Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Floor Official Conflicts of Interest, 10738-10740 [E5-899]

Download as PDF 10738 Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices and regulations thereunder. The Commission finds that the proposed rule change is consistent with Section 6(b)(4) of the Act,13 which requires that the rules of the Exchange provide for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. The Commission believes that lowering the fee for inbound P Orders retroactively to transactions that settled on or after February 1, 2005 should reduce a financial disincentive to send P Orders to the Phlx. The Commission also believes that implementing a fee for inbound P/A Orders is consistent with the practices of the other Participants. The Commission believes that approving the proposed rule change, as amended, on a pilot basis, until July 31, 2005, will give the Exchange and the Commission further opportunity to evaluate whether Linkage fee are appropriate. The Commission believes that the proposed rule change, as amended, is generally consistent with the practices of other Participants and presents no new regulatory issues. Accordingly, the Commission finds good cause pursuant to Section 19(b)(2) of the Act,14 for approving this proposed rule change, as amended, prior to the thirtieth day after publication of notice thereof in the Federal Register. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,15 that the proposed rule change (SR–Phlx–2005– 10), as amended, is hereby approved on an accelerated basis for a pilot period to expire on July 31, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.16 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–878 Filed 3–3–05; 8:45 am] BILLING CODE 8010–01–P 13 15 U.S.C. 78f(b)(4). U.S.C. 78s(b)(2). 15 15 U.S.C. 78s(b)(2). 16 17 CFR 200.30–3(a)(12). 14 15 VerDate jul<14>2003 19:07 Mar 03, 2005 Jkt 205001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51272; File No. SR–Phlx– 2004–75] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Floor Official Conflicts of Interest on a case-by-case basis, in determining the eligibility or ineligibility of a particular Floor Official to participate in a particular ruling due to a conflict of interest. * * * * * F–27 Floor Official Rulings—Options Floor Officials are empowered to render rulings on the trading floor to resolve trading disputes occurring on February 28, 2005. and respecting activities on the trading Pursuant to Section 19(b)(1) of the floor. All rulings rendered by Floor Securities Exchange Act of 1934 Officials are effective immediately and (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 must be complied with promptly. notice is hereby given that on November Failure to promptly comply with a 9, 2004, the Philadelphia Stock ruling concerning a trading dispute may Exchange, Inc. (‘‘Phlx’’ or the result in referral to the Business ‘‘Exchange’’) filed with the Securities Conduct Committee. Failure to and Exchange Commission (‘‘SEC’’ or promptly comply with other rulings ‘‘Commission’’) the proposed rule issued pursuant to Order and Decorum change as described in Items I, II, and Regulations or Floor Procedure Advices and not concerning a trading dispute III below, which Items have been may result in an additional violation. prepared by the Phlx. The Commission Floor Officials need not render is publishing this notice to solicit decisions in any instance where the comments on the proposed rule change request for a ruling was not made within from interested persons. a reasonable period of time. A Floor I. Self-Regulatory Organization’s Official should not render a decision or Statement of the Terms of Substance of authorize a citation where such Floor the Proposed Rule Change Official was involved in or affected by The Phlx proposes to amend the dispute, as well as in any situation Exchange Rule 124, Disputes, and where the Floor Official is not able to Option Floor Procedure Advices–27, objectively and fairly render a decision. Floor Official Rulings—Options (‘‘OFPA Floor Officials shall endeavor to be prompt in rendering decisions. F–27’’), to authorize Exchange staff to However, in any instance where a Floor determine that a Floor Official is Official has determined that the benefits ineligible to participate in a particular of further discovery as to the facts and ruling where it appears that such Floor circumstances of any matter under Official has a conflict of interest. Below is the amended text of the review outweigh the monetary risks of proposed rule change. Proposed new a delayed rulings, the Floor Official may language is in italics. determine to delay rendering the ruling until such time as that further discovery * * * * * is completed. In issuing decisions for Disputes the resolution of trading disputes, Floor Officials shall institute the course of Rule 124. (a)–(d) * * * No change. Commentary: action deemed by the ruling Floor .01. Exchange staff may determine Official to be more fair to all parties that a Floor Official is ineligible to under the circumstances at the time. A participate in a particular ruling where Floor Official may direct the execution it appears that such Floor Official has of an order on the floor, to adjust the a conflict of interest. For purposes of transaction terms or participants to an this Rule, and without limitation, a executed order on the floor. However, conflict of interest exists where a Floor two Floor Officials may nullify a Official: (a) is directly or indirectly transaction if they determine the affiliated with a party seeking a Floor transaction to have been in violation of Official ruling; (b) is a participant or is Rules 1014 (Obligations and Restrictions directly or indirectly affiliated with a Applicable to specialist and ROTs), participant in a transaction that is the 1015 (Quotation Guarantees), 1017 (Priority and Parity at Openings in subject of a Floor Official ruling; (c) is Options), 1033 (Bids and Offers) or 1080 a debtor or creditor of a party seeking (AUTOM). a Floor Official ruling; or (d) is an A minimum of three members of the immediate family member of a party seeking a Floor Official ruling. Exchange Sub-Committee on Rules and Rulings, a staff may consider other circumstances, sub-committee of the standing committee, or the Chairperson of the 1 15 U.S.C. 78s(b)(1). standing committee (or his designee) if 2 17 CFR 240.19b–4. three Sub-Committee members cannot PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 E:\FR\FM\04MRN1.SGM 04MRN1 Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices be promptly convened, shall be empowered by the standing committee to review Floor Official rulings (‘‘Review Panel’’). Requests for a review must be submitted to the Director of the Market Surveillance Department of the Exchange (or his designee) within 15 minutes from the time the contested ruling was rendered. Any person who appeals a Floor Official ruling concerning a trading dispute and loses will be subject to a $250.00 fee upon a finding by the Review Panel that such appeal is frivolous. The Review Panel shall endeavor to meet on the matter as soon as practicable after notice of a request for a review of a Floor Official ruling. Floor Official rulings may be sustained, overturned or modified by a majority vote of the Review Panel members present. In making a determination, the Review Panel may consider facts and circumstances not available to the ruling Floor Official as well as action taken by the parties in reliance on the Floor Official’s ruling (e.g., cover, hedge, and related trading activity). Decisions of the Review Panel will be considered final decisions of the standing committee and may be appealed to the Exchange’s Board of Governors pursuant to Exchange ByLaw Article XI. Neither Floor Official rulings nor Review Panel decisions reviewing Floor Official rulings preclude a person from also availing upon the Exchange’s Arbitration facilities. Exchange staff may determine that a Floor Official is ineligible to participate in a particular ruling where it appears that such Floor Official has a conflict of interest. For purposes of this Rule, and without limitation, a conflict of interest exists where a Floor Official: (a) Is directly or indirectly affiliated with a party seeking a Floor Official ruling; (b) is a participant or is directly or indirectly affiliated with a participant in a transaction that is the subject of a Floor Official ruling; (c) is a debtor or creditor of a party seeking a Floor Official ruling; or (d) is an immediate family member of a party seeking a Floor Official ruling. Exchange staff may consider other circumstances, on a caseby-case basis, in determining the eligibility or ineligibility of a particular Floor Official to participate in a particular ruling due to a conflict of interest. FINE SCHEDULE * * * No change. * * * * * * VerDate jul<14>2003 19:07 Mar 03, 2005 Jkt 205001 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 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. The 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 The purpose of the proposed rule change is to preclude Floor Officials from participating in rulings where they have conflicts of interest that may interfere with their ability to make fair and objective decisions. Accordingly, the proposed rule change would provide expressly that Exchange staff would be authorized to disqualify a Floor Official from participation in a particular ruling where it appears that such Floor Official has a conflict of interest. Currently, Exchange Rule 124 and OFPA F–27 authorize Phlx Floor Officials to render rulings on the trading floor to resolve trading disputes occurring on and respecting activities on the trading floor. Floor Officials are also authorized to rule on Phlx member requests for relief from the requirements of certain rules in certain circumstances. The Exchange believes that a Floor Official should not, however, render a decision or authorize a citation where such Floor Official is involved in or affected by the dispute, as well as in any situation where the Floor Official is not able to objectively and fairly render a decision. The proposed rule change would authorize Exchange staff 3 to disqualify a Floor Official from participation in a particular ruling where it appears that such Floor Official has a conflict of interest. Generally, Exchange staff would assign a Floor Official to hear and rule on a trading dispute or member request for relief from the requirements of an Exchange rule. The proposed rule staff’’ generally refers to staff of the Exchange’s Office of Market Surveillance present on the trading floor. Telephone conversation among Richard Rudolph, Director and Counsel, Phlx, Gordon Fuller, Counsel to the Assistant Director, Division of Market Regulation, Commission and Geraldine Idrizi, Attorney, Division, Commission on December 15, 2004. PO 00000 3 ‘‘Exchange Frm 00149 Fmt 4703 Sfmt 4703 10739 change would require Exchange staff, prior to making any such assignment, to determine whether the Floor Official has a conflict of interest with respect to that particular dispute or request. If a conflict exists, then such Floor Official would be ineligible to participate in that ruling.4 The proposed rule would define a ‘‘conflict of interest’’ to exist where a Floor Official is directly or indirectly affiliated with a party seeking a Floor Official ruling; is a participant or is directly or indirectly affiliated with a participant in a transaction that is the subject of a Floor Official ruling; is a debtor or creditor of a party seeking a Floor Official ruling; or is an immediate family member of a party seeking a Floor Official ruling. The proposed rule would not limit the term ‘‘conflict of interest’’ to these four circumstances and Exchange staff would be authorized to consider other circumstances, on a case-by-case basis, in determining the eligibility of a particular Floor Official to participate in a particular ruling. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 5 in general, and furthers the objectives of Section 6(b)(5) of the Act 6 in particular, in that it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and to protect investors and the public interest, by providing expressly in the Exchange’s rules that Exchange staff would be authorized to disqualify a Floor Official from participation in a particular ruling where it appears that such Floor Official has a conflict of interest, thus ensuring that the Exchange is able to take all necessary steps to prevent Floor Officials from making rulings where they have conflicts of interest that may interfere with their ability to make fair and objective decisions. 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. 4 Telephone conversation among Richard Rudolph, Director and Counsel, Phlx, Gordon Fuller, Counsel to the Assistant Director, Division of Market Regulation, Commission and Geraldine Idrizi, Attorney, Division, Commission on December 15, 2004. 5 15 U.S.C. 78s(b). 6 15 U.S.C. 78s(b)(5). E:\FR\FM\04MRN1.SGM 04MRN1 10740 Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received. 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 Exchange consents, the Commission shall: (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. 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 rulecomments@sec.gov. Please include File Number SR–Phlx–2004–75 on the subject line. 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–2004–75 and should be submitted on or before March 25, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.7 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–899 Filed 3–3–05; 8:45 am] BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 10043 and # 10044] Illinois Disaster # IL–00001 U.S. Small Business Administration. ACTION: Notice. AGENCY: 19:07 Mar 03, 2005 Jkt 205001 PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Dated: February 23, 2005. Hector V. Barreto, Administrator. [FR Doc. 05–4237 Filed 3–3–05; 8:45 am] BILLING CODE 8025–01–P SUMMARY: This is a notice of an Administrative declaration of a disaster for the State of Illinois, dated 02/23/ 2005. Incident: Flooding. Incident Period: 01/01/2005 through 02/12/2005. Effective Date: 02/23/2005. Physical Loan Application Deadline Paper Comments Date: 04/25/2005. • Send paper comments in triplicate EIDL Loan Application Deadline Date: to Jonathan G. Katz, Secretary, 11/23/2005. Securities and Exchange Commission, ADDRESSES: Submit completed loan 450 Fifth Street, NW., Washington, DC applications to: U.S. Small Business 20549–0609. Administration, Disaster Area Office 1, All submissions should refer to File 360 Rainbow Blvd. South 3rd Floor, Number SR–Phlx–2004–75. This file Niagara Falls, NY 14303. number should be included on the subject line if e-mail is used. To help the FOR FURTHER INFORMATION CONTACT: Alan Escobar, Office of Disaster Commission process and review your Assistance, U.S. Small Business comments more efficiently, please use only one method. The Commission will Administration, 409 3rd Street, Suite post all comments on the Commission’s 6050, Washington, DC 20416. Internet Web site (http://www.sec.gov/ SUPPLEMENTARY INFORMATION: Notice is rules/sro.shtml). Copies of the hereby given that as a result of the submission, all subsequent Administrator’s disaster declaration on amendments, all written statements 02/23/2005, applications for disaster with respect to the proposed rule loans may be filed at the address listed change that are filed with the above or other locally announced Commission, and all written locations. communications relating to the The following areas have been proposed rule change between the determined to be adversely affected by Commission and any person, other than the disaster: those that may be withheld from the 7 17 CFR 200.30–3(a)(12). public in accordance with the VerDate jul<14>2003 Primary Counties: Iroquois. Contiguous Counties: Illinois, Ford, Kankakee, Vermilion, Indiana, Benton, and Newton. The Interest Rates are: Homeowners With Credit Available Elsewhere—5.875 Homeowners Without Credit Available Elsewhere—2.937 Businesses With Credit Available Elsewhere—5.800 Businesses and Small Agricultural Cooperatives Without Credit Available Elsewhere—4.000 Other (Including Non-Profit Organizations) With Credit Available Elsewhere—4.750 Businesses And Non-Profit Organizations Without Credit Available Elsewhere—4.000 The number(s) assigned to this disaster for physical damage is 10043 6 and for economic injury is 10044 0. The States which received EIDL Decl # are: Illinois and Indiana. TENNESSEE VALLEY AUTHORITY Paperwork Reduction Act of 1995, as Amended by Public Law 104–13; Proposed Collection, Comment Request. Tennessee Valley Authority. Proposed collection; comment AGENCY: ACTION: request. SUMMARY: The proposed information collection described below will be submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35, as amended). The Tennessee Valley Authority is soliciting public comments on this proposed collection as provided by 5 CFR Section 1320.8(d)(1). Requests for information, including copies of the information collection proposed and supporting documentation, should be directed to the Agency Clearance Officer: Alice D. Witt, Tennessee Valley Authority, 1101 Market Street (EB 5B), Chattanooga, Tennessee 37402–2801; (423) 751–6832. (SC: 001DCCB) Comments should be sent to the Agency Clearance Officer no later than May 3, 2005. SUPPLEMENTARY INFORMATION: Type of Request: Regular submission. E:\FR\FM\04MRN1.SGM 04MRN1

Agencies

[Federal Register Volume 70, Number 42 (Friday, March 4, 2005)]
[Notices]
[Pages 10738-10740]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-899]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51272; File No. SR-Phlx-2004-75]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Floor 
Official Conflicts of Interest

February 28, 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, 2004, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
the ``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 Phlx. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend Exchange Rule 124, Disputes, and Option 
Floor Procedure Advices-27, Floor Official Rulings--Options (``OFPA F-
27''), to authorize Exchange staff to determine that a Floor Official 
is ineligible to participate in a particular ruling where it appears 
that such Floor Official has a conflict of interest.
    Below is the amended text of the proposed rule change. Proposed new 
language is in italics.
* * * * *

Disputes

    Rule 124. (a)-(d) * * * No change.
    Commentary:
    .01. Exchange staff may determine that a Floor Official is 
ineligible to participate in a particular ruling where it appears that 
such Floor Official has a conflict of interest. For purposes of this 
Rule, and without limitation, a conflict of interest exists where a 
Floor Official: (a) is directly or indirectly affiliated with a party 
seeking a Floor Official ruling; (b) is a participant or is directly or 
indirectly affiliated with a participant in a transaction that is the 
subject of a Floor Official ruling; (c) is a debtor or creditor of a 
party seeking a Floor Official ruling; or (d) is an immediate family 
member of a party seeking a Floor Official ruling. Exchange staff may 
consider other circumstances, on a case-by-case basis, in determining 
the eligibility or ineligibility of a particular Floor Official to 
participate in a particular ruling due to a conflict of interest.
* * * * *

F-27 Floor Official Rulings--Options

    Floor Officials are empowered to render rulings on the trading 
floor to resolve trading disputes occurring on and respecting 
activities on the trading floor. All rulings rendered by Floor 
Officials are effective immediately and must be complied with promptly. 
Failure to promptly comply with a ruling concerning a trading dispute 
may result in referral to the Business Conduct Committee. Failure to 
promptly comply with other rulings issued pursuant to Order and Decorum 
Regulations or Floor Procedure Advices and not concerning a trading 
dispute may result in an additional violation. Floor Officials need not 
render decisions in any instance where the request for a ruling was not 
made within a reasonable period of time. A Floor Official should not 
render a decision or authorize a citation where such Floor Official was 
involved in or affected by the dispute, as well as in any situation 
where the Floor Official is not able to objectively and fairly render a 
decision.
    Floor Officials shall endeavor to be prompt in rendering decisions. 
However, in any instance where a Floor Official has determined that the 
benefits of further discovery as to the facts and circumstances of any 
matter under review outweigh the monetary risks of a delayed rulings, 
the Floor Official may determine to delay rendering the ruling until 
such time as that further discovery is completed. In issuing decisions 
for the resolution of trading disputes, Floor Officials shall institute 
the course of action deemed by the ruling Floor Official to be more 
fair to all parties under the circumstances at the time. A Floor 
Official may direct the execution of an order on the floor, to adjust 
the transaction terms or participants to an executed order on the 
floor. However, two Floor Officials may nullify a transaction if they 
determine the transaction to have been in violation of Rules 1014 
(Obligations and Restrictions Applicable to specialist and ROTs), 1015 
(Quotation Guarantees), 1017 (Priority and Parity at Openings in 
Options), 1033 (Bids and Offers) or 1080 (AUTOM).
    A minimum of three members of the Sub-Committee on Rules and 
Rulings, a sub-committee of the standing committee, or the Chairperson 
of the standing committee (or his designee) if three Sub-Committee 
members cannot

[[Page 10739]]

be promptly convened, shall be empowered by the standing committee to 
review Floor Official rulings (``Review Panel''). Requests for a review 
must be submitted to the Director of the Market Surveillance Department 
of the Exchange (or his designee) within 15 minutes from the time the 
contested ruling was rendered. Any person who appeals a Floor Official 
ruling concerning a trading dispute and loses will be subject to a 
$250.00 fee upon a finding by the Review Panel that such appeal is 
frivolous. The Review Panel shall endeavor to meet on the matter as 
soon as practicable after notice of a request for a review of a Floor 
Official ruling. Floor Official rulings may be sustained, overturned or 
modified by a majority vote of the Review Panel members present. In 
making a determination, the Review Panel may consider facts and 
circumstances not available to the ruling Floor Official as well as 
action taken by the parties in reliance on the Floor Official's ruling 
(e.g., cover, hedge, and related trading activity). Decisions of the 
Review Panel will be considered final decisions of the standing 
committee and may be appealed to the Exchange's Board of Governors 
pursuant to Exchange By-Law Article XI. Neither Floor Official rulings 
nor Review Panel decisions reviewing Floor Official rulings preclude a 
person from also availing upon the Exchange's Arbitration facilities.
    Exchange staff may determine that a Floor Official is ineligible to 
participate in a particular ruling where it appears that such Floor 
Official has a conflict of interest. For purposes of this Rule, and 
without limitation, a conflict of interest exists where a Floor 
Official: (a) Is directly or indirectly affiliated with a party seeking 
a Floor Official ruling; (b) is a participant or is directly or 
indirectly affiliated with a participant in a transaction that is the 
subject of a Floor Official ruling; (c) is a debtor or creditor of a 
party seeking a Floor Official ruling; or (d) is an immediate family 
member of a party seeking a Floor Official ruling. Exchange staff may 
consider other circumstances, on a case-by-case basis, in determining 
the eligibility or ineligibility of a particular Floor Official to 
participate in a particular ruling due to a conflict of interest.
    FINE SCHEDULE * * * No change.
* * * * * *

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 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. The 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
    The purpose of the proposed rule change is to preclude Floor 
Officials from participating in rulings where they have conflicts of 
interest that may interfere with their ability to make fair and 
objective decisions. Accordingly, the proposed rule change would 
provide expressly that Exchange staff would be authorized to disqualify 
a Floor Official from participation in a particular ruling where it 
appears that such Floor Official has a conflict of interest.
    Currently, Exchange Rule 124 and OFPA F-27 authorize Phlx Floor 
Officials to render rulings on the trading floor to resolve trading 
disputes occurring on and respecting activities on the trading floor. 
Floor Officials are also authorized to rule on Phlx member requests for 
relief from the requirements of certain rules in certain circumstances. 
The Exchange believes that a Floor Official should not, however, render 
a decision or authorize a citation where such Floor Official is 
involved in or affected by the dispute, as well as in any situation 
where the Floor Official is not able to objectively and fairly render a 
decision.
    The proposed rule change would authorize Exchange staff \3\ to 
disqualify a Floor Official from participation in a particular ruling 
where it appears that such Floor Official has a conflict of interest. 
Generally, Exchange staff would assign a Floor Official to hear and 
rule on a trading dispute or member request for relief from the 
requirements of an Exchange rule. The proposed rule change would 
require Exchange staff, prior to making any such assignment, to 
determine whether the Floor Official has a conflict of interest with 
respect to that particular dispute or request. If a conflict exists, 
then such Floor Official would be ineligible to participate in that 
ruling.\4\ The proposed rule would define a ``conflict of interest'' to 
exist where a Floor Official is directly or indirectly affiliated with 
a party seeking a Floor Official ruling; is a participant or is 
directly or indirectly affiliated with a participant in a transaction 
that is the subject of a Floor Official ruling; is a debtor or creditor 
of a party seeking a Floor Official ruling; or is an immediate family 
member of a party seeking a Floor Official ruling. The proposed rule 
would not limit the term ``conflict of interest'' to these four 
circumstances and Exchange staff would be authorized to consider other 
circumstances, on a case-by-case basis, in determining the eligibility 
of a particular Floor Official to participate in a particular ruling.
---------------------------------------------------------------------------

    \3\ ``Exchange staff'' generally refers to staff of the 
Exchange's Office of Market Surveillance present on the trading 
floor. Telephone conversation among Richard Rudolph, Director and 
Counsel, Phlx, Gordon Fuller, Counsel to the Assistant Director, 
Division of Market Regulation, Commission and Geraldine Idrizi, 
Attorney, Division, Commission on December 15, 2004.
    \4\ Telephone conversation among Richard Rudolph, Director and 
Counsel, Phlx, Gordon Fuller, Counsel to the Assistant Director, 
Division of Market Regulation, Commission and Geraldine Idrizi, 
Attorney, Division, Commission on December 15, 2004.
---------------------------------------------------------------------------

 2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \6\ in particular, in that it is designed to promote 
just and equitable principles of trade, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and to protect investors and the public interest, by providing 
expressly in the Exchange's rules that Exchange staff would be 
authorized to disqualify a Floor Official from participation in a 
particular ruling where it appears that such Floor Official has a 
conflict of interest, thus ensuring that the Exchange is able to take 
all necessary steps to prevent Floor Officials from making rulings 
where they have conflicts of interest that may interfere with their 
ability to make fair and objective decisions.
---------------------------------------------------------------------------

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

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.

[[Page 10740]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received.

 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 Exchange consents, the Commission shall:
    (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. 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-2004-75 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-Phlx-2004-75. 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-2004-75 and should be submitted on or before March 
25, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-899 Filed 3-3-05; 8:45 am]
BILLING CODE 8010-01-P