Self-Regulatory Organizations; International Securities Exchange, Inc.; Order Approving a Proposed Rule Change and Amendment No. 1 Thereto Relating to Market Maker Orders, 63374-63375 [E6-18079]

Download as PDF 63374 Federal Register / Vol. 71, No. 209 / Monday, October 30, 2006 / Notices in either cancelling the order back to the participant or routing the order to a destination of the participant’s choice. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any 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 Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. 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 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–CHX–2006–30 and should be submitted on or before November 20, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14 Nancy M. Morris, Secretary. [FR Doc. E6–18083 Filed 10–27–06; 8:45 am] BILLING CODE 8011–01–P 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: SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54644; File No. SR–ISE– 2004–17] • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CHX–2006–30 on the subject line. sroberts on PROD1PC70 with NOTICES Electronic Comments Self-Regulatory Organizations; International Securities Exchange, Inc.; Order Approving a Proposed Rule Change and Amendment No. 1 Thereto Relating to Market Maker Orders October 23, 2006. I. Introduction On May 26, 2004, the International Securities Exchange, Inc. (‘‘ISE’’ or Paper Comments ‘‘Exchange’’), filed with the Securities • Send paper comments in triplicate and Exchange Commission to Nancy M. Morris, Secretary, (‘‘Commission’’), pursuant to Section Securities and Exchange Commission, 19(b)(1) of the Securities Exchange Act 100 F Street, NE., Washington, DC of 1934 (‘‘Act’’) 1 and Rule 19b–4 20549–1090. thereunder,2 a proposal to eliminate the All submissions should refer to File restriction on Electronic Access Number SR–CHX–2006–30. This file Members (‘‘EAMs’’) representing ISE number should be included on the market maker orders, provided that such subject line if e-mail is used. To help the orders are identified as orders for the Commission process and review your account of an ISE market maker. The comments more efficiently, please use Exchange filed Amendment No. 1 with only one method. The Commission will post all comments on the Commission’s 14 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). Internet Web site (http://www.sec.gov/ 2 17 CFR 240.19b–4. rules/sro.shtml). Copies of the VerDate Aug<31>2005 02:16 Oct 28, 2006 Jkt 211001 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 the Commission on August 14, 2006.3 The amended proposal was published for comment in the Federal Register on September 14, 2006.4 The Commission received no comments on the proposal. This order approves the proposal, as amended. II. Description of the Proposal The Exchange proposes to amend ISE Rule 717(g) to eliminate the restriction on EAMs representing ISE market maker orders, provided that such orders are identified as orders for the account of an ISE market maker. Currently, under ISE Rules, EAMs generally are not permitted to represent orders for the account of an ISE market maker. In its filing with the Commission, the Exchange stated that it initially included this restriction in its rules due to a system limitation. Specifically, allowing ISE market makers to enter orders through another member instead of directly might have created an opportunity for ISE market makers to avoid certain limitations on market maker trading contained in the Exchange’s Rules.5 The Exchange represents that it has developed the capability for EAMs to mark orders to show that they are for the account of an ISE market maker. A marked order can be tracked through the Exchange’s surveillance system as if it were directly entered by the market maker. Therefore, the Exchange proposes to eliminate the prohibition against EAMs entering orders for the account of ISE market makers in most circumstances. However, the proposal would continue to prohibit an EAM from entering an order solicited from an ISE market maker into the Solicited Order Mechanism and the Price Improvement Mechanism— functionalities that are designed to expose solicited transactions to the market—if the market maker is assigned to the options class that is the subject of the order.6 III. Discussion After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the 3 Amendment No. 1 replaced and superceded the original filing in its entirety. 4 See Securities Exchange Act Release No. 54415 (September 7, 2006), 71 FR 54321. 5 See, e.g., ISE Rule 805 (Market Maker Orders). 6 This limitation on entering orders solicited from market makers assigned to the options class was included in a rule change by the CBOE (the ‘‘Automated Improvement Mechanism’’ or ‘‘AIM’’) recently approved by the Commission. See Securities Exchange Act Release No. 53222 (Feb. 3, 2006), 71 FR 7089 (Feb. 10, 2006). The execution of solicited transactions through AIM is similar to the execution of orders through the ISE’s Price Improvement Mechanism. E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 71, No. 209 / Monday, October 30, 2006 / Notices requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.7 In particular, the Commission believes that the proposal is consistent with the requirements of Section 6(b)(5) of the Act,8 which requires, among other things, that the rules of a national securities exchange be designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transaction in securities; 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 ISE’s proposal should permit EAMs to represent orders of ISE market makers without compromising the Exchange’s ability to surveil their trading activity. Thus the proposal should not impact the Exchange’s execution of its regulatory obligations. In addition, the proposed provision prohibiting an EAM from entering an order solicited from an ISE market maker into the Solicited Order Mechanism and the Price Improvement Mechanism in that ISE market maker’s assigned class would permit those two functionalities to remain mechanisms for exposing solicited transactions to the competition of the marketplace. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,9 that the proposed rule change (File No. SR–ISE– 2004–17), as amended, is approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Nancy M. Morris, Secretary. [FR Doc. E6–18079 Filed 10–27–06; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54648; File No. SR–Phlx– 2006–52] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change, and Amendment No. 1 Thereto, Relating to Quoting Obligations October 24, 2006. I. Introduction On August 15, 2006, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Phlx Rule 1014, ‘‘Obligations and Restrictions Applicable to Specialists and Registered Options Traders,’’ by adopting Phlx Rule 1014(b)(ii)(D)(4), which would state that Streaming Quote Traders (‘‘SQTs’’),3 Remote Streaming Quote Traders (‘‘RSQTs’’),4 and SQTs and RSQTs that receive Directed Orders 5 (‘‘DSQTs’’ and ‘‘DRSQTs,’’ respectively) would be deemed not to be assigned in any option series until the time to expiration for such series is less than nine months. Accordingly, the market making obligations described in Phlx Rule 1014(b)(ii)(D) would not apply to SQTs, RSQTs, DSQTs, and DRSQTs respecting series with an expiration of nine months or greater. On September 8, 2006, the Exchange filed Amendment No. 1 to the proposed rule change.6 The proposed rule change, as amended, was published for comment in the Federal Register on September 19, 2006.7 The Commission received no comments regarding the proposal, as amended. This order approves the proposed rule change, as amended. II. Description of the Proposal Currently, SQTs and RSQTs that do not receive Directed Orders in a Streaming Quote Option 8 are BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Phlx Rule 1014(b)(ii)(A). 4 See Phlx Rule 1014(b)(ii)(B). 5 See Phlx Rule 1080(l)(i)(A). 6 Amendment No. 1 made a clarifying change to the proposed rule text, as well as two minor technical changes to the purpose section. 7 See Securities Exchange Act Release No. 54429 (September 12, 2006), 71 FR 54864. 8 A Streaming Quote Option is an option in which SQTs may generate and submit option quotations if such SQT is physically present on the Exchange floor, and RSQTs may generate and submit option sroberts on PROD1PC70 with NOTICES 2 17 7 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b)(5). 9 15 U.S.C. 78s(b)(2). 10 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 02:16 Oct 28, 2006 Jkt 211001 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 63375 responsible to quote continuous, twosided markets in not less than 60% of the series in each Streaming Quote Option in which such SQT or RSQT is assigned.9 A DSQT or DRSQT is responsible to quote continuous, two-sided markets in not less than 99% of the series listed on the Exchange in at least 60% of the options in which such DSQT or DRSQT is assigned.10 Whenever a DSQT or DRSQT enters a quotation in an option in which such DSQT or DRSQT is assigned, such DSQT or DRSQT must maintain continuous quotations for not less than 99% of the series of the option listed on the Exchange until the close of that trading day.11 To reduce the number of quotations submitted by SQTs, RSQTs, DSQTs and DRSQTs, the Phlx proposes to relax the quoting obligations that require quotes to be generated. Specifically, the Exchange proposes, on a six–month pilot basis, to permit SQTs, RSQTs, DSQTs and DRSQTs not to submit streaming quotations in options with a series of more than nine months until expiration, which are known as LEAPS (Long-term Equity Anticipation Securities), by deeming them not to be assigned in any option series until the time to expiration for such series is less than nine months. The effect of this is to relax their quoting obligations, and ultimately the number of quotes they are required to submit, because the quoting obligations in Phlx Rule 1014(b)(ii)(D)(1) apply only to those options in which they are assigned. Specialists, currently responsible to quote continuous, two-sided markets in not less than 99% of the series in each Streaming Quote Option in which such specialist is assigned,12 would still be required to quote LEAPS, so the Exchange would continue to disseminate a two-sided market in LEAPS. The Exchange proposes to effect the proposed rule change, as amended, on a six–month pilot basis, beginning on the date the Commission approves this proposed rule filing. III. Discussion The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national quotations from off the floor of the Exchange, electronically. See Phlx Rule 1080(k). Currently, all options trading on the Exchange are Streaming Quote options. 9 See Phlx Rule 1014(b)(ii)(D)(1). 10 See Phlx Rule 1014(b)(ii)(D)(1). 11 See Phlx Rule 1014(b)(ii)(D)(1). 12 See Phlx Rule 1014(b)(ii)(D)(2). E:\FR\FM\30OCN1.SGM 30OCN1

Agencies

[Federal Register Volume 71, Number 209 (Monday, October 30, 2006)]
[Notices]
[Pages 63374-63375]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-18079]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54644; File No. SR-ISE-2004-17]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Order Approving a Proposed Rule Change and Amendment No. 1 
Thereto Relating to Market Maker Orders

October 23, 2006.

I. Introduction

    On May 26, 2004, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange''), filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposal to eliminate the restriction on Electronic 
Access Members (``EAMs'') representing ISE market maker orders, 
provided that such orders are identified as orders for the account of 
an ISE market maker. The Exchange filed Amendment No. 1 with the 
Commission on August 14, 2006.\3\ The amended proposal was published 
for comment in the Federal Register on September 14, 2006.\4\ The 
Commission received no comments on the proposal. This order approves 
the proposal, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superceded the original filing 
in its entirety.
    \4\ See Securities Exchange Act Release No. 54415 (September 7, 
2006), 71 FR 54321.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to amend ISE Rule 717(g) to eliminate the 
restriction on EAMs representing ISE market maker orders, provided that 
such orders are identified as orders for the account of an ISE market 
maker. Currently, under ISE Rules, EAMs generally are not permitted to 
represent orders for the account of an ISE market maker. In its filing 
with the Commission, the Exchange stated that it initially included 
this restriction in its rules due to a system limitation. Specifically, 
allowing ISE market makers to enter orders through another member 
instead of directly might have created an opportunity for ISE market 
makers to avoid certain limitations on market maker trading contained 
in the Exchange's Rules.\5\
---------------------------------------------------------------------------

    \5\ See, e.g., ISE Rule 805 (Market Maker Orders).
---------------------------------------------------------------------------

    The Exchange represents that it has developed the capability for 
EAMs to mark orders to show that they are for the account of an ISE 
market maker. A marked order can be tracked through the Exchange's 
surveillance system as if it were directly entered by the market maker. 
Therefore, the Exchange proposes to eliminate the prohibition against 
EAMs entering orders for the account of ISE market makers in most 
circumstances. However, the proposal would continue to prohibit an EAM 
from entering an order solicited from an ISE market maker into the 
Solicited Order Mechanism and the Price Improvement Mechanism--
functionalities that are designed to expose solicited transactions to 
the market--if the market maker is assigned to the options class that 
is the subject of the order.\6\
---------------------------------------------------------------------------

    \6\ This limitation on entering orders solicited from market 
makers assigned to the options class was included in a rule change 
by the CBOE (the ``Automated Improvement Mechanism'' or ``AIM'') 
recently approved by the Commission. See Securities Exchange Act 
Release No. 53222 (Feb. 3, 2006), 71 FR 7089 (Feb. 10, 2006). The 
execution of solicited transactions through AIM is similar to the 
execution of orders through the ISE's Price Improvement Mechanism.
---------------------------------------------------------------------------

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the

[[Page 63375]]

requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\7\ In particular, the 
Commission believes that the proposal is consistent with the 
requirements of Section 6(b)(5) of the Act,\8\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transaction in securities; 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.
---------------------------------------------------------------------------

    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that ISE's proposal should permit EAMs to 
represent orders of ISE market makers without compromising the 
Exchange's ability to surveil their trading activity. Thus the proposal 
should not impact the Exchange's execution of its regulatory 
obligations. In addition, the proposed provision prohibiting an EAM 
from entering an order solicited from an ISE market maker into the 
Solicited Order Mechanism and the Price Improvement Mechanism in that 
ISE market maker's assigned class would permit those two 
functionalities to remain mechanisms for exposing solicited 
transactions to the competition of the marketplace.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-ISE-2004-17), as 
amended, is approved.
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Nancy M. Morris,
Secretary.
[FR Doc. E6-18079 Filed 10-27-06; 8:45 am]
BILLING CODE 8011-01-P