Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Split Price Priority, 35759-35762 [E5-3194]
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Federal Register / Vol. 70, No. 118 / Tuesday, June 21, 2005 / Notices
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–2005–23 and should
be submitted on or before July 12, 2005.
IV. Commission’s Finding and Order
Granting Accelerated Approval of
Proposed Rule Change
The Commission find good cause
pursuant to Section 19(b)(2) of the Act 15
for approving the proposed rule change
and Amendment No. 1 prior to the
thirtieth day after publication in the
Federal Register. The Commission finds
that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to Phlx and, in
particular, the requirements of Section
6(c)(3)(B) and the rules and regulations
thereunder.16 After review the
Commission finds that the proposed
rule change is consistent with the
requirements of Section 6(c)(3)(B) of the
Act17 because under this section the
Exchange must prescribe standards of
training, experience and competence for
persons associated with Exchange
members and member organizations.18
Specifically, the Commission believes
that the proposed rule change should
help to ensure that all registered persons
are kept up-to-date on regulatory,
compliance, and sales practice-related
industry issues. The Commission also
believes that the proposed rule change,
as amended, will reinforce the
importance of compliance with just and
equitable principles of trade by
exposing all registered industry
participants to the full benefits of the
Regulatory Element programs, which
include a new Regulatory Element
module that focuses specifically on
ethics.
The Commission further believes that
accelerating the approval of the
proposed rule change and allowing for
retroactive effectiveness of the
Exchange’s proposed rule change to
April 4, 2005 is necessary to make Phlx
rules consistent with respect to
elimination of exemptions from the
continuing education requirement and
to have a consistent implementation
date.19
15 15
16 15
U.S.C. 78s(b)(2).
U.S.C. 78f(b)(3)(B).
17 Id.
18 In approving this proposed rule change, as
amended, the Commission notes that it has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
19 See infra, note 6.
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Based on the above, the Commission
believes that there is good cause,
consistent with Section 19(b)(2) of the
Act 20 to approve the proposal, as
amended, on an accelerated basis.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,21 that the
proposed rule change (SR–Phlx–2005–
23) is hereby approved on an
accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.22
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–3191 Filed 6–20–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51820; File No. SR–Phlx–
2005–28]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change and Amendment No. 1 Thereto
Relating to Split Price Priority
June 10, 2005.
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 April 28,
2005, the Philadelphia Stock Exchange,
Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II, below, which Items have
been prepared by the Phlx. On May 23,
2005, the Exchange amended the
proposed rule change (‘‘Amendment No.
1’’).3 The Exchange filed the proposal
pursuant to Section 19(b)(3)(A) of the
Act,4 and Rule 19b–4(f)(6) thereunder,5
which renders the proposal effective
upon filing with the Commission.6 The
Commission is publishing this notice to
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
22 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 1, the Exchange made a few
technical corrections to the purpose section and the
rule text of the proposed rule change and marked
the box on the cover page of Form 19b–4 to indicate
that the proposed rule change is subject to a pilot
program.
4 15 U.S.C. 78s(b)(3)(A).
5 17 CFR 240.19b–4(f)(6).
6 The Exchange requested the Commission to
waive the five-day pre-filing notice requirement and
the 30-day operative delay, as specified in Rule
19b–4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii).
PO 00000
20 15
21 15
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35759
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to adopt new Phlx
Rule 1014(g)(i)(C) governing purchase or
sale priority for orders of 100 option
contracts or more. The proposed rule
would afford priority to members that
purchase (sell) fifty or more contracts at
a particular price at the next lower
(higher) price in purchasing (selling) the
equivalent number of contracts in the
same series. Such priority would only
apply to orders that represent the same
transaction or order as the previous
purchase (sale), and would only apply
to transactions in equity options and
options overlying Exchange Traded
Fund Shares (‘‘ETFs’’) that are effected
in open outcry. The proposal is subject
to a pilot program until December 31,
2005.
The text of the proposed rule change,
as amended, is set forth below.
Proposed new language is in italics.
*
*
*
*
*
Obligations and Restrictions Applicable
to Specialists and Registered Options
Traders
Rule 1014. (a)–(f) No change.
(g) Equity Option and Index Option
Priority and Parity
(i) (A)–(B) No change.
(C) Purchase or sale priority for orders
of 100 contracts or more. If a member
purchases (sells) 50 or more option
contracts of a particular series at a
particular price or prices, he shall, at
the next lower (higher) price have
priority in purchasing (selling) up to the
equivalent number of option contracts
of the same series that he purchased
(sold) at the higher (lower) price or
prices, but only if his bid (offer) is made
promptly and the purchase (sale) so
effected represents the opposite side of
a transaction with the same order or
offer (bid) as the earlier purchase or
purchases (sale or sales). The Options
Committee may increase the ‘‘minimum
qualifying order size’’ above 100
contracts for all products under its
jurisdiction. Announcements regarding
changes to the minimum qualifying
order size shall be made via an
Exchange circular. This paragraph shall
only apply to transactions in equity
options and options overlying Exchange
Traded Fund Shares (‘‘ETFs’’) and only
to such transactions that are effected in
open outcry.
(ii)–(vii) No change.
(h) No change.
Commentary: .01–.18 No change.
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Federal Register / Vol. 70, No. 118 / Tuesday, June 21, 2005 / Notices
.19 Floor brokers are able to achieve
split price priority in accordance with
Rule 1014(g)(i)(C), provided, however,
that a floor broker who bids (offers) on
behalf of a non-market-maker Phlx
member broker-dealer (‘‘Phlx member
BD’’) must ensure that the Phlx member
BD qualifies for an exemption from
Section 11(a)(1) of the Exchange Act or
that the transaction satisfies the
requirements of Exchange Act Rule
11a2–2(T), otherwise the floor broker
must yield priority to orders for the
accounts of non-members.
*
*
*
*
*
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, as amended, 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 purpose of the proposed rule
change, as amended, is to establish rules
that would facilitate the execution of
large orders, which by virtue of their
size and the need to execute them at
multiple prices may be difficult to
execute without a limited exception to
current Exchange priority rules.
The proposed rule change, adopting
Rule 1014(g)(i)(C), would establish a
new priority rule regarding open outcry
split price transactions in equity options
and options overlying ETFs generally to
permit a member who is responding to
an order 7 for at least 100 contracts 8
who buys (sells) at least 50 contracts at
a particular price to have priority over
all others in purchasing (selling) up to
an equivalent number of contracts of the
same order at the next lower (higher)
price without being required to yield to
existing customer interest in the limit
7 Clarification provided in telephone conference
call on June 8, 2005, among Richard Rudolph, Vice
President and Counsel, Phlx, and Ira Brandriss,
Special Counsel, Ann Leddy, Special Counsel, and
Mitra Mehr, Staff Attorney, Division of Market
Regulation (‘‘Division’’), Commission (‘‘June 8th
Telephone Conference’’).
8 Orders for a size of less than 100 contracts
would not be affected by this proposed rule.
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order book. Absent this proposed rule,
such orders would be required to yield
priority.9
For example, when a floor broker
(‘‘Floor Broker’’) is representing a
customer’s order for 100 contracts and
a member executes a purchase of 50 of
those contracts at a price of $.30, the
member would have priority over all
market participants to purchase the
remaining 50 contracts in the order at
$.25.10 Two trades would be reported to
the tape, one a purchase of 50 contracts
at $.30, and the other a purchase of 50
contracts at $.25. The effect to the
customer would be a net purchase price
of $.275 for 100 contracts. The Exchange
believes that the proposal should lead to
more aggressive quoting by crowd
participants, which in turn could lead to
better executions. A crowd participant
might be willing to trade at a better
price for a portion of an order if he/she
were assured of trading with the balance
of the order at the next pricing
increment. As a result, Floor Brokers
representing orders in the trading crowd
might receive better-priced executions.
Under the proposal, the Exchange’s
Options Committee 11 would have the
ability to increase the minimum
qualifying order size to a number larger
than 100 contracts. Any changes, which
would have to apply to all products
under the committee’s jurisdiction,
would be announced to the membership
via an Exchange Circular.
One possible limitation on the ability
of crowd participants to use the split
price priority rule is the current
requirement that orders for controlled
accounts 12 must yield priority to orders
for customer accounts. Using the
example above, if the $.25 represents
orders for customer accounts, those
orders would have priority over orders
for controlled accounts at $.25. This
means that a holder of a controlled
account who is willing to trade at $.30
and $.25 may be unwilling to trade at
the price of $.30 if he/she cannot trade
the balance of the order at $.25 because
of the requirement to yield to orders for
customer accounts. The Exchange
e.g., Phlx Rule 119(a).
provided in June 8th Telephone
Conference.
11 The Options Committee has general
supervision of the dealings of members on the
options trading floor. See Phlx By-Law Article X,
Section 10–20.
12 A controlled account includes any account
controlled by or under common control with a
broker-dealer. Customer accounts are all other
accounts. Equity option and index option orders of
controlled accounts are required to yield priority to
customer orders when competing at the same price.
Orders of controlled accounts generally are not
required to yield priority to other controlled
account orders. See Phlx Rule 1014(g)(i)(A).
PO 00000
9 See,
10 Clarification
Frm 00146
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believes that this jeopardizes the
member’s willingness to execute the
first part of the order at a price of $.30
(using the above example), thereby
potentially making it difficult to achieve
price improvement for the Floor
Broker’s customer on the Phlx.13
Instead, the order might trade at another
exchange that has no impediments, i.e.,
no customer interest at those price
levels. Accordingly, one significant
purpose of this proposal is to adopt a
limited exception to the existing priority
requirement concerning controlled
accounts.
The Exchange believes that it would
be reasonable to make a limited
exception to the rule requiring
controlled accounts to yield priority to
non-controlled accounts in order to
allow split price trading. In this regard,
the proposed exception would be
similar in operation to the current
limited ‘‘spread-type’’ priority
exception 14 under Exchange rules. This
exception (which is established in the
rules of many options exchanges) was
intended to facilitate the trading of
spread, or ‘‘hedge’’ order,15 which by
virtue of their multi-legged composition
could be more difficult to trade without
a limited exception to the priority rule
for one of the legs. The purpose behind
the proposed split-price priority
exception is the same—to bring about
the execution of large orders, which by
virtue of their size and the need to
execute them at multiple prices may be
difficult to execute without a limited
exception to the priority rules. The
proposed exception would operate in
the same manner as the hedge order
exception by allowing a member
effecting a trade that betters the market
to have priority on the balance of that
trade at the next pricing increment, even
if there are orders in the book at the
same price.
In order to address potential concerns
regarding Section 11(a) of the Act,16 the
Exchange proposes to adopt new
Commentary .19 to Phlx Rule 1014.
Section 11(a) of the Act generally
prohibits members of national securities
exchanges from effecting transactions
for the member’s own account, absent
an exemption. Under the proposal, there
13 Clarification provided in June 8th Telephone
Conference.
14 Currently, a member that executes at least one
option leg of a spread order at a better price than
the established bid or offer for that option contract,
and no option leg of the spread order is executed
at a price outside of the established bid or offer for
that option contract, has priority over all other
orders at the same price. See Phlx Rule 1033(d).
15 The Exchange defines a ‘‘hedge order’’ as any
spread type order for the same account. See Phlx
Rule 1066(f).
16 15 U.S.C. 78k(a).
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Federal Register / Vol. 70, No. 118 / Tuesday, June 21, 2005 / Notices
could be situations where because of the
proposed limited exception to customer
priority, orders on behalf of members
could trade ahead of orders of
nonmembers in violation of Section
11(a). Proposed Commentary .19 would
make clear that Floor Brokers may avail
themselves of the split-price priority
rule, but that they would be obligated to
ensure compliance with Section 11(a).
Specifically, a Floor Broker bidding
(offering) on behalf of a Phlx member
broker-dealer that is not a specialist or
Registered Options Trader (‘‘ROT’’) on
the Exchange would be required to
ensure that the order he/she represents
qualifies for an exemption from Section
11(a)(1) of the Act or that the transaction
satisfies the requirements of Rule 11a2–
2(T) 17 under the Act.18 Otherwise, the
Floor Broker would be required to yield
priority to order(s) for the account(s) of
non-members.
2. Statutory Basis
The Exchange believes that its
proposed rule change, as amended, is
consistent with Section 6(b) of the Act 19
in general, and furthers the objectives of
Section 6(b)(5) of the Act 20 in
particular, in that it is designed to
perfect the mechanisms of a free and
open market and the national market
system, protect investors and the public
interest and promote just and equitable
principles of trade, by establishing a
17 17 CFR 240.11a2–2T. Rule 11a2–2T generally
states that a member of a national securities
exchange (the ‘‘initiating member’’) may not effect
a transaction on that exchange for its own account,
the account of an associated person, or an account
with respect to which it or an associated person
thereof exercises investment discretion unless:
(i) The transaction is executed on the floor, or
through use of the facilities, of the exchange by a
member (the ‘‘executing member’’) which is not an
associated person of the initiating member;
(ii) the order for the transaction is transmitted
from off the exchange floor;
(iii) neither the initiating member nor an
associated person of the initiating member
participates in the execution of the transaction at
any time after the order for the transaction has been
so transmitted; and
(iv) in the case of a transaction effected for an
account with respect to which the initiating
member or an associated person thereof exercises
investment discretion, neither the initiating
member nor any associated person thereof retains
any compensation in connection with effecting the
transaction; provided, however, that this condition
shall not apply to the extent that the person or
persons authorized to transact business for the
account have expressly provided otherwise by
written contract referring to Section 11(a) of the Act
and this section executed on or after March 15,
1978, by each of them and by such exchange
member or associated person exercising investment
discretion.
18 The Exchange notes that there are other
exemptions from the requirements of Section 11(a).
19 15 U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(5).
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limited priority rule regarding splitprice transactions.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change, as amended,
will impose any inappropriate burden
on competition.
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, as amended, 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 if consistent with the
protection of investors and the public
interest, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act,21 and Rule 19b–4(f)(6)
thereunder.22 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.23
A proposed rule change filed under
Rule 19b–4(f)(6) 24 normally does not
become operative prior to 30 days after
the date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii), the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the five-day pre-filing notice
requirement and the 30-day operative
delay.25 The Commission believes that
such waiver is consistent with the
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
23 The effective date of the original proposal is
April 28, 2005, and the effective date of the
amendment is May 23, 2005. For purposes of
calculating the 30-day operative delay and the 60day period within which the Commission may
summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission
considers that period to commence on May 23,
2005, the date the Exchange filed Amendment No.
1 to the proposed rule change. See 15 U.S.C.
78s(b)(3)(C).
24 17 CFR 240.19b–4(f)(6).
25 17 CFR 240.19b–4(f)(6)(iii).
PO 00000
21 15
22 17
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35761
protection of investors and the public
interest because it would allow the Phlx
to implement immediately a rule similar
to rules already in place at other options
exchanges and thus would permit the
Exchange to be better able to compete
for larger-sized orders. For these
reasons, the Commission designates the
proposed rule change, as amended, to be
effective upon filing with the
Commission.26
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, 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 rulecomments@sec.gov. Please include File
Number SR–Phlx–2005–28 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–Phlx–2005–28. 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. Copies of the filing also will be
available for inspection and copying at
the principal office of the Phlx. All
comments received will be posted
without change; the Commission does
not edit personal identifying
26 For purposes only of accelerating the operative
date of this proposal, the Commission has
considered the rule’s impact on efficiency,
competition and capital formation. 15 U.S.C. 78c(f).
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Federal Register / Vol. 70, No. 118 / Tuesday, June 21, 2005 / Notices
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–Phlx–2005–28 and should
be submitted on or before July 12, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.27
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–3194 Filed 6–20–05; 8:45 am]
BILLING CODE 8010–01–P
Responses: 5,000.
Annual Burden: 2,500.
SMALL BUSINESS ADMINISTRATION
Jacqueline K. White,
Chief, Administrative Information Branch.
[FR Doc. 05–12163 Filed 6–20–05; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
Reporting and Recordkeeping
Requirements Under OMB Review
Small Business Administration.
Notice of Reporting
Requirements Submitted for OMB
Review.
ACTION:
Reporting and Recordkeeping
Requirements Under OMB Review
Small Business Administration.
Notice of Reporting
Requirements Submitted for OMB
Review.
AGENCY:
ACTION:
SUMMARY: Under the provisions of the
Paperwork Reduction Act (44 U.S.C.
Chapter 35), agencies are required to
submit proposed reporting and
recordkeeping requirements to OMB for
review and approval, and to publish a
notice in the Federal Register notifying
the public that the agency has made
such a submission.
DATES: Submit comments on or before
July 21, 2005. If you intend to comment
but cannot prepare comments promptly,
please advise the OMB Reviewer and
the Agency Clearance Officer before the
deadline.
Copies: Request for clearance (OMB
83–1), supporting statement, and other
documents submitted to OMB for
review may be obtained from the
Agency Clearance Officer.
ADDRESSES: Address all comments
concerning this notice to: Agency
Clearance Officer, Jacqueline White,
Small Business Administration, 409 3rd
Street, SW., 5th Floor, Washington, DC
20416; and
David_Rostker@omb.eop.gov, fax
number 202–395–7285, Office of
Information and Regulatory Affairs,
Office of Management and Budget.
FOR FURTHER INFORMATION CONTACT:
Jacqueline White, Agency Clearance
Officer, jacqueline.white@sba.gov, (202)
205–7044.
SUPPLEMENTARY INFORMATION:
Title: Request for Borrowers
(Financial Statement).
Form No: 770.
Frequency: On Occasion.
Description of Respondents: SBA
Borrowers of guarantor’s who request
compromise.
27 17
CFR 200.30–3(a)(12).
VerDate jul<14>2003
22:07 Jun 20, 2005
SUMMARY: Under the provisions of the
Paperwork Reduction Act (44 U.S.C.
Chapter 35), agencies are required to
submit proposed reporting and
recordkeeping requirements to OMB for
review and approval, and to publish a
notice in the Federal Register notifying
the public that the agency has made
such a submission.
DATES: Submit comments on or before
July 21, 2005. If you intend to comment
but cannot prepare comments promptly,
please advise the OMB Reviewer and
the Agency Clearance Officer before the
deadline.
Copies: Request for clearance (OMB
83–1), supporting statement, and other
documents submitted to OMB for
review may be obtained from the
Agency Clearance Officer.
ADDRESSES: Address all comments
concerning this notice to: Agency
Clearance Officer, Jacqueline White,
Small Business Administration, 409 3rd
Street, SW., 5th Floor, Washington, DC
20416; and
David_Rostker@omb.eop.gov, fax
number 202–395–7285 Office of
Information and Regulatory Affairs,
Office of Management and Budget.
FOR FURTHER INFORMATION CONTACT:
Jacqueline White, Agency Clearance
Officer, jacqueline.white@sba.gov (202)
205–7044.
SUPPLEMENTARY INFORMATION:
Title: Impact of Credit Scoring on
Lending.
Form No.: 2269.
Frequency: On occasion.
Description of Respondents: Senior
Executives in banks and thrifts who are
knowledgeable about credit risk and
lending practices for small businesses.
Responses: 1,200.
Annual Burden: 300.
Jacqueline K. White,
Chief, Administrative Information Branch.
[FR Doc. 05–12164 Filed 6–20–05; 8:45 am]
BILLING CODE 8025–01–P
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Small Business Administration.
Notice of reporting requirements
submitted for OMB Review.
AGENCY:
ACTION:
AGENCY:
SMALL BUSINESS ADMINISTRATION
Reporting and Recordkeeping
Requirements Under OMB Review
Sfmt 4703
SUMMARY: Under the provisions of the
Paperwork Reduction Act (44 U.S.C.
chapter 35), agencies are required to
submit proposed reporting and
recordkeeping requirements to OMB for
review and approval, and to publish a
notice in the Federal Register notifying
the public that the agency has made
such a submission.
DATES: Submit comments on or before
July 21, 2005. If you intend to comment
but cannot prepare comments promptly,
please advise the OMB Reviewer and
the Agency Clearance Officer before the
deadline.
Copies: Request for clearance (OMB
83–1), supporting statement, and other
documents submitted to OMB for
review may be obtained from the
Agency Clearance Officer.
ADDRESSES: Address all comments
concerning this notice to: Agency
Clearance Officer, Jacqueline White,
Small Business Administration, 409 3rd
Street, SW., 5th Floor, Washington, DC
20416; and
David_Rostker@omb.eop.gov, fax
number 202–395–7285 Office of
Information and Regulatory Affairs,
Office of Management and Budget.
FOR FURTHER INFORMATION CONTACT:
Jacqueline White, Agency Clearance
Officer, jacqueline.white@sba.gov (202)
205–7044.
SUPPLEMENTARY INFORMATION:
Title: ‘‘25–Model Corp. Resol. or GP
Certif., 33–Model Letter to Selling Agent
34-Bank ID, 1065 Appl. Lic. Assure, of
Compliance.’’
Form No: 23, 33, 34, 1065.
Frequency: On Occasion.
Description of Respondents:
Applicants for SBA-guaranteed
leverages.
Annual Responses: 50.
Annual Burden: 45.
Jacqueline K. White,
Chief, Administrative Information Branch.
[FR Doc. 05–12166 Filed 6–20–05; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
Public Federal Regulatory
Enforcement Fairness Hearing; Region
VIII Regulatory Fairness Board
The U.S. Small Business
Administration Region VIII Regulatory
E:\FR\FM\21JNN1.SGM
21JNN1
]]>Agencies
[Federal Register Volume 70, Number 118 (Tuesday, June 21, 2005)]
[Notices]
[Pages 35759-35762]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3194]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51820; File No. SR-Phlx-2005-28]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
and Amendment No. 1 Thereto Relating to Split Price Priority
June 10, 2005.
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 April 28, 2005, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II, below, which Items have been prepared by the Phlx. On May 23, 2005,
the Exchange amended the proposed rule change (``Amendment No. 1'').\3\
The Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the
Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the proposal
effective upon filing with the Commission.\6\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange made a few technical
corrections to the purpose section and the rule text of the proposed
rule change and marked the box on the cover page of Form 19b-4 to
indicate that the proposed rule change is subject to a pilot
program.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
\6\ The Exchange requested the Commission to waive the five-day
pre-filing notice requirement and the 30-day operative delay, as
specified in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to adopt new Phlx Rule 1014(g)(i)(C) governing
purchase or sale priority for orders of 100 option contracts or more.
The proposed rule would afford priority to members that purchase (sell)
fifty or more contracts at a particular price at the next lower
(higher) price in purchasing (selling) the equivalent number of
contracts in the same series. Such priority would only apply to orders
that represent the same transaction or order as the previous purchase
(sale), and would only apply to transactions in equity options and
options overlying Exchange Traded Fund Shares (``ETFs'') that are
effected in open outcry. The proposal is subject to a pilot program
until December 31, 2005.
The text of the proposed rule change, as amended, is set forth
below. Proposed new language is in italics.
* * * * *
Obligations and Restrictions Applicable to Specialists and Registered
Options Traders
Rule 1014. (a)-(f) No change.
(g) Equity Option and Index Option Priority and Parity
(i) (A)-(B) No change.
(C) Purchase or sale priority for orders of 100 contracts or more.
If a member purchases (sells) 50 or more option contracts of a
particular series at a particular price or prices, he shall, at the
next lower (higher) price have priority in purchasing (selling) up to
the equivalent number of option contracts of the same series that he
purchased (sold) at the higher (lower) price or prices, but only if his
bid (offer) is made promptly and the purchase (sale) so effected
represents the opposite side of a transaction with the same order or
offer (bid) as the earlier purchase or purchases (sale or sales). The
Options Committee may increase the ``minimum qualifying order size''
above 100 contracts for all products under its jurisdiction.
Announcements regarding changes to the minimum qualifying order size
shall be made via an Exchange circular. This paragraph shall only apply
to transactions in equity options and options overlying Exchange Traded
Fund Shares (``ETFs'') and only to such transactions that are effected
in open outcry.
(ii)-(vii) No change.
(h) No change.
Commentary: .01-.18 No change.
[[Page 35760]]
.19 Floor brokers are able to achieve split price priority in
accordance with Rule 1014(g)(i)(C), provided, however, that a floor
broker who bids (offers) on behalf of a non-market-maker Phlx member
broker-dealer (``Phlx member BD'') must ensure that the Phlx member BD
qualifies for an exemption from Section 11(a)(1) of the Exchange Act or
that the transaction satisfies the requirements of Exchange Act Rule
11a2-2(T), otherwise the floor broker must yield priority to orders for
the accounts of non-members.
* * * * *
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, as
amended, 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 purpose of the proposed rule change, as amended, is to
establish rules that would facilitate the execution of large orders,
which by virtue of their size and the need to execute them at multiple
prices may be difficult to execute without a limited exception to
current Exchange priority rules.
The proposed rule change, adopting Rule 1014(g)(i)(C), would
establish a new priority rule regarding open outcry split price
transactions in equity options and options overlying ETFs generally to
permit a member who is responding to an order \7\ for at least 100
contracts \8\ who buys (sells) at least 50 contracts at a particular
price to have priority over all others in purchasing (selling) up to an
equivalent number of contracts of the same order at the next lower
(higher) price without being required to yield to existing customer
interest in the limit order book. Absent this proposed rule, such
orders would be required to yield priority.\9\
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\7\ Clarification provided in telephone conference call on June
8, 2005, among Richard Rudolph, Vice President and Counsel, Phlx,
and Ira Brandriss, Special Counsel, Ann Leddy, Special Counsel, and
Mitra Mehr, Staff Attorney, Division of Market Regulation
(``Division''), Commission (``June 8th Telephone Conference'').
\8\ Orders for a size of less than 100 contracts would not be
affected by this proposed rule.
\9\ See, e.g., Phlx Rule 119(a).
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For example, when a floor broker (``Floor Broker'') is representing
a customer's order for 100 contracts and a member executes a purchase
of 50 of those contracts at a price of $.30, the member would have
priority over all market participants to purchase the remaining 50
contracts in the order at $.25.\10\ Two trades would be reported to the
tape, one a purchase of 50 contracts at $.30, and the other a purchase
of 50 contracts at $.25. The effect to the customer would be a net
purchase price of $.275 for 100 contracts. The Exchange believes that
the proposal should lead to more aggressive quoting by crowd
participants, which in turn could lead to better executions. A crowd
participant might be willing to trade at a better price for a portion
of an order if he/she were assured of trading with the balance of the
order at the next pricing increment. As a result, Floor Brokers
representing orders in the trading crowd might receive better-priced
executions.
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\10\ Clarification provided in June 8th Telephone Conference.
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Under the proposal, the Exchange's Options Committee \11\ would
have the ability to increase the minimum qualifying order size to a
number larger than 100 contracts. Any changes, which would have to
apply to all products under the committee's jurisdiction, would be
announced to the membership via an Exchange Circular.
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\11\ The Options Committee has general supervision of the
dealings of members on the options trading floor. See Phlx By-Law
Article X, Section 10-20.
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One possible limitation on the ability of crowd participants to use
the split price priority rule is the current requirement that orders
for controlled accounts \12\ must yield priority to orders for customer
accounts. Using the example above, if the $.25 represents orders for
customer accounts, those orders would have priority over orders for
controlled accounts at $.25. This means that a holder of a controlled
account who is willing to trade at $.30 and $.25 may be unwilling to
trade at the price of $.30 if he/she cannot trade the balance of the
order at $.25 because of the requirement to yield to orders for
customer accounts. The Exchange believes that this jeopardizes the
member's willingness to execute the first part of the order at a price
of $.30 (using the above example), thereby potentially making it
difficult to achieve price improvement for the Floor Broker's customer
on the Phlx.\13\ Instead, the order might trade at another exchange
that has no impediments, i.e., no customer interest at those price
levels. Accordingly, one significant purpose of this proposal is to
adopt a limited exception to the existing priority requirement
concerning controlled accounts.
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\12\ A controlled account includes any account controlled by or
under common control with a broker-dealer. Customer accounts are all
other accounts. Equity option and index option orders of controlled
accounts are required to yield priority to customer orders when
competing at the same price. Orders of controlled accounts generally
are not required to yield priority to other controlled account
orders. See Phlx Rule 1014(g)(i)(A).
\13\ Clarification provided in June 8th Telephone Conference.
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The Exchange believes that it would be reasonable to make a limited
exception to the rule requiring controlled accounts to yield priority
to non-controlled accounts in order to allow split price trading. In
this regard, the proposed exception would be similar in operation to
the current limited ``spread-type'' priority exception \14\ under
Exchange rules. This exception (which is established in the rules of
many options exchanges) was intended to facilitate the trading of
spread, or ``hedge'' order,\15\ which by virtue of their multi-legged
composition could be more difficult to trade without a limited
exception to the priority rule for one of the legs. The purpose behind
the proposed split-price priority exception is the same--to bring about
the execution of large orders, which by virtue of their size and the
need to execute them at multiple prices may be difficult to execute
without a limited exception to the priority rules. The proposed
exception would operate in the same manner as the hedge order exception
by allowing a member effecting a trade that betters the market to have
priority on the balance of that trade at the next pricing increment,
even if there are orders in the book at the same price.
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\14\ Currently, a member that executes at least one option leg
of a spread order at a better price than the established bid or
offer for that option contract, and no option leg of the spread
order is executed at a price outside of the established bid or offer
for that option contract, has priority over all other orders at the
same price. See Phlx Rule 1033(d).
\15\ The Exchange defines a ``hedge order'' as any spread type
order for the same account. See Phlx Rule 1066(f).
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In order to address potential concerns regarding Section 11(a) of
the Act,\16\ the Exchange proposes to adopt new Commentary .19 to Phlx
Rule 1014. Section 11(a) of the Act generally prohibits members of
national securities exchanges from effecting transactions for the
member's own account, absent an exemption. Under the proposal, there
[[Page 35761]]
could be situations where because of the proposed limited exception to
customer priority, orders on behalf of members could trade ahead of
orders of nonmembers in violation of Section 11(a). Proposed Commentary
.19 would make clear that Floor Brokers may avail themselves of the
split-price priority rule, but that they would be obligated to ensure
compliance with Section 11(a). Specifically, a Floor Broker bidding
(offering) on behalf of a Phlx member broker-dealer that is not a
specialist or Registered Options Trader (``ROT'') on the Exchange would
be required to ensure that the order he/she represents qualifies for an
exemption from Section 11(a)(1) of the Act or that the transaction
satisfies the requirements of Rule 11a2-2(T) \17\ under the Act.\18\
Otherwise, the Floor Broker would be required to yield priority to
order(s) for the account(s) of non-members.
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\16\ 15 U.S.C. 78k(a).
\17\ 17 CFR 240.11a2-2T. Rule 11a2-2T generally states that a
member of a national securities exchange (the ``initiating member'')
may not effect a transaction on that exchange for its own account,
the account of an associated person, or an account with respect to
which it or an associated person thereof exercises investment
discretion unless:
(i) The transaction is executed on the floor, or through use of
the facilities, of the exchange by a member (the ``executing
member'') which is not an associated person of the initiating
member;
(ii) the order for the transaction is transmitted from off the
exchange floor;
(iii) neither the initiating member nor an associated person of
the initiating member participates in the execution of the
transaction at any time after the order for the transaction has been
so transmitted; and
(iv) in the case of a transaction effected for an account with
respect to which the initiating member or an associated person
thereof exercises investment discretion, neither the initiating
member nor any associated person thereof retains any compensation in
connection with effecting the transaction; provided, however, that
this condition shall not apply to the extent that the person or
persons authorized to transact business for the account have
expressly provided otherwise by written contract referring to
Section 11(a) of the Act and this section executed on or after March
15, 1978, by each of them and by such exchange member or associated
person exercising investment discretion.
\18\ The Exchange notes that there are other exemptions from the
requirements of Section 11(a).
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2. Statutory Basis
The Exchange believes that its proposed rule change, as amended, is
consistent with Section 6(b) of the Act \19\ in general, and furthers
the objectives of Section 6(b)(5) of the Act \20\ in particular, in
that it is designed to perfect the mechanisms of a free and open market
and the national market system, protect investors and the public
interest and promote just and equitable principles of trade, by
establishing a limited priority rule regarding split-price
transactions.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change, as
amended, will impose any inappropriate burden on competition.
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, as amended, 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 if
consistent with the protection of investors and the public interest, it
has become effective pursuant to Section 19(b)(3)(A) of the Act,\21\
and Rule 19b-4(f)(6) thereunder.\22\ 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.\23\
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f)(6).
\23\ The effective date of the original proposal is April 28,
2005, and the effective date of the amendment is May 23, 2005. For
purposes of calculating the 30-day operative delay and the 60-day
period within which the Commission may summarily abrogate the
proposed rule change under Section 19(b)(3)(C) of the Act, the
Commission considers that period to commence on May 23, 2005, the
date the Exchange filed Amendment No. 1 to the proposed rule change.
See 15 U.S.C. 78s(b)(3)(C).
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A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally
does not become operative prior to 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the five-day pre-filing notice requirement and
the 30-day operative delay.\25\ The Commission believes that such
waiver is consistent with the protection of investors and the public
interest because it would allow the Phlx to implement immediately a
rule similar to rules already in place at other options exchanges and
thus would permit the Exchange to be better able to compete for larger-
sized orders. For these reasons, the Commission designates the proposed
rule change, as amended, to be effective upon filing with the
Commission.\26\
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\24\ 17 CFR 240.19b-4(f)(6).
\25\ 17 CFR 240.19b-4(f)(6)(iii).
\26\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the rule's impact on
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-2005-28 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-Phlx-2005-28. 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. Copies of the
filing also will be available for inspection and copying at the
principal office of the Phlx. All comments received will be posted
without change; the Commission does not edit personal identifying
[[Page 35762]]
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-Phlx-2005-28 and should be submitted on or before July
12, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3194 Filed 6-20-05; 8:45 am]
BILLING CODE 8010-01-P
