Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto To Amend the By-Laws, Rules and Option Floor Procedure Advices of NASDAQ OMX PHLX, Inc., 16249-16255 [E9-8001]
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Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices
volume options classes that trade in the
Exchange’s Second Market. Further, no
other exchange requires its market
makers to participate in the opening
rotation in 100% of the series in options
classes in which it makes a market. For
the foregoing reasons, this rule filing
qualifies for immediate effectiveness as
a ‘‘non-controversial’’ rule change under
paragraph (f)(6) of Rule 19b–4 of the
Act, as it does not raise any new, unique
or substantive issues, and is beneficial
for competitive purposes and to
promote a free and open market for the
benefit of investors.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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:
dwashington3 on PROD1PC60 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2009–15 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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of the filing also will be available for
inspection and copying at the principal
office of the Exchange. 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–ISE–
2009–15 and should be submitted on or
before April 30, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.5
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–8066 Filed 4–8–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59697; File No. SR–Phlx–
2009–23]
Self-Regulatory Organizations;
NASDAQ OMX PHLX, Inc.; Notice of
Filing of a Proposed Rule Change and
Amendment No. 1 Thereto To Amend
the By-Laws, Rules and Option Floor
Procedure Advices of NASDAQ OMX
PHLX, Inc.
April 2, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
Paper Comments
notice is hereby given that on March 13,
• Send paper comments in triplicate
2009, NASDAQ OMX PHLX, Inc.
to Elizabeth M. Murphy, Secretary,
(‘‘Phlx’’ or the ‘‘Exchange’’) filed with
Securities and Exchange Commission,
the Securities and Exchange
100 F Street, NE., Washington, DC
Commission (‘‘Commission’’) the
20549–1090.
proposed rule change as described in
All submissions should refer to File
Items I, II, and III below, which Items
Number SR–ISE–2009–15. This file
have been prepared by the Exchange.
number should be included on the
On March 25, 2009, Phlx filed
subject line if e-mail is used. To help the
Amendment No. 1 to the proposed rule
Commission process and review your
change. The Commission is publishing
comments more efficiently, please use
this notice to solicit comments on the
only one method. The Commission will
proposed rule change, as amended, from
post all comments on the Commission’s
interested persons.
Internet Web site (https://www.sec.gov/
I. Self-Regulatory Organization’s
rules/sro.shtml). Copies of the
Statement of the Terms of Substance of
submission, all subsequent
the Proposed Rule Change
amendments, all written statements
with respect to the proposed rule
The Exchange proposes to amend its
change that are filed with the
By-Laws, Rules of the Board of
Commission, and all written
Governors and Options Rules (the two
communications relating to the
sets of rules are together known as the
proposed rule change between the
Commission and any person, other than
5 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
those that may be withheld from the
2 17 CFR 240.19b–4.
public in accordance with the
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16249
‘‘Rules’’), and Option Floor Procedure
Advices (‘‘OFPAs’’ or ‘‘Advices’’) 3 to
make changes to certain standing
committees and processes of the
Exchange. Specifically, the Exchange
proposes to eliminate: (a) The
Admissions Committee; (b) the Options
Allocation, Evaluation and Securities
Committee; (c) the Options Committee;
(d) the Foreign Currency Options
Committee; and (e) the Weekly Bulletin.
Additionally, the Exchange proposes to:
(a) make the Finance Committee
optional; (b) change the structure of the
Business Conduct Committee and
eliminate reference to the Hearing
Officer; and (c) authorize action in the
event of an emergency or extraordinary
market conditions.4
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxphlx.cchwallstreet.com/
NASDAQOMXPHLX/Filings/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
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 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
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
3 OFPAs are discussed in Rule 970, which sets
forth the criteria for the imposition of a fine (not
to exceed $5,000) on any member, member
organization, or any partner, officer, director or
person employed by or associated with any member
or member organization, for any violation of an
OFPA, which violation the Exchange determined is
minor in nature (known as the ‘‘Minor Rule Plan’’).
Such a fine would be imposed in lieu of
commencing a ‘‘disciplinary proceeding’’ as that
term is used in Exchange Rules 960.1–960.12, and
would be subject to Rule 19d–1 under the Act.
4 Certain changes proposed in the present filing
may be affected by SR–Phlx–2009–17, which is
pending. See Securities Exchange Act Release No.
59538 (March 9, 2009), 74 FR 11152 (March 16,
2009). We would amend the present filing if
necessary upon approval of SR–Phlx–2009–17.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange was recently acquired
by The NASDAQ OMX Group, Inc.
(‘‘NASDAQ OMX’’).5
The purpose of the proposed rule
change is to streamline the governance
of the Exchange by eliminating and/or
consolidating certain standing
committees of the Board to make the
Exchange’s governance process more
similar to that of NASDAQ OMX’s other
U.S. SROs, The NASDAQ Stock Market
LLC (the ‘‘NASDAQ Stock Market’’) and
NASDAQ OMX BX, Inc. (‘‘BX’’). The
duties of the eliminated committees will
generally be administered by Exchange
staff or other Board committees. The
Exchange also proposes to codify the
ability of the Exchange to take
emergency action, change how
information is provided to Exchange
membership, and update the
functioning of the Exchange’s
disciplinary committee.
The Exchange proposes to: Eliminate
the Admissions Committee and
Allocation, Evaluation and Securities
Committee; consolidate the Options
Committee and the Foreign Currency
Options Committee into the Quality of
Markets Committee; and eliminate the
use of the Weekly Bulletin. The
Exchange also proposes to: Change the
membership structure of the Business
Conduct Committee and eliminate the
Hearing Officer; make the Finance
Committee optional at the discretion of
the Board; and authorize the Chief
Executive Officer and the President of
the Exchange to take action in the event
of an emergency or extraordinary market
conditions. As a result of this filing,
eleven standing committees of the
Exchange’s Board would be reduced to
seven, one of which would be optional
at the discretion of the Board.6
5 On July 24, 2008, NASDAQ OMX acquired all
of the common stock of the Exchange, which
became a wholly owned subsidiary of NASDAQ
OMX. The Exchange has continued to operate as a
separate self-regulatory organization (‘‘SRO’’). See
Securities Exchange Act Release No. 58179 (July 17,
2008), 73 FR 42874 (July 23, 2008) (SR–Phlx–2008–
31). See also Securities Exchange Act Release No.
58183 (July 17, 2008), 73 FR 42850 (July 23, 2008)
(SR–NASDAQ–2008–035). The Exchange recently
changed its name to NASDAQ OMX PHLX. See
Securities Exchange Act Release No. 58380 (August
18, 2008), 73 FR 49728 (August 22, 2008) (SR–Phlx–
2008–61).
6 The following Exchange Committees would
remain after this filing: Executive; Audit; Business
Conduct; Compensation; Nominating, Elections and
Governance; Quality of Markets; and Finance
(optional). But see Securities Exchange Act Release
No. 59538 (March 9, 2009) (SR–Phlx–2009–17),
which discusses, among other things, renaming of
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The Exchange believes that its
proposal should considerably
streamline Exchange governance to the
benefit of the Exchange and its
membership. Moreover, the Exchange
believes that its proposal is conducive
to the objective of Phlx, BX, and the
NASDAQ Stock Market having similar
by-laws and/or rules where practical.
Admissions Committee
The Exchange proposes to amend its
By-Law Article X, Section 10–1,
Standing Committees, which lists all
Exchange standing committees, to
eliminate the Admissions Committee.
The Exchange proposes to delete its ByLaw Article X, Section 10–6,
Admissions Committee, which sets forth
the duties and functions of the
Admissions Committee,7 and transfer
those duties to the Exchange’s
Membership Department in proposed
new Rule 900.1, General Powers and
Duties of Membership Department. The
Exchange proposes to delete By-Law
Article XII, Section 12–5, Application,
which sets forth the duties and
functions of the Admissions Committee
in respect of applications for permits
and admission as foreign currency
options (‘‘FCO’’) participants,8 and
transfer the relevant provisions of
Section 12–5 to the Membership
Department in new Rule 900.2,
Membership Applications.
Over the years, Exchange staff has
been involved in virtually all aspects of
the Exchange’s admission and
membership process, including assisting
the Admissions Committee in the
review of membership applications,
renewals and requests for contraction
and expansion of membership
privileges, and communicating with the
Admissions Committee and Phlx
membership regarding admission and
the Nominating, Elections and Governance
Committee.
7 Pursuant to By-Law Article X, Section 10–6, the
Admissions Committee has jurisdiction over,
among other things: the review of applications of
non-members seeking to become members, member
organizations, permit holders, foreign currency
options participants, or foreign currency options
participant organizations; changes to membership
affiliation and status; determinations regarding
affiliations of existing members and member
organization firms and determinations regarding
inactive nominees [sic]; and qualification,
revocation and reinstatement of permits and foreign
currency options participations.
8 By-Law Article XII, Section 12–5 describes the
processing of applications for permits or admission
as FCO participants and indicates, among other
things, that: Exchange staff (the Membership
Services Department) initially receives, reviews and
makes recommendations regarding such
applications; the Admissions Committee makes the
final application determinations; and applicant
names are posted for a period of seven days in the
Weekly Bulletin and on the Web site of the
Exchange.
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membership. The Exchange believes
that staff time allocated to
communicating with the Admissions
Committee, organizing its meetings, and
communicating on its behalf can be
better utilized and redirected to
performance of admission and
membership-related functions by the
new Membership Department, which is
currently known as the Membership
Services Department. The Exchange
therefore proposes to have the
Membership Department perform the
functions of the Admissions Committee.
The Exchange proposes to expressly
provide that the Membership
Department will administer the
Exchange rules that are currently
administered by the Admissions
Committee.9 The Exchange also
proposes to delete all references to the
Admissions Committee, clarify
references to the Membership
Department, and generally make
changes in a variety of by-laws and rules
that correspond to by-law amendments
discussed herein.10
Proposed new Rule 900.1, which is
based on deleted By-Law Article X,
Section 10–6, indicates that the
Membership Department will be in
charge of the membership and
admissions processes at the Exchange.
As such, the Membership Department
will have jurisdiction over, among other
things, admission, denial, reinstatement,
and revocation of membership to the
Exchange; supervision of members,
membership organizations and
partnership arrangements; qualification,
registration, and determinations
regarding affiliations of entities as
foreign currency options participants;
and rights and privileges of permit
holders.11
9 See Rule 900 (indicating that the Membership
Department will administer Rules 901 to 949 and
971 and 972, inclusive).
10 ‘‘Membership Department’’ in By-Law Article I,
Section 1–1(mm) replaces the Exchange’s
Membership Services Department. See also By-Law
Article I, Section 1–1, Article IV, Section 4–4,
Article V, Section 5–8, Article XI, Section 11–1,
Article XIII, Sections 13–2, 13–6, 13–8, Article XIV,
Section 14–5, Article XV, Sections 15–1, 15–2,
15–3, 15–6, 15–7, 15–8, 15–10 Article XVII,
Sections 17–1, 17–2, 17–3, 17–4, 17–5, and Article
XXVII, Section 27–4; and Rules 1, 173, 600, 601,
602, 901, 902, 904, 906, 907, 909, 921, 922, 930,
949, and 1090.
11 The Exchange proposes to transfer from By-Law
Article X, Section 10–6 to new Rule 900.1 only
those substantive areas that are relevant to the
structure of the admissions and membership
process overseen by the Membership Department.
For example, the provision in Section 10–6 that the
Business Conduct Committee share jurisdiction
over the revocation of permits and foreign currency
options participations in connection with
disciplinary matters with the Admissions
Committee, and references to the Admissions
Committee are not transferred to Rule 900.1.
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Proposed new Rule 900.2, which is
based on deleted By-Law Article XII,
Section 12–5, indicates that applicants
for a permit or admission as a member
or as a foreign currency options
participant shall initiate the procedure
by filing an application with the
Membership Department in such form
as prescribed by the department. All
applications will be reviewed and acted
on by the Membership Department.
Should the Membership Department not
approve an application, it shall notify
the applicant in writing of the specific
grounds for denial.12
An applicant that is not approved has
a right to an appeal hearing pursuant to
By-Law Article XI. The process of
appealing from standing committee
decisions is set forth in By-Law Article
XI, Section 11–1(a), which indicates that
appeals from standing committee
decisions are initiated by filing with the
Secretary of the Exchange a notice of
appeal within 10 days after the decision
has been rendered. The Exchange
proposes to add the Membership
Department into By-Law Article XI,
Section 11–1(a) to permit appeals from
Membership Department decisions. The
Exchange proposes to similarly add the
Membership Department into By-Law
Article XI, Section 11–1(c) to indicate
that appeals from decisions of the
Membership Department will be heard
by a special committee of the Board
composed of three Governors, at least
one of whom is an Independent
Governor (the ‘‘Special Committee’’). A
decision of the Special Committee is not
appealable to the Board.
The Exchange believes that the
elimination of the Admissions
Committee and transfer of its duties to
the Membership Department will begin
to align Exchange admissions and
membership processing more closely to
that of NASDAQ OMX and/or the
NASDAQ Stock Market.13
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Weekly Bulletin
The Exchange proposes to eliminate
publication of its Weekly Bulletin (the
12 The Exchange proposes to transfer from deleted
By-law Article XII, Section 12–5 to new Rule 900.2
only those substantive areas that are relevant to the
processing of applications. Provisions in Section
12–5 regarding posting of applicant names for a
seven day period in the Weekly Bulletin and on the
Exchange’s Web site; references to the Admissions
Committee; and references to the Demutualization
Merger, see Securities Exchange Act Release No.
49098 (January 16, 2004), 69 FR 3974 (January 27,
2004) (SR–Phlx–2003–73), for example, are not
transferred to Rule 900.2.
13 The NASDAQ Stock Market does not have an
Admissions Committee. See NASDAQ Stock Market
By-Law (‘‘NASDAQ By-Law’’) Article III, Sections
5 and 6. Membership application processing and
decisions regarding NASDAQ membership are
handled by staff. See NASDAQ Stock Market Rule
(‘‘NASDAQ Rule’’) 1000 et seq.
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‘‘Bulletin’’), which contains, among
other things, changes in permit holder
and member organization status and
applications made to the Exchange.14
The Bulletin invites readers to report
information regarding applications and
applicants. The current admissions
process requires that, if the Admissions
Committee votes favorably regarding a
request by an applicant, his or her name
has to be posted for a period of 7 days
in the Bulletin and on the Exchange’s
Web site. If during this time an
objection to provision of a permit or
application is received by the
Admissions Committee (the ‘‘objection
process’’), it must reconsider its
favorable vote.15
The Exchange believes that admission
and membership decisions can be
administered by the Exchange. The
Exchange therefore proposes to
eliminate the objection process and
notification in the Bulletin and/or on its
Web site. The Exchange intends to
instead provide notification regarding
membership approvals on the
Exchange’s Web site.
The Exchange believes that the
Bulletin, which at one time served as a
predominant means of communication
regarding exchange matters, is no longer
a viable means of communication in
today’s fast-paced, electronic world. As
such, the Exchange proposes to
terminate publication of the Bulletin
and to provide disciplinary and other
relevant information on its Web site.
Allocation Committee
The Exchange proposes to amend its
By-Law Article X, Section 10–1,
Standing Committees, to eliminate the
Options Allocation, Evaluation and
Securities Committee (the ‘‘Allocation
Committee’’). The Exchange proposes to
delete its By-Law X, Section 10–7,
Options Allocation, Evaluation and
Securities Committee, which sets forth
the duties and functions of the
14 The Bulletin, which is currently distributed in
electronic form, also provides notice of certain
matters such as, for example, the bid, ask and last
sales prices for Exchange memberships and
NASDAQ OMX Futures Exchange, Inc. (‘‘NFX’’)
(formerly Philadelphia Board of Trade or ‘‘PBOT’’)
shares; and disciplinary decisions issued and
sanctions imposed by the Exchange’s Business
Conduct Committee. See Supplementary Material to
By-Law Article XVIII, Section 18–2 for Board policy
of publicizing fines, censures and disciplinary
actions regarding members and member
organizations. The Exchange intends to provide this
information on its Web site.
15 See By-Law Article XII, Section 12–5. See also
By-Law Article XV, Section 15–1 regarding a 7 day
notice in the Bulletin; and By-Law Article XVII,
Section 17–5 regarding a 14 day notice in the
Bulletin prior to the Admission Committee
considering an application. See also By-Law Article
XV, Section 15–2 regarding a 7 day transfer notice.
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16251
Allocation Committee.16 The relevant
functions and duties of the committee
will be performed by Exchange staff.
Similar to Exchange staff involvement
with the admission and membership
process, Exchange staff has been
involved in all aspects of the Exchange’s
allocation process through its work with
the Allocation Committee. The time
allocated by Exchange staff to
communicating with and on behalf of
the Allocation Committee and
organizing its meetings can be better
utilized and redirected to performance
of allocation-related functions upon
elimination of the Allocation
Committee.17 In addition, the allocation
process often necessitates a fast
turnaround, such that calling committee
meetings, particularly during trading
hours, is often challenging. Thus, the
Exchange believes that allowing
Exchange staff to perform the functions
of the Allocation Committee should
significantly improve the flow and
efficiency of the allocation process.
With the elimination of the Allocation
Committee, the Exchange proposes to
expressly state that the Exchange will
administer the rules that are currently
administered by the Allocation
Committee.18 The Exchange also
proposes to delete all references to the
Allocation Committee, clarify references
to the Exchange or its staff, and
generally make changes in a variety of
by-laws, rules, and OFPAs that
correspond to by-law amendments
discussed herein.19
The Exchange believes that the
elimination of the Allocation Committee
16 Pursuant to By-Law Article X, Section 10–7, the
Allocation Committee has jurisdiction over, among
other things: the appointment or approval of
specialists, Streaming Quote Traders (‘‘SQTs’’) and
Remote Streaming Quote Traders (‘‘RSQTs’’);
allocation, retention and transfer of privileges to
deal in options on Exchange trading floors;
evaluation of the performance of specialists, SQTs
and RSQTs; and administration of the 500 series of
Exchange rules.
17 The Exchange’s Equity Allocation, Evaluation
and Securities Committee was eliminated with the
implementation of the Exchange’s electronic equity
trading system (XLE). See Securities Exchange Act
Release No. 54329 (August 17, 2006), 71 FR 50482
(August 25, 2006) (SR–Phlx–2006–43). XLE is no
longer operating.
18 See Rule 500 (indicating that Rules 500 through
599 will be administered by the Exchange). Unlike
the transfer of duties from the Admissions
Committee to a specific Membership Department,
the transfer of duties from the Allocation
Committee is generally to the ‘‘Exchange.’’ In
addition to the rules, the admission process is
described by the Exchange on its Web site.
19 See By-Law Article XI, Section 11–1 and ByLaw Article XXVII, Sections 27–3 and 27–4 [sic];
Rules 501, 505, 506, 507, 508, 510, 511, 513, 515,
602, and 1014; and OFPA B–6. See also Rules 525
and 526 (deleting rules regarding Allocation
Committee authority), and 509 (deleting rule
referring to outdated subcommittee of the
Allocation Committee).
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and transfer of its duties to the
Exchange should help make the
Exchange’s allocations structure more
similar to that of the NASDAQ Stock
Market.20
Options Committee and Foreign
Currency Options Committee
The Exchange is eliminating the
Options Committee and Foreign
Currency Options Committee (the ‘‘FCO
Committee’’), which are now two
separate Board committees, and
combining them into the Quality of
Markets Committee. In particular, the
Exchange proposes to amend its By-Law
Article X, Section 10–1, Standing
Committees to eliminate the Options
Committee and the FCO Committee
from the list of Exchange committees.
The Exchange proposes to delete its ByLaw Article X, Section 10–20, Options
Committee, and its By-Law Article X,
Section 10–17, Foreign Currency
Options Committee, setting forth the
duties and functions of the
committees.21 The Exchange then
proposes to fold these two committees
into the Quality of Markets Committee
(the ‘‘QMC’’) by amending the language
of By-Law Article X, Section 10–21,
Quality of Markets Committee, so that
the duties and functions of the
Exchange’s QMC would be analogous to
those of the NASDAQ Stock Market
QMC.22 Specifically, the new QMC
would have the following functions
respecting index, foreign currency, and
equity options as well as equities: 23 to
provide advice and guidance to the
Board on issues relating to the fairness,
integrity, efficiency, and
competitiveness of the information,
order handling, and execution
mechanisms of the Exchange from the
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20 The
NASDAQ Stock Market does not currently
have a Board committee similar to the Allocation
Committee. See NASDAQ Stock Market By-Law
Article III, Sections 5 and 6.
21 Pursuant to By-Law Article X, Section 10–20,
the Options Committee currently has jurisdiction
to, among other things: supervise the dealings of
members and market makers on the options trading
floor; recommend adoption of such rules as it
deems necessary for the convenient and orderly
transaction of business upon the equity and index
options trading floor; enforce rules and regulations
relating to order, decorum, health, safety and
welfare on the equity and index options trading
floor; and resolve trading disputes on the equity
and index options trading floor. Pursuant to Article
X, Section 10–17, the FCO Committee has
analogous powers and duties in respect of the FCO
trading floor. The Exchange notes that pursuant to
Rule 124, trading disputes are now settled by
Options Exchange Officials (‘‘OEOs’’). See
Securities Exchange Act Release No. 55877 (June 7,
2007), 72 FR 32937 (June 14, 2007) (SR–Phlx–2006–
87). OEOs are defined in Rule 1(pp).
22 See NASDAQ Stock Market By-Law Article III,
Section 6(c).
23 Equities do not currently trade on the
Exchange.
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perspective of investors (both individual
and institutional), retail firms, specialist
and registered options trader firms, and
other participants of the Exchange; and
to advise the Board with respect to
national market system plans and
linkages between the facilities of the
Exchange and other markets.
The new QMC would include broad
representation of various participant
groups in the Exchange, including
investors, specialist and registered
options trader (‘‘ROT’’) firms, retail
firms, and order entry firms.
Specifically, the QMC would include a
number of Member Representative
members 24 that is equal to at least 20
percent of the total number of members
of the committee. Furthermore, the
number of Non-Industry members (i.e.,
committee members not associated with
broker-dealers) 25 on the QMC would
equal the sum of the number of Industry
members 26 and Member Representative
24 ‘‘Member Representative member’’ is defined
as a member of any committee appointed by the
Board of Governors who has been elected or
appointed after having been nominated pursuant to
these By-Laws. The definition of ‘‘Member
Representative member’’ is also proposed to be
modified in SR–Phlx–2009–17. See proposed ByLaw Article I, Section 1–1(qq), which is based on
NASDAQ Stock Market By-Law Article I(r).
25 ‘‘Non-Industry member’’ is defined as a
member of any committee appointed by the Board
of Governors who is (i) a Public member; (ii) an
officer, director, or employee of an issuer of
securities listed on the Exchange; or (iii) any other
individual who would not be an Industry member.
See proposed By-Law Article I, Section 1–1(oo),
which is based on NASDAQ Stock Market By-Law
Article I(w). ‘‘Public Member’’ is defined as a
member of any committee appointed by the Board
of Governors who has no material business
relationship with a broker or dealer, the Exchange,
or its affiliates. See proposed By-Law Article I,
Section 1–1(pp) [sic], which is based on NASDAQ
Stock Market By-Law Article I(z). The definitions of
‘‘Non-Industry member’’ and ‘‘Public Member’’ are
also proposed to be modified in SR–Phlx–2009–17.
26 ‘‘Industry member’’ is defined as a member of
any committee appointed by the Board who (i) is
or has served in the prior three years as an officer,
director, or employee of a broker or dealer,
excluding an outside director or a director not
engaged in the day-to-day management of a broker
or dealer; (ii) is an officer, director (excluding an
outside director), or employee of an entity that
owns more than ten percent of the equity of a
broker or dealer, and the broker or dealer accounts
for more than five percent of the gross revenues
received by the consolidated entity; (iii) owns more
than five percent of the equity securities of any
broker or dealer, whose investments in brokers or
dealers exceed ten percent of his or her net worth,
or whose ownership interest otherwise permits him
or her to be engaged in the day-to-day management
of a broker or dealer; (iv) provides professional
services to brokers or dealers, and such services
constitute 20 percent or more of the professional
revenues received by the committee member or 20
percent or more of the gross revenues received by
the committee member’s firm or partnership; (v)
provides professional services to a director, officer,
or employee of a broker, dealer, or corporation that
owns 50 percent or more of the voting stock of a
broker or dealer, and such services relate to the
director’s, officer’s, or employee’s professional
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members. The Exchange believes that
the proposed composition of the QMC
would reflect a ‘‘fair representation’’ of
Exchange members.27
By-Law Article VIII, Section 8–1
currently states that the Chairs of the
Options Committee and the FCO
Committee preside over the Exchange’s
options and FCO trading floors. The
Exchange proposes to amend its By-Law
Article VIII, Section 8–1 to eliminate
reference to the Chairs of the Options
Committee and FCO Committee and to
indicate that the President of the
Exchange and his designee would be
vested with supervision over the
options trading floor.28 In particular,
updated Article VIII, Section 8–1 would
indicate that the President of the
Exchange and his designated staff shall
have: general supervision over the
options trading floor as well as general
supervision of the dealings of members
on the trading floor and on Exchange
trading systems, and of the premises of
the Exchange immediately adjacent
thereto; supervision of all connections
or means of communications with the
options trading floor; and supervision
over the location of equipment and the
assignment and use of space on the
options trading floor. Section 8–1 would
also indicate that the President shall
have supervision over relations with
other options exchanges; and that the
Exchange shall make and enforce rules
and regulations relating to order,
decorum, health, safety and welfare on
the options trading floor and the
immediately adjacent premises of the
Exchange and shall be empowered to
impose penalties for violations thereof.
The Exchange believes that vesting this
authority with the President of the
capacity and constitute 20 percent or more of the
professional revenues received by the committee
member or 20 percent or more of the gross revenues
received by the committee member’s firm or
partnership; or (vi) has a consulting or employment
relationship with or provides professional services
to the Exchange or any affiliate thereof or to FINRA
(or any predecessor) or has had any such
relationship or provided any such services at any
time within the prior three years. The definition of
‘‘Industry member’’ is also proposed to be modified
in SR–Phlx–2009–17. See proposed By-Law Article
I, Section 1–1(nn), which is based on NASDAQ
Stock Market By-Law Article I(m).
27 See Section 6(b)(3) of the Act setting forth,
among other things, the objective of ‘‘fair
representation’’ of an exchange’s members in the
administration of its affairs. 15 U.S.C. 78f(b)(3).
28 By-Law Article VIII, Section 8–1 also refers to
XLE, which was the Exchange’s electronic system
for the entry, display, execution, and reporting of
orders in NMS stocks. XLE was discontinued on
October 24, 2008, and is no longer operating. See
Securities Exchange Act Release No. 58613
(September 22, 2008), 73 FR 57181 (October 1,
2008) (SR–Phlx–2008–65). References to XLE will
be removed from By-Law Article VIII, Section 8–1;
Article I, Section 1–1; and Article X, Sections 10–
11 and 10–15.
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Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices
Exchange is appropriate, should
streamline Exchange processes, and is
similar to the NASDAQ Stock Market.29
As with other eliminated committees,
the Exchange proposes to delete all
references to the Options Committee
and the FCO Committee, clarify
references to the Exchange or its staff,
and generally make changes in a variety
of by-laws, rules, and OFPAs that
correspond to the proposed by-law
amendments.30
Business Conduct Committee
dwashington3 on PROD1PC60 with NOTICES
The Business Conduct Committee
(‘‘BCC’’) is the Exchange’s disciplinary
committee. It has exclusive jurisdiction
to, among other things: monitor
compliance with the Act and rules and
regulations thereunder, with the
Exchange’s By-Laws and Rules and any
interpretations thereof, and with the
rules, regulations and policies of the
Board or any Exchange committees; and
authorize the initiation of any
disciplinary actions or proceedings
brought by the Exchange.31 The BCC
currently consists of nine members that
include: three Independent Governors;
one member or person associated with
a member organization who conducts
business on XLE; one member who
conducts options business at the
Exchange; and four persons who are
members or persons associated with a
member organization. The Exchange
proposes to change the required number
of members on BCC and the
qualifications for committee
membership.
The Exchange proposes to change ByLaw Article X, Section 10–11 to give the
Board discretion to establish not less
than five or more than nine members of
BCC.32 The Exchange also proposes that
the BCC would be populated from three
distinct groups. The majority of the
committee members would be NonIndustry members and the remaining
committee members would be Industry
members. Significantly, to further
ensure fair representation of Exchange
members on this important
29 See NASDAQ Stock Market By-Law Article IV,
Section 5 (vesting general supervision of the
operations of the NASDAQ Stock Market in the
President).
30 See By-Law Article XXVII, Section 27–3; Rules
60, 101, 124, 508, 606, 1012, 1014, 1017, 1061,
1064, 1066, 1079, and 1080; and OFPAs A–12, A–
13, A–14, B–6, F–27, F–28, and F–31.
31 See By-Law Article X, Section 10–11. Because
the functions and duties of BCC are clearly set forth
in Section 10–11, the Exchange proposes to delete
Rule 700, Powers and Duties, which the Exchange
believes superfluously lists the rules administered
by BCC.
32 In By-Law-Article X, Section 10–11, the
Exchange also adds a cross-reference to By-Law
Article VIII, Section 8–1.
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committee,33 at least one committee
member would have to be a member of
the Exchange that conducts an options
business at Phlx.34
The Exchange also proposes to update
certain provisions in its disciplinary
procedures in furtherance of conforming
its hearings processes with those of the
NASDAQ Stock Market.35 Specifically,
the Exchange is changing the
composition of its disciplinary Hearing
Panel by deleting the requirement to
have a Hearing Officer. Currently,
Exchange disciplinary hearings on a
Statement of Charges 36 are held before
a three person Hearing Panel appointed
by the Chair of the BCC and the
presiding person of each Hearing Panel
is a Hearing Officer. The Exchange is
eliminating the Hearing Officer position.
The Exchange proposes to change its
By-Law Article X, Section 10–11 to
delete references to a Hearing Officer.
The Exchange proposes to change
various rules in the 960 series to delete
references to the Hearing Officer, and to
clarify references to the Hearing Panel.37
The Exchange also proposes to add the
definition of a Hearing Attorney in Rule
960.5 to indicate that, among other
things, the Hearing Attorney will take
over the administrative duties that the
Hearing Officer previously handled, will
advise the Hearing Panel on applicable
rules and procedure, but will not be a
voting member of the Hearing Panel.38
33 See Section 6(b)(3) of the Act setting forth,
among other things, the objective of ‘‘fair
representation’’ of an Exchange’s members in the
administration of its affairs. 15 U.S.C. 78f(b)(3).
34 The Exchange is deleting the requirement to
have one BCC member that is an Exchange member
or is associated with a member organization that
conducts equity business on XLE, as XLE is no
longer operating. See supra note 17.
The Commission notes that Phlx has committed
to submit a separate proposed rule change further
modifying Phlx By-Law Article X, Section 10–11 to
clarify that the BCC shall include a number of
committee members equal to at least 20% of the
total number of members on the BCC that are
representative of Phlx members./FTNT≤
35 See Rules 960.1 to 960.12 (Exchange
disciplinary hearing rules) and NASDAQ Stock
Market Rules 4800 to 4816 (NASDAQ Stock Market
delisting hearing rules).
36 See Rules 960.2 and 960.3.
37 See Rules 960.4, 960.5, 960.6, 960.8, 960.9,
960.10, 960.11, and 970.
38 Proposed subsection (a)(4) of Rule 960.5 states:
A Hearing Attorney shall assist the Hearing Panel
in the discharge of its duties. The Hearing Attorney
shall not have a vote in the Panel’s disposition of
the matter, but will advise the Panel on the
application of the Disciplinary Rules, Guidelines for
Sanctions, and relevant precedent. The Hearing
Attorney will not be permitted to be involved in
any manner in the investigation of possible
misconduct, to participate in the consideration by
the Business Conduct Committee of whether to
institute a disciplinary action, to render a decision
following a hearing without the concurrence of a
majority of the Hearing Panel, rule upon requests
to disqualify the Hearing Attorney or any member
of the Hearing Panel, or issue citations for
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16253
The process of appealing from Hearing
panel decisions will remain the same.39
The Exchange additionally proposes
rule changes to update and conform
certain disciplinary rules. To that end,
the Exchange proposes amendments
that would: update references to the
Exchange’s Regulatory Department in
Rule 960.2; add the ability to serve
documents by electronic delivery upon
mutual consent of the parties in Rule
960.11; and clarify that Hearing
Panelists may be paid additional
compensation in extraordinary cases in
Rule 960.5.
The Exchange believes that allowing
the Board to reduce the number of
members on BCC by as much as 44%
should make the committee more
efficient. The Exchange also believes
that requiring that the BCC be composed
of Non-Industry members and Industry
members that are defined similarly by
the Exchange and the NASDAQ Stock
Market, and introducing a Hearing
Attorney position in lieu of a Hearing
Officer, should make the Exchange and
NASDAQ Stock Market hearing
processes more similar while
maximizing the fairness and
independence of the Exchange’s BCC
and disciplinary proceedings.
Finance Committee
Currently, the Finance Committee is a
permanent standing committee of the
Board.40 The Exchange proposes to
amend its By-Law Article X, Section 10–
1 to indicate that the Finance
Committee would be an optional
committee, to be appointed only if
deemed necessary by the Board, and
that the Finance Committee would have
such powers and duties with respect to
the financial operation of the Exchange
as may be delegated by the Board. The
Exchange proposes to amend its By-Law
Article X, Section 10–15 to make
corresponding changes indicating the
optional nature of the Finance
Committee. Should a Finance
Committee not be appointed by the
Board, however, pursuant to By-Law
violations of Exchange rules or floor procedure
advices.
39 Appeals may be initiated by filing with the
Exchange a written notice of appeal within 10 days
after a decision is rendered, and will be conducted
by the Board or an Advisory Committee appointed
by the Board. See By-Law Article XI, Sections 11–
1, 11–2, and 11–3. The Exchange proposes to delete
reference to ‘‘Hearing Officer’’ in the title of By-Law
Article XI, Section 11–3.
40 The Finance Committee has the jurisdiction to,
among other things, report to the Board regarding:
examination of the accounts and vouchers of the
Exchange; prepare estimates of the income and
recommendations as to appropriations for expenses,
and assist in the preparation of the annual budget
and make recommendations thereon. See By-Law
Article X, Section 10–15.
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16254
Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices
Article IV, the Board continues to retain
the power to review the Exchange’s
finances.41
The Exchange’s proposal to make the
Finance Committee optional is similar
to the NASDAQ Stock Market, where
the Finance Committee is optional, at
the discretion of the Board.42
dwashington3 on PROD1PC60 with NOTICES
Emergency or Extraordinary Market
Conditions
The Exchange proposes adoption of
new By-Law Article IV, Section 4–23,
which is similar to NASDAQ Stock
Market By-Law Article IX, Section 5
authorizing the Board or its designee to
take certain actions in the event of an
emergency or extraordinary market
conditions. Specifically, new By-Law
IV, Section 4–23 states that in the event
of an emergency or extraordinary market
conditions, the Board or such person as
may be designated by the Board, shall
have the authority to take any action
regarding: the trading in or operation of
the Exchange or any other organized
securities markets that may be operated
by the Exchange, the operation of any
automated system owned or operated by
the Exchange, and the participation in
any such system or any or all persons
or the trading therein of any or all
securities; and the operation of any or
all offices or systems of members and
member organizations, if, in the opinion
of the Board or its designee, such action
is necessary or appropriate for the
protection of investors or the public
interest or for the orderly operation of
the marketplace or the system. Although
the Exchange has other ‘‘extraordinary
market conditions’’ provisions in its
rules,43 the Exchange seeks adoptions of
a provision that is similar to the
NASDAQ Stock Market.
Finally, the Exchange is proposing
technical, housekeeping rule changes in
respect of references that are obsolete,
no longer in use, or in need of updating
so that Phlx Rules and Advices may be
conformed. These include references to
departments, positions, and committees
that are renamed or no longer exist (e.g.
Market Surveillance Department,
Market Surveillance, Arbitration
Department, Financial Automation,
Office of Chief Examiner, and Stock List
Committee); and to circulars that are no
longer in use (e.g. exchange and
information circulars).44
By-Law Article IV, Section 4–4.
NASDAQ Stock Market By-Law Article III,
Section 5(b) (Board may appoint a Finance
Committee to advise regarding financial operations
and conditions of NASDAQ Stock Market).
43 See e.g. Rules 1080(e) and 98.
44 See Rules 100, 108, 124, 507, 761, 800, 803,
960.2, 1001, 1003, 1014, 1017, 1039, 1042, 1047,
1061, 1080, 1092, and 1001A; and OFPAs A–12, A–
2. Statutory Basis
IV. Solicitation of Comments
The Exchange proposes to streamline
the governance structure of the
Exchange by updating, eliminating and
consolidating its committees, codifying
certain emergency functions, updating
its disciplinary process, and
harmonizing Exchange By-Laws, Rules
and OFPAs. The Exchange believes that
its proposal is consistent with Section
6(b) of the Act 45 in general, and furthers
the objectives of Section 6(b)(5) of the
Act 46 in particular, in that it is designed
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
Exchange believes that its proposal also
furthers the objectives of Section 6(b)(3)
of the Act,47 in that it is designed to
promote fair representation of the
members of the Exchange in the
administration of its affairs, as
discussed herein.
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:
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were either
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.
41 See
42 See
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15:28 Apr 08, 2009
Jkt 217001
13, A–14, F–7, F–13, F–15, F–22, and F–27. As an
example, the terms ‘‘Market Surveillance
Department’’ in Rule 761 and ‘‘Market
Surveillance’’ in Rule 1047 are changed to
‘‘regulatory staff.’’
45 15 U.S.C. 78f(b).
46 15 U.S.C. 78f(b)(5).
47 15 U.S.C. 78f(b)(3).
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Phlx–2009–23 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2009–23. 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 (https://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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of the Exchange. 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 publicly available. All
submissions should refer to File
Number SR–Phlx–2009–23 and should
be submitted on or before April 30,
2009.
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Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.48
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–8001 Filed 4–8–09; 8:45 am]
BILLING CODE 8010–01–P
DEPARTMENT OF STATE
[Public Notice 6573]
Fine Arts Committee Notice of Meeting
The Fine Arts Committee of the
Department of State will meet on April
30, 2009 at 1:30 p.m. in the Henry Clay
Room of the Harry S. Truman Building,
2201 C Street, NW., Washington, DC.
The meeting will last until
approximately 3 p.m. and is open to the
public.
The agenda for the committee meeting
will include a summary of the work of
the Fine Arts Office since its last
meeting on November 13, 2008 and the
announcement of gifts and loans of
furnishings as well as financial
contributions from January 1, 2008
through December 31, 2008.
Public access to the Department of
State is strictly controlled and space is
limited. Members of the public wishing
to take part in the meeting should
telephone the Fine Arts Office at (202)
647–1990 or send an e-mail to
BurdenVK@State.gov by April 23 to
make arrangements to enter the
building. The public may take part in
the discussion as long as time permits
and at the discretion of the chairman.
Dated: March 2, 2009.
Marcee Craighill,
Secretary, Fine Arts Committee, Department
of State.
[FR Doc. E9–8121 Filed 4–8–09; 8:45 am]
BILLING CODE 4710–35–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
dwashington3 on PROD1PC60 with NOTICES
Notice of Intent To Prepare an
Environmental Impact Statement for
the George Bush Intercontinental
Airport, Houston, TX and To Conduct
Public Scoping Meetings
AGENCY: Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
ACTION: Notice of Intent to prepare an
environmental impact statement (EIS)
and to conduct public scoping meetings.
48 17
CFR 200.30–3(a)(12).
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15:28 Apr 08, 2009
Jkt 217001
SUMMARY: The FAA is issuing this
Notice of Intent to advise the public that
the FAA will prepare an EIS under the
provisions of the National
Environmental Policy Act (NEPA) of
1969, as amended. The EIS will address
proposed improvements to George Bush
Intercontinental Airport (IAN). The
Houston Airport System (HAS), the
sponsor of the project, completed an
Airport Master Plan (AMP) for IAN in
2006. The AMP showed that additional
airfield capacity was needed. Airfield
improvements including additional
runway(s) were recommended to meet
future capacity and reduce projected
delays at IAH.
Based on analysis presented in the
AMP, FAA concurred that additional
capacity was needed to meet forecast
demand and began the EIS process. One
of the first tasks in the process was to
update the aviation forecast because of
the decline in aviation operations since
the AMP was completed. An updated
forecast of aircraft operations was
completed and reconfirmed the need to
provide for additional capacity at IAH.
The EIS will document the purpose
and need for the proposed
improvements as well as analyze a range
of alternatives such as use of other
modes of transportation or airports,
construction of airfield improvements
and as required by NEPA, the no action
alternative. It is anticipated that the
focus of the analysis will be on airfield
improvement alternatives including:
altering runway use and/or constructing
taxiways; constructing a new runway
between Runways 8L/26R and 8R/26L;
and constructing a new runway south of
Runway 9/27. To comply with NEPA,
the FAA must also evaluate the
potential environmental impacts of each
of the reasonable alternatives such as
and not limited to: noise impacts,
impacts on air and water quality,
wetlands, fish, wildlife, plants,
floodplains, historic resources,
hazardous wastes, socioeconomics, and
economic factors.
FOR FURTHER INFORMATION CONTACT:
Federal Aviation Administration,
Airports Division, Attn: Paul Blackford,
ASW–652B, 2601 Meacham Boulevard,
Fort Worth, TX 76137, E-mail:
pblackford.faa@iah-eis.org, Phone: 817–
222–5607.
SUPPLEMENTARY INFORMATION: The
purpose of this notice is to inform
federal, state, and local government
agencies and the public, of FAA’s intent
to prepare an EIS and to conduct a
public and agency scoping process.
Information, data, opinions, and
comments obtained throughout the
scoping process will be considered in
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16255
the preparation of the draft EIS. The
scoping process for this EIS will include
a comment period for interested
agencies and parties to submit oral and/
or written comments representing the
concerns and issues they believe the EIS
should address.
Scoping Meetings: The purpose of the
scoping meetings is to receive input
from the public and agencies regarding
the scope and process related to the EIS.
Comments and suggestions are invited
from all interested parties to ensure that
issues and concerns related to the
proposed action and its alternatives are
addressed. Public and agency scoping
meetings will be conducted to
encourage submittal of comments to the
FAA.
Public scoping meetings will be held
from 6 to 9 p.m. on May 12, 2009, at the
Humble Civic Center and May 14, 2009,
at the Nimitz High School. Each meeting
will include an introductory
presentation, exhibits for team members
to further explain the project and
process, and opportunities to submit
oral or written comments. To notify the
general public of the scoping process, a
legal notice will be placed in
newspapers having general circulation
in the study area. The newspaper notice
will notify the public that scoping
meetings will be held to gain public
input concerning the proposed action,
alternatives to be considered, and
environmental impacts to be evaluated.
The notice will also identify where the
scoping package will be available for
review.
An agency scoping meeting for all
federal, state, and local regulatory
agencies which have jurisdiction by law
or have special expertise with respect to
any potential environmental impacts
associated with the proposed action will
be held from 1:30 to 3:30 p.m. on May
12, 2009 at the Humble Civic Center. A
notification letter along with a scoping
package will be sent in advance of those
meetings.
The Scoping Meetings provide the
first major opportunity for gathering
comments from agency representatives
and the general public. Comments
received at the meetings, or by mail, email and via the Web site (https://
www.iah-eis.org) by June 15, 2009, will
be included in the Scoping Report and
considered for inclusion in the EIS. The
Final Scoping Report will be made
available to the public on the Web site.
In addition to preparing the EIS to
fulfill the requirements of NEPA, the
FAA will prepare the EIS in order to
comply with other applicable laws
having public involvement
requirements. Comments addressing
other applicable laws should be
E:\FR\FM\09APN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 67 (Thursday, April 9, 2009)]
[Notices]
[Pages 16249-16255]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-8001]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59697; File No. SR-Phlx-2009-23]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing of a Proposed Rule Change and Amendment No. 1 Thereto To Amend
the By-Laws, Rules and Option Floor Procedure Advices of NASDAQ OMX
PHLX, Inc.
April 2, 2009.
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 March 13, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' or the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. On March 25, 2009, Phlx filed
Amendment No. 1 to the proposed rule change. The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, 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 Exchange proposes to amend its By-Laws, Rules of the Board of
Governors and Options Rules (the two sets of rules are together known
as the ``Rules''), and Option Floor Procedure Advices (``OFPAs'' or
``Advices'') \3\ to make changes to certain standing committees and
processes of the Exchange. Specifically, the Exchange proposes to
eliminate: (a) The Admissions Committee; (b) the Options Allocation,
Evaluation and Securities Committee; (c) the Options Committee; (d) the
Foreign Currency Options Committee; and (e) the Weekly Bulletin.
Additionally, the Exchange proposes to: (a) make the Finance Committee
optional; (b) change the structure of the Business Conduct Committee
and eliminate reference to the Hearing Officer; and (c) authorize
action in the event of an emergency or extraordinary market
conditions.\4\
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\3\ OFPAs are discussed in Rule 970, which sets forth the
criteria for the imposition of a fine (not to exceed $5,000) on any
member, member organization, or any partner, officer, director or
person employed by or associated with any member or member
organization, for any violation of an OFPA, which violation the
Exchange determined is minor in nature (known as the ``Minor Rule
Plan''). Such a fine would be imposed in lieu of commencing a
``disciplinary proceeding'' as that term is used in Exchange Rules
960.1-960.12, and would be subject to Rule 19d-1 under the Act.
\4\ Certain changes proposed in the present filing may be
affected by SR-Phlx-2009-17, which is pending. See Securities
Exchange Act Release No. 59538 (March 9, 2009), 74 FR 11152 (March
16, 2009). We would amend the present filing if necessary upon
approval of SR-Phlx-2009-17.
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The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
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 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 Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 16250]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange was recently acquired by The NASDAQ OMX Group, Inc.
(``NASDAQ OMX'').\5\
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\5\ On July 24, 2008, NASDAQ OMX acquired all of the common
stock of the Exchange, which became a wholly owned subsidiary of
NASDAQ OMX. The Exchange has continued to operate as a separate
self-regulatory organization (``SRO''). See Securities Exchange Act
Release No. 58179 (July 17, 2008), 73 FR 42874 (July 23, 2008) (SR-
Phlx-2008-31). See also Securities Exchange Act Release No. 58183
(July 17, 2008), 73 FR 42850 (July 23, 2008) (SR-NASDAQ-2008-035).
The Exchange recently changed its name to NASDAQ OMX PHLX. See
Securities Exchange Act Release No. 58380 (August 18, 2008), 73 FR
49728 (August 22, 2008) (SR-Phlx-2008-61).
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The purpose of the proposed rule change is to streamline the
governance of the Exchange by eliminating and/or consolidating certain
standing committees of the Board to make the Exchange's governance
process more similar to that of NASDAQ OMX's other U.S. SROs, The
NASDAQ Stock Market LLC (the ``NASDAQ Stock Market'') and NASDAQ OMX
BX, Inc. (``BX''). The duties of the eliminated committees will
generally be administered by Exchange staff or other Board committees.
The Exchange also proposes to codify the ability of the Exchange to
take emergency action, change how information is provided to Exchange
membership, and update the functioning of the Exchange's disciplinary
committee.
The Exchange proposes to: Eliminate the Admissions Committee and
Allocation, Evaluation and Securities Committee; consolidate the
Options Committee and the Foreign Currency Options Committee into the
Quality of Markets Committee; and eliminate the use of the Weekly
Bulletin. The Exchange also proposes to: Change the membership
structure of the Business Conduct Committee and eliminate the Hearing
Officer; make the Finance Committee optional at the discretion of the
Board; and authorize the Chief Executive Officer and the President of
the Exchange to take action in the event of an emergency or
extraordinary market conditions. As a result of this filing, eleven
standing committees of the Exchange's Board would be reduced to seven,
one of which would be optional at the discretion of the Board.\6\
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\6\ The following Exchange Committees would remain after this
filing: Executive; Audit; Business Conduct; Compensation;
Nominating, Elections and Governance; Quality of Markets; and
Finance (optional). But see Securities Exchange Act Release No.
59538 (March 9, 2009) (SR-Phlx-2009-17), which discusses, among
other things, renaming of the Nominating, Elections and Governance
Committee.
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The Exchange believes that its proposal should considerably
streamline Exchange governance to the benefit of the Exchange and its
membership. Moreover, the Exchange believes that its proposal is
conducive to the objective of Phlx, BX, and the NASDAQ Stock Market
having similar by-laws and/or rules where practical.
Admissions Committee
The Exchange proposes to amend its By-Law Article X, Section 10-1,
Standing Committees, which lists all Exchange standing committees, to
eliminate the Admissions Committee. The Exchange proposes to delete its
By-Law Article X, Section 10-6, Admissions Committee, which sets forth
the duties and functions of the Admissions Committee,\7\ and transfer
those duties to the Exchange's Membership Department in proposed new
Rule 900.1, General Powers and Duties of Membership Department. The
Exchange proposes to delete By-Law Article XII, Section 12-5,
Application, which sets forth the duties and functions of the
Admissions Committee in respect of applications for permits and
admission as foreign currency options (``FCO'') participants,\8\ and
transfer the relevant provisions of Section 12-5 to the Membership
Department in new Rule 900.2, Membership Applications.
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\7\ Pursuant to By-Law Article X, Section 10-6, the Admissions
Committee has jurisdiction over, among other things: the review of
applications of non-members seeking to become members, member
organizations, permit holders, foreign currency options
participants, or foreign currency options participant organizations;
changes to membership affiliation and status; determinations
regarding affiliations of existing members and member organization
firms and determinations regarding inactive nominees [sic]; and
qualification, revocation and reinstatement of permits and foreign
currency options participations.
\8\ By-Law Article XII, Section 12-5 describes the processing of
applications for permits or admission as FCO participants and
indicates, among other things, that: Exchange staff (the Membership
Services Department) initially receives, reviews and makes
recommendations regarding such applications; the Admissions
Committee makes the final application determinations; and applicant
names are posted for a period of seven days in the Weekly Bulletin
and on the Web site of the Exchange.
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Over the years, Exchange staff has been involved in virtually all
aspects of the Exchange's admission and membership process, including
assisting the Admissions Committee in the review of membership
applications, renewals and requests for contraction and expansion of
membership privileges, and communicating with the Admissions Committee
and Phlx membership regarding admission and membership. The Exchange
believes that staff time allocated to communicating with the Admissions
Committee, organizing its meetings, and communicating on its behalf can
be better utilized and redirected to performance of admission and
membership-related functions by the new Membership Department, which is
currently known as the Membership Services Department. The Exchange
therefore proposes to have the Membership Department perform the
functions of the Admissions Committee.
The Exchange proposes to expressly provide that the Membership
Department will administer the Exchange rules that are currently
administered by the Admissions Committee.\9\ The Exchange also proposes
to delete all references to the Admissions Committee, clarify
references to the Membership Department, and generally make changes in
a variety of by-laws and rules that correspond to by-law amendments
discussed herein.\10\
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\9\ See Rule 900 (indicating that the Membership Department will
administer Rules 901 to 949 and 971 and 972, inclusive).
\10\ ``Membership Department'' in By-Law Article I, Section 1-
1(mm) replaces the Exchange's Membership Services Department. See
also By-Law Article I, Section 1-1, Article IV, Section 4-4, Article
V, Section 5-8, Article XI, Section 11-1, Article XIII, Sections 13-
2, 13-6, 13-8, Article XIV, Section 14-5, Article XV, Sections 15-1,
15-2, 15-3, 15-6, 15-7, 15-8, 15-10 Article XVII, Sections 17-1, 17-
2, 17-3, 17-4, 17-5, and Article XXVII, Section 27-4; and Rules 1,
173, 600, 601, 602, 901, 902, 904, 906, 907, 909, 921, 922, 930,
949, and 1090.
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Proposed new Rule 900.1, which is based on deleted By-Law Article
X, Section 10-6, indicates that the Membership Department will be in
charge of the membership and admissions processes at the Exchange. As
such, the Membership Department will have jurisdiction over, among
other things, admission, denial, reinstatement, and revocation of
membership to the Exchange; supervision of members, membership
organizations and partnership arrangements; qualification,
registration, and determinations regarding affiliations of entities as
foreign currency options participants; and rights and privileges of
permit holders.\11\
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\11\ The Exchange proposes to transfer from By-Law Article X,
Section 10-6 to new Rule 900.1 only those substantive areas that are
relevant to the structure of the admissions and membership process
overseen by the Membership Department. For example, the provision in
Section 10-6 that the Business Conduct Committee share jurisdiction
over the revocation of permits and foreign currency options
participations in connection with disciplinary matters with the
Admissions Committee, and references to the Admissions Committee are
not transferred to Rule 900.1.
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[[Page 16251]]
Proposed new Rule 900.2, which is based on deleted By-Law Article
XII, Section 12-5, indicates that applicants for a permit or admission
as a member or as a foreign currency options participant shall initiate
the procedure by filing an application with the Membership Department
in such form as prescribed by the department. All applications will be
reviewed and acted on by the Membership Department. Should the
Membership Department not approve an application, it shall notify the
applicant in writing of the specific grounds for denial.\12\
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\12\ The Exchange proposes to transfer from deleted By-law
Article XII, Section 12-5 to new Rule 900.2 only those substantive
areas that are relevant to the processing of applications.
Provisions in Section 12-5 regarding posting of applicant names for
a seven day period in the Weekly Bulletin and on the Exchange's Web
site; references to the Admissions Committee; and references to the
Demutualization Merger, see Securities Exchange Act Release No.
49098 (January 16, 2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-
2003-73), for example, are not transferred to Rule 900.2.
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An applicant that is not approved has a right to an appeal hearing
pursuant to By-Law Article XI. The process of appealing from standing
committee decisions is set forth in By-Law Article XI, Section 11-1(a),
which indicates that appeals from standing committee decisions are
initiated by filing with the Secretary of the Exchange a notice of
appeal within 10 days after the decision has been rendered. The
Exchange proposes to add the Membership Department into By-Law Article
XI, Section 11-1(a) to permit appeals from Membership Department
decisions. The Exchange proposes to similarly add the Membership
Department into By-Law Article XI, Section 11-1(c) to indicate that
appeals from decisions of the Membership Department will be heard by a
special committee of the Board composed of three Governors, at least
one of whom is an Independent Governor (the ``Special Committee''). A
decision of the Special Committee is not appealable to the Board.
The Exchange believes that the elimination of the Admissions
Committee and transfer of its duties to the Membership Department will
begin to align Exchange admissions and membership processing more
closely to that of NASDAQ OMX and/or the NASDAQ Stock Market.\13\
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\13\ The NASDAQ Stock Market does not have an Admissions
Committee. See NASDAQ Stock Market By-Law (``NASDAQ By-Law'')
Article III, Sections 5 and 6. Membership application processing and
decisions regarding NASDAQ membership are handled by staff. See
NASDAQ Stock Market Rule (``NASDAQ Rule'') 1000 et seq.
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Weekly Bulletin
The Exchange proposes to eliminate publication of its Weekly
Bulletin (the ``Bulletin''), which contains, among other things,
changes in permit holder and member organization status and
applications made to the Exchange.\14\ The Bulletin invites readers to
report information regarding applications and applicants. The current
admissions process requires that, if the Admissions Committee votes
favorably regarding a request by an applicant, his or her name has to
be posted for a period of 7 days in the Bulletin and on the Exchange's
Web site. If during this time an objection to provision of a permit or
application is received by the Admissions Committee (the ``objection
process''), it must reconsider its favorable vote.\15\
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\14\ The Bulletin, which is currently distributed in electronic
form, also provides notice of certain matters such as, for example,
the bid, ask and last sales prices for Exchange memberships and
NASDAQ OMX Futures Exchange, Inc. (``NFX'') (formerly Philadelphia
Board of Trade or ``PBOT'') shares; and disciplinary decisions
issued and sanctions imposed by the Exchange's Business Conduct
Committee. See Supplementary Material to By-Law Article XVIII,
Section 18-2 for Board policy of publicizing fines, censures and
disciplinary actions regarding members and member organizations. The
Exchange intends to provide this information on its Web site.
\15\ See By-Law Article XII, Section 12-5. See also By-Law
Article XV, Section 15-1 regarding a 7 day notice in the Bulletin;
and By-Law Article XVII, Section 17-5 regarding a 14 day notice in
the Bulletin prior to the Admission Committee considering an
application. See also By-Law Article XV, Section 15-2 regarding a 7
day transfer notice.
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The Exchange believes that admission and membership decisions can
be administered by the Exchange. The Exchange therefore proposes to
eliminate the objection process and notification in the Bulletin and/or
on its Web site. The Exchange intends to instead provide notification
regarding membership approvals on the Exchange's Web site.
The Exchange believes that the Bulletin, which at one time served
as a predominant means of communication regarding exchange matters, is
no longer a viable means of communication in today's fast-paced,
electronic world. As such, the Exchange proposes to terminate
publication of the Bulletin and to provide disciplinary and other
relevant information on its Web site.
Allocation Committee
The Exchange proposes to amend its By-Law Article X, Section 10-1,
Standing Committees, to eliminate the Options Allocation, Evaluation
and Securities Committee (the ``Allocation Committee''). The Exchange
proposes to delete its By-Law X, Section 10-7, Options Allocation,
Evaluation and Securities Committee, which sets forth the duties and
functions of the Allocation Committee.\16\ The relevant functions and
duties of the committee will be performed by Exchange staff.
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\16\ Pursuant to By-Law Article X, Section 10-7, the Allocation
Committee has jurisdiction over, among other things: the appointment
or approval of specialists, Streaming Quote Traders (``SQTs'') and
Remote Streaming Quote Traders (``RSQTs''); allocation, retention
and transfer of privileges to deal in options on Exchange trading
floors; evaluation of the performance of specialists, SQTs and
RSQTs; and administration of the 500 series of Exchange rules.
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Similar to Exchange staff involvement with the admission and
membership process, Exchange staff has been involved in all aspects of
the Exchange's allocation process through its work with the Allocation
Committee. The time allocated by Exchange staff to communicating with
and on behalf of the Allocation Committee and organizing its meetings
can be better utilized and redirected to performance of allocation-
related functions upon elimination of the Allocation Committee.\17\ In
addition, the allocation process often necessitates a fast turnaround,
such that calling committee meetings, particularly during trading
hours, is often challenging. Thus, the Exchange believes that allowing
Exchange staff to perform the functions of the Allocation Committee
should significantly improve the flow and efficiency of the allocation
process.
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\17\ The Exchange's Equity Allocation, Evaluation and Securities
Committee was eliminated with the implementation of the Exchange's
electronic equity trading system (XLE). See Securities Exchange Act
Release No. 54329 (August 17, 2006), 71 FR 50482 (August 25, 2006)
(SR-Phlx-2006-43). XLE is no longer operating.
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With the elimination of the Allocation Committee, the Exchange
proposes to expressly state that the Exchange will administer the rules
that are currently administered by the Allocation Committee.\18\ The
Exchange also proposes to delete all references to the Allocation
Committee, clarify references to the Exchange or its staff, and
generally make changes in a variety of by-laws, rules, and OFPAs that
correspond to by-law amendments discussed herein.\19\
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\18\ See Rule 500 (indicating that Rules 500 through 599 will be
administered by the Exchange). Unlike the transfer of duties from
the Admissions Committee to a specific Membership Department, the
transfer of duties from the Allocation Committee is generally to the
``Exchange.'' In addition to the rules, the admission process is
described by the Exchange on its Web site.
\19\ See By-Law Article XI, Section 11-1 and By-Law Article
XXVII, Sections 27-3 and 27-4 [sic]; Rules 501, 505, 506, 507, 508,
510, 511, 513, 515, 602, and 1014; and OFPA B-6. See also Rules 525
and 526 (deleting rules regarding Allocation Committee authority),
and 509 (deleting rule referring to outdated subcommittee of the
Allocation Committee).
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The Exchange believes that the elimination of the Allocation
Committee
[[Page 16252]]
and transfer of its duties to the Exchange should help make the
Exchange's allocations structure more similar to that of the NASDAQ
Stock Market.\20\
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\20\ The NASDAQ Stock Market does not currently have a Board
committee similar to the Allocation Committee. See NASDAQ Stock
Market By-Law Article III, Sections 5 and 6.
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Options Committee and Foreign Currency Options Committee
The Exchange is eliminating the Options Committee and Foreign
Currency Options Committee (the ``FCO Committee''), which are now two
separate Board committees, and combining them into the Quality of
Markets Committee. In particular, the Exchange proposes to amend its
By-Law Article X, Section 10-1, Standing Committees to eliminate the
Options Committee and the FCO Committee from the list of Exchange
committees. The Exchange proposes to delete its By-Law Article X,
Section 10-20, Options Committee, and its By-Law Article X, Section 10-
17, Foreign Currency Options Committee, setting forth the duties and
functions of the committees.\21\ The Exchange then proposes to fold
these two committees into the Quality of Markets Committee (the
``QMC'') by amending the language of By-Law Article X, Section 10-21,
Quality of Markets Committee, so that the duties and functions of the
Exchange's QMC would be analogous to those of the NASDAQ Stock Market
QMC.\22\ Specifically, the new QMC would have the following functions
respecting index, foreign currency, and equity options as well as
equities: \23\ to provide advice and guidance to the Board on issues
relating to the fairness, integrity, efficiency, and competitiveness of
the information, order handling, and execution mechanisms of the
Exchange from the perspective of investors (both individual and
institutional), retail firms, specialist and registered options trader
firms, and other participants of the Exchange; and to advise the Board
with respect to national market system plans and linkages between the
facilities of the Exchange and other markets.
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\21\ Pursuant to By-Law Article X, Section 10-20, the Options
Committee currently has jurisdiction to, among other things:
supervise the dealings of members and market makers on the options
trading floor; recommend adoption of such rules as it deems
necessary for the convenient and orderly transaction of business
upon the equity and index options trading floor; enforce rules and
regulations relating to order, decorum, health, safety and welfare
on the equity and index options trading floor; and resolve trading
disputes on the equity and index options trading floor. Pursuant to
Article X, Section 10-17, the FCO Committee has analogous powers and
duties in respect of the FCO trading floor. The Exchange notes that
pursuant to Rule 124, trading disputes are now settled by Options
Exchange Officials (``OEOs''). See Securities Exchange Act Release
No. 55877 (June 7, 2007), 72 FR 32937 (June 14, 2007) (SR-Phlx-2006-
87). OEOs are defined in Rule 1(pp).
\22\ See NASDAQ Stock Market By-Law Article III, Section 6(c).
\23\ Equities do not currently trade on the Exchange.
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The new QMC would include broad representation of various
participant groups in the Exchange, including investors, specialist and
registered options trader (``ROT'') firms, retail firms, and order
entry firms. Specifically, the QMC would include a number of Member
Representative members \24\ that is equal to at least 20 percent of the
total number of members of the committee. Furthermore, the number of
Non-Industry members (i.e., committee members not associated with
broker-dealers) \25\ on the QMC would equal the sum of the number of
Industry members \26\ and Member Representative members. The Exchange
believes that the proposed composition of the QMC would reflect a
``fair representation'' of Exchange members.\27\
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\24\ ``Member Representative member'' is defined as a member of
any committee appointed by the Board of Governors who has been
elected or appointed after having been nominated pursuant to these
By-Laws. The definition of ``Member Representative member'' is also
proposed to be modified in SR-Phlx-2009-17. See proposed By-Law
Article I, Section 1-1(qq), which is based on NASDAQ Stock Market
By-Law Article I(r).
\25\ ``Non-Industry member'' is defined as a member of any
committee appointed by the Board of Governors who is (i) a Public
member; (ii) an officer, director, or employee of an issuer of
securities listed on the Exchange; or (iii) any other individual who
would not be an Industry member. See proposed By-Law Article I,
Section 1-1(oo), which is based on NASDAQ Stock Market By-Law
Article I(w). ``Public Member'' is defined as a member of any
committee appointed by the Board of Governors who has no material
business relationship with a broker or dealer, the Exchange, or its
affiliates. See proposed By-Law Article I, Section 1-1(pp) [sic],
which is based on NASDAQ Stock Market By-Law Article I(z). The
definitions of ``Non-Industry member'' and ``Public Member'' are
also proposed to be modified in SR-Phlx-2009-17.
\26\ ``Industry member'' is defined as a member of any committee
appointed by the Board who (i) is or has served in the prior three
years as an officer, director, or employee of a broker or dealer,
excluding an outside director or a director not engaged in the day-
to-day management of a broker or dealer; (ii) is an officer,
director (excluding an outside director), or employee of an entity
that owns more than ten percent of the equity of a broker or dealer,
and the broker or dealer accounts for more than five percent of the
gross revenues received by the consolidated entity; (iii) owns more
than five percent of the equity securities of any broker or dealer,
whose investments in brokers or dealers exceed ten percent of his or
her net worth, or whose ownership interest otherwise permits him or
her to be engaged in the day-to-day management of a broker or
dealer; (iv) provides professional services to brokers or dealers,
and such services constitute 20 percent or more of the professional
revenues received by the committee member or 20 percent or more of
the gross revenues received by the committee member's firm or
partnership; (v) provides professional services to a director,
officer, or employee of a broker, dealer, or corporation that owns
50 percent or more of the voting stock of a broker or dealer, and
such services relate to the director's, officer's, or employee's
professional capacity and constitute 20 percent or more of the
professional revenues received by the committee member or 20 percent
or more of the gross revenues received by the committee member's
firm or partnership; or (vi) has a consulting or employment
relationship with or provides professional services to the Exchange
or any affiliate thereof or to FINRA (or any predecessor) or has had
any such relationship or provided any such services at any time
within the prior three years. The definition of ``Industry member''
is also proposed to be modified in SR-Phlx-2009-17. See proposed By-
Law Article I, Section 1-1(nn), which is based on NASDAQ Stock
Market By-Law Article I(m).
\27\ See Section 6(b)(3) of the Act setting forth, among other
things, the objective of ``fair representation'' of an exchange's
members in the administration of its affairs. 15 U.S.C. 78f(b)(3).
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By-Law Article VIII, Section 8-1 currently states that the Chairs
of the Options Committee and the FCO Committee preside over the
Exchange's options and FCO trading floors. The Exchange proposes to
amend its By-Law Article VIII, Section 8-1 to eliminate reference to
the Chairs of the Options Committee and FCO Committee and to indicate
that the President of the Exchange and his designee would be vested
with supervision over the options trading floor.\28\ In particular,
updated Article VIII, Section 8-1 would indicate that the President of
the Exchange and his designated staff shall have: general supervision
over the options trading floor as well as general supervision of the
dealings of members on the trading floor and on Exchange trading
systems, and of the premises of the Exchange immediately adjacent
thereto; supervision of all connections or means of communications with
the options trading floor; and supervision over the location of
equipment and the assignment and use of space on the options trading
floor. Section 8-1 would also indicate that the President shall have
supervision over relations with other options exchanges; and that the
Exchange shall make and enforce rules and regulations relating to
order, decorum, health, safety and welfare on the options trading floor
and the immediately adjacent premises of the Exchange and shall be
empowered to impose penalties for violations thereof. The Exchange
believes that vesting this authority with the President of the
[[Page 16253]]
Exchange is appropriate, should streamline Exchange processes, and is
similar to the NASDAQ Stock Market.\29\
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\28\ By-Law Article VIII, Section 8-1 also refers to XLE, which
was the Exchange's electronic system for the entry, display,
execution, and reporting of orders in NMS stocks. XLE was
discontinued on October 24, 2008, and is no longer operating. See
Securities Exchange Act Release No. 58613 (September 22, 2008), 73
FR 57181 (October 1, 2008) (SR-Phlx-2008-65). References to XLE will
be removed from By-Law Article VIII, Section 8-1; Article I, Section
1-1; and Article X, Sections 10-11 and 10-15.
\29\ See NASDAQ Stock Market By-Law Article IV, Section 5
(vesting general supervision of the operations of the NASDAQ Stock
Market in the President).
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As with other eliminated committees, the Exchange proposes to
delete all references to the Options Committee and the FCO Committee,
clarify references to the Exchange or its staff, and generally make
changes in a variety of by-laws, rules, and OFPAs that correspond to
the proposed by-law amendments.\30\
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\30\ See By-Law Article XXVII, Section 27-3; Rules 60, 101, 124,
508, 606, 1012, 1014, 1017, 1061, 1064, 1066, 1079, and 1080; and
OFPAs A-12, A-13, A-14, B-6, F-27, F-28, and F-31.
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Business Conduct Committee
The Business Conduct Committee (``BCC'') is the Exchange's
disciplinary committee. It has exclusive jurisdiction to, among other
things: monitor compliance with the Act and rules and regulations
thereunder, with the Exchange's By-Laws and Rules and any
interpretations thereof, and with the rules, regulations and policies
of the Board or any Exchange committees; and authorize the initiation
of any disciplinary actions or proceedings brought by the Exchange.\31\
The BCC currently consists of nine members that include: three
Independent Governors; one member or person associated with a member
organization who conducts business on XLE; one member who conducts
options business at the Exchange; and four persons who are members or
persons associated with a member organization. The Exchange proposes to
change the required number of members on BCC and the qualifications for
committee membership.
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\31\ See By-Law Article X, Section 10-11. Because the functions
and duties of BCC are clearly set forth in Section 10-11, the
Exchange proposes to delete Rule 700, Powers and Duties, which the
Exchange believes superfluously lists the rules administered by BCC.
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The Exchange proposes to change By-Law Article X, Section 10-11 to
give the Board discretion to establish not less than five or more than
nine members of BCC.\32\ The Exchange also proposes that the BCC would
be populated from three distinct groups. The majority of the committee
members would be Non-Industry members and the remaining committee
members would be Industry members. Significantly, to further ensure
fair representation of Exchange members on this important
committee,\33\ at least one committee member would have to be a member
of the Exchange that conducts an options business at Phlx.\34\
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\32\ In By-Law-Article X, Section 10-11, the Exchange also adds
a cross-reference to By-Law Article VIII, Section 8-1.
\33\ See Section 6(b)(3) of the Act setting forth, among other
things, the objective of ``fair representation'' of an Exchange's
members in the administration of its affairs. 15 U.S.C. 78f(b)(3).
\34\ The Exchange is deleting the requirement to have one BCC
member that is an Exchange member or is associated with a member
organization that conducts equity business on XLE, as XLE is no
longer operating. See supra note 17.
The Commission notes that Phlx has committed to submit a
separate proposed rule change further modifying Phlx By-Law Article
X, Section 10-11 to clarify that the BCC shall include a number of
committee members equal to at least 20% of the total number of
members on the BCC that are representative of Phlx members./FTNT>
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The Exchange also proposes to update certain provisions in its
disciplinary procedures in furtherance of conforming its hearings
processes with those of the NASDAQ Stock Market.\35\ Specifically, the
Exchange is changing the composition of its disciplinary Hearing Panel
by deleting the requirement to have a Hearing Officer. Currently,
Exchange disciplinary hearings on a Statement of Charges \36\ are held
before a three person Hearing Panel appointed by the Chair of the BCC
and the presiding person of each Hearing Panel is a Hearing Officer.
The Exchange is eliminating the Hearing Officer position. The Exchange
proposes to change its By-Law Article X, Section 10-11 to delete
references to a Hearing Officer.
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\35\ See Rules 960.1 to 960.12 (Exchange disciplinary hearing
rules) and NASDAQ Stock Market Rules 4800 to 4816 (NASDAQ Stock
Market delisting hearing rules).
\36\ See Rules 960.2 and 960.3.
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The Exchange proposes to change various rules in the 960 series to
delete references to the Hearing Officer, and to clarify references to
the Hearing Panel.\37\ The Exchange also proposes to add the definition
of a Hearing Attorney in Rule 960.5 to indicate that, among other
things, the Hearing Attorney will take over the administrative duties
that the Hearing Officer previously handled, will advise the Hearing
Panel on applicable rules and procedure, but will not be a voting
member of the Hearing Panel.\38\ The process of appealing from Hearing
panel decisions will remain the same.\39\
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\37\ See Rules 960.4, 960.5, 960.6, 960.8, 960.9, 960.10,
960.11, and 970.
\38\ Proposed subsection (a)(4) of Rule 960.5 states: A Hearing
Attorney shall assist the Hearing Panel in the discharge of its
duties. The Hearing Attorney shall not have a vote in the Panel's
disposition of the matter, but will advise the Panel on the
application of the Disciplinary Rules, Guidelines for Sanctions, and
relevant precedent. The Hearing Attorney will not be permitted to be
involved in any manner in the investigation of possible misconduct,
to participate in the consideration by the Business Conduct
Committee of whether to institute a disciplinary action, to render a
decision following a hearing without the concurrence of a majority
of the Hearing Panel, rule upon requests to disqualify the Hearing
Attorney or any member of the Hearing Panel, or issue citations for
violations of Exchange rules or floor procedure advices.
\39\ Appeals may be initiated by filing with the Exchange a
written notice of appeal within 10 days after a decision is
rendered, and will be conducted by the Board or an Advisory
Committee appointed by the Board. See By-Law Article XI, Sections
11-1, 11-2, and 11-3. The Exchange proposes to delete reference to
``Hearing Officer'' in the title of By-Law Article XI, Section 11-3.
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The Exchange additionally proposes rule changes to update and
conform certain disciplinary rules. To that end, the Exchange proposes
amendments that would: update references to the Exchange's Regulatory
Department in Rule 960.2; add the ability to serve documents by
electronic delivery upon mutual consent of the parties in Rule 960.11;
and clarify that Hearing Panelists may be paid additional compensation
in extraordinary cases in Rule 960.5.
The Exchange believes that allowing the Board to reduce the number
of members on BCC by as much as 44% should make the committee more
efficient. The Exchange also believes that requiring that the BCC be
composed of Non-Industry members and Industry members that are defined
similarly by the Exchange and the NASDAQ Stock Market, and introducing
a Hearing Attorney position in lieu of a Hearing Officer, should make
the Exchange and NASDAQ Stock Market hearing processes more similar
while maximizing the fairness and independence of the Exchange's BCC
and disciplinary proceedings.
Finance Committee
Currently, the Finance Committee is a permanent standing committee
of the Board.\40\ The Exchange proposes to amend its By-Law Article X,
Section 10-1 to indicate that the Finance Committee would be an
optional committee, to be appointed only if deemed necessary by the
Board, and that the Finance Committee would have such powers and duties
with respect to the financial operation of the Exchange as may be
delegated by the Board. The Exchange proposes to amend its By-Law
Article X, Section 10-15 to make corresponding changes indicating the
optional nature of the Finance Committee. Should a Finance Committee
not be appointed by the Board, however, pursuant to By-Law
[[Page 16254]]
Article IV, the Board continues to retain the power to review the
Exchange's finances.\41\
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\40\ The Finance Committee has the jurisdiction to, among other
things, report to the Board regarding: examination of the accounts
and vouchers of the Exchange; prepare estimates of the income and
recommendations as to appropriations for expenses, and assist in the
preparation of the annual budget and make recommendations thereon.
See By-Law Article X, Section 10-15.
\41\ See By-Law Article IV, Section 4-4.
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The Exchange's proposal to make the Finance Committee optional is
similar to the NASDAQ Stock Market, where the Finance Committee is
optional, at the discretion of the Board.\42\
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\42\ See NASDAQ Stock Market By-Law Article III, Section 5(b)
(Board may appoint a Finance Committee to advise regarding financial
operations and conditions of NASDAQ Stock Market).
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Emergency or Extraordinary Market Conditions
The Exchange proposes adoption of new By-Law Article IV, Section 4-
23, which is similar to NASDAQ Stock Market By-Law Article IX, Section
5 authorizing the Board or its designee to take certain actions in the
event of an emergency or extraordinary market conditions. Specifically,
new By-Law IV, Section 4-23 states that in the event of an emergency or
extraordinary market conditions, the Board or such person as may be
designated by the Board, shall have the authority to take any action
regarding: the trading in or operation of the Exchange or any other
organized securities markets that may be operated by the Exchange, the
operation of any automated system owned or operated by the Exchange,
and the participation in any such system or any or all persons or the
trading therein of any or all securities; and the operation of any or
all offices or systems of members and member organizations, if, in the
opinion of the Board or its designee, such action is necessary or
appropriate for the protection of investors or the public interest or
for the orderly operation of the marketplace or the system. Although
the Exchange has other ``extraordinary market conditions'' provisions
in its rules,\43\ the Exchange seeks adoptions of a provision that is
similar to the NASDAQ Stock Market.
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\43\ See e.g. Rules 1080(e) and 98.
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Finally, the Exchange is proposing technical, housekeeping rule
changes in respect of references that are obsolete, no longer in use,
or in need of updating so that Phlx Rules and Advices may be conformed.
These include references to departments, positions, and committees that
are renamed or no longer exist (e.g. Market Surveillance Department,
Market Surveillance, Arbitration Department, Financial Automation,
Office of Chief Examiner, and Stock List Committee); and to circulars
that are no longer in use (e.g. exchange and information
circulars).\44\
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\44\ See Rules 100, 108, 124, 507, 761, 800, 803, 960.2, 1001,
1003, 1014, 1017, 1039, 1042, 1047, 1061, 1080, 1092, and 1001A; and
OFPAs A-12, A-13, A-14, F-7, F-13, F-15, F-22, and F-27. As an
example, the terms ``Market Surveillance Department'' in Rule 761
and ``Market Surveillance'' in Rule 1047 are changed to ``regulatory
staff.''
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2. Statutory Basis
The Exchange proposes to streamline the governance structure of the
Exchange by updating, eliminating and consolidating its committees,
codifying certain emergency functions, updating its disciplinary
process, and harmonizing Exchange By-Laws, Rules and OFPAs. The
Exchange believes that its proposal is consistent with Section 6(b) of
the Act \45\ in general, and furthers the objectives of Section 6(b)(5)
of the Act \46\ in particular, in that it is designed 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
Exchange believes that its proposal also furthers the objectives of
Section 6(b)(3) of the Act,\47\ in that it is designed to promote fair
representation of the members of the Exchange in the administration of
its affairs, as discussed herein.
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\45\ 15 U.S.C. 78f(b).
\46\ 15 U.S.C. 78f(b)(5).
\47\ 15 U.S.C. 78f(b)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either 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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Phlx-2009-23 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2009-23. 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 (https://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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. 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 publicly available. All
submissions should refer to File Number SR-Phlx-2009-23 and should be
submitted on or before April 30, 2009.
[[Page 16255]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\48\
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\48\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-8001 Filed 4-8-09; 8:45 am]
BILLING CODE 8010-01-P
