[Federal Register Volume 59, Number 149 (Thursday, August 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18966]
[[Page Unknown]]
[Federal Register: August 4, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34455; File No. SR-Phlx-94-14]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Relating to its Order
and Decorum Regulations
July 28, 1994.
I. Introduction
On March 10, 1994, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') submitted to 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 amend Regulation 4 (``Order'')
of the Exchange's Rule 60 order and decorum regulations. On March 31,
1994, the Exchange submitted to the Commission Amendment No. 1 to the
proposed rule change.\3\ On June 22, 1994, the Exchange submitted to
the Commission Amendment No. 2 to the proposed rule change.\4\
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1994).
\3\See letter from Gerald D. O'Connell, Vice President, Market
Surveillance, Phlx, to Sharon Lawson, Assistant Director, SEC, dated
March 30, 1994. Amendment No. 1 clarified that in any instance where
an act described in Regulation 4(a) is deemed particularly
egregious, or where an individual has established a pattern of order
violations, two floor officials may refer the matter to the Business
Conduct Committee where additional fines and other sanctions may be
imposed pursuant to Phlx Rule 960.
\4\See letter from Gerald D. O'Connell, First Vice President,
Phlx, to Sharon Lawson, Assistant Director, SEC, dated June 22,
1994. Amendment No. 2 added a range of fines for violations that
constitute a public embarrassment to the Exchange.
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The proposed rule change was published for comment in the
Securities Exchange Act Release No. 34244 (June 22, 1994), 59 FR 33314
(June 28, 1994). No comments were received on the proposal. This order
approves the proposed rule change as amended.
II. Description of the Proposal
The Phlx is amending Regulation 4 of the Exchange's order and
decorum regulations,\5\ which were adopted pursuant to Phlx Rule 60
(``Assessments for Breach of Regulations'').\6\ Regulation 4, Paragraph
(i) (redesignated Paragraph (a)) currently prohibits members/
participants or employees of a member/participant from engaging in
disorderly conduct on the trading floor, and imposes fines for
violations thereof. In addition to a general prohibition against
disorderly conduct in Paragraph (a), Subparagraphs (ii) through (iv)
currently impose specific fines for abuse of the paging system,
possession of firearms, and various degrees of fighting, including
inciting physical abuse, minor acts of physical abuse and major acts of
physical abuse.
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\5\In addition to Regulation 4, the Exchange's Rule 60
Regulations govern smoking; food, liquids, and beverages;
identification badges and access cards; visitors and applicants;
dress; and proper utilization of the security system. See Phlx Rule
60 Regulations.
\6\Rule 60 permits Exchange officials and floor officials to
assess fines, not exceeding $1,000, for violations of regulations
pertaining to order, decorum, health, safety and welfare (``order
and decorum'') on the Exchange, or to refer such violations to the
Exchange's Business Conduct Committee where higher fines or other
sanctions may be imposed, in accordance with Phlx Rule 960. Rule 60
also enumerates the procedural aspects of order and decorum fines,
including the ability to contest a fine and request a hearing. The
Exchange has adopted seven regulations of order and decorum pursuant
to Rule 60, including Regulation 4.
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The Phlx is amending Regulation 4, Paragraph (a) to prohibit
indecorous conduct on the trading floor which is disruptive to the
conduct of business on the floor. The Exchange is also adopting Sub-
Paragraph (iv) to Regulation 4 to impose a fine ranging from $500 to
$1,000 for abusive, derisive or harassing treatment directed at any
person while on the floor, which, in the view of two floor officials,
could constitute a public embarrassment to the Exchange.
Finally, the Exchange is adopting Paragraph (b) to Regulation 4
stating that any acts described in paragraph (a) which are deemed
particularly egregious, or where an individual has established a
pattern of order violations, may be referred by two floor officials to
the Business Conduct Committee where additional fines and other
sanctions may be imposed pursuant to Phlx Rule 960. As a result of this
adopted language, similar language which currently follows the
paragraph addressing physical abuse in Regulation 4 is being deleted to
apply the new paragraph to all violations of Regulation 4.
The Exchange believes that the amendment is consistent with Section
6 of the Act in general, and in particular, with Section 6(b)(5), in
that it is designed to promote just and equitable principles of trade,
and protect investors and the public interested by ensuring an orderly
and decorous environment on the trading floor for Exchange business to
be conducted. The proposal is also consistent with Section 5(b)(6), in
that Regulation 4, as amended, would continue to provide that members
of the Exchange be appropriately disciplined for violations of the
rules of the Exchange.
III. Discussion
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 Sections 6(b)(5), (6) and (7) of
the Act.\7\
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\7\15 U.S.C. 78f (1988).
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The Commission believes that the Phlx's amendments are a reasonable
measure which should help to ensure the orderly operation of the
Exchange floor. The proposal addresses the operational concerns by
explicitly prohibiting indecorous conduct that is disruptive to
business on the Exchange's trading floor. The Commission believes that
the amendment to Regulation 4 should contribute to the Phlx's efforts
to ensure the efficient, undisrupted conduct of business on the
Exchange and provide a trading floor environment free from conduct that
could distract or interfere with market activity. As a result, the rule
change should enhance the members' ability to engage in transactions in
securities and, thereby, protect investors and the public interest.
The Commission believes that the proposed amendments provide
appropriate penalties for violations of Regulation 4. Specifically, the
adopted range of fines ($500 to $1,000) that can be imposed for
abusive, derisive or harassing conduct on the floor which is determined
by two floor officials to constitute a public embarrassment to the
Exchange is reasonable in relation to the infractions in question
because of the Phlx's interest in ensuring the safety of its floor
personnel and the undisrupted conduct of business on the Exchange.
Moreover, because the rule change defines the scope of prohibited
conduct, provides notice to members, provides a right of appeal, and is
tailored to serve a legitimate Exchange regulatory interest to ensure
that trading can continue undisrupted on the Phlx floor, the proposal
provides fair and reasonable procedures for the regulation of trading
floor conduct.
The Commission also believes that it is appropriate for the
Exchange to retain discretion to pursue formal disciplinary proceedings
in accordance with Phlx Rule 960 for egregious violations or where an
individual has established a pattern of order violations. This will
enable the Exchange to seek stiffer sanctions where warranted by the
scope and nature of the violative conduct. The Commission, however,
emphasizes that when an Exchange investigation results in a full
disciplinary proceeding pursuant to Rule 960, all procedural rights
provided in the Rule would apply.\8\
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\8\The Exchange stated that two floor officials could not impose
a fine or sanction pursuant to both Rules 60 and 960 for the same
conduct. The Exchange also stated that if a disciplinary proceeding
pursuant to Rule 960 is initiated by the Exchange, all procedural
rights contained in Rule 960 would apply. Conversation between
Gerald D. O'Connell, Vice President, Market Surveillance, Phlx, and
Louis A. Randazzo, Attorney, SEC, on March 25, 1994.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-Phlx-94-14) is approved.
\9\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.\10\
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\10\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-18966 Filed 8-3-94; 8:45 am]
BILLING CODE 8010-01-M
