68 FR 69 pgs. 17717-17718 - Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to the Net Capital Calculation for Broker-Dealer Accounts
Type: NOTICEVolume: 68Number: 69Pages: 17717 - 17718
Docket number: [Release No. 34-47630; File No. SR-Phlx-2003-14]
FR document: [FR Doc. 03-8731 Filed 4-9-03; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47630; File No. SR-Phlx-2003-14]
Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to the Net Capital Calculation for Broker-Dealer Accounts
April 3, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 ("Act" or "Exchange Act"),1and rule 19b-42thereunder, notice is hereby given that on March 19, 2003, the Philadelphia Stock Exchange, Inc. ("Phlx" or "Exchange") submitted to 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 Phlx. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
Footnotes:
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 Phlx rule 722(c)(5) ("Broker-Dealer Accounts") to clarify that the haircut requirements of Exchange Act rule 15c3-13must be considered in computing the net capital of a broker-dealer that is extending margin to another broker-dealer and to harmonize it with other exchanges' rules.4
Below is the text of the proposed rule change. Proposed new language is italicized . Proposed deletions are in [brackets].
Footnotes:
3 17 CFR 240.15c3-1.
4 See Securities Exchange Act Release No. 46716 (October 24, 2002), 67 FR 66434 (October 31, 2002) (SR-CBOE-2002-59) (relating to margin requirements for broker-dealer accounts). The Phlx notes that Chicago Board Options Exchange ("CBOE") rule 12.3(g) is substantially similar to New York Stock Exchange, Inc. ("NYSE") rule 431(e)(6)(A). See Securities Exchange Act Release No. 42453 (February 24, 2000), 65 FR 11620 (March 3, 2000) (SR-NYSE-1997-27) (order approving a proposed rule change affecting the margin calculation for broker-dealer accounts).
Rule 722. Margin Accounts5
Footnotes:
5 The phrase, "Rule 722. Margin Accounts", reflects the correction of a typographical error from the rule text that Phlx submitted with the proposed rule change. Telephone conversation between Mark I. Salvacion, Director and Counsel, Phlx, and Tim Fox, Attorney, Division of Market Regulation, Commission on April 3, 2003.
5. Broker-Dealer Accounts. A member organization may carry the proprietary account of another broker-dealer, which is registered with the Securities and Exchange Commission, upon a margin basis which is satisfactory to both parties, provided the requirements of Regulation T of the Board of Governors of the Federal Reserve System are adhered to and the account is not carried in a deficit equity condition. The amount of any deficiency between the equity maintained in the account and the [margin required by the other provisions of this rule] haircut requirements calculated pursuant to rule 15c3-1 of the Exchange Act, shall be deducted in computing the Net Capital of the member organization under rule 15c3-1 of the Exchange Act and rule 703.
II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in item IV below. The Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Phlx rule 722(c)(5) ("Broker-Dealer Accounts"), to clarify that the haircut requirements of Exchange Act rule 15c3-16must be considered in computing the net capital of a broker-dealer extending margin to another broker-dealer. As amended, Phlx rule 722(c)(5) would be substantially similar to CBOE rule 12.3(g).
Footnotes:
6 17 CFR 240.15c3-1.
Currently, Phlx rule 722 sets forth the rules governing the margin that must be maintained in margin accounts of customers of Phlx members, whether such customers are members themselves, partners of members, member firms, member corporations or stockholders therein, or non-members. Phlx rule 722(c) sets forth certain exceptions to the general margin requirements. Phlx rule 722(c)(5) provides that an Exchange member may carry the proprietary account of another broker-dealer registered with the Commission, on a margin basis that is satisfactory to both parties ("broker-to-broker margin"); provided however, that the parties adhere to Regulation T of the Board of Governors of the Federal Reserve System,7and the account is not carried in a deficit condition.
Footnotes:
7 12 CFR 220.1 et seq.
Phlx rule 722(c)(5) further provides that the amount of any deficiency between the equity maintained in the account and the "margin required by the other provisions of" Phlx rule 722 shall be deducted in computing the net capital of the Phlx member carrying the account of another registered broker-dealer. The Phlx believes that this language does not accurately reflect that the haircut requirements specified in Exchange Act rule 15c3-18must also be considered in computing such Phlx member's net capital.
Footnotes:
8 17 CFR 240.15c3-1.
Accordingly, the Phlx proposes to delete the phrase "margin required by the other provisions of," and clarify in its rule that the haircut requirements calculated pursuant to Exchange Act rule 15c3-1 will be used to calculate the net capital of a Phlx member carrying the margin account of a registered broker-dealer customer. The Phlx notes that the CBOE and NYSE each has adopted a similar change to its margin rules.
2. Statutory Basis
The Phlx believes that the proposed rule change harmonizes the margin treatment between Phlx's rule and analogous CBOE and NYSE rules. As such, the Phlx believes that its proposal is consistent with section 6(b) of the Act9in general, and furthers the objectives of section 6(b)(5) of the Act10in particular, in that it is designed to perfect the mechanism of a free and open market and to protect investors and the public interest.
Footnotes:
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
B. Self-Regulatory Organization's Statement on Burden on Competition
This proposed rule change does not impose any burden on competition that is 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
The Phlx has designated the foregoing proposed rule change as effecting a change that: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) by its terms does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest.11Accordingly, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act12and rule 19b-4(f)(6) thereunder.13At any time within 60 days of the filing of such 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.
Footnotes:
11 As required under Securities Exchange Act rule 19b-4(f)(6)(iii), the Phlx provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the filing date or such shorter period as designated by the Commission. See Prefiling Notice of Proposed Rule Change (SR-Phlx-2003-14), dated March 11, 2003.
12 15 U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b-4(f)(6).
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Phlx. All submissions should refer to File No. SR-Phlx-2003-14 and should be submitted by May 1, 2003.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-8731 Filed 4-9-03; 8:45 am]
BILLING CODE 8010-01-P