[Federal Register Volume 64, Number 23 (Thursday, February 4, 1999)]
[Notices]
[Pages 5697-5698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2604]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40991; File No. SR-Phlx-98-45]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Approving Proposed Rule Change and Amendment No. 1 Thereto
Proposing To Adopt New Rule 949 Respecting Purchase, Sale, Transfer,
and Posting of Membership Transactions
January 28, 1999.
I. Introduction
On November 5, 1998, 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 proposed rule change to adopt new Rule 949 respecting
the purchase, sale, transfer, and posting of membership transactions.
On December 14, 1998, the Phlx submitted an amendment to the proposed
rule change.\3\ The proposed rule change was published for comment in
the Federal Register on December 23, 1998.\4\ The Commission did not
receive any comments on the proposal. This order approves the proposal,
as amended.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Letter from Murray L. Ross, Vice President and Secretary,
Phlx, to Michael Walinskas, Deputy Associate Director, Division of
Market Regulation, SEC, dated December 14, 1998 (``Amendment No.
1''). Amendment No. 1 corrected grammatical errors in the proposed
rule language.
\4\ Securities Exchange Act Release No. 40798 (December 16,
1998), 63 FR 71181.
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II. Description of the Proposal
The Exchange proposed to adopt a new rule which codifies Exchange
procedures concerning the purchase, sale, transfer and posting of
membership transactions. The proposal also provides for privately
negotiated sales and requests for transfer under certain specified
circumstances.
If the transaction is between unrelated parties, the proposed rule
provides that transactions must be posted, published, and be for
monetary consideration between the posted bid and offer. The proposed
rule also permits sales between related entities, but requires
publication in the Secretary's bulletin. Thus, both members and non-
members will have access to information regarding transfers of
membership. Additionally, the proposal ensures that the Exchange will
be protected by requiring that the proceeds of all sales be deposited
with the Exchange to satisfy any outstanding charges owed by the
member.
The proposed rule provides that bids and offers must be in writing
and submitted to the Office of the Secretary of the Exchange by an
approved applicant, member organization, or lessor. Bids and offers may
only be made in $500 increments. Additionally, the proposed rule
codifies an existing Exchange practice of requiring payment for a
membership by certified or cashier's check payable to the Exchange.
Furthermore, the rule specifies that the sale of a membership shall be
deemed negotiated and contracted when the filed bid and offer are
matched in price and confirmed by the Office of the Secretary. The sale
is consummated upon receipt of payment from the purchaser for the
purchase price and other associated membership initiation, transfer,
and prorated dues and other fees.
The procedures for privately negotiated sales and requests for
transfer are found in Section D of the proposed rule. This section
provides for the posting of a deposit with the Exchange to cover
potential claims that could be asserted pursuant to By-Law Article
XV.\5\ Only those transfers that conform with Section D will be
processed for transfer and all other private sales will be void.
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\5\ By-Law Article XV sets forth procedures for transferring
memberships. Section 15-3 provides that proceeds are to be
distributed according to a provided seniority list.
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III. Discussion
The Commission believes that the proposed rule is consistent with
the requirements of the Act and the rules and regulations thereunder
\6\ applicable to a national securities exchange. In particular, the
Commission finds that the proposed rule is consistent with Section
6(b)(5) \7\ of the Act. Section 6(b)(5) of the Act requires, among
other things, that the rules of the Exchange be designed to promote
just and equitable principles of trade and protect investors and the
public interest.
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\6\ In reviewing this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. The proposed rule change should improve efficiency
because it provides an orderly process by which memberships can be
transferred. In addition, the proposed rule change should improve
competition because the procedures provide notice to all interested
parties about the current market for memberships which should
improve bids and offers. 15 U.S.C. 78f(b)(7).
\7\ 15 U.S.C. 78f(b)(5).
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The proposed rule codifies procedures for the transfer of
membership interests. By codifying these procedures, the Exchange
should ensure the prompt and orderly transfer of membership interests.
All bids and offers must be filed in writing with the Office of the
Secretary which shall then match the bids and offers according to price
and confirm the sale. In addition, all money exchanged must be filed
with the Office of the Secretary to ensure that all outstanding debts
and fees are paid. By implementing these procedures, the Exchange
should protect the financial interests of both buyers and sellers of
memberships and provide equity and openness to all who seek to purchase
or sell a membership. Buyers should be confident that all outstanding
liens are paid and sellers should be confident that the potential
buyers have the means to pay their offering price.
Moreover, the new procedures should ensure fairness by providing a
public market in which to transfer memberships. All persons interested
in purchasing membership interests will have to follow the same
procedures. These procedures, in general, protect investors and the
public interest by providing a fair and open market for membership
transactions. Therefore, the
[[Page 5698]]
Commission believes the proposed rule change is consistent with the
requirements of Section 6(b)(5) of the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) \8\ of the
Act, that the proposed rule change, as amended, (SR-Phlx-98-45) is
approved.
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\8\ 15 U.S.C. 78s(b)(2).
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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2604 Filed 2-3-99; 8:45 am]
BILLING CODE 8010-01-M
