[Federal Register Volume 59, Number 123 (Tuesday, June 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15609]
[Federal Register: June 28, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34244; File No. SR-Phlx-94-14]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to its Order
and Decorum Regulations
June 22, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on March
10, 1994, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the self-
regulatory organization. On March 31, 1994, the Exchange submitted to
the Commission Amendment No. 1 to the proposed rule change.\1\ On June
22, 1994, the Exchange submitted to the Commission Amendment No. 2 to
the proposed rule change.\2\ The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
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\1\See letter from General D. O'Connell, Vice President, Market
Surveillance, Phlx, to Sharon Lawson, Assistant Director, SEC, dated
March 30, 1994. Amendment No. 1 clarified that in any instance where
an act described in Regulation 4(a) is deemed particularly
egregious, or where an individual has established a pattern of order
violations, two floor officials may refer the matter to the Business
Conduct Committee where additional fines and other sanctions may be
imposed pursuant to Phlx Rule 960.
\2\See letter from Gerald D. O'Connell, First Vice President,
Phlx, to Sharon Lawson, Assistant Director, SEC, dated June 22,
1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Regulation 4 (``Order'') as follows:
(1) to adopt paragraph (b) permitting two Floor Officials to refer
particularly egregious or repetitive violations to the Exchange's
Business Conduct Committee; (2) to renumber the existing provisions as
(a)(i)--(iii); (3) to add to the general prohibition against disorderly
conduct a proscription against acting in an indecorous manner which is
disruptive to the conduct of business on the trading floor; and (4) to
adopt paragraph (a)(iv) imposing a fine ranging from $500 to $1,000 for
each instance of abusive, derisive or harassing treatment directed at
any person while on the floor, which, in the view of two Floor
Officials, could constitute a public embarrassment to the Exchange.\3\
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\3\The text of the proposed amendment was attached as Exhibit B
to File No. SR-Phlx-94-14 and is available at the locations
specified in Item IV.
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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 self-regulatory organization
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 self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(a) Purpose
Regulation 4 (``Order'') is the most fundamental of the Exchange's
order and decorum regulations, which are adopted pursuant to Phlx Rule
60 (``Assessments for Breach of Regulations''). Rule 60 permits
Exchange officials and Floor Officials to assess fines, not exceeding
$1,000, for violations of regulations pertaining to order, decorum,
health, safety and welfare (``order and decorum'') on the Exchange, or
to refer such violations to the Exchange's Business Conduct Committee
where higher fines or other sanctions may be imposed, in accordance
with Phlx Rule 960.\4\ Rule 60 also enumerates the procedural aspects
of order and decorum fines, including the ability to contest a fine and
request a hearing. The Exchange has adopted seven regulations of order
and decorum pursuant to Rule 60, including regulation 4.\5\
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\4\Phlx Rule 960 governs disciplinary procedures at the
Exchange. Rule 960 provides for, among other things, a statement of
charges, answer, hearing, decision, petition for review of decision,
and sanctions, which include expulsion, suspension, fine, censure,
limitations or termination as to activities, functions, operations,
or association with a member or member organization, or any other
fitting sanction.
\5\In addition to Regulation 4, the Exchange's Rule 60
Regulations govern smoking; food, liquids, and beverages;
identification badges and access cards, visitors and applicants,
dress; and proper utilization of the security system. See Phlx Rule
60 Regulations.
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In summary, Regulation 4 governs conduct on the trading floors of
the Exchange by prohibiting disorderly conduct and imposing fines for
violations thereof. In addition to a general prohibition against
disorderly behavior, specific fines are also imposed for abuse of the
paging system, possession of firearms, and various degrees of fighting,
including inciting physical abuse, minor acts of physical abuse and
major acts of physical abuse.
At this time, the Exchange proposes to add a new paragraph (b)
Stating that any acts described in paragraph (a) which are deemed
particularly egregious, or where an individual has established a
pattern or order violations, may be referred by two Floor Officials to
the Business Conduct Committee where additional fines and other
sanctions may be imposed pursuant to Phlx rule 960.\6\ As a result of
this proposed language, similar language which currently follows the
paragraph addressing physical abuse is proposed to be deleted in order
for the new paragraph to apply to all violations of Regulation 4.
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\6\The Exchange stated that two Floor Officials could not impose
a fine or sanction pursuant to both Rules 60 and 960 for the same
conduct. The Exchange also stated that if a disciplinary proceeding
pursuant to Rule 960 is initiated by the Exchange, all procedural
rights contained in Rule 960 would apply. Conversation between
Gerald D. O'Connell, Vice President, Market Surveillance, Phlx, and
Louis A. Randazzo, Attorney, SEC, on March 25, 1994.
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In addition to adopting new paragraph (b), the proposal would also
renumber the existing provisions of the regulation. The following
language in the introductory paragraph is proposed to be deleted as
redundant: instances determined by a Floor Official as violative of the
``Order'' requirement may result in fines as described below. The first
paragraph would be renumbered as (a), with the abuse of paging system,
firearms and physical abuse provisions numbered (i)--(iii),
respectively.
The following prohibition is proposed to be added to paragraph (a)
to expand upon the general prohibition against disorderly conduct:
acting in an indecorous manner which is disruptive to the conduct of
business on the trading floor. The new language explicitly prohibits
behavior that results in a disruption of trading and provides a gauge
by which a Floor Official may determine whether a certain act was
disorderly (if an act caused floor traders to divert their attention
from trading, the act could be construed as disorderly).
The Exchange also proposes to adopt new paragraph (a)(iv) to
prohibit instances of abusive, derisive or harassing treatment directed
at any person while on the floor, which in the view of two Floor
Officials, could constitute a public embarrassment to the Exchange, and
impose a fine ranging from $500 to $1,000 for such violations. The
Exchange believes that because such behavior is indecorous but not
disruptive to trading in each case, it warrants a separate fine between
$500 and $1,000 and direct prohibition. This provision is intended to
specifically implement Exchange Rule 708 (``Acts Detrimental to the
Interest or Welfare of the Exchange'').\7\ Specifically, Rule 708,
Commentary .01(e) prohibits misconduct on the trading floor, in
violation of the Exchange's Order and Decorum Regulations, that is
repetitive, egregious of a publicly embarrassing nature to the Exchange
rule 708 would specifically enable the Exchange's Business Conduct
Committee to pursue formal disciplinary action for disorderly conduct
on the trading floor. The purpose of the present proposal is to provide
an established procedure by which referrals of such floor misconduct
would be made to the Business Conduct Committee by Floor Officials.
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\7\Phlx Rule 708 was approved by the Commission on April 1,
1994. See Securities Exchange Act Release No. 33850 (April 1, 1994)
(order approving File No. SR-Phlx-93-53).
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(b) Statutory Basis
The proposed rule change is consistent with Section 6 of the Act in
general, and in particular, with Section 6(b)(5), in that it is
designed to promote just and equitable principles of trade, and protect
investors and the public interest by ensuring an orderly and decorous
environment on the trading floor for Exchange business to be conducted.
The proposal is also consistent with Section 6(b)(6), in that
Regulation 4, as amended, would continue to provide that members of the
Exchange be appropriately disciplined for violations of the rules of
the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement of Comments on the Proposed
Rule Change Received from Members, Participants or Others.
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such other 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 self-regulatory organization consents, the Commission will:
(A) by order approve the 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Copies
of the submission, all subsequent amendments, all written statements
with respect to the proposed rule change that are filed with the
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying at the
Commission's Public Reference Room, 450 Fifth Street NW., Washington,
DC 20549. Copies of the filing will also be available for inspection
and copying at the principal office of the Phlx. All submissions should
refer to File No. SR-Phlx-94-14 and should be submitted by July 19,
1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15609 Filed 6-27-94; 8:45 am]
BILLING CODE 8010-01-M