Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Extension of the Exchange's Directed Order Flow Pilot Program, 31251-31253 [E6-8484]

Download as PDF Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices 2. Statutory Basis NSX believes that the proposed rule change is consistent with the provisions of section 6(b) of the Act,7 in general, and with section 6(b)(4) of the Act,8 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees and other charges by crediting members on a pro rata basis. B. Self-Regulatory Organization’s Statement on Burden on Competition NSX does not believe that the proposed rule change 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 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 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) of the Act 9 and Rule 19b–4(f)(6) thereunder.10 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. wwhite on PROD1PC61 with NOTICES 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: Number SR–NSX–2006–07 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments [Release No. 34–53870; File No. SR-Phlx2006–27] • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NSX–2006–07. 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 such filing also will be available for inspection and copying at the principal office of NSX. 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–NSX–2006–07 and should be submitted on or before June 22, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6–8441 Filed 5–31–06; 8:45 am] BILLING CODE 8010–01–P 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 U.S.C. 78f(b). U.S.C. 78f(b)(4). 9 15 U.S.C. 78s(b)(3)(A). 10 17CFR 240.19b–4(f)(6). 7 15 8 15 VerDate Aug<31>2005 19:10 May 31, 2006 11 17 Jkt 208001 31251 PO 00000 Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Extension of the Exchange’s Directed Order Flow Pilot Program May 25, 2006. 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 26, 2006, 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and is approving the proposal on an accelerated basis, for a pilot period through May 27, 2007. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to extend, for an additional one year period, a pilot program concerning Exchange Rule 1080, Phlx Automated Options Market (AUTOM) 3 and Automatic Execution System (AUTO-X), and Exchange Rule 1014, Obligations And Restrictions Applicable To Specialists And Registered Options Traders. Specifically the pilot program covers: (1) Exchange Rule 1080(l), Directed Orders, under which Exchange specialists, Streaming Quote Traders (‘‘SQTs’’) 4 and Remote 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 AUTOM is the Exchange’s electronic order delivery, routing, execution and reporting system, which provides for the automatic entry and routing of equity option and index option orders to the Exchange trading floor. Orders delivered through AUTOM may be executed manually, or certain orders are eligible for AUTOM’s automatic execution features, AUTO–X, Book Sweep and Book Match. Equity option and index option specialists are required by the Exchange to participate in AUTOM and its features and enhancements. Option orders entered by Exchange members into AUTOM are routed to the appropriate specialist unit on the Exchange trading floor. AUTOM is today more commonly referred to as Phlx XL. See Exchange Rule 1080. 4 An SQT is an Exchange Registered Options Trader (‘‘ROT’’) who has received permission from the Exchange to generate and submit option quotations electronically through an electronic interface with AUTOM via an Exchange approved 2 17 CFR 200.30–3(a)(12). Frm 00110 Fmt 4703 Sfmt 4703 Continued E:\FR\FM\01JNN1.SGM 01JNN1 31252 Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices Streaming Quote Traders (‘‘RSQTs’’) 5 trading on the Exchange’s electronic options trading platform, Phlx XL,6 receive Directed Orders (as defined below); and (2) Exchange Rule 1014(g)(viii), which sets forth the trade allocation algorithm for electronically executed and allocated trades involving Directed Orders. This proposal is in connection with a pilot program that is currently scheduled to expire on May 27, 2006.7 The text of the proposed rule change is set forth below. Brackets indicate deletions; italics indicates new text * * * * * Philadelphia Stock Exchange Automated Options Market (AUTOM) and Automatic Execution System (AUTO–X) Rule 1080. (a)–(k) No change. (l) Directed Orders. For a one-year pilot period, beginning on May 28, 2006 [the date of approval of this Rule by the Securities and Exchange Commission], respecting Streaming Quote Options traded on Phlx XL, specialists, RSQTs and SQTs may receive Directed Orders (as defined in this Rule) in accordance with the provisions of this Rule 1080(l). * * * * * Obligations And Restrictions Applicable To Specialists And Registered Options Traders Rule 1014. (a)–(f) No change. (g)(i)–(vii) No change. (viii) For a one year pilot period, beginning on May 28, 2006 [the date of approval of this Rule by the Securities and Exchange Commission], Directed Orders (as defined in Rule 1080(l)(i)(A)) that are executed electronically shall be automatically allocated as follows: * * * * * wwhite on PROD1PC61 with NOTICES 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 proprietary electronic quoting device in eligible options to which such SQT is assigned. See Exchange Rule 1014(b)(ii)(A). 5 An RSQT is a participant in the Exchange’s electronic trading system, Phlx XL who has received permission from the Exchange to trade in options for his own account, and to generate and submit option quotations electronically from off the floor of the Exchange through AUTOM in eligible options to which such RSQT has been assigned. 6 See Securities Exchange Act Release No. 50100 (July 27, 2004), 69 FR 46612 (August 3, 2004) (SR– Phlx–2003–59). 7 See Securities Exchange Act Release No. 51759 (May 27, 2005), 70 FR 32860 (June 6, 2005) (SR– Phlx–2004–91) (‘‘Pilot Program Approval Order’’). VerDate Aug<31>2005 19:10 May 31, 2006 Jkt 208001 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 III 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 extend, for an additional one-year period, a pilot program that allows specialists, SQTs, and RSQTs assigned in options that trade on Phlx XL to receive directed orders (‘‘Directed Orders’’) 8 from a member or member organization (‘‘Order Flow Provider’’ or ‘‘OFP’’) 9 that submits, as agent, the customer order to the Exchange through AUTOM, and establishes a trade allocation algorithm for Directed Orders that are electronically executed and allocated to reward such Directed Specialists, SQTs and RSQTs with a participation guarantee for attracting such order flow to the Exchange.10 The proposed rule is subject to a pilot program scheduled to expire on May 27, 2006. The Exchange proposes that the extended pilot expire on May 27, 2007. Pursuant to Rule 1080(l), OFPs must transmit Directed Orders to a particular specialist, SQT or RSQT through AUTOM. If the Exchange’s disseminated best bid or offer is at the National Best Bid or Offer when the Directed Order is received, the Directed Order is automatically executed on Phlx XL and allocated to the orders and quotes represented in the Exchange’s quotation. A Directed Specialist, SQT or RSQT will receive a participation allocation pursuant to Rule 1014(g)(viii) if the Directed Specialist, SQT or RSQT was quoting at the NBBO at the time that the Directed Order was received.11 Otherwise, the automatic execution will be allocated to those quotations and orders at the NBBO pursuant to Rule 1014(g)(vii).12 When the Exchange is not quoting at the NBBO, the Directed Order will be manually handled by the 8 See Exchange Rule 1080(l)(i)(A). Exchange Rule 1080(l)(i)(B). 10 See Exchange Rule 1080(1). The word ‘‘Directed’’ modifies all three; that is, it is referring to a Directed Specialist, Directed SQT and Directed RSQT. 11 See Exchange Rule 1080(l)(ii). 12 See Exchange Rule 1080(l)(iii). 9 See PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 specialist in accordance with the Exchange’s rules. The Exchange believes that the pilot program rewards specialists, SQTs and RSQTs for actively engaging in marketing activities and establishing relationships with OFPs that generate Directed Orders sent to the Exchange by such OFPs. The Exchange believes that the pilot program will result in additional order flow to the Exchange, thus adding depth and liquidity to the Exchange’s markets, and enabling the Exchange to continue to compete effectively with other options exchanges for order flow. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act 13 in general, and furthers the objectives of section 6(b)(5) of the Act 14 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, by permitting specialists, SQTs, and RSQTs trading options on Phlx XL to receive Directed Orders, and by encouraging the capture of order flow on the Exchange by rewarding Directed Order recipients with a participation guarantee in trades involving Directed Orders. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others The Exchange has not solicited, and does not intend to solicit comments on the proposed rule change. III. 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 and whether the pilot time frame is appropriate. Comments may be submitted by any of the following methods: 13 15 14 15 E:\FR\FM\01JNN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 01JNN1 Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices securities exchange 16, and, in particular, the requirements of section • Use the Commission’s Internet 6(b)(5) of the Act.17 Section 6(b)(5) comment form (https://www.sec.gov/ requires, among other things, that the rules/sro.shtml); or rules of a national securities exchange • Send an e-mail to rulebe designed to prevent fraudulent and comments@sec.gov. Please include File manipulative acts and practices, to Number SR–Phlx–2006–27 on the promote just and equitable principles of subject line. trade, to remove impediments to and Paper Comments perfect the mechanism of a free and open market and a national market • Send paper comments in triplicate system, and, in general, to protect to Nancy M. Morris, Secretary, investors and the public interest. The Securities and Exchange Commission, Commission notes that the current pilot 100 F Street, NE., Washington, DC was approved on a one-year basis to 20549–1090. give the Commission an opportunity to All submissions should refer to File evaluate the impact of the pilot program Number SR–Phlx–2006–27. This file on the options markets to determine number should be included on the subject line if e-mail is used. To help the whether it would be beneficial to customers and to the options markets as Commission process and review your a whole before approving any request comments more efficiently, please use only one method. The Commission will for permanent approval of the pilot post all comments on the Commission’s program. The Commission believes that a one-year extension of the pilot period Internet Web site (https://www.sec.gov/ would provide the Commission with rules/sro.shtml). Copies of the additional time to continue evaluate the submission, all subsequent Exchange’s Directed Order program. amendments, all written statements with respect to the proposed rule The Exchange has requested that the change that are filed with the Commission find good cause for Commission, and all written approving the proposed rule change communications relating to the prior to the thirtieth day after proposed rule change between the publication of notice thereof in the Commission and any person, other than Federal Register. The Commission those that may be withheld from the believes that granting accelerated public in accordance with the approval of the proposed rule change provisions of 5 U.S.C. 552, will be would allow the pilot program to available for inspection and copying in continue without disruption while the the Commission’s Public Reference Room. Copies of such filing also will be Commission and the Exchange continue to review the pilot program’s impact on available for inspection and copying at the principal office of the Exchange. All the options market. Accordingly, the Commission finds good cause, comments received will be posted consistent with section 19(b)(2) of the without change; the Commission does Act,18 for approving the proposed rule not edit personal identifying change prior to the thirtieth day after information from submissions. You publication of notice thereof in the should submit only information that you wish to make available publicly. All Federal Register. submissions should refer to File V. Conclusion Number SR–Phlx–2006–27 and should be submitted on or before June 22, 2006. It is therefore ordered, pursuant to section 19(b)(2) of the Act,19 that the IV. Commission’s Findings and Order proposed rule change (SR–Phlx–2006– Granting Accelerated Approval of the 27), which institutes the pilot program Proposed Rule Change through May 27, 2007, is hereby The Exchange has asked the approved on an accelerated basis. Commission to approve the proposed rule change on an accelerated basis for an additional year so that the pilot program may continue uninterrupted. After careful consideration, the Commission finds that the proposed 16 In approving this proposal, the Commission has rule change is consistent with the considered the proposed rule’s impact on 15 requirements of section 6 of the Act efficiency, competition, and capital formation. 15 and the rules and regulations U.S.C. 78c(f). 17 15.U.S.C. 78f(b)(5). thereunder applicable to a national wwhite on PROD1PC61 with NOTICES Electronic Comments 18 15 15 15 U.S.C. 78f. VerDate Aug<31>2005 19:10 May 31, 2006 19 15 Jkt 208001 PO 00000 U.S.C. 78s(b)(2). U.S.C. 78s(b)(2). Frm 00112 Fmt 4703 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.20 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–8484 Filed 5–31–06; 8:45 am] BILLING CODE 8010–01–P DEPARTMENT OF STATE [Public Notice 5429] Exchange Visitor Program—Training and Internship: Supplemental—Notice of Proposed Information Collection: DS–7002, Training/Internship Placement Plan, OMB Control Number 1405–XXXX. Notice of request for public comment and submission to OMB of proposed collection of information in connection with rulemaking. ACTION: SUMMARY: In a notice of proposed rulemaking published in the Federal Register on April 7, 2006 (71 FR 17778) regarding proposed revisions to its training/internship programs administered by the Bureau of Educational and Cultural Affairs, the Department of State stated that the proposed rule contained a collection of information requirement for Purposes of the Paperwork Reduction Act. The Department further stated that it would be submitted to OMB for review and be the subject of a separate Federal Register notice and request for public comment. Accordingly, the Department has submitted the following information collection request to the Office of Management and Budget (OMB) for approval in accordance with the Paperwork Reduction Act of 1995. • Title of Information Collection: Training/Internship Placement Plan. • OMB Control Number: 1405–XXXX. • Type of Request: New Collection. • Originating Office: Office of Exchange Coordination and Designation, Bureau of Educational and Cultural Affairs, Department of State. • Form Number: DS–7002. • Respondents: Exchange Visitor Program designated sponsors for foreign nationals who wish to participate in structured training or internship programs offered by U.S. businesses. • Estimated Number of Respondents: 160 per year. • Estimated Number of Responses: 30,000 per year. • Average Hours per Response: 60 minutes. • Total Estimated Burden: 30,000 hours. 20 17 Sfmt 4703 31253 E:\FR\FM\01JNN1.SGM CFR 200.30–3(a)(12). 01JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 71, Number 105 (Thursday, June 1, 2006)]
[Notices]
[Pages 31251-31253]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-8484]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53870; File No. SR-Phlx-2006-27]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Relating to the Extension of the Exchange's Directed Order 
Flow Pilot Program

May 25, 2006.
    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 26, 2006, 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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and is approving the 
proposal on an accelerated basis, for a pilot period through May 27, 
2007.
---------------------------------------------------------------------------

    \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 Phlx proposes to extend, for an additional one year period, a 
pilot program concerning Exchange Rule 1080, Phlx Automated Options 
Market (AUTOM) \3\ and Automatic Execution System (AUTO-X), and 
Exchange Rule 1014, Obligations And Restrictions Applicable To 
Specialists And Registered Options Traders. Specifically the pilot 
program covers: (1) Exchange Rule 1080(l), Directed Orders, under which 
Exchange specialists, Streaming Quote Traders (``SQTs'') \4\ and Remote

[[Page 31252]]

Streaming Quote Traders (``RSQTs'') \5\ trading on the Exchange's 
electronic options trading platform, Phlx XL,\6\ receive Directed 
Orders (as defined below); and (2) Exchange Rule 1014(g)(viii), which 
sets forth the trade allocation algorithm for electronically executed 
and allocated trades involving Directed Orders. This proposal is in 
connection with a pilot program that is currently scheduled to expire 
on May 27, 2006.\7\
---------------------------------------------------------------------------

    \3\ AUTOM is the Exchange's electronic order delivery, routing, 
execution and reporting system, which provides for the automatic 
entry and routing of equity option and index option orders to the 
Exchange trading floor. Orders delivered through AUTOM may be 
executed manually, or certain orders are eligible for AUTOM's 
automatic execution features, AUTO-X, Book Sweep and Book Match. 
Equity option and index option specialists are required by the 
Exchange to participate in AUTOM and its features and enhancements. 
Option orders entered by Exchange members into AUTOM are routed to 
the appropriate specialist unit on the Exchange trading floor. AUTOM 
is today more commonly referred to as Phlx XL. See Exchange Rule 
1080.
    \4\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
option quotations electronically through an electronic interface 
with AUTOM via an Exchange approved proprietary electronic quoting 
device in eligible options to which such SQT is assigned. See 
Exchange Rule 1014(b)(ii)(A).
    \5\ An RSQT is a participant in the Exchange's electronic 
trading system, Phlx XL who has received permission from the 
Exchange to trade in options for his own account, and to generate 
and submit option quotations electronically from off the floor of 
the Exchange through AUTOM in eligible options to which such RSQT 
has been assigned.
    \6\ See Securities Exchange Act Release No. 50100 (July 27, 
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59).
    \7\ See Securities Exchange Act Release No. 51759 (May 27, 
2005), 70 FR 32860 (June 6, 2005) (SR-Phlx-2004-91) (``Pilot Program 
Approval Order'').
---------------------------------------------------------------------------

    The text of the proposed rule change is set forth below. Brackets 
indicate deletions; italics indicates new text
* * * * *

Philadelphia Stock Exchange Automated Options Market (AUTOM) and 
Automatic Execution System (AUTO-X)

    Rule 1080. (a)-(k) No change.
    (l) Directed Orders. For a one-year pilot period, beginning on May 
28, 2006 [the date of approval of this Rule by the Securities and 
Exchange Commission], respecting Streaming Quote Options traded on Phlx 
XL, specialists, RSQTs and SQTs may receive Directed Orders (as defined 
in this Rule) in accordance with the provisions of this Rule 1080(l).
* * * * *

Obligations And Restrictions Applicable To Specialists And Registered 
Options Traders

    Rule 1014. (a)-(f) No change.
    (g)(i)-(vii) No change.
    (viii) For a one year pilot period, beginning on May 28, 2006 [the 
date of approval of this Rule by the Securities and Exchange 
Commission], Directed Orders (as defined in Rule 1080(l)(i)(A)) that 
are executed electronically shall be automatically allocated as 
follows:
* * * * *

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 III 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 extend, for an additional one-year period, 
a pilot program that allows specialists, SQTs, and RSQTs assigned in 
options that trade on Phlx XL to receive directed orders (``Directed 
Orders'') \8\ from a member or member organization (``Order Flow 
Provider'' or ``OFP'') \9\ that submits, as agent, the customer order 
to the Exchange through AUTOM, and establishes a trade allocation 
algorithm for Directed Orders that are electronically executed and 
allocated to reward such Directed Specialists, SQTs and RSQTs with a 
participation guarantee for attracting such order flow to the 
Exchange.\10\ The proposed rule is subject to a pilot program scheduled 
to expire on May 27, 2006. The Exchange proposes that the extended 
pilot expire on May 27, 2007.
---------------------------------------------------------------------------

    \8\ See Exchange Rule 1080(l)(i)(A).
    \9\ See Exchange Rule 1080(l)(i)(B).
    \10\ See Exchange Rule 1080(1). The word ``Directed'' modifies 
all three; that is, it is referring to a Directed Specialist, 
Directed SQT and Directed RSQT.
---------------------------------------------------------------------------

    Pursuant to Rule 1080(l), OFPs must transmit Directed Orders to a 
particular specialist, SQT or RSQT through AUTOM. If the Exchange's 
disseminated best bid or offer is at the National Best Bid or Offer 
when the Directed Order is received, the Directed Order is 
automatically executed on Phlx XL and allocated to the orders and 
quotes represented in the Exchange's quotation. A Directed Specialist, 
SQT or RSQT will receive a participation allocation pursuant to Rule 
1014(g)(viii) if the Directed Specialist, SQT or RSQT was quoting at 
the NBBO at the time that the Directed Order was received.\11\ 
Otherwise, the automatic execution will be allocated to those 
quotations and orders at the NBBO pursuant to Rule 1014(g)(vii).\12\ 
When the Exchange is not quoting at the NBBO, the Directed Order will 
be manually handled by the specialist in accordance with the Exchange's 
rules.
---------------------------------------------------------------------------

    \11\ See Exchange Rule 1080(l)(ii).
    \12\ See Exchange Rule 1080(l)(iii).
---------------------------------------------------------------------------

    The Exchange believes that the pilot program rewards specialists, 
SQTs and RSQTs for actively engaging in marketing activities and 
establishing relationships with OFPs that generate Directed Orders sent 
to the Exchange by such OFPs. The Exchange believes that the pilot 
program will result in additional order flow to the Exchange, thus 
adding depth and liquidity to the Exchange's markets, and enabling the 
Exchange to continue to compete effectively with other options 
exchanges for order flow.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \13\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \14\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest, by permitting specialists, SQTs, and 
RSQTs trading options on Phlx XL to receive Directed Orders, and by 
encouraging the capture of order flow on the Exchange by rewarding 
Directed Order recipients with a participation guarantee in trades 
involving Directed Orders.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange believes that 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit 
comments on the proposed rule change.

III. 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 and whether the pilot time frame is 
appropriate. Comments may be submitted by any of the following methods:

[[Page 31253]]

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-2006-27 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2006-27. 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 such 
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-2006-27 and should be submitted on or before June 
22, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The Exchange has asked the Commission to approve the proposed rule 
change on an accelerated basis for an additional year so that the pilot 
program may continue uninterrupted. After careful consideration, the 
Commission finds that the proposed rule change is consistent with the 
requirements of section 6 of the Act \15\ and the rules and regulations 
thereunder applicable to a national securities exchange \16\, and, in 
particular, the requirements of section 6(b)(5) of the Act.\17\ Section 
6(b)(5) requires, among other things, that the rules of a national 
securities exchange be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. The Commission notes that the 
current pilot was approved on a one-year basis to give the Commission 
an opportunity to evaluate the impact of the pilot program on the 
options markets to determine whether it would be beneficial to 
customers and to the options markets as a whole before approving any 
request for permanent approval of the pilot program. The Commission 
believes that a one-year extension of the pilot period would provide 
the Commission with additional time to continue evaluate the Exchange's 
Directed Order program.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f.
    \16\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \17\ 15.U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of notice thereof in the Federal Register. The Commission 
believes that granting accelerated approval of the proposed rule change 
would allow the pilot program to continue without disruption while the 
Commission and the Exchange continue to review the pilot program's 
impact on the options market. Accordingly, the Commission finds good 
cause, consistent with section 19(b)(2) of the Act,\18\ for approving 
the proposed rule change prior to the thirtieth day after publication 
of notice thereof in the Federal Register.
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    \18\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-Phlx-2006-27), which 
institutes the pilot program through May 27, 2007, is hereby approved 
on an accelerated basis.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-8484 Filed 5-31-06; 8:45 am]
BILLING CODE 8010-01-P

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