[Federal Register Volume 64, Number 80 (Tuesday, April 27, 1999)]
[Notices]
[Pages 22665-22666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10455]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41306; File No. SR-Phlx-99-07]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to the
Requirement for Off-Floor Traders for Which the Exchange Is the
Designated Examining Authority To Successfully Complete the General
Securities Representative Examination Series 7
April 16, 1999.
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 March 15, 1999, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC`` or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. On April 7, 1999, the Phlx filed Amendment No. 1.\3\ On April
13, 1999, the Phlx filed Amendment No. 2.\4\ 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.
\3\ Amendment No. 1 removed a description of professional
traders from the filing. Letter from Richard S. Rudolph, Legal
Counsel, Phlx, to Karl Varner, Special Counsel, Division of Market
Regulation (``Division''), SEC, April 6, 1999.
\4\ Amendment No. 2 made technical changes to the proposed rule
change. Letter from Richard S. Rudolph, Legal Counsel, Phlx, to Karl
Varner, Special counsel, Division, SEC, April 12, 1999.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to amend Phlx Rule 604, Registration and
Termination of Registered Representatives, to require successful
completion of the National Association of Securities Dealers General
Securities Representative Examination (``Series 7 Exam'') by persons
associated with member of participant organizations for which the
Exchange is the Designated Examining Authority (``DEA'') who are
trading from off the floor of the Exchange.
Specifically, the Exchange seeks to require associated persons of
members or member organizations for which the Exchange is the DEA, but
who are not themselves Exchange members, who engage in proprietary
trading of equities and options, including, but not limited to, persons
who execute such trades or make trading decisions with respect to such
trades, to successfully complete the Series 7 Exam. The proposed rule
would apply to those persons who are not Exchange members registered in
a trading capacity on the floor of the Exchange.
The text of the proposed rule change is below. Additions are
italicized, and deletions are bracketed.
Rule 604. Registration and Termination of Registered [Representatives]
Persons
(e) (i) Every person who is compensated directly or indirectly by a
member or participant organization for which the Exchange is the DEA
who executes, makes trading decisions with respect to, or otherwise
engages in proprietary or agency trading of equities, preferred
securities, convertible debt securities or options off the floor of the
Exchange (``off-floor traders''), must successfully complete the
General Securities Registered Representative Examination Test Series 7.
(1) The requirement to successfully complete the Series 7
examination applies to current off-floor traders as well as future off-
floor traders who affiliate with members at a later date. Off-floor
traders currently engaged in off-floor trading activity at the time of
approval of this rule must successfully complete the Series 7
examination within six (6) months of notification by the Exchange.
* * * * *
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
The Exchange proposes to add paragraph (e) of Phlx Rule 604 to
establish examination requirements for securities traders not located
on the floor of the Exchange. Currently, the Exchange specifies
qualification requirements for various persons conducting a public
business or duties customarily performed by a registered
[[Page 22666]]
representative. These qualification requirements are enumerated in Phlx
Rule 604.\5\ No similar qualification requirement exists for persons
who conduct trading activities from off the floor of the Exchange. The
purpose of the proposed rule change is to bring the Exchange's
qualification requirements in line with those of the other major
securities exchanges and enhance the consistency of qualification
requirements across the exchanges by adding testing requirements for
off-floor traders and certain other associated persons of members who
are not covered by the current qualification requirements for floor
traders.
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\5\ Securities Exchange Act Release No. 36515 (November
27,1995), 60 FR 62119 (December 4, 1995) (File No. SR-Phlx-95-58)
(order approving amendment of Phlx Rule 604).
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The Exchange has discovered that the majority of those persons to
whom the proposed rule would apply are associated with certain limited
liability companies (``LLC``) for the purpose of conducting off-floor
trading in their own accounts. These securities traders become members
of the LLC to avail themselves of good faith margin provided through
the LLC's Joint Back Office agreement with its clearing agent.
The new Series 7 Exam requirements, if approved, will apply to all
previously registered persons, who will be required to successfully
complete the Series 7 Exam within six months of notice by the Exchange.
The new examination requirement would be phased in over a six-month
period. Associated persons who are currently registered to trade from
off the floor of the Exchange would be required to register to take the
Series 7 Exam within 30 days of the Exchange's notice to membership of
this requirement and those off-floor traders to whom the order applies
will be required to notify the Exchange promptly that they have so
registered. Off-floor traders required to register for the Series 7
Exam will have six months from the date of notice by the Exchange in
which to successfully complete the Series 7 Exam.
Off-floor traders to whom the proposed rule applies who become
associated with member organizations after notice of this requirement
must successfully complete the Series 7 Exam prior to conducting
securities trading activities for which the examination is required.
The proposed rule change is consistent with Section 6 of the Act
\6\ in general, and furthers the objectives of Section 6(c)(3)(A) of
the Act \7\ and Section 6(c)(3)(B) of the Act \8\ in particular, in
that it is designed to prescribe appropriate standards of training,
experience, and competence for brokers and dealers and persons
associated with Exchange members in order to protect investors and the
public. The proposed rule change is also consistent with Section
6(b)(5) of the Act \9\ in general, in that it is designed to perfect
the mechanisms of a free and open market and a national market system,
and to protect investors and the public interest by requiring
registered off-floor traders to demonstrate their qualifications to
trade by successfully passing the Series 7 Examination.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(c)(3)(A).
\8\ 15 U.S.C. 78f(c)(3)(B).
\9\ 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 inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comment 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 Phlx 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.
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. Copies of such filing will also be
available for inspection and copying at the principal office of the
Phlx. All submissions should refer to File No. Sr-Phlx-99-07 and should
be submitted by May 18, 1999.
For the Commission, by the Division on Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-10455 Filed 4-26-99; 8:45 am]
BILLING CODE 8010-01-M
