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Notice

Self Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Approving Proposed Rule Change and Notice of Filing and Order Granting Accelerated Approval to Amendments No. 1 and 2 to the Proposed Rule Change Relating to Trustees of Stock Exchange Fund

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Information about this document as published in the Federal Register.

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Start Preamble February 9, 2000.

I. Introduction

On June 9, 1999, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), 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 Article IX of its By-Laws, concerning Trustees of Stock Exchange Fund. Notice of the proposal appeared in the Federal Register on July 9, 1999.[3] . The Commission received no comments on the proposal. The Phlx subsequently submitted Amendment No. 1 to the proposed rule change on August 16, 1999 [4] and Amendment No. 2 on November 5, 1999.[5] The proposed change relates specifically to Section 9-5, concerning Agent of Trustees, and Section 9-6, concerning Reports. This notice and order approves the proposed rule change, as amended, and solicits comments from interested persons on Amendment Nos. 1 and 2.

II. Description of the Proposal

Section 9-5 of Article IX currently mandates that the Trustees of the Stock Exchange Fund, with the approval of the Board of Governors, appoint a Trust Company to act as their Agent to hold the securities of the Exchange for safeguarding and to collect the interests, dividends, and income from the Fund for the Treasurer of the Exchange. The Agent also is empowered to make deliveries of securities held for the Trustees of the Stock Exchange Fund from time to time as the Trustees of the Stock Exchange Fund direct.

The proposed rule change, as amended, deletes reference to a Trust Company and mandates that the Trustees, with the approval of the Board of Governors, appoint as Agents for such purpose either a broker-dealer registered with the Commission under Section 15 of the Act [6] or a bank as defined in Section 3(a)(6) of the Act.[7] The reason for the change, according to Phlx, is that the Exchange no longer utilizes its subsidiary, the Philadelphia Depository Trust Co., for such services.

Section 9-6 of Article IX currently mandates that the Trustees of the Stock Exchange Fund submit to the Phlx Board of Governors at least quarterly a statement of the investments of the Exchange. The proposed rule change would mandate that the Trustees submit the quarterly statement to the Finance Committee of the Exchange, and that the Finance Committee then forward it to the Board of Governors with its recommendation.[8] The Board believes that oversight by the Finance Committee of the Trustees of the Stock Exchange Fund is appropriate, since the Finance Start Printed Page 8228Committee, pursuant to Article X of the Exchange's By-Laws, Section 10-15, has charge of the funds of the Exchange and serves in an advisory capacity to the Board in the investment and sale of securities held by the Exchange.

III. Discussion

For the reasons discussed below, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations promulgated thereunder.[9] Specifically, the Commission finds that the proposed rule change is consistent with the Section 6(b)(5) [10] requirements that the rules of a national securities exchange be designed to promote just and equitable principles of trade and protect investors and the public interest.

The proposal, as amended, would require that the Trustees of the Stock Exchange Fund appoint either a registered broker-dealer or bank to act as their agent to hold the securities of the Exchange, to collect the interest, dividends, and income deriving from those securities, and from time to time to make deliveries of such securities as directed by the Trustees. The proposal thereby addresses a need created when the Exchange determined that it would no longer utilize the services of the trust company that had fulfilled this role in the past. The Exchange has also stated that it will notify the Commission when it replaces its agent with another one.[11] The Commission finds that these proposed changes set in place an appropriate and reasonable arrangement for safeguarding the Exchange's securities and collecting the income derived from those securities.

The proposed rule change would also require the Trustees of the Stock Exchange fund to submit a statement of the Exchange's investments to an additional level of review before they are presented to the Board of Governors. The Commission finds that this proposed change, by providing additional oversight of the financial arrangements of the Stock Exchange Fund, is consistent with the aim of protecting investors and the public interest.

The Commission also finds good cause for approving proposed Amendment Nos. 1 and 2 prior to the thirtieth day after the date of publication of notice of filing in the Federal Register. Amendment Nos. 1 and 2 add to the protections of the Exchange's securities embodied in the original proposal by providing that the agent appointed by the Trustees be either a registered broker-dealer or a bank and that the Exchange will notify the Commission as to changes in its agent.

For these reasons, the Commission finds good cause for accelerating approval of the proposed rule change, as amended, to allow the Exchange to implement these protections without further delay.

IV. Solicitation Of Comments

Interested persons are invited to submit written data, views and arguments concerning Amendment Nos. 1 and 2, including whether the proposed rule change, as amended, is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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 the filing will also be available for inspection and copying at the principal offices of the Phlx.

Submissions should refer to File No. SR-Phlx-99-17 and should be submitted by March 9, 2000.

V. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) [12] of the Act, that the proposed rule change (SR-Phlx-99-17) is hereby approved.

Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[13]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Securities Exchange Act Rel. No. 41591 (July 1, 1999), 64 FR 37187.

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4.  See Letter from Murray L. Ross, Vice President and Secretary, Phlx, to Michael Walinskas, Deputy Associate Director, Division of Market Regulation, Commission, dated August 11, 1999. The substance of Amendment No. 1 is discussed below.

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5.  See Letter from Murray L. Ross, Vice President and Secretary, Phlx, to Michael Walinskas, Deputy Associate Director, Division of Market Regulation, Commission, dated November 4, 1999. The substance of Amendment No. 2 is discussed below.

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8.  Such recommendation may vary according to issues that may arise, including such matters as altering the portfolio mix and appointing a new Agent pursuant to Section 9-5 of Article IX as amended by this proposal. Telephone conservation between Murray L. Ross, Vice President and General Secretary, the Phlx, and Karl Varner, Special Counsel, and Ira L. Brandriss, Attorney, the Commission, on February 9, 2000.

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9.  In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). The Commission believes that the proposed rule change, which relates to internal organizational concerns of the Exchange with respect to the handling of its own investments, will have minimal impact, if any, on efficiency, competition, and capital formation.

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11.  See Amendment No. 1.

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[FR Doc. 00-3747 Filed 2-16-00; 8:45 am]

BILLING CODE 8010-01-M