
[Federal Register: September 9, 2008 (Volume 73, Number 175)]
[Notices]               
[Page 52433-52434]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09se08-144]                         

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SECURITIES AND EXCHANGE COMMISSION

Release No. 34-58454]

 
Order Granting Application for Exemption Pursuant to Section 
36(a) of the Exchange Act by the Philadelphia Stock Exchange, Inc. From 
the Rule Filing Requirements of Section 19(b) of the Exchange Act With 
Respect to Certain Rules Incorporated by Reference

September 3, 2008.

I. Introduction

    On June 27, 2007,\1\ the Philadelphia Stock Exchange, Inc., n/k/a 
NASDAQ OMX PHLX, Inc., (``Phlx'' or the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') pursuant to Rule 0-
12 \2\ under the Securities Exchange Act of 1934 (``Exchange Act'') an 
application for an exemption under Section 36(a)(1) of the Exchange Act 
\3\ from the rule filing requirements of Section 19(b) of the Exchange 
Act \4\ with respect to certain margin rules of other self-regulatory 
organizations (``SROs'') that the Exchange seeks to incorporate by 
reference.
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    \1\ See Letter from Edith H. Hallahan, Esq., Senior Vice 
President and Deputy General Counsel, Phlx, to Nancy M. Morris, 
Secretary, Commission, dated June 26, 2007.
    \2\ 17 CFR 240.0-12.
    \3\ 15 U.S.C. 78mm(a)(1).
    \4\ 15 U.S.C. 78s(b).
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II. Application for Section 36 Exemption From Section 19(b) Rule Filing 
Requirements for SRO Rules Incorporated by Reference

    On August 11, 2008, the Commission approved a proposed rule 
change--SR-Phlx-2007-33--which, among other things, permits Phlx 
members to elect to be bound by the margin rules of either the New York 
Stock Exchange LLC (``NYSE'') or the Chicago Board Options Exchange, 
Incorporated (``CBOE'').\5\ More specifically, Phlx amended its Rule 
721 to state a member organization must elect to be bound by the 
initial and maintenance margin requirements of either the NYSE or CBOE 
as the same may be in effect and amended from time to time.\6\ Phlx 
Rule 721 further states that upon the filing of such election, a Phlx 
member shall be bound to comply with the margin rules of the NYSE or 
CBOE, as applicable, as though said rules were part of Phlx's margin 
rules. On June 26, 2007, Phlx submitted a formal request, pursuant to 
Rule 0-12 under the Exchange Act,\7\ seeking an exemption under Section 
36 of the Exchange Act from the rule filing procedures of Section 19(b) 
of the Exchange Act with respect to changes to the margin rules of 
either the NYSE or CBOE.\8\
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    \5\ See Exchange Act Release 58340, 73 FR 48268 (August 18, 
2008).
    \6\ Exchange Act Release No. 58340 (August 11, 2008); see also 
Exchange Act Release No. 58045 (June 26, 2008), 73 FR 38487 (July 7, 
2008) (SR-Phlx-2007-33).
    \7\ See 17 CFR 240.0-12.
    \8\ See Letter from Edith H. Hallahan, Esq., Senior Vice 
President and Deputy General Counsel, Phlx, to Nancy M. Morris, 
Secretary, Commission, dated June 26, 2007.
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III. Order Granting Section 36 Exemption

    Section 36 of the Exchange Act \9\ authorizes the Commission to 
conditionally or unconditionally exempt any person, security, or 
transaction, or any class thereof, from any provision of the Exchange 
Act or rule thereunder, if necessary or appropriate in the public 
interest and consistent with the protection of investors. The 
Commission believes that it is appropriate to issue exemptions, subject 
to the conditions described below, to allow SROs to incorporate by 
reference the rules of other SROs without being subject to the rule 
filing requirements of Section 19(b) of the Exchange Act whenever the 
SRO's rules that are incorporated by reference change. Such exemptions 
promote efficient use of Commission and SRO resources by avoiding 
duplicative rule filings based on simultaneous changes to identical 
rule text sought by more than one SRO.
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    \9\ 15 U.S.C. 78mm.
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    The Commission will consider granting requests for exemption, 
pursuant to Section 36 of the Exchange Act, from the rule filing 
requirements imposed by Section 19(b) of the Exchange Act, provided 
that:\10\
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    \10\ Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004).

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[[Page 52434]]

    (1) An SRO wishing to incorporate rules of another SRO by reference 
has submitted a written request for an order exempting it from the 
requirement in Section 19(b) of the Exchange Act to file proposed rule 
changes relating to the rules incorporated by reference, has identified 
the applicable originating SROs, together with the rules it wants to 
incorporate by reference, and otherwise has complied with the 
procedural requirements set forth in the Commission's release governing 
procedures for requesting exemptive orders pursuant to Rule 0-12 under 
the Exchange Act;\11\
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    \11\ See 17 CFR 240.0-12 and Exchange Act Release No. 39624 
(February 5, 1998), 63 FR 8101 (February 18, 1998) (Commission 
Procedures for Filing Applications for Orders for Exemptive Relief 
Pursuant to Section 36 of the Exchange Act; Final Rule).
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    (2) an incorporating SRO has requested incorporation of categories 
of rules (rather than individual rules within a category) that are not 
trading rules (e.g., the SRO has requested incorporation of rules such 
as margin, suitability, arbitration); and
    (3) the incorporating SRO has reasonable procedures in place to 
provide written notice to its members each time a change is proposed to 
the incorporated rules of another SRO.
    The Commission believes that it is appropriate to issue an 
exemption, subject to the conditions described above, to allow Phlx to 
incorporate by reference the margin rules of the NYSE or CBOE (by 
allowing its members to elect to be bound by the margin rules of either 
the NYSE or CBOE), without being subject to the rule filing 
requirements of Section 19(b) of the Exchange Act whenever the SRO's 
margin rules that are incorporated by reference change. The Commission 
believes that this exemption will promote more efficient use of 
Commission and Phlx resources by avoiding duplicative rule filings 
based on simultaneous changes to identical rule text sought by more 
than one SRO. The Commission notes in granting this exemption, that 
Phlx by incorporating by reference another SRO's margin rules would 
agree to be governed by the incorporated rules, as amended from time to 
time, but not be required to file a separate proposed rule change with 
the Commission each time either the NYSE or CBOE seeks to modify its 
margin rules.
    Phlx is requesting to incorporate by reference the whole category 
of the NYSE and CBOE margin rules (i.e., did not ``cherry-pick'' 
certain individual rules within a category), which are regulatory rules 
and not trading rules. The Commission also has previously approved the 
incorporation by reference of the NYSE and CBOE margin rules for the 
International Securities Exchange and the Boston Options Exchange.\12\ 
The Commission notes that the Exchange previously requested, and the 
Commission granted, a request by Phlx to incorporate by reference, the 
NASD Code of Arbitration Procedure, subject to certain conditions.\13\ 
Consistent with the conditions attendant to its prior exemptive 
request, the Exchange has agreed to continue to provide written notice 
to its members whenever the NYSE or CBOE proposes a change to its 
margin rules.\14\ This procedure will provide Phlx members with notice 
of a proposed rule change that affects their interests, so that they 
would have the opportunity to comment on it.
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    \12\ Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004).
    \13\ See Exchange Act Release No. 49260 (February 17, 2004), 69 
FR 8500 (February 24, 2004).
    \14\ See supra note 1.
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    For the reasons discussed above, the Commission finds that the 
exemption is necessary or appropriate in the public interest, and is 
consistent with the protection of investors.
    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\15\ that Phlx, with respect to the margin rules of the NYSE and 
CBOE that Phlx proposes to incorporate by reference as specified above, 
and subject to the conditions described above, shall be exempt from 
rule filing requirements of Section 19(b) of the Exchange Act to the 
extent that Section 19(b) would otherwise require submission of a 
proposed rule change filing with the Commission.
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    \15\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(76).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20809 Filed 9-8-08; 8:45 am]

BILLING CODE 8010-01-P
