[Federal Register Volume 65, Number 1 (Monday, January 3, 2000)]
[Notices]
[Pages 153-154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-34016]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42272; File No. SR-Phlx-99-42]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Approving Proposed Rule Change on an Accelerated Basis Relating
to Exchange Rule 98, Emergency Committee
December 23, 1999.
On October 13, 1999 the Philadelphia Stock Exchange. (``PHLX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change relating to Exchange Rule 98,
Emergency Committee. The proposed rule change was published for comment
in the Federal Register on November 29, 1999.\3\ The Commission
received no comments on the proposal. On December 22, 1999 the Exchange
submitted to the Commission Amendment No. 2 to the proposed rule
change, requesting that the proposed rule be approved for a 120 day
pilot to expire on April 21, 2000.\4\ This order approves the proposal,
as amended, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 34-42156 (November 19,
1999), 64 FR 66684.
\4\ See letter from Richard S. Rudolph, Counsel, Exchange, to
Rebekah Liu, Special Counsel, Division of Market Regulation
(``Division''), Commission, dated December 22, 1999. Because
Amendment No. 2 only requests that the proposed rule be approved for
a 120-day pilot, the Amendment is non-substantive in nature.
Therefore, the Commission will not solicit comments on Amendment No.
2.
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to amend Exchange Rule 98, Emergency
Committee (``Emergency Committee'') to update certain of its
provisions. First, the composition of the Emergency Committee is to be
updated to correspond with previous revisions to the Exchange's
governance structure. In 1997, various amendments to the Exchange's
Certificate of Incorporation and By-Laws dealing with the governance
structure of the Exchange were approved by the Commission.\5\ Among
other things, a provision was added authorizing the Board of Governors
to appoint a Chairman of the Board who would be the full-time, paid
Chief Executive Officer of the Exchange, and the President position was
eliminated.\6\ The proposed rule change, therefore, would replace the
``Chairman of the Exchange'' with the current ``Chairman of the Board''
designation; delete the word ``President'' from the rule as the
Exchange no longer has a ``President''; and include the Exchange's On-
Floor Vice Chairman \7\ as a member of the Emergency Committee.\8\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 38960 (August 22,
1997), 62 FR 45904 (August 29, 1997).
\6\ Id. Other corresponding amendments to the By-Laws were made
in connection with the 1997 changes to the Exchange's governance
structure. For example, references to ``President'' were changed to
``Chief Executive Officer'' or ``Chairman of the Board.'' See PHLX
By-law Article IV, Section 4-1 and PHLX By-Law Article V, Section 5-
1.
\7\ See PHLX By-Law, Article IV, Section 4-2.
\8\ Thus, under the proposed rule, the Emergency Committee would
include five individuals: the Chairman of the Board of Governors;
the On-Floor Vice Chairman of the Board of Governors; and the
Chairmen of the Floor Procedure Committee, the Options Committee,
and the Foreign Currency Options Committee .
---------------------------------------------------------------------------
Second, the proposed rule change deletes a provision authorizing
the Emergency Committee to take action regarding CENTRAMART, an equity
order entry system which is no longer used on the Exchange's equity
trading floor.
Finally, the Exchange is proposing to clarify that the Emergency
Committee is authorized to take action if any emergency condition is
created by the Year 2000 date change.
[[Page 154]]
III. Discussion
The Commission finds that the proposed rule change is consistent
with Section 6 of the Act \9\ and the rules and regulations thereunder
applicable to a national securities exchange. In particular, the
Commission finds the proposed rule change is consistent with the
requirements of Section 6(b)(5) of the Act \10\ which requires, among
other things, that the rules of an exchange be 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.\11\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
---------------------------------------------------------------------------
The proposed rule change is consistent with the requirements of the
Act because by conforming the composition of the Emergency Committee to
structural amendments that were made to the Exchange's governance
structure, the proposed rule will help to ensure that the Emergency
Committee can operate in times of emergency, which will foster investor
and public interest, and promote just and equitable principles of
trade.
The proposed rule is making one new change to the structure of the
Emergency Committee by replacing the President, which the Exchange no
longer has, with the On-Floor Vice Chairman. While this means that the
Emergency Committee will have, at a minimum, two On-Floor
representatives--the On-Floor Vice Chairman and the Chairman of the
Floor Procedure Committee--the Commission believes that the Exchange
has justified the change.\12\ The Exchange notes that addition of the
On-Floor Vice Chairman will preserve the five-member structure of the
Emergency Committee, minimizing the possibility of a tie vote on the
Emergency Committee, and provides the Emergency Committee with the most
qualified replacement for the President; that is, a member that can
contribute direct knowledge of any potential or existing emergencies
existing on the trading floor.\13\ In addition, while the Commission
would be concerned about any committee structure that is dominated by
one Exchange interest, the Commission believes that the Chairman of the
Board, as well as the other remaining members of the Emergency
Committee, which may or may not be from the floor, should help to
controvert any such concerns. The Commission is granting accelerated
approval to this proposed rule change for a 120-day pilot basis to
allow the Exchange to further consider whether the overall Emergency
Committee structure ensures that all Exchange interests are fairly
represented.\14\
---------------------------------------------------------------------------
\12\ The Commission notes that previously, the President could
have been a floor member.
\13\ Letter from Richard S. Rudolph, Counsel, Exchange, to
Rebekah Liu, Special Counsel, Division, Commission, dated November
16, 1999.
\14\ The Commission requests that the Exchange report back to
the Commission 45 days prior to the expiration of the 120-day pilot
on its views as to whether the Emergency Committee structure ensures
that all Exchange interests, including On-Floor and Off-Floor, are
fairly represented on the committee.
---------------------------------------------------------------------------
By clarifying that the Emergency Committee has the authority to
take action if ``extraordinary market conditions or other emergencies''
arise due to the Year 2000 date change, the proposed rule also removes
possible impediments to the Exchange's market that may arise due to the
Year 2000 date change, thereby perfecting the mechanism of a free and
open market and a national market system. As noted by the Exchange, the
proposed Rule was submitted as part of the Year 2000 contingency plan
designed by the Exchange's Year 2000 Task Force. The Commission notes
that the current rule gives the Emergency Committee the power to act in
any ``emergency condition,'' which in the Commission's opinion, would
include one created by the Year 2000 date change.\15\ While the
Exchange desired to clarify this, the Commission notes that the Rule
proposal does not go beyond true emergency situations. Accordingly, not
every problem that arises from the Year 2000 date change would
necessarily rise to the level of an emergency warranting action by the
Emergency Committee.
---------------------------------------------------------------------------
\15\ Previously, the Exchange described ``extraordinary market
or emergency conditions'' as, among other things, a declaration of
war, a presidential assassination, an electrical blackout, or events
such as the 1987 market break or other highly volatile trading
conditions that require intervention for the market's continued
efficient operation. Letter from William W. Uchimoto, General
Counsel, Exchange, to Sharon L. Itkin, Division, Commission, dated
March 15, 1989.
---------------------------------------------------------------------------
Finally, by deleting references to CENTRAMART, the proposed rule
makes clear that this equity order system is no longer in use at the
Exchange. Taken together, then, the provisions of the proposed rule
change should protect investors and the public interest.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register. Accelerated approval of the
proposed rule change should help the Emergency Committee to be ready to
take action on issues related to the Year 2000 date change prior to
January 1, 2000. The Commission notes that the Exchange's proposal was
published in the Federal Register for the full statutory period and no
comments were received. Therefore, the Commission believes it is
consistent with Section 6(b)(5) and Section 19(b)(2) of the Act to
grant accelerated approval to the proposed rule change.\16\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\17\ that the proposed rule change (SR-PHLX-99-42), as amended, is
approved on an accelerated basis.
\17\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 99-34016 Filed 12-30-99; 8:45 am]
BILLING CODE 8010-01-M
