Document ID: SEC-2007-1267-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-09-12T04:00Z

[Federal Register: September 12, 2007 (Volume 72, Number 176)]
[Notices]               
[Page 52193-52195]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12se07-134]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56369; File No. SR-Phlx-2007-56]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change, 
as Modified by Amendment No. 1 Thereto, Relating to the Definition of 
Common Stock

September 6, 2007.
    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 August 2, 2007, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
On August 30, 2007, the Exchange filed Amendment No. 1 to the proposed 
rule change. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt Phlx Rule 800 providing for a 
definition of the term ``common stock,'' as used in Phlx Rules 800-899. 
In those rules, the term ``common stock'' will include any security of 
an issuer designated as common stock and any security of an issuer, 
however designated, which by statute or by its terms, is a common stock 
(e.g., a security which entitles the holders thereof to vote generally 
on matters submitted to the issuer's security holders for a vote). This 
definition is substantially similar to NYSEArca Equities Rule 
5.1(b)(12). The text of the proposed rule change is available on the 
Exchange's Web site at http://www.Phlx.com/exchange/phlx_rule_fil.html
, at the Exchange, and at the Commission's Public Reference 

Room.

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 Exchange included statements 
concerning the purpose of, and basis for, 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 adopt Phlx Rule 800 
providing for a definition of the term common stock as used in Phlx 
Rules 800-899.\3\ The term common stock is typically used to refer to a 
security issued by corporations in the United States, whose holders 
have a residual right to the corporation. However, at times, another 
name may be given to this security or this type of security may not be 
issued by a corporation.\4\ Phlx believes that the proposed definition 
reflects the fact that the term common stock is not always given to a 
security that has the characteristics of a common stock or that the 
issuer of this type of security is not always a corporation.
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    \3\ The proposed definition in Phlx Rule 800(a) is identical to 
the definition of common stock in Phlx Rule 812(d)(2), which, by its 
terms, is limited to Phlx Rule 812. The definition in proposed Phlx 
Rule 800(a) would be applicable to Phlx Rules 800-899.
    \4\ For example, the Blackstone Group, L.P., a limited 
partnership, recently listed their common units representing limited 
partner interests on the New York Stock Exchange (``NYSE''). 
However, the NYSE Web site page on Blackstone Group, L.P., http://www.nyse.com/about/listed/bx.html
, describes the security as common 

stock.
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    By adopting this new, expanded definition of common stock, Phlx 
would be permitted to list and trade, pursuant to unlisted trading 
privileges (``UTP''), securities of issuers that have the 
characteristics of common stock, even though the security is not 
designated as common stock. Phlx is permitted to trade certain 
securities that are not listed on Phlx pursuant to provisions of the 
Act, the rules thereunder, and Phlx Rules. Section 12(f)(1)(A)(i) of 
the Act states that ``any national securities exchange, in accordance 
with the requirements of this subsection and the rules hereunder, may 
extend unlisted trading privileges to any security that is listed and 
registered on a national

[[Page 52194]]

securities exchange * * * .'' \5\ Rule 12f-5 under the Act states that 
``[a] national securities exchange shall not extend unlisted trading 
privileges to any security unless the national securities exchange has 
in effect a rule or rules providing for transactions in the class or 
type of security to which the exchange extends unlisted trading 
privileges.'' \6\ Generally, Phlx Rule 801 permits the Exchange to 
trade securities pursuant to UTP.\7\ In addition, Phlx Rules 160-189 
describe the operation of Phlx's electronic equity trading system, XLE, 
for transactions in, among other things, common stock and the 
responsibilities of XLE Participants \8\ using XLE.
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    \5\ 15 U.S.C. 781(f)(1)(A)(i).
    \6\ 17 CFR 240.12f-5.
    \7\ Phlx Rule 801 states ``[o]nly such securities as shall have 
been approved by the Exchange for listing or admission pursuant to 
unlisted trading privileges shall be dealt in on the Exchange.''
    \8\ XLE Participants are Phlx members, Phlx member 
organizations, their Sponsored Participants (non-members who are 
sponsored by Phlx member organizations) and individuals authorized 
by Phlx member organizations or Sponsored Participants to enter 
orders on XLE. See Phlx Rule 1(nn).
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    Phlx has listing standards for common stock.\9\ The listing 
standards set forth minimum quantitative requirements for both the 
issuer \10\ and the security,\11\ and standards for the security's 
voting rights.\12\ However, Phlx's current listing standards for common 
stock would not apply to certain securities covered by the expanded 
definition of common stock proposed herein. With the adoption of the 
proposed expanded definition of common stock, the current listing 
standards for common stock in Rule 803(a) would apply to such 
securities and accordingly, as described above, such securities would 
be eligible for trading pursuant to UTP. Further, Phlx would apply the 
same quantitative criteria in Phlx Rule 803(a) to an issuer, and its 
security designated as common stock, applying to list under this 
expanded definition of common stock as it would to a corporation 
listing its common stock.
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    \9\ See Phlx Rule 803(a).
    \10\ Phlx Rule 803(a)(1)-(2) provides:
    ``The listing criteria for Tier I Issues are as follows:
    (a) In the case of Common Stock:
    (1) Net Tangible Assets--Total assets (including the value of 
patents, copyrights and trademarks but excluding the value of 
goodwill) less total liabilities of at least $4,000,000.
    (2) Earnings--Pretax income of $750,000 and net income of at 
least $400,000 in its last fiscal year.''
    \11\ Phlx Rule 803(a)(3)-(4) provides:
    ``The listing criteria for Tier I Issues are as follows:
    (a) In the case of Common Stock:
    * * * * *
    (3) Public Distribution--at least 500,000 publicly held shares 
and at least 800 public shareholders if the issuer has between 
500,000 and 1 million shares publicly held, or at least 400 public 
shareholders if the issuer has either (i) over 1 million shares 
publicly held or (ii) over 500,000 shares publicly held and average 
daily trading volume in excess of 2,000 shares per day for a six 
month period preceding the date of application.
    (4) Stock Price/Market Value of Shares Publicly Held--$5 per 
share on each of the five business days prior to the application 
date and $3,000,000 aggregate market value.''
    \12\ See Phlx Rules 803(a)(5) and 812.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ 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 an additional venue for the listing and trading, 
pursuant to UTP, of common stock to which the proposed definition would 
apply.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \15\ and 
Rule 19b-4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied the five-day pre-filing requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \17\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \18\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. Phlx has 
requested that the Commission waive the 30-day operative delay. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposed definition of common stock is identical to 
NYSEArca Equities Rule 5.1(b)(12) and raises no new regulatory issues. 
Moreover, waiving the operative delay will allow the Exchange, pursuant 
to its current listing standards and UTP, to immediately list and trade 
securities that now fall within this new definition of common stock, 
providing an additional venue for such securities. For these reasons, 
the Commission designates that the proposed rule change become 
operative immediately.\19\
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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.\20\
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    \20\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, the 
Commission considers the period to commence on August 30, 2007, the 
date on which the Exchange filed Amendment No. 1.
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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-2007-56 on the subject line.

[[Page 52195]]

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-2007-56. 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/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, 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 
the Exchange. 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-2007-56 and should be submitted on or before October 3, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-17961 Filed 9-11-07; 8:45 am]

BILLING CODE 8010-01-P