81 FR 9531 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Partnerships

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 37 (February 25, 2016)

[Federal Register Volume 81, Number 37 (Thursday, February 25, 2016)]
[Notices]
[Pages 9531-9532]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-03946]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77186; File No. SR-Phlx-2016-20]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to 
Partnerships

February 19, 2016.
    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 February 16, 2016, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete these Rules: 903 entitled, ``Fixed 
Interest of Partner'';'' 904 entitled, ``Use of a Partnership Name;'' 
905 entitled, ``Special or Limited Partners;'' and 906 entitled, 
``Notice of Change in Partnership.'' The text of the proposed rule 
change is available on the Exchange's Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to delete certain Phlx membership rules in 
order to harmonize and modernize the Exchange's Rulebook. Specifically, 
Exchange proposes to delete Rule 903 entitled, ``Fixed Interest of 
Partner;'' Rule 904 entitled, ``Use of a Partnership Name;'' Rule 905 
entitled, ``Special or Limited Partners;'' and Rule 906 entitled, 
``Notice of Change in Partnership.'' Specifically, each proposed rule 
change is as a result of the demutualization of the Exchange in 2004 
and no longer applicable to the business today. The proposed changes 
related to the former need for the exchange to more acutely understand 
the ownership structure of the membership and are discussed in greater 
detail below.
    These rules were applicable when Phlx offered seats, prior to 
demutualization. Before demutualization, Phlx seats conveyed ownership 
which created a greater obligation on Phlx to gather information on the 
members corporate structure. Specifically, Phlx was obligated to 
maintain a heighted vigilance on the makeup, ownership, and changes of 
individuals in a partnership in order to ensure the financial integrity 
of its ownership structure. Today, permits are issued to Exchange 
members and member organizations. The Exchange no longer needs to 
differentiate ownership because the permit structure conveys no 
ownership to the membership. These membership rules related to 
partnerships are no longer applicable today. The distinctions regarding 
the admission of member as a partnership, as compared to a corporation, 
are no longer relevant. The Exchange proposes to remove these outdated 
Rules.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \3\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \4\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to and perfect the mechanism of a free and open 
market

[[Page 9532]]

and a national market system and, in general, to protect investors and 
the public interest. The Exchange believes that Rules 903-906 are 
burdensome and unnecessary. These rules regarding partnership 
interests, use of names, privileges, and changes to the partnership 
serve no modern purpose to the Exchange. The former ownership structure 
required the Exchange to be vigilant of the ownership structure of its 
members in case of financial distress or bankruptcy as the seat 
structure was vital to the financial condition of the Exchange. Before 
demutualization, members had ownership interest in the Exchange. Today, 
permits convey no ownership and therefore such vigilance as to the 
ownership structure of members is not warranted. The rules have not 
been changed since demutualization, but for 904 and 906 which were 
edited in 2009 in order to replace the term ``Membership Committee'' 
with ``Membership Department'' which was done in conjunction with other 
changes to the standing committees and corporate governance processes 
in order to make the Exchange more similar to the other Nasdaq SRO's.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78(f)(b)(5).
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    The removal of Rules 903-906 will promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities by removing 
burdensome requirements so that members may properly focus on other 
relevant requirements which benefit the marketplace.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange's proposed amendments seek to delete certain 
unnecessary rules which today burden partnerships over corporation. The 
deletions of Rules 903-906 will remove a current burden on competition 
which requires members and member organizations that are partnerships 
to disclose unnecessary information as compared to other corporate 
entities not structured as a partnership.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \5\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\6\
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    \5\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \6\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved. The Exchange has 
provided the Commission 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 date of 
filing of the proposed rule change.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2016-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2016-20. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE., Washington, 
DC 20549, on official business days between the hours of 10:00 a.m. and 
3:00 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-Phlx-2016-20 and 
should be submitted on or before March 17, 2016.
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    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
Brent J. Fields,
Secretary.
[FR Doc. 2016-03946 Filed 2-24-16; 8:45 am]
BILLING CODE 8011-01-P