
[Federal Register: July 23, 2008 (Volume 73, Number 142)]
[Notices]               
[Page 42873-42874]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jy08-87]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58175; File No. SR-Phlx-2008-12]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval to a Proposed Rule Change, as Modified by 
Amendment No. 1 Thereto, Relating to an Exemption From Examination 
Requirements for Off-Floor Traders

July 16, 2008.
    On April 14, 2008, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``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 Phlx Rule 604(e)(iii) to modify the 
category of persons who are exempt from the requirement that Off-Floor 
Traders \3\ complete the Series 7 General Securities Registered 
Representative Examination (``Series 7''). On May 30, 2008, Phlx filed 
Amendment No. 1 to the proposed rule change.\4\ The proposal was 
published for comment in the Federal Register on June 12, 2008.\5\ The 
Commission received no comments on the proposal. This order approves 
the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Phlx Rule 604(e)(i) defines an off-floor trader as a 
``person who is compensated directly or indirectly by a member or 
participant organization for which the Exchange is the DEA 
[Designated Examining Authority], or any other associated person of 
such member or participant organization, and who executes, makes 
trading decisions with respect to, or otherwise engages in 
proprietary or agency trading of securities, including, but not 
limited to, equities, preferred securities, convertible debt 
securities or options off the floor of the Exchange.''
    \4\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
    \5\ See Securities Exchange Act Release No. 57923 (June 4, 
2008), 73 FR 33479 (June 12, 2008).
---------------------------------------------------------------------------

    Phlx states that the Series 7 exemption meant to apply to persons 
who traded on its equity trading floor and were associated with either 
a specialist organization or a floor brokerage organization that 
executed orders on an agency basis (``Former Floor Participants''). 
When Phlx replaced its equity trading floor with XLE, an electronic 
trading system, certain persons became Off-Floor Traders by definition, 
and consequently subject to the requirement to pass the Series 7. Phlx 
did not intend for this category of persons to be subject to the Series 
7 requirement. Therefore, Phlx proposed to exempt these persons from 
the Series 7 by expanding the exemption in Rule 604 to include Market 
Maker Authorized Traders (MMATs) and Off-Floor Traders who only handle 
and/or make trading decisions regarding agency orders and any bona fide 
errors related to those agency orders.
    Phlx believes the proposed rule change will make the administration 
of the Series 7 requirements for Off-Floor Traders more efficient, 
because under the current rule, the exemption applies to persons 
``primarily engaged'' in submitting orders to XLE or making trading 
decisions with respect to XLE, which requires the Former Floor 
Participant and the Exchange's enforcement staff to make a judgment 
call. Under the proposed rule, however, an XLE participant needs to 
register with the Exchange in order to be an MMAT, so the determination 
of MMAT status is straightforward. In addition, Phlx staff can examine 
what type of orders (agency or proprietary) Off-Floor Traders handle 
for net capital purposes and could identify whether Off-Floor Traders 
would qualify for the proposed exemption. Finally for the same reasons, 
the proposed rule change should improve Phlx's enforcement efforts, 
because Phlx and its members will be able to more easily determine 
which persons are subject to the Series 7 requirement.
    After careful review of the proposal, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to

[[Page 42874]]

a national securities exchange.\6\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\7\ 
which requires, among other things, that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The Commission believes that this proposed rule change will 
better capture the floor-based activities of Former Floor Participants 
by focusing on the status of, or type of, activity performed by those 
persons. In addition, it should provide a clearer standard that should 
allow Exchange staff, as well as members and individuals, to better 
determine who is subject to the Series 7 requirement. This should make 
the administration, as well as compliance and enforcement, of the 
Series 7 requirement more efficient.
---------------------------------------------------------------------------

    \6\ 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).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-Phlx-2008-12), as modified by 
Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-16758 Filed 7-22-08; 8:45 am]

BILLING CODE 8010-01-P
