[Federal Register Volume 63, Number 246 (Wednesday, December 23, 1998)]
[Notices]
[Pages 71181-71183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33982]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40798; File No. SR-Phlx-98-45]
Self-Regulatory Organizations: Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto by the Philadelphia Stock Exchange,
Inc. Proposing To Adopt New Rule 949 Respecting Purchase, Sale,
Transfer, and Posting of Membership Transactions
December 16, 1998.
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 5, 1998, 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 the
Exchange. On December 15, 1998, the Exchange submitted an amendment to
the proposed rule change.\3\ The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Letter from Murray L. Ross, Vice President and Secretary,
Exchange, to Michael Walinskas, Deputy Associate Director, Division
of Market Regulation, SEC, dated December 14, 1998 (``Amendment No.
1). Amendment No. 1 corrected grammatical errors in the proposed
rule language.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to adopt new Rule 949 respecting the
purchase, sale, transfer and posting of membership transactions. The
proposed rule change codifies procedures for conducting the market for
Exchange memberships and provides that private transactions may only be
undertaken under certain specified circumstances. Below is the text of
the proposed rule change. Additions are italicized.
Rule 949 Purchase, Sale, Transfer and Posting of Membership
Transactions
A. Public Sales and Membership Market Procedures. A membership may
be purchased by an approved applicant, an existing member organization
or an approved lessor through the Office of the Secretary of the
Exchange in accordance with Exchange procedures. A bid stating the
price to be paid shall be submitted in writing to the Office of the
Secretary by an approved applicant, member organization or approved
[[Page 71182]]
lessor. Any bid shall be in increments of five hundred dollars ($500).
The Office of the Secretary shall file all bids according to the
highest price and the earliest submission date. The highest bid with
the earliest submission date shall be posted and published in the
Secretary's Bulletin of the Exchange.
All bids remain in effect for six months unless written revocation
thereof is received by the Office of the Secretary. When a bid filed in
accordance with the provisions of this rule is matched with an offer
filed in accordance with the provisions of this rule neither can be
changed or withdrawn. Not later than the fourteenth day following the
matching of the bid and offer, the purchaser shall deliver a certified
or cashier's check to the Office of the Secretary, made payable to the
Exchange, covering the purchase price of the membership.
B. A membership may be sold by the owner through the market
conducted by the Office of the Secretary in accordance with Exchange
procedures. A written offer for sale stating the acceptable price shall
be submitted to the Office of the Secretary. The Office of the
Secretary shall file all such offers according to the lowest price and
earliest submission date. The lowest offer with the earliest submission
date shall be posted by the Office of the Secretary and published in
the Secretary's Bulletin of the Exchange. All offers shall remain in
effect for six months unless written revocation thereof is received by
the Office of the Secretary. Any offer shall be in increments of five
hundred dollars ($500). When an offer filed in accordance with the
provisions of this rule is matched with a bid filed in accordance with
the provisions of this rule neither can be changed or withdrawn.
C. Confirmation of Sale by the Exchange. The sale of an Exchange
membership shall be deemed negotiated and contracted at the time the
filed bid and offer are matched in price and confirmed by the Office of
the Secretary of the Exchange and shall be considered consummated upon
the payment by the purchaser of the purchase price of the membership
and associated initiation and transfer fees as well as other charges
including pro-rated dues. In the event that the Exchange has not
received payment of the sums due on the purchase of the membership
within fourteen days after the contracted notice of arranged sale is
given by the Office of the Secretary of the Exchange, the arranged sale
shall be automatically canceled and the purchaser and seller restored
thereby to their respective status existing before the arranged sale.
Neither the purchaser nor seller shall have, assert or maintain any
rights, privileges or claims of any nature whatsoever against each
other or against the Exchange, its members, member organizations,
officers and employees, arising or resulting directly or indirectly
from or by such cancellation.
D. Private Sales and Transfers. All Ex-Exchange privately
negotiated sales and requests for transfer shall be posted and
published in the Secretary's Bulletin of the Exchange. Any or all
privately negotiated sales or requests for transfer must conform to one
of the following provisions:
(1) The owner of a membership (whether or not such membership is
registered for a member organization) is transferring such membership
to a spouse, brother, sister, parent, child, grandchild or grandparent,
provided the transferee is approved for membership or qualifies as an
approved lessor:
(2) The owner of a membership is transferring such membership to a
member organization which has succeeded, through statutory merger,
exchange of stock or acquisition of assets to the business of the
transferor:
(3) The owner of a membership is transferring such membership to a
member organization in which the transferor will maintain a substantial
interest, that is, an interest at least equal in value to the cost or
market price of the membership, whichever is lower:
(4) The owner of a membership is transferring such membership to an
individual or organization which is a partner, shareholder or member of
the transferor as part or all of a liquidation, or distribution of the
transferor,; or
(5) The owner of a membership is transferring such membership to a
member, member organization or approved lessor as a privately arranged
sale for monetary consideration that is not less than the posted bid
nor greater than the posted offer filed with the Office of the
Secretary of the Exchange.
Nothwitstanding the foregoing, a transfer which conforms to one of
the enumerated subparagraphs D 1 through 5 shall not become effective
unless the transferor deposits with the Office of the Secretary an
amount equal to the last sale of a membership, pursuant to paragraphs
A, B and C of this rule, of the same rights and privileges as the
membership being transferred. Said deposit shall be applied as through
it were proceeds of a sale of a membership or its transfer for the
purposes of By-Law Article XV. All other private sales shall be void.
E. Obligations of Terminating Members. Every member who sells or
transfers their membership pursuant to the provisions of these Rules
must be current in all filings and payments of dues, fees and charges
relating to that membership, including filing fees and charges required
by the Securities and Exchange Commission and the Securities Investor
Protection Corporation. If a member fails to make all such filings, or
to pay all such dues, fees and changes, the Office of the Secretary of
the Exchange may, notwithstanding other applicable provisions of these
Rules, withhold distribution of the proceeds of the sale of said
membership, or delay the effectiveness of the membership of the
transferee, until such time as the failures have been remedied.
F. Non-Responsibility of the Exchange. The Exchange and its
officers, members and employees shall be subject to no liability in
connection with any bid or offer of a membership, whether or not filed
formally with the Exchange as provided herein, unless such liability
results form negligence of the Exchange.
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 Exchange included statements
concerning the purpose of, and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange 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 rule codified procedures for conducting the market for
Exchange memberships and provides that private transactions may only be
undertaken under certain specified circumstances. The Exchange believes
the proposed rule change will provide equity and openness to all who
seek to purchase or sell a membership. The proposed rule provides that
transactions must be posted, published and be for monetary
consideration between the posted bid and offer between unrelated
parties. The proposed rule change also permits sales between related
entities, but requires publication in the Secretary's Bulletin.
Therefore, both members and nonmembers will have access to information
regarding all
[[Page 71183]]
transfers of memberships. Additionally, the Exhcnage will be protected
by requiring that the proceeds of all sales will be available to the
Exchange to satisfy any outstanding charges owed by the member.
The proposed rule provides that bids and offers must be made in
writing, and submitted to the Office of the Secretary by an approved
applicant, member organization, or approved lessor. Bids and offers may
only be filed in $500 increments. Additionally, the proposed rule
codifies exiting Exchange practice of requiring payment for a
membership by certified or cashier's check payable to the Exchange.
Furthermore, the rule specifies that sale of a membership shall be
deemed negotiated and contracted when the filed bid and offer are
matched in price and confirmed by the Office of the Secretary, and
consummated upon receipt of payment from the purchaser for the purchase
price and other associated membership initiation, transfer and prorated
dues and other fees.
Section D of the proposed rule sets forth the procedures to be
followed in privately negotiated sales and requests for transfer. This
section provides for posting of a deposit to the Exchange to cover
potential claims that could be asserted pursuant to By-Law Article
XV.\4\ Only those transactions that conform to Section D would be
processed for transfer and all other private sales would be void.
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\4\ By-Law Article XV sets forth procedures for transferring
memberships. Section 15-3 provides that proceeds are to distributed
according to a provided seniority list.
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The following outlines the provisions of the proposed new rule.
Section A provides the procedures for making an offer to purchase a
membership. Section B provides the procedure for an offer to sell a
membership. Section C contains the guidelines for determining the time
when membership sales are deemed negotiated and contracted and when
membership sales are consummated. Section D contains five situations
that are exempt from the procedures laid out in Sections A and B.
Subsection 1 contains sales to certain named categories of family
members. Subsection 2 concerns transfers to a firm which is the
member's successor in interest. Subsection 4 concerns transfer involved
in a dissolution of a members entity. Subsection 5 concerns other
private transfers that occur within the bid and offer of the public
market for memberships. Section E proscribes that all members selling a
membership must be current on all dues, fees and other membership
charges before the sale will be consummated. Section F limits the
liability of the Exchange to its own negligence in matters pertaining
to membership transactions.
In summary, only these transactions that confirm to specified
provisions of the proposed rule would be processed for transfer. All
other private sales would be void. The proposed rule is substantially
similar to and modeled after the provisions of the Pacific Exchange,
Inc. Rules 1.21 and 1.22 and the Chicago Board Options Exchange, Inc.
Rule 3.14(c). The proposed rule results from discussions with concerned
members and Exchange staff in an effort to codify the best practices of
other exchanges respecting procedures for conducting the market in
memberships and confirming existing Exchange practices to the
provisions of a new rule.
2. Basis
The Exchange believes the proposed rule change is consistent with
Section 6 of the Act in general,\5\ and in particular with Section
6(b)(5) \6\ because it is designed to promote just and equitable
principles of trade and protects investors and the public interest by
providing codified procedures for conducting the market in Exchange
memberships by the Office of the Secretary of the Exchange.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The PHLX does not believe that the proposed rule change will 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
Written comments were not received in response to Circular 98-109
which notified the membership of the intent of the Board of Governors
to propose a new rule concerning these matters.
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 within 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 PHLX 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, including 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.
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 will also be
available for inspection and copying at the principal office of PHLX.
All submissions should refer to File No. SR-Phlx-98-45 and should be
submitted by January 13, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-33982 Filed 12-22-98; 8:45 am]
BILLING CODE 8010-01-M