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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. To Divide Its Allocation, Evaluation and Securities Committee Into Two Separate Committees: the Equity Allocation, Evaluation and Securities Committee and the Option Allocation, Evaluation and Securities Committee

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Start Preamble May 19, 2000.

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 28, 2000, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend Exchange By-Law, Article X, Section 10-7 and Exchange Rule 500, each concerning its Allocation, Evaluation and Securities Committee (“AESC”), to divide the AESC into two separate committees: the Equity Allocation, Evaluation and Securities Committee and the Option Allocation, Evaluation Start Printed Page 34522and Securities Committee. The text of the proposed rule change is available at the Phlx and at the Commission.

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 Phlx 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 Phlx 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

1. Purpose

The proposed change to By-Law Article X, Section 10-7 is intended to divide the Exchange's current Allocation, Evaluation and Securities Committee into two separate committees, one for equities and one for options. The proposed change to Rule 500 is intended to allow the rules governing the Committees to conform to the new By-Law.

Currently, the AESC is composed of persons who are active on both the equity and options trading floors, persons who conduct a public securities business, one Public Governor, and one Non-Industry Governor, and one Non-Industry Governor.[3] The full AESC is responsible for appointment of specialist units on each floor; [4] approving the transfer of equities and options among specialist units on each floor; [5] allocating both equities and options to applicant specialist units on each floor; [6] evaluating the performance of specialist units on each floor; [7] reallocating equities and options when warranted due to performance issues from one specialist unit to another on each floor; [8] and supervising questions pertaining to securities admitted to dealings on the Exchange.[9]

The proposal to divide the AESC into separate committees—the Equity Allocation, Evaluation and Securities Committee and the Option Allocation, Evaluation and Securities Committee—would serve to provide expertise on each new committee in allocating securities to, and evaluating performance of, specialist units on each trading floor on which the committee members work and have experience.

Currently, AESC members evaluate specialists and vote to allocate securities to equity specialist units and to option specialist units, regardless of whether their particular experience is in equities or options. The proposed new committees would consist, in part, of members with experience specific to the type of security to be allocated and in the type of specialists to be evaluated.

Each committee would consist of nine members. Five persons would be members of both new committees: three off-floor persons who conduct a securities business, one Non-Industry Governor, and one Public Governor. One of the Governors would chair both committees. The remainder of the Equity Allocation, Evaluation and Securities Committee would consist of four persons who are active on the equity trading floor as floor brokers or specialists. The remainder of the Option Allocation, Evaluation and Securities Committee would consist of one person who is active on the options trading floor as a floor broker and three persons who are active on the options trading floor as specialists, registered options traders, or floor brokers.

Each new committee would consist of core members, who would serve a three-year term that would be renewable once, and annual members, who would serve a one-year term that would be renewable twice. The core members of the Equity Allocation, Evaluation and Securities Committee would consist of three persons who conduct a public securities business and two persons who are active on the equity trading floor as specialists or floor brokers. The annual members of the Equity Allocation, Evaluation and Securities Committee would consist of two persons who are active on the equity trading floor as specialists or floor brokers, the Public Governor, and the Non-Industry Governor. The core members of the Option Allocation, Evaluation and Securities Committee would consist of three persons who conduct a public securities business, one person who is active on the options trading floor as a floor broker, and one person who is active on the options trading floor as a specialist, registered options trader, or floor broker. The annual members of the Option Allocation, Evaluation and Security Committee would consist of two persons who are active on the options trading floor as specialists, registered options traders, or floor brokers; the Public Governor; and the Non-Industry Governor.[10]

2. Statutory Basis

The Phlx believes the proposed rule change is consistent with and furthers the objectives of Section 6(b)(5) of the Act.[11] Specifically, the Phlx believes that the proposal would aid in the perfection of the mechanisms of a free and open market and a national market system, and would protect investors and the public interest, by appointing to an appropriate committee individuals who have specific experience and expertise relating either to equities or to options. By so doing, the two new committees would have greater expertise in allocating securities (either equities or options) and evaluating specialists than the single existing committee.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Phlx does not believe that the proposed rule change would impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

No written comments were solicited or received with respect to the proposed rule change.

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 with 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 Exchange 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, Start Printed Page 34523including 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 filings will also be available for inspection and copying at the principal office of Phlx. All submissions should refer to File No. SR-Phlx-00-28 and should be submitted by June 20, 2000.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[12]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Exchange Rule 500.

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4.  See Exchange Rule 501.

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5.  See Exchange Rule 508.

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6.  See Exchange Rule 511(b).

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7.  See Exchange Rules 511(c) to 511(e) and 515.

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8.  See id.

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9.  See Exchange Rules 800 to 899.

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10.  The original proposal did not include a description of the core members and the annual members of each of the two new committees. However, the text of the proposed new Exchange rules describes the committees and that description was added to the proposal with the consent of the Phlx. Phone conversation between Richard S. Rudolph, Counsel, Phlx, and Michael Gaw, Attorney, Division of Market Regulation, Commission, on April 11, 2000.

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[FR Doc. 00-13416 Filed 5-26-00; 8:45 am]

BILLING CODE 8010-01-M