

[Federal Register: January 17, 2008 (Volume 73, Number 12)]
[Notices]               
[Page 3306-3307]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ja08-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57134; File No. SR-Phlx-2005-68]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval of a Proposed Rule Change and Amendment No. 1 
Thereto Relating to Deletion of Rule 702, Carrying Accounts

January 11, 2008.

I. Introduction

    On November 9, 2005, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and 19b-4 
thereunder,\2\ a proposal to delete Phlx Rule 702. regarding Carrying 
Accounts. Phlx filed Amendment No. 1 to the proposed rule change on 
January 18, 2007. Notice of the proposal, as amended, was published for 
comment in the Federal Register on February 14, 2007.\3\ The Commission 
received no comments regarding the proposal. This order approves the 
proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Exchange Act Release No. 55256 (Feb. 8, 2007), 72 FR 7106 
(Feb. 14, 2007).
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II. Description of the Proposal

    The purpose of the proposed rule change to delete Rule 702, 
Carrying Accounts, is to eliminate an unnecessary and confusing 
Exchange rule. Currently, Rule 702 provides that ``[n]o member, doing 
business as an individual, shall carry accounts for customers, except 
as provided in Rule 903.'' \4\
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    \4\ The reference to Rule 903 is clearly an incorrect reference 
which should be to Rule 904, Use of a Partnership Name, which 
provides that ``[n]o member shall conduct business under a 
partnership firm name unless he has at least one general partner, 
provided, however, that if by death or otherwise a member becomes 
the sole general partner in a member organization that is a 
partnership he may continue business under the partnership name for 
such period as may be allowed by the Committee.''

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[[Page 3307]]

    Rule 702 is unnecessary because a Phlx member's ability to carry 
customer accounts is dictated by its ability to comply with relevant 
securities laws and regulations, including Exchange Act Rules 15c3-1 
and 15c3-3, which do not make distinctions on the basis of a broker-
dealer's organizational and corporate structure.
    Rule 702 creates confusion because virtually all ``members'' are 
individuals. The term ``member'' (as opposed to ``member 
organization'') is defined in Exchange Rules as a permit holder which 
has not been terminated in accordance with the by-laws of the 
Exchange.\5\ Currently, the only issued and outstanding Exchange 
permits are Series A-1 Permits, the terms and conditions of which are 
governed by Rule 908. Among other things, section (b) of Rule 908 
provides that a Series A-1 permit shall only be issued to an 
individual.\6\ Pursuant to Rule 908, all Series A-1 permit holders must 
maintain an affiliation with a ``member organization,'' which are not 
subject to Rule 702.
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    \5\ See Exchange By-Law Article I, Section 1(t) and Exchange 
Rule 1(n). Exchange By-Law Article XII, Section 1(b) provides in 
part that ``[e]xcept as otherwise set forth in the rules of the 
Exchange or any resolution of the Board of Governors authorizing a 
specific class or series of permits, a permit will confer upon and 
subject the holder thereof to all the privileges and obligations of 
a member pursuant to these By-Laws and the rules of the Exchange, * 
* * and to conduct business on the Exchange as provided in these By-
Laws and such rules.''
    \6\ Rule 908 does contain one exception, which is not relevant 
to this analysis, that provides that a Series A-1 Permit may also be 
issued to ``a corporation meeting the requirements of Section 12-4 
of the By-Laws.'' Section 12-4 of the By-Laws, Admission of 
Corporation, provides that ``[a] corporation may be issued a permit 
by the Exchange, provided such corporation is incorporated under the 
laws of the Commonwealth of Pennsylvania, and all of its capital 
stock is owned by the Exchange.'' This By-Law provision was intended 
to permit Exchange membership for the Exchange's subsidiary, Stock 
Clearing Corporation of Philadelphia.
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III. Discussion

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\7\ In particular, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act, which requires, among other 
things, that the rules of an exchange be designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market, and, in general, to protect 
investors and the public interest.
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
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    The Commission believes it is reasonable and consistent with the 
Act for the Exchange to eliminate an unnecessary and confusing Exchange 
rule.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-Phlx-2005-68) be and 
hereby is approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-733 Filed 1-16-08; 8:45 am]

BILLING CODE 8011-01-P
