Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to Performance Evaluations for Streaming Quote Traders and Remote Streaming Quote Traders, 71605-71607 [E6-20963]
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Federal Register / Vol. 71, No. 237 / Monday, December 11, 2006 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change is
subject to Section 19(b)(3)(A)(iii) of the
Act 12 and Rule 19b–4(f)(6) thereunder 13
because the proposal: (i) Does not
significantly affect the protection of
investors or the public interest; (ii) does
not impose any significant burden on
competition; and (iii) does not become
operative prior to 30 days after the date
of filing or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest; provided that the selfregulatory organization has given the
Commission notice of its intent to file
the proposed rule change, along with a
brief description and text of the
proposed rule change, at least five
business days prior to the date of filing
of the proposed rule change, or such
shorter time as designated by the
Commission.
Nasdaq provided the Commission
with written notice of its intent to file
this proposed rule change at least five
business days prior to the date of filing
the proposed rule change. Nasdaq has
requested that the Commission waive
the 30-day operative delay. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest because the filing
promotes market participants’
understanding of Nasdaq’s application
of NASD Rule 11890, thereby promoting
greater certainty with regard to the
administration of the rule. For these
reasons, the Commission designates the
proposal to be effective upon filing with
the Commission.14
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.15
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
12 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
14 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
15 See Section 19(b)(3)(C) of the Act, 15 U.S.C.
78s(b)(3)(C). For purposes of calculating the 60-day
abrogation period, the Commission considers the
proposed rule change, as amended, to have been
filed on November 30, 2006, when Amendment No.
1 was filed.
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13 17
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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
Electronic Comments
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule
Change Relating to Performance
Evaluations for Streaming Quote
Traders and Remote Streaming Quote
Traders
• 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–NASD–2006–123 on the
subject line.
[Release No. 34–54859; File No. SR–Phlx–
2006–51]
December 1, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
• Send paper comments in triplicate
notice is hereby given that on November
to Nancy M. Morris, Secretary,
22, 2006, the Philadelphia Stock
Securities and Exchange Commission,
Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)
Station Place, 100 F Street, NE.,
filed with the Securities and Exchange
Washington, DC 20549–1090.
Commission (‘‘Commission’’) the
proposed rule change as described in
All submissions should refer to File
Items I, II, and III, below, which Items
Number SR–NASD–2006–123. This file
have been substantially prepared by the
number should be included on the
Phlx. The Commission is publishing
subject line if e-mail is used. To help the
this notice to solicit comments on the
Commission process and review your
proposed rule change from interested
comments more efficiently, please use
persons.
only one method. The Commission will
post all comments on the Commission’s I. Self-Regulatory Organization’s
Internet Web site (https://www.sec.gov/
Statement of the Terms of Substance of
rules/sro.shtml). Copies of the
the Proposed Rule Change
submission, all subsequent
The Phlx, pursuant to Section 19(b)(1)
amendments, all written statements
of the Act 3 and Rule 19b–4 thereunder,4
with respect to the proposed rule
proposes to adopt Phlx Rule 510, SQT
change that are filed with the
and RSQT Performance Evaluation, to
Commission, and all written
establish performance requirements for
communications relating to the
Streaming Quote Traders (‘‘SQTs’’) 5 and
proposed rule change between the
Remote Streaming Quote Traders
Commission and any person, other than (‘‘RSQTs’’).6 The text of the proposed
those that may be withheld from the
rule change is available on the Phlx’s
public in accordance with the
provisions of 5 U.S.C. 552, will be
1 15 U.S.C. 78s(b)(1).
available for inspection and copying in
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(1).
the Commission’s Public Reference
4 17 CFR 240.19b–4.
Room. Copies of such filing also will be
5 An SQT is an Exchange Registered Options
available for inspection and copying at
Trader (‘‘ROT’’) who has received permission from
the principal office of the NASD. All
the Exchange to generate and submit option
comments received will be posted
quotations electronically through an electronic
without change; the Commission does
interface with AUTOM via an Exchange approved
proprietary electronic quoting device in eligible
not edit personal identifying
options to which such SQT is assigned. See Phlx
information from submissions. You
Rule 1014(b)(ii)(A). AUTOM is the Exchange’s
should submit only information that
electronic order delivery, routing, execution and
you wish to make available publicly. All reporting system, which provides for the automatic
entry and routing of equity option and index option
submissions should refer to File
orders to the Exchange trading floor. Orders
Number SR–NASD–2006–123 and
delivered through AUTOM may be executed
should be submitted on or before
manually, or certain orders are eligible for
January 2, 2007.
AUTOM’s automatic execution features, AUTO–X,
Paper Comments
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6–20965 Filed 12–8–06; 8:45 am]
BILLING CODE 8011–01–P
16 17
PO 00000
CFR 200.30–3(a)(12).
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Book Sweep and Book Match. AUTOM is today
more commonly referred to as Phlx XL. See
Securities Exchange Act Release No. 50100 (July 27,
2004), 69 FR 46612 (August 3, 2004) (SR–Phlx–
2003–59) and Phlx Rule 1080.
6 An RSQT is a participant in 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. See
Phlx Rule 1014(b)(ii)(B).
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Federal Register / Vol. 71, No. 237 / Monday, December 11, 2006 / Notices
Web site at https://www.phlx.com, at the
Phlx’s Office of the Secretary, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Phlx included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The 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
mstockstill on PROD1PC61 with NOTICES
1. Purpose
The purpose of the proposed rule
change is to adopt new Phlx Rule 510
to (1) Establish performance
requirements for SQTs and RSQTs, (2)
authorize the Exchange to conduct
performance evaluations periodically,
and (3) authorize the Exchange’s
Options Allocation, Evaluation and
Securities Committee (‘‘OAESC’’) 7 to
take corrective action where minimum
requirements are not met.
Proposed Phlx Rule 510 provides for
monthly performance evaluations of
SQTs and RSQTs to determine whether
they have fulfilled performance
standards relating to, among other
things, quality of markets, efficient
quote submission to the Exchange
(including quotes submitted through a
third party vendor), competition,
observance of ethical standards, and
administrative factors.
The proposal would permit the
Exchange to consider requests for relief
from established quote spread
parameters on the Exchange 8 and
efficiency of quote submission through
the Specialized Quote Feed (‘‘SQF’’), as
defined in Phlx Rule 1080, Commentary
.01. Failure to meet established
minimum performance requirements
could result in restriction by the OAESC
of additional options assignments;
suspension, termination, or restriction
of an existing assignment on one or
more options; or suspension,
7 See Phlx By-Law Article X, Section 10–7.
OAESC has jurisdiction over, among other things:
the appointment of specialists on the options and
foreign currency options trading floors; allocation,
retention and transfer of privileges to deal in
options on the trading floors; and administration of
the 500 series of the Phlx rules.
8 See Phlx Rule 1014(c)(i)(A).
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termination, or restriction of an SQT’s
or RSQT’s status as such.
New Phlx Rule 510 would establish
specific criteria for each option assigned
to an SQT or RSQT that would be
regularly evaluated by the Exchange.
First, the Exchange would evaluate the
percentage of total quotes submitted by
the SQT or RSQT that represent the
NBBO. If the percentage of the total
quotes that represent the NBBO is in the
lowest quartile of all SQTs or RSQTs for
two or more consecutive months, this
may be considered sub-standard
performance.
Second, the Exchange would evaluate
the SQT or RSQT’s adherence to the
Exchange’s established quoting
requirements pursuant to Phlx Rule
1014.9 If an SQT or RSQT fails to meet
the quoting requirements as prescribed
by the rule, this may be considered substandard performance.
Third, the Exchange would consider
the number of requests for quote spread
parameter 10 relief for the purposes of
evaluating performance standards.
Finally, to evaluate efficient quote
submission to the Exchange, the
Exchange will consider how an SQT or
RSQT optimizes the submission of
quotes through the SQF, as defined in
Phlx Rule 1080, by evaluating the
number of individual quotes per quote
‘‘block’’ received by the Exchange.
A quote ‘‘block’’ is a component of the
Exhange’s SQF application that allows
for delivery of a set of multiple
quotations from the SQT or RSQT to the
Exchange. Within a single ‘‘block,’’ the
SQT or RSQT can deliver quotes for any
number of option series ranging from 1
to 99.
An SQT or RSQT is assigned a
number of ports or lines on which they
can send quote blocks. The number of
lines assigned dictates the number of
blocks that may be sent simultaneously
by the SQT or RSQT. The number of
lines assigned to an SQT or RSQT is
generally a function of the number of
products being quoted, taking into
9 Phlx Rule 1014(b)(ii)(D)(1) provides that an SQT
and an RSQT shall be responsible to quote
continuous, two-sided markets in not less than 60%
of the series in each option in which such SQT or
RSQT is assigned, provided that, on any given day,
a Directed SQT (‘‘DSQT’’) or a Directed RSQT
(‘‘DRSQT’’) (as defined in Phlx Rule 1080(l)(i)(C))
shall be 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. 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.
10 Phlx Rule 1034 establishes maximum allowable
bid/ask differentials on the Exchange.
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account the throughput required to
minimize quote latency risk.
The Exchange intends to evaluate the
average number of quotes (1–99)
submitted within the SQT or RSQT’s
quote blocks. The number of quotes
delivered in each block would generally
be a measure of the SQT or RSQT’s
quoting efficiency. For example, a firm
sending an average of 1 quote in each
block may be considered inefficient
while a firm sending an average of 99
quotes in each block would be
considered very efficient.
In general, the expenditure of
systemic resources required to process
an inefficient block is nearly equal to
the expenditure of systemic resources
required to process an efficient block.
Therefore, an efficient SQT or RSQT can
achieve a much higher level of quote
submission than an inefficient SQT or
RSQT using nearly the same amount of
exchange system resources. The
Exchange believes that the regular
monitoring of quoting efficiency in this
fashion will result in more efficient
quoting on the Exchange (i.e., more
quotes submitted per block), thus
preserving and maximizing Exchange
system capacity for handling quote
traffic.
In conclusion, the Exchange believes
that the proposed performance
requirements for SQTs and RSQTs
should, among other things, promote
quoting efficiency and preserve system
capacity, increase competition,
minimize requests for relief from quote
spread parameters, and encourage
efficient adherence to quoting
obligations, to the benefit of customers
and the marketplace in general.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 11 in general, and
furthers the objectives of Section 6(b)(5)
of the Act 12 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 establishing
performance standards for SQTs and
RSQTs, which should, in turn, improve
the quality of markets on the Exchange.
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 that is not
1115
1215
E:\FR\FM\11DEN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
11DEN1
Federal Register / Vol. 71, No. 237 / Monday, December 11, 2006 / Notices
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
Written comments on the proposed
rule change were neither solicited nor
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 Phlx 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.
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:
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
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–Phlx–2006–51 and should
be submitted on or before January 2,
2007.
of these Determinations is ordered to be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a list of
the exhibit objects, contact Wolodymyr
Sulzynsky, Attorney-Adviser, Office of
the Legal Adviser, U.S. Department of
State (telephone: (202) 453–8050). The
address is U.S. Department of State, SA–
44, 301 4th Street, SW., Room 700,
Washington, DC 20547–0001.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6–20963 Filed 12–8–06; 8:45 am]
DEPARTMENT OF STATE
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice 5638]
Culturally Significant Objects Imported
for Exhibition; Determinations:
‘‘Defining Modernity: European
Drawings 1800–1900’’
mstockstill on PROD1PC61 with NOTICES
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–2006–51 on the
subject line.
SUMMARY: Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
Paper Comments:
October 1, 1999, Delegation of Authority
• Send paper comments in triplicate
No. 236 of October 19, 1999, as
to Nancy M. Morris, Secretary,
amended, and Delegation of Authority
Securities and Exchange Commission,
No. 257 of April 15, 2003 [68 FR 19875],
100 F Street, NE., Washington, DC
I hereby determine that the objects to be
20549–1090.
included in the exhibition ‘‘Defining
All submissions should refer to File
Modernity: European Drawings 1800–
Number SR–Phlx–2006–51. This file
1900’’, imported from abroad for
number should be included on the
temporary exhibition within the United
subject line if e-mail is used. To help the States, are of cultural significance. The
Commission process and review your
objects are imported pursuant to loan
comments more efficiently, please use
agreements with the foreign owners or
only one method. The Commission will custodians. I also determine that the
post all comments on the Commission’s exhibition or display of the exhibit
Internet Web site (https://www.sec.gov/
objects at The J. Paul Getty Center, Los
rules/sro.shtml). Copies of the
Angeles, California, from on or about
submission, all subsequent
June 5, 2007, until on or about
amendments, all written statements
September 9, 2007, and at possible
with respect to the proposed rule
additional venues yet to be determined,
change that are filed with the
is in the national interest. Public Notice
Commission, and all written
1317 CFR 200.30–3(a)(12).
communications relating to the
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15:15 Dec 08, 2006
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Dated: December 1, 2006.
C. Miller Crouch,
Principal Deputy Assistant Secretary for
Educational and Cultural Affairs, Department
of State.
[FR Doc. E6–20999 Filed 12–8–06; 8:45 am]
BILLING CODE 4710–05–P
[Public Notice 5637]
Culturally Significant Objects Imported
for Exhibition; Determinations:
‘‘George Stubbs (1724–1806): British
Painter’’
SUMMARY: Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, Delegation of Authority
No. 236 of October 19, 1999, as
amended, and Delegation of Authority
No. 257 of April 15, 2003 [68 FR 19875],
I hereby determine that the objects to be
included in the exhibition ‘‘George
Stubbs (1724–1806): British Painter’’,
imported from abroad for temporary
exhibition within the United States, are
of cultural significance. The objects are
imported pursuant to loan agreements
with the foreign owners or custodians.
I also determine that the exhibition or
display of the exhibit objects at The
Frick Collection, New York, New York,
from on or about February 14, 2007,
until on or about May 27, 2007, and at
possible additional venues yet to be
determined, is in the national interest.
Public Notice of these Determinations is
ordered to be published in the Federal
Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a list of
the exhibit objects, contact Wolodymyr
Sulzynsky, Attorney-Adviser, Office of
the Legal Adviser, U.S. Department of
State (telephone: (202) 453–8050). The
address is U.S. Department of State, SA–
44, 301 4th Street, SW., Room 700,
Washington, DC 20547–0001.
E:\FR\FM\11DEN1.SGM
11DEN1
]]>Agencies
[Federal Register Volume 71, Number 237 (Monday, December 11, 2006)]
[Notices]
[Pages 71605-71607]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20963]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54859; File No. SR-Phlx-2006-51]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change Relating to Performance
Evaluations for Streaming Quote Traders and Remote Streaming Quote
Traders
December 1, 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 November 22, 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, II,
and III, below, which Items have been substantially prepared by the
Phlx. The Commission is publishing this notice to solicit comments on
the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx, pursuant to Section 19(b)(1) of the Act \3\ and Rule 19b-
4 thereunder,\4\ proposes to adopt Phlx Rule 510, SQT and RSQT
Performance Evaluation, to establish performance requirements for
Streaming Quote Traders (``SQTs'') \5\ and Remote Streaming Quote
Traders (``RSQTs'').\6\ The text of the proposed rule change is
available on the Phlx's
[[Page 71606]]
Web site at https://www.phlx.com, at the Phlx's Office of the Secretary,
and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ 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 Phlx
Rule 1014(b)(ii)(A). 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. AUTOM is today more commonly referred to as
Phlx XL. See Securities Exchange Act Release No. 50100 (July 27,
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59) and Phlx Rule
1080.
\6\ An RSQT is a participant in 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. See Phlx Rule 1014(b)(ii)(B).
---------------------------------------------------------------------------
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 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 is to adopt new Phlx Rule
510 to (1) Establish performance requirements for SQTs and RSQTs, (2)
authorize the Exchange to conduct performance evaluations periodically,
and (3) authorize the Exchange's Options Allocation, Evaluation and
Securities Committee (``OAESC'') \7\ to take corrective action where
minimum requirements are not met.
---------------------------------------------------------------------------
\7\ See Phlx By-Law Article X, Section 10-7. OAESC has
jurisdiction over, among other things: the appointment of
specialists on the options and foreign currency options trading
floors; allocation, retention and transfer of privileges to deal in
options on the trading floors; and administration of the 500 series
of the Phlx rules.
---------------------------------------------------------------------------
Proposed Phlx Rule 510 provides for monthly performance evaluations
of SQTs and RSQTs to determine whether they have fulfilled performance
standards relating to, among other things, quality of markets,
efficient quote submission to the Exchange (including quotes submitted
through a third party vendor), competition, observance of ethical
standards, and administrative factors.
The proposal would permit the Exchange to consider requests for
relief from established quote spread parameters on the Exchange \8\ and
efficiency of quote submission through the Specialized Quote Feed
(``SQF''), as defined in Phlx Rule 1080, Commentary .01. Failure to
meet established minimum performance requirements could result in
restriction by the OAESC of additional options assignments; suspension,
termination, or restriction of an existing assignment on one or more
options; or suspension, termination, or restriction of an SQT's or
RSQT's status as such.
---------------------------------------------------------------------------
\8\ See Phlx Rule 1014(c)(i)(A).
---------------------------------------------------------------------------
New Phlx Rule 510 would establish specific criteria for each option
assigned to an SQT or RSQT that would be regularly evaluated by the
Exchange. First, the Exchange would evaluate the percentage of total
quotes submitted by the SQT or RSQT that represent the NBBO. If the
percentage of the total quotes that represent the NBBO is in the lowest
quartile of all SQTs or RSQTs for two or more consecutive months, this
may be considered sub-standard performance.
Second, the Exchange would evaluate the SQT or RSQT's adherence to
the Exchange's established quoting requirements pursuant to Phlx Rule
1014.\9\ If an SQT or RSQT fails to meet the quoting requirements as
prescribed by the rule, this may be considered sub-standard
performance.
---------------------------------------------------------------------------
\9\ Phlx Rule 1014(b)(ii)(D)(1) provides that an SQT and an RSQT
shall be responsible to quote continuous, two-sided markets in not
less than 60% of the series in each option in which such SQT or RSQT
is assigned, provided that, on any given day, a Directed SQT
(``DSQT'') or a Directed RSQT (``DRSQT'') (as defined in Phlx Rule
1080(l)(i)(C)) shall be 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.
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.
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Third, the Exchange would consider the number of requests for quote
spread parameter \10\ relief for the purposes of evaluating performance
standards.
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\10\ Phlx Rule 1034 establishes maximum allowable bid/ask
differentials on the Exchange.
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Finally, to evaluate efficient quote submission to the Exchange,
the Exchange will consider how an SQT or RSQT optimizes the submission
of quotes through the SQF, as defined in Phlx Rule 1080, by evaluating
the number of individual quotes per quote ``block'' received by the
Exchange.
A quote ``block'' is a component of the Exhange's SQF application
that allows for delivery of a set of multiple quotations from the SQT
or RSQT to the Exchange. Within a single ``block,'' the SQT or RSQT can
deliver quotes for any number of option series ranging from 1 to 99.
An SQT or RSQT is assigned a number of ports or lines on which they
can send quote blocks. The number of lines assigned dictates the number
of blocks that may be sent simultaneously by the SQT or RSQT. The
number of lines assigned to an SQT or RSQT is generally a function of
the number of products being quoted, taking into account the throughput
required to minimize quote latency risk.
The Exchange intends to evaluate the average number of quotes (1-
99) submitted within the SQT or RSQT's quote blocks. The number of
quotes delivered in each block would generally be a measure of the SQT
or RSQT's quoting efficiency. For example, a firm sending an average of
1 quote in each block may be considered inefficient while a firm
sending an average of 99 quotes in each block would be considered very
efficient.
In general, the expenditure of systemic resources required to
process an inefficient block is nearly equal to the expenditure of
systemic resources required to process an efficient block. Therefore,
an efficient SQT or RSQT can achieve a much higher level of quote
submission than an inefficient SQT or RSQT using nearly the same amount
of exchange system resources. The Exchange believes that the regular
monitoring of quoting efficiency in this fashion will result in more
efficient quoting on the Exchange (i.e., more quotes submitted per
block), thus preserving and maximizing Exchange system capacity for
handling quote traffic.
In conclusion, the Exchange believes that the proposed performance
requirements for SQTs and RSQTs should, among other things, promote
quoting efficiency and preserve system capacity, increase competition,
minimize requests for relief from quote spread parameters, and
encourage efficient adherence to quoting obligations, to the benefit of
customers and the marketplace in general.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \11\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \12\ 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 establishing performance
standards for SQTs and RSQTs, which should, in turn, improve the
quality of markets on the Exchange.
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\11\15 U.S.C. 78f(b).
\12\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 will
impose any burden on competition that is not
[[Page 71607]]
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
Written comments on the proposed rule change were neither solicited
nor 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 Phlx 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Phlx-2006-51 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-2006-51. 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 information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-Phlx-2006-51 and should be submitted on or before January 2, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-20963 Filed 12-8-06; 8:45 am]
BILLING CODE 8011-01-P
