Document ID: SEC-2008-0113-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2008-01-23T05:00Z

[Federal Register: January 23, 2008 (Volume 73, Number 15)]
[Notices]               
[Page 4038-4040]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23ja08-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57155; File No. SR-Phlx-2008-02]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Amend By-Law Article XIV, 
Section 14-5 and Phlx Rule 50

January 15, 2008.
    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 January 8, 2008, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by Phlx. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to: (i) Modify the timeframes within which 
monies owed to the Exchange would become reportable to the Board of 
Governors (``Board'') for further action; (ii) eliminate references to 
the monetary threshold of $10,000; (iii) conform By-Law language to 
indicate that Members, Member Organizations, participants, and 
participant organizations would be subject to being terminated for 
failure to pay; and (iv) make other clarifying amendments. The text of 
the proposed rule change is available at Phlx, the Commission's Public 
Reference Room, and http://www.phlx.com.

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

    In its filing with the Commission, 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. Phlx 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 amend the language in 
Phlx By-Law Article XIV, section 14-5 and Exchange Rule 50 to bolster 
the Exchange's procedures regarding collection of monies owed to the 
Exchange.
    The proposed rule change modifies the timeframes within which 
monies owed to the Exchange would become reportable to the Board, and 
by which Members, Member Organizations, participants, and participant 
organizations would be subject to a suspension or termination. The 
proposed rule change also defines the types of fees subject to each 
timeframe. Specifically, the previous time limitations of 50 days from 
the original invoice for certain monies and 20 days for other 
categories of monies would be removed from By-Law Article XIV, Section 
14-5 and the time limitations in Exchange Rule 50 would be amended. The 
50 day timeframe applied to dues, foreign currency options users' fees, 
fees, other charges and other monies due and owed to the Exchange. The 
20 day timeframe applied to fines and other monetary sanctions.
    Under this proposal, a Member, or Member Organization, participant, 
or participant organization or employee thereof shall be referred to 
the Board for failure to: (i) Pay fines and/or other monetary sanctions 
within 30 days after notice thereof; or (ii) pay dues, foreign currency 
options users' fees, fees, other charges, and/or other monies due, 
including late charges, within 90 days from the date of the original 
invoice. These timeframes would be amended in Rule 50 and deleted from 
By-Law Article XIV, section 14-5, rather than appear in both Rule 50 
and By-Law Article XIV, section 14-5. The purpose of amending these 
timeframes is to conform to the Exchange's current accounting and 
billing cycles and to allow a reasonable time for payment of invoices 
prior to the necessity to report a past due amount to the Board for 
further action.
    In addition, this proposed rule change would eliminate the 
references to the monetary threshold of $10,000 from both By-Law 
Article XIV, section 14-5 and Rule 50, so that all past due amounts are 
reportable to the Board within the specified proposed new timeframes. 
The requirement to report to the Finance Committee is proposed to be 
eliminated from Rule 50. Both of these changes are intended to direct 
collection matters to the Board directly and without regard to the 
amount, in order to enhance the immediacy of the Exchange's collection 
efforts.
    The word ``terminate'' is proposed to be added to By-Law Article 
XIV, section 14-5 to conform with the termination language in By-Law 
Article XIV, section 14-1. By-Law Article XIV, section 14-1 currently 
provides that the Board shall have the power to establish and assess 
penalties and late charges for failure to pay any fees, dues, or 
charges owed to the Exchange, including, without limitation, 
termination of a permit or participation (which permit or

[[Page 4039]]

participation may be reissued) and forfeiture of all rights as a 
Member, Member Organization or participant organization, permit holder 
or (with respect to a foreign currency options participation) an owner, 
lessor or lessee. The proposed rule change to By-Law Article XIV, 
section 14-5 clarifies that the Board has the power to terminate, not 
just suspend, any permit or rights and privileges of a foreign currency 
options participation of any Member, foreign currency options 
participant,\3\ Member Organization or participant organization or 
employee thereof. Currently, By-Law Article XIV, section 14-5 only 
covers suspension. The Exchange believes it is helpful to add 
``terminate'' to By-Law Article XIV, section 14-5 so that the 
consequences of a failure to pay appear together, even though By-Law 
Article XIV, section 14-1 already gives the Board the power to 
terminate. In other words, the Board's power to terminate is merely 
being repeated in another by-law and is not being created by this 
proposed rule change.
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    \3\ By-Law Article I, Section 1-1(j) defines a Foreign Currency 
Options Participation as ``the foreign currency options 
participations issued from time to time by the Exchange.''
    By-Law Article I, Section 1-1(k) defines a Foreign Currency 
Options Participant or Participant as ``a Member of the Exchange who 
has purchased a foreign currency options participation and a non-
member who has been admitted to the Exchange as a foreign currency 
options participant by the Admissions Committee.''
    By-Law Article I, Section 1-1(l) defines a Foreign Currency 
Options Participant Organization as:
    ``* * * corporation, partnership (general or limited), limited 
liability partnership, limited liability company, business trust or 
similar organization, transacting business as a broker or a dealer 
in securities and which has the status of a foreign currency options 
participant organization by virtue of (i) permission given to it by 
the Admissions Committee pursuant to the provisions of Section 10-6 
of these By-Laws or (ii) the transitional rules adopted by the 
Exchange pursuant to Section 12-12 of these By-Laws. References 
herein to officer or partner, when used in the context of a foreign 
currency options participant organization, shall include any person 
holding a similar position in any organization other than a 
corporation or partnership that has the status of a foreign currency 
options participant organization.''
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    A Member, Member Organization or employee thereof is required to 
maintain a permit in order to qualify as a member of the Exchange. That 
permit has certain rights and privileges \4\ that allow the Member or 
Member Organization, and its employees, to access the trading floor and 
trade, among other things. In order to trade foreign currency options 
at the Exchange, either a permit or a foreign currency participation is 
required.\5\
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    \4\ See Exchange Rule 908 (Rights and Privileges of A-1 
Permits.)
    \5\ See Exchange By-Law Article XXVII, Section 27-1 (Foreign 
Currency Options Participants) and Exchange By-Law Article XIII, 
Section 13-1 (Qualification.) See also Securities Exchange Act 
Release No. 49098 (January 16, 2004), 69 FR 3974 (January 27, 2004) 
(SR-Phlx-2003-73) at n. 8 which states, ``The Exchange, however, 
plans to retain its existing Foreign Currency Option (``FCO'') 
participations (as defined in section 1-1(i) of the amended By-
laws). After the demutualization, the ability to trade FCOs on the 
Phlx will also be available through a Series A-1 Permit, as set 
forth in proposed Rule 908(b).''
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    For non-payment of monies owed, the Board may, using its powers in 
By-Law Article XIV, Sections 14-1 and 14-5, determine to, in the case 
of a permit: (1) Suspend trading privileges that flow from the permit 
for a period of time, until payment is made; or (2) terminate the 
permit; or, in the case of a foreign currency options participation, 
(3) suspend the rights and privileges for a period of time; (4) 
terminate the participation; or (5) if eligible, pursuant to the last 
paragraph of By-Law Article XIV, section 14-5, dispose of the 
participation.
    In the event that a permit is terminated by the Board, the affected 
party would be required to reapply for admission with the Exchange for 
a new permit once payment in full was made of any outstanding balance 
owed to the Exchange. In the event of disposal,\6\ as referenced in the 
last paragraph of By-Law Article XIV, section 14-5, the Exchange would 
purchase the participation at the current bid \7\ and allocate proceeds 
to the holder less the amount that was owed the Exchange.\8\ This 
provision is only being changed to delete the $10,000 threshold, such 
that any amounts owed and not paid after one year may subject a foreign 
currency options participation to disposal.
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    \6\ See By-Law Article XXVII, Section 27-3 (Privileges and 
Obligations of Foreign Currency Options Participants.)
    \7\ The current bid for a Foreign Currency Options Participation 
is posted weekly in the Exchange bulletin.
    \8\ See By-Law Article XV, Section 15-3 (Disposition of Proceeds 
of Sale of Foreign Currency Options Participation) and By-Law 
Article XV, Section 15-11 (Foreign Currency Options Participations 
Purchased by the Exchange.)
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\9\ in general, and furthers the objectives of section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest by providing notice and clarity of its reporting procedures 
for non-payment to the Exchange.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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 Registeror 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 Phlx 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-Phlx-2008-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2008-02. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/

[[Page 4040]]

rules/sro.shtml). 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of Phlx. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2008-02 and should be 
submitted on or before February 13, 2008.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-1059 Filed 1-22-08; 8:45 am]

BILLING CODE 8011-01-P