

[Federal Register: December 14, 2005 (Volume 70, Number 239)]
[Notices]               
[Page 74085-74087]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de05-120]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52919; File No. SR-Phlx-2005-66]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Revisions to the Series 4 
Examination Program

December 7, 2005.
    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 November 9, 2005, 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 Phlx. On 
November 28, 2005, Phlx filed Amendment No. 1 to the proposed rule 
change. Phlx has designated the proposed rule change as constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization pursuant to Section 19(b)(3)(A)(i) of the Act 
\3\ and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change, as 
amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Phlx is filing revisions to the study outline and selection 
specifications for the Limited Principal--Registered Options (Series 4) 
examination program (``Series 4 Examination''), which is administered 
by the National Association of Securities Dealers, Inc. (``NASD''). The 
proposed revisions update the material to reflect changes to the laws, 
rules, and regulations covered by the Series 4 Examination, as well as 
to modify the content of the examination program to track more closely 
the functional workflow of a Series 4 limited principal. Phlx is not 
proposing any textual changes to its rules.
    The revised Series 4 Examination study outline is available on 
Phlx's Web site (http://www.phlx.com), at the Phlx, and at the 

Commission. However, the Exchange has omitted the Series 4 Examination 
selection specifications from this filing and has submitted the 
specifications under separate cover to the Commission with a request 
for confidential treatment pursuant to Rule 24b-2 under the Act.\5\
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    \5\ 17 CFR 240.24b-2.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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. 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
    Phlx Rule 1024 states that a member organization shall not transact 
any business with the public in option contracts unless those persons 
engaged in the management of the member organization's business 
pertaining to option contracts are registered with and approved by the 
Exchange as Options Principals. Additionally, the rule states that no 
individual member shall transact any business directly with the public 
in option contracts unless he is registered with and approved by the 
Exchange as an Options Principal. The Series 4 examination, an 
industry-wide examination, qualifies an individual to function as a 
Registered Options and Security Futures Principal, but only for 
purposes of supervising a member firm's options activities.\6\
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    \6\ A Registered Options and Security Futures Principal must 
complete an additional continuing education program before such 
person can supervise security futures activities.
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    The Series 4 Examination tests a candidate's knowledge of options

[[Page 74086]]

trading generally, the Phlx rules applicable to the trading of option 
contracts, and the rules of registered clearing agencies for options. 
The Series 4 Examination covers, among other things, equity options, 
foreign currency options, index options, and options on government and 
mortgage-backed securities.
    The Series 4 Examination is shared by Phlx and the following SROs: 
the NASD, the American Stock Exchange LLC, the Chicago Board Options 
Exchange, Inc., the New York Stock Exchange, Inc., and the Pacific 
Exchange, Inc. NASD has filed with the Commission similar revisions to 
the study outline and selection specifications for the Series 4 
Examination.\7\ Phlx believes that the other SROs are filing similar 
proposals.
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    \7\ See Securities Exchange Act Release Nos. 51216 (February 16, 
2005), 70 FR 8866 (February 23, 2005) (SR-NASD-2005-25) and 52546 
(September 30, 2005), 70 FR 59109 (October 11, 2005) (SR-NASD-2005-
109) (extending the implementation date of the revisions to no later 
than November 30, 2005).
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    A committee of industry representatives, together with the staff of 
Phlx and the other SROs, recently undertook a periodic review of the 
Series 4 Examination and study outline and selection specifications. As 
a result of this review and as part of an ongoing effort to align the 
Series 4 Examination more closely to the supervisory duties of a Series 
4 principal, Phlx is proposing to modify the content of the Series 4 
Examination to track the functional workflow of a Series 4 principal. 
More specifically, Phlx is proposing to revise the main section 
headings and the number of questions on each section of the Series 4 
study outline as follows: Options Investment Strategies, decreased from 
35 to 34 questions; Supervision of Sales Activities and Trading 
Practices, increased from 71 to 75 questions; and Supervision of 
Employees, Business Conduct, and Recordkeeping and Reporting 
Requirements, decreased from 19 to 16 questions. Phlx is further 
proposing revisions to the study outline to reflect the SEC short sale 
requirements. The revised examination continues to cover the areas of 
knowledge required to supervise options activities.
    Phlx is proposing similar changes to the corresponding sections of 
the Series 4 Examination selection specifications and question bank. 
The number of questions on the Series 4 Examination will remain at 125, 
and candidates will have three hours to complete the exam. Also, each 
question will continue to count as one point and candidates must 
correctly answer 70 percent of the questions to receive a passing 
grade.
    As further discussed below, the Exchange is filing the proposed 
rule change for immediate effectiveness. The Exchange will announce the 
proposed revisions in a Notice to Members to be published prior to the 
implementation date.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general and furthers the objectives of Section 
6(c)(3),\9\ which authorize Phlx to prescribe standards of training, 
experience and competence for members of the Exchange or persons 
associated with them.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(c)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that the proposed rule change, as 
amended, will impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments 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

    The proposed rule change, as amended, has become effective pursuant 
to Section 19(b)(3)(A)(i) \10\ of the Act and Rule 19b-4(f)(1) 
thereunder,\11\ in that the proposed rule change constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the Exchange.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(i).
    \11\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.\12\
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    \12\ The effective date of the original proposed rule is 
November 9, 2005. The effective date of Amendment No. 1 is November 
28, 2005. For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on November 28, 2005, the date on which Phlx submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-Phlx-2005-66 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-Phlx-2005-66. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 also will be available for inspection and copying at the 
principal office of the Phlx. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2005-66 and should be submitted on or before 
January 4, 2006.


[[Page 74087]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).

Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7326 Filed 12-13-05; 8:45 am]

BILLING CODE 8010-01-P
