

Respondent is petitioning for review.

Exchange Enforcement Staff will have

15 days to file a written response. The

Respondent may then file a reply within

15 days after service of the Enforcement

Staff’s response.

Paragraph (b) of the proposed rule,

‘‘Conduct of Review,’’ provides that the

review shall be conducted by the

Exchange’s Board of Governors

(‘‘Board’’), or an Advisory Committee

made up of three Governors, with at

least one being a non-industry Governor

appointed by the Chairman of the

Board. No Governor who was a member

of the hearing panel below may

participate in the hearing on review.

Unless the Board of Governors or

Advisory Committee hearing the review

allows oral argument, the review will be

based solely on the record below. If an

Advisory Committee hears the review, it

must submit a written report to the

Board.

Sub-paragraphs (b)(ii) and (iii) of the

proposed rule set forth the standard of

review for the Board or Advisory

Committee. The decision of the

Business Conduct Committee can be

affirmed, reversed or modified, in whole

or in part. A modification may include

an increase or decrease of the sanction.

However, neither the Board nor the

Advisory Committee may reverse or

modify the findings, conclusions, and

decision of the Business Conduct

Committee if the factual conclusions in

the decision are supported by

substantial evidence, and such decision

is not arbitrary, capricious or an abuse

of discretion.

In paragraph (c), the proposed rule

change includes procedures for a review

by the Board of Governors on its own

initiative. The review would follow the

procedure set forth in paragraph (b) of

the proposed rule. Together, these

provisions are intended to establish a

standard and process of review.

Finally, paragraph (d) of the proposed

rule sets forth the procedures by which

the Exchange’s Enforcement staff may

petition the Board for permission to

appeal. The petition must specify the

findings and conclusions that are the

subject of the petition, along with the

reasons the staff is petitioning for

review. If the Board grants permission,

the Exchange’s Enforcement staff must

serve a copy of the petition on the

Respondent within 5 days. The

respondent then has 15 days to file a

written response with the Board, and

the staff would have 15 days to file a

reply.4

II. 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 and, in particular, with the

requirements of Sections 6(b)(6) and

6(b)(7).5 Section 6(b)(6) requires that

members and persons associated with

members be appropriately disciplined

for violation of any provision of the Act,

the rules and regulations thereunder, or

the rules of the Exchange. Section

6(b)(7) of the Act requires, among other

things, that the rules of the Exchange

provide a fair procedure for the

disciplining of members and persons

associated with the members.

Currently, the Phlx does not have

detailed procedures for appeals from

decisions in summary and regular

disciplinary proceedings. The

Commission believes that the proposed

procedures in Phlx Rule 960.9 could

provide for a more appropriate and fair

disciplinary procedure. For example,

paragraphs (b) and (c) of revised Rule

960.9 set forth a standard of review the

Board of Governors or the Advisory

Committee must follow in deciding

whether to affirm, reverse or modify the

decision of the Business Conduct

Committee. The Commission believes

that explicit standards will help ensure

that decisions in disciplinary

proceedings are not rendered arbitrarily.

The Commission also believes that the

clear time guidelines set forth in

paragraphs (a), (c), and (d) enhance the

fairness of the disciplinary procedure.

Currently, Phlx Rule 960.9 only dictates

the time a respondent has to file an

appeal. Under the proposal, the

expanded procedures in Rule 960.0

layout the timetable for responses and

replies to be filed. Thus, respondents

and the Exchange’s Enforcement staff

will not be subjected to unnecessary

delays. The Commission believes this is

a more fair procedure because it brings

a measure of finality to disciplinary

proceedings.

III. Conclusion

It is therefore ordered, pursuant to

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

proposed rule change (SR–PHLX–00–

52) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30382 Filed 11–28–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43585; File No. SR–Phlx–

00–98]

Self-Regulatory Organizations; Notice

of Filing of Proposed By-Law Change

by the Philadelphia Stock Exchange,

Inc., Relating to Allocation, Evaluation

and Securities Committee

November 17, 2000.

Pursuant to Section 10(b)(1) of the

Securities Exchange Act of 1934

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

notice is hereby given that on November

7, 2000, the Philadelphia Stock

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

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed by-law 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 by-law change from interested

persons.