Document ID: SEC-2007-1443-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-10-16T04:00Z

[Federal Register: October 16, 2007 (Volume 72, Number 199)]
[Notices]               
[Page 58711-58713]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16oc07-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56626; File No. SR-Phlx-2007-60]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of a Proposed Rule Change Relating to Structured 
Equity Products

October 5, 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 14, 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, II, 
and III below, which Items have been substantially prepared by the 
Exchange. 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 Phlx proposes to update its rules regarding the listing of 
equity securities. Specifically, the Exchange proposes to modify Phlx 
Rule 802, Rule 806 (Initial Public Offerings), Rule 807 (Registration 
Under the Exchange Act), and Rule 837 (Annual Reports). The Phlx Fee 
Schedule will also be amended to add initial and continued listing fees 
for certain structured equity securities on the Exchange (``Structured 
Equity Products'').\3\ The text of the proposed rule change is 
available at the Commission's Public Reference Room, at the Exchange, 
and at http://www.Phlx.com.

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    \3\ For purposes of this proposed rule change, Structured Equity 
Products are securities listed pursuant to the categories in Phlx 
Rule 803 entitled Other Securities, Equity Linked Notes, Basket 
Linked Notes, Index Linked Exchangeable Notes and Index Linked 
Securities. See Phlx Rule 803(f), (h), (k), (m) and (n).
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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, 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 permit the Exchange 
to update certain of its listing rules and fees in order to attract the 
listing of Structured Equity Products. Currently, the vast majority of 
equity securities that trade on the Phlx are listed on other exchanges 
and traded on the Phlx pursuant to unlisted trading privileges 
(``UTP''). This allows the Exchange to compete for the trading volume 
of a security. However, the Phlx now intends to actively pursue serving 
as the listing market for certain Structured Equity Products.
    The Phlx has long had a series of rules (the ``800 Series'') that 
create standards regarding both the security to be listed and traded on 
Phlx, as well as regarding the issuer of the security. In order to 
attract the listing of the Structured Equity Products, Phlx proposes 
modifications to the 800 Series to accommodate the specific attributes 
of many structured equity securities.
    Phlx Rule 802. Phlx Rule 802 identifies factors to be evaluated by 
the Exchange when reviewing and preparing its confidential listing 
opinion as to the eligibility of an applicant's securities. Among other 
things, Phlx Rule 802 currently states that the applicant company must 
be a ``going concern.'' \4\ The proposed rule change would delete the 
``going concern'' requirement in order to remove uncertainty as to 
whether a Structured Equity Product qualifies as a ``going concern.'' 
The Exchange believes that the existing listing standards in Phlx Rule 
803(a)(2) for traditional operating companies should sufficiently 
satisfy the ``going concern'' requirement for such other equity 
products that may become listed on the Exchange.
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    \4\ ``Going concern'' refers to the ability of the applicant to 
meet its current obligations with cash or other assets that can be 
quickly converted into cash. If the applicant is not able to meet 
its current obligations, the ability of that applicant being able to 
continue to operate is in doubt. See email from John Dayton, 
Director and Counsel, Phlx, to Ronesha Butler, Special Counsel, 
Division of Market Regulation, Commission, dated September 14, 2007.
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    Phlx Rule 806. Phlx Rule 806 permits new issues of securities to be 
listed on the Exchange on the day that the registration statement is 
effective with the SEC, or upon effectiveness of the registration 
statement or equivalent document if registration with the SEC is not 
required. However, the issuer must meet certain initial listing 
criteria.
    The proposed rule change would classify the two paragraphs of Phlx 
Rule 806 as (a) and (b). In addition, the proposed rule change would 
provide an exclusion for Structured Equity Products from Phlx Rule 
806(b), which includes certain requirements relating to the 
distribution of new issues. This amendment would reflect the fact that 
distributors of Structured Equity Products generally make informal 
arrangements with dealers prior to going effective to provide assurance 
that sufficient creation units will be purchased from the issuer to 
meet the minimum listing requirements.
    Phlx Rule 807. Phlx Rule 807 requires that securities approved for 
listing by the Exchange must be registered under

[[Page 58712]]

Section 12(b) of the Act.\5\ In addition, Phlx Rule 807 provides that 
securities registered under 12(g) of the Act,\6\ or that have recently 
been the subject of a public offering registered under the Securities 
Act of 1933, may be registered for exchange trading under Section 12(b) 
of the Act through the filing of SEC Form 8-A. The proposed rule change 
would update Phlx Rule 807 to reflect the fact that registration of 
securities on Form 8-A automatically becomes effective within 30 days 
of filing. The Exchange states that the proposed amendments to Phlx 
Rule 807 are substantially similar to a corresponding provision in 
Section 210 of the American Stock Exchange (``Amex'') Company Guide.
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    \5\ 15 U.S.C. 78l(b).
    \6\ 15 U.S.C. 78l(g).
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    Phlx Rule 837. Phlx Rule 837 requires listed companies to provide 
their shareholders with annual reports containing audited financial 
statements of the company and its subsidiaries at least 10 days prior 
to the annual meeting of shareholders and not later than four months 
after the close of the company's last preceding fiscal year. It further 
states that three copies of the report must be filed with the Exchange 
at the time it is distributed to shareholders. The proposed rule change 
would amend Phlx Rule 837 to provide that any annual report that is 
required to be sent to the Exchange will be deemed sent if it is filed 
on EDGAR. The Exchange states that this amendment would make Phlx Rule 
837 consistent with the corresponding provision in Section 1101 of the 
Amex Company Guide.
    Fees. For Structured Equity Products, the Exchange will charge an 
original listing fee of $5,000, then charge a $500 per month continuing 
listing fee for each month thereafter. For example, when an issuer 
lists a Structured Equity Products, the Exchange will bill the issuer 
$5,000 in the month of original listing. Beginning in the subsequent 
month, the Exchange will invoice the issuer $500 per month until such 
time as the product is delisted. Therefore, the maximum listing fee an 
issuer of a Structured Equity Products could pay in any one calendar 
year would be $10,500.\7\ The Exchange believes that its proposed 
original listing fee and proposed continuing listing fee are reasonable 
in light of Amex's original listing fee \8\ and annual fee \9\ for 
Structured Equity Products.
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    \7\ The Exchange currently lists two Structured Equity Products, 
Pharmaceutical Basket Opportunity Exchangeable Securities and 
Biotechnology Basket Opportunity Exchangeable Securities. The issuer 
for these securities, Morgan Stanley, was invoiced the current 
annual continuing listing fee of $1,250 for the first product and 
$250 for the second product in January 2007. The Exchange believes 
that, for these two products, the proposed $500 per month continuing 
listing fee should begin in January 2008. The Exchange believes that 
it is reasonable and appropriate to begin charging the proposed 
continuing listing fee to Morgan Stanley for these two products in 
January 2008 (in contrast to new products that would begin to pay 
the proposed fee in the month subsequent to initial listing) because 
Morgan Stanley was invoiced the current annual continuing listing 
fee for 2007 and could have reasonably expected that this current 
fee would cover their obligation for these two products through the 
end of 2007.
    \8\ Amex's original listing fee for Structured Equity Products 
(Securities Listed under Section 107 (Other Products)) begins at 
$5,000 and may be as much as $45,000 based on the number of shares 
to be listed. See Section 140 of the Amex Company Guide.
    \9\ Amex's annual fee for Structured Equity Products (Securities 
Listed under Section 107 (Other Products)) begins at $15,000 and may 
be as much as $30,000 based on the number of shares outstanding. See 
Section 141 of the Amex Company Guide.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ 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 modifying Exchange rules relating to the listing of 
Structured Equity Products. In addition, the Exchange believes that its 
proposal furthers the objectives of Section 6(b)(4) of the Act \12\ in 
particular, in that the proposed original listing fee and proposed 
continuing listing fee are an equitable allocation of reasonable fees 
and other charges among Exchange members and issuers and other persons 
using its facilities.\13\
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ See e-mail from John Dayton, Director and Counsel, Phlx, to 
Christopher W. Chow, Special Counsel, Division of Market Regulation, 
Commission, dated October 5, 2007.
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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 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. 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-2007-60 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-2007-60. 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, 100 F Street, NE., Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m.

[[Page 58713]]

Copies of such 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-2007-60 and should be submitted on 
or before November 6, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Secretary.
 [FR Doc. E7-20358 Filed 10-15-07; 8:45 am]

BILLING CODE 8011-01-P