Subject: File No. SR-Phlx-2004-47
From: Richard B Feinberg
Affiliation: Penn Mont Securities

September 26, 2004

I hereby submit the following comment regarding the proposed rule filing SR-PHLX-2004-47. This rule should not be approved as filed because of public statements by the PHLX that New Rule 651 will apply to all non-adjudicated---that is still undecided---casesas reported in the August 9, 2004 issue of Wall Street Letter. Such ex post facto application of any rule by any SRO regulated by the Securities and Exchange Commission is patently unconstitutional. Indeed, in a conversation I had with Mr. Frucher, the Chairman/CEO of the PHLX on September 23, 2004, he stated to me that the SEC told us that the rule is an SRO matter and that we can adjudicate it any way we want. If the commission or any of its employees intimated or expressed that view it would be out of character and inappropriate, certainly before approval or effectiveness of any rule filing. This rule has also be misrepresented to the members, member organizations, foreign currency options participants and foreign currency options participant organizations. In PHLX Memo No. 1581-04 the PHLX stated, The Exchange has submitted an immediately effective filing at SR-Phlx-2004-47 to the Securities and Exchange Commission Commission, proposing to adopt new Rule 651 regarding reimbursement of litigation expenses. As the SEC is well aware, the submission of rule filings regarding fees, dues or commentaries on existing rules are effective upon filing. All others are subject to comment. I attempted to correct Mr. Trypupenko shortly after the dissemination of the aforementioned memo to state that if that was the case that the rule was submitted with a request for expedited approval. He neither corrected the memo nor did he disseminate a more accurate memo. In addition, a member of the PHLX, Mr. Lawrence Gage has filed an appeal with the PHLX as to the action of the Executive Committees adoption of this rule according to the By-laws of the PHLX dealing with appeals. The Executive Committee, not the Board of Governors adopted this rule. To date the PHLX has not set a date to hear this appeal. Under the By-laws of the PHLX all action is stayed while an appeal of a standing committee is active. Despite that appeal, the PHLX continued to pursue its filing with the SEC. And the latest PHLX rule updates has been sent to the members stating the adoption of Rule 651 as part of the Rules and Regulations of the PHLX with a date of adoption of August 5, 2004. This statements and rule updates are belied by the facts. This rule also breaks the law of the State of Delaware in regard to the rights of common stock holders to bring suit against management. Delaware law provides for corporated relief against shareholder suits under existing frivolous law suit provisions. Since all of the current shareholders are members or affiliated with member organizations, this rule would withhold from them the protections of Delaware law. The similar rulemaking that the SEC approved for the Chicago Board Options Exchange, Inc. and the American Stock Exchange, Inc. is more appropriate because they are mutualized organizations. As of January 2004 the PHLX became a demutualized entity under the laws and protections of the State of Delaware. For all of the foregoing the rule as submitted to the SEC for approval should be rejected.