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]

Download as PDF 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. mstockstill on PROD1PC61 with NOTICES 13 17 VerDate Aug<31>2005 15:15 Dec 08, 2006 Jkt 211001 71605 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 (http://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 (http://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). Frm 00103 Fmt 4703 Sfmt 4703 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). E:\FR\FM\11DEN1.SGM 11DEN1 71606 Federal Register / Vol. 71, No. 237 / Monday, December 11, 2006 / Notices Web site at http://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). VerDate Aug<31>2005 15:15 Dec 08, 2006 Jkt 211001 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. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 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 (http://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 (http://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 VerDate Aug<31>2005 15:15 Dec 08, 2006 Jkt 211001 71607 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 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]


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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 http://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.
---------------------------------------------------------------------------

    Third, the Exchange would consider the number of requests for quote 
spread parameter \10\ relief for the purposes of evaluating performance 
standards.
---------------------------------------------------------------------------

    \10\ Phlx Rule 1034 establishes maximum allowable bid/ask 
differentials on the Exchange.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \11\15 U.S.C. 78f(b).
    \12\15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 (http://
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 (http://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