[Federal Register Volume 59, Number 195 (Tuesday, October 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25039]
[[Page Unknown]]
[Federal Register: October 11, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34782; File No. SR-PHLX-94-36]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Philadelphia Stock Exchange, Inc., Relating to By-Law
Articles IX and X Respecting the Trustees of the Stock Exchange Fund
and the Executive Committee
October 3, 1994.
On July 8, 1994, the Philadelphia Stock Exchange, Inc. (``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 proposal to amend Section 9-1, ``Trustees of Stock
Exchange Fund--How Appointed'' of Article IX, ``Trustees of Stock
Exchange Fund'' of the Exchange's By-Laws to allow two members of the
Exchange's Board of Governors (``Board''), rather than two Vice
Chairmen, to serve as trustees of the Stock Exchange Fund (``Fund'')
and to allow qualified non-members to serve as trustees. In addition,
the PHLX proposes to amend Section 10-13, ``Executive Committee,'' of
By-Law Article X, ``Standing Committees,'' to delete the requirement
that the Executive Vice President of the Exchange serve on the
Exchange's Executive Committee.\3\
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1993).
\3\Pursuant to Article XXII, ``Amending the By-Laws,'' of the
Exchange's By-Laws the Board voted on the proposed amendments to the
Exchange's By-Laws and submitted them to the Exchange's members for
comment. Receiving no comments, the Board voted to approve the
proposed amendments and filed its proposal with the Commission.
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Notice of the proposal appeared in the Federal Register in
Securities Exchange Act Release No. 34567 (August 19, 1994), 59 FR
44211 (August 26, 1994). No comment letters were received on the
proposal.
Currently, Section 9-1 of the Exchange's By-Laws requires that the
trustees of the Fund include the Chairman of the Exchange's Board, two
Vice Chairmen of the Board and up to five other Exchange members; all
of the trustees, except the Chairman, are appointed by the Exchange's
Board and serve for three years or until a successor is appointed. The
PHLX proposes to amend Section 9-1 to allow two members of the
Exchange's Board, rather than two Vice Chairmen, to serve as trustees
of the Fund and to allow qualified non-members to serve as trustees.
Under Section 9-1, as amended, the trustees of the Fund will include
the Chairman of the Board and two members of the Board. The remaining
five trustees, pursuant to the proposal, can be either members, non-
members, or a combination from these two categories.
In addition, the PHLX proposes to amend Section 10-13, ``Executive
Committee,'' of By-Law Article X, ``Standing Committees,'' to delete
the requirement that the Executive Vice President of the Exchange serve
on the Exchange's Executive Committee.\4\
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\4\The Executive Committee executes and implements corporate
policy established previously by the Exchange's Board of Governors
and makes recommendations concerning corporate policy to the Board
of Governors. See By-Law Section 10-13.
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The PHLX states that the proposal to amend By-Law Article IX,
Section 9-1, will give the Exchange's Board more flexibility in
choosing trustees of the Fund by eliminating the requirement that all
trustees be Exchange members or affiliated with member organizations.
Under the proposal, the Board will be able to choose qualified persons
with investment management expertise regardless of their status as
Exchange members or affiliates.
The proposed amendment will also eliminate the requirement that the
Exchange's Vice Chairmen serve as Fund trustees, to ease the
administrative burdens currently imposed upon the Vice Chairmen. The
proposal retains the Board's oversight of the trustees by continuing to
require the Chairman of the Board to be a trustee and by imposing a new
requirement that two other members of the Board be trustees.
The proposed amendment to By-Law Article X, Section 10-13 deletes
the Executive Vice President of the PHLX from membership on the
Exchange's Executive Committee while increasing the minimum number of
Board members on the Executive Committee from three to four. The PHLX
states that the Exchange's management will continue to be represented
on the Executive Committee by the Exchange's President and Chief
Executive Officer. Under Section 10-13, as amended, the other members
of the Executive Committee shall include the Chairman of the Board, two
Vice Chairmen of the Board, the immediate past Chairman of the Board,
and four or more additional members of the Board appointed by the
Chairman of the Board with the Board's approval.
The PHLX believes that the proposal is consistent with Section 6 of
the Act, in general, and, in particular with Section 6(b)(3), in that
it is designed to assure a fair representation of the Exchange's
members in the administration of its affairs and to provide that one or
more Fund trustees may be representatives not associated with a member
of the Exchange.\5\
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\5\Telephone conversation between Murray L. Ross, Secretary,
PHLX, and Yvonne Fraticelli, Attorney, Options Branch, Division of
Market Regulation, Commission, on July 27, 1994.
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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 Section 6(b)(3) in that it is
designed to assure the fair representation of the Exchange's members in
the administration of its affairs.\6\ Specifically, the Commission
believes that the proposed amendments to Section 9-1 are designed to
provide the PHLX's Board with greater flexibility in the selection of
Fund trustees by allowing the Board to appoint qualified non-members to
serve as trustees of the Fund, thereby allowing non-members with
investment expertise to serve as Fund trustees. In addition, the
Commission believes that it is reasonable for the PHLX to eliminate the
requirement that the Exchange's Vice Chairmen serve as Fund trustees in
order to ease the administrative duties of the Vice Chairmen. At the
same time, the Commission notes that the proposal requires two members
of the Board, as well as the Chairman of the Board, to serve as Fund
trustees, thus helping to ensure that the Board will retain its
oversight of the Fund.
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\6\15 U.S.C. 78f(b)(3) (1988).
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In addition, the Commission believes that it is reasonable for the
PHLX to amend Section 10-13 to eliminate the PHLX's Executive Vice
President from membership on the Exchange's Executive Committee in
order to allow the PHLX's management to be represented on the Executive
Committee. Although the proposal also increases the minimum number of
Board members who are required to be on the Executive Committee from
three to four, the Commission does not believe this change should
substantially affect the governance of the Exchange.\7\ The Commission
believes that the proposal should make the structure of the Executive
Committee less cumbersome and help to streamline the Executive
Committee's proceedings while preserving the participation of the
PHLX's management on the Executive Committee.
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\7\In this context, the Commission notes that the PHLX's By-Laws
already permit the appointment of more than three Board members to
the Executive Committee. Nevertheless, as the Commission has noted
in other contexts, the Commission would be concerned if the
Executive Committee were dominated by floor interests. See e.g.,
Securities Exchange Act Release Nos. 31633 (December 22, 1992), 57
FR 62402 (December 30, 1992) (order approving File Nos. MSE-92-12
and MSE-92-13) (amending Constitution of the Midwest Stock Exchange
(``MSE'') to require that the MSE's Board of Governors consist of
sixteen member Governors and eight non-member Governors, and
revising the composition of the MSE's Nominating Committee and
Executive Committee); and 22058 (May 21, 1985), 50 FR 23090 (May 30,
1985) (File Nos. SR-CBOE-84-15 and SR-CBOE-84-16) (disapproving
proposed rule change to increase the minimum number of floor
directors on the Board of the Chicago Board Options Exchange
(``CBOE'') and approving proposed rule change to provide for
election of a floor member to be the CBOE's Executive Committee
Chairman).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-PHLX-94-36) is approved.
\8\15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-25039 Filed 10-7-94; 8:45 am]
BILLING CODE 8010-01-M
