Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change, and Amendment Nos. 1 and 2 Thereto, Relating To a Pilot Program to Quote and Trade Options in Penny Increments, 74979-74982 [E6-21171]
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Federal Register / Vol. 71, No. 239 / Wednesday, December 13, 2006 / Notices
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–Phlx–2006–80 and should
be submitted on or before January 3,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.19
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6–21159 Filed 12–12–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Release No. 34–54886; File No.
SR–Phlx–2006–74]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule
Change, and Amendment Nos. 1 and 2
Thereto, Relating To a Pilot Program to
Quote and Trade Options in Penny
Increments
December 6, 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
13, 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. On November 22, 2006, the
Exchange filed Amendment No. 1 to the
proposed rule change.3 The Exchange
filed Amendment No. 2 to the proposed
rule change on December 5, 2006.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx, pursuant to Section 19(b)(1)
of the Act 5 and Rule 19b–4 thereunder,6
proposes to amend various Exchange
rules in order to establish a six-month
pilot period, beginning on January 26,
2007 (the ‘‘pilot’’), during which certain
hsrobinson on PROD1PC76 with NOTICES
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 replaced the original filing in
its entirety.
4 Amendment No. 2 replaced the previous filing
in its entirety.
5 15 U.S.C. 78s(b)(1).
6 17 CFR 240.19b–4.
1 15
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options would be quoted and traded on
the Exchange in minimum increments
of $0.01 for all series in such options
with a price of less than $3.00, and in
minimum increments of $0.05 for all
series in such options with a price of
$3.00 or higher, except that options
overlying the Nasdaq-100 Index
Tracking Stock (‘‘QQQQ’’) 7 would be
quoted and traded in minimum
increments of $0.01 for all series
regardless of the price. A list of all such
options would be communicated to
Phlx’s membership via Exchange
circular.
The text of the proposed rule change,
including Exhibit 2 (a draft Exchange
circular which includes a list of all
options to be included in the pilot), is
available on the Phlx’s Web site at
https://www.phlx.com, at the Phlx’s
Office of the Secretary, and at the
Commission’s Public Reference Room.
January 26, 2007, and would extend for
a six-month period. There will be 13
options included in the pilot as
determined by the Commission, subject
to a rollout schedule to be determined.
The rollout would begin on January 26,
2007. The options included in the pilot
are:
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 Exchange has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
Changes to Minimum Increments
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 establish a six-month pilot
program during which certain options
would be quoted and traded in
increments of $0.01.
Scope of the Pilot
Proposed Phlx Rule 1034(a)(i)(B)
states that the pilot would begin on
7 The Nasdaq-100, Nasdaq-100 Index, Nasdaq,
The Nasdaq Stock Market, Nasdaq-100 SharesSM,
Nasdaq-100 TrustSM, Nasdaq-100 Index Tracking
StockSM, and QQQSM are trademarks or service
marks of The Nasdaq Stock Market, Inc. (Nasdaq)
and have been licensed for use for certain purposes
by the Philadelphia Stock Exchange pursuant to a
License Agreement with Nasdaq. The Nasdaq-100
Index (the Index) is determined, composed, and
calculated by Nasdaq without regard to the
Licensee, the Nasdaq-100 TrustSM, or the beneficial
owners of Nasdaq-100 SharesSM. Nasdaq has
complete control and sole discretion in
determining, comprising, or calculating the Index or
in modifying in any way its method for
determining, comprising, or calculating the Index in
the future.
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Frm 00084
Fmt 4703
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Symbol
IWM ................
QQQQ ............
SMH ...............
GE ..................
AMD ...............
MSFT .............
INTC ...............
CAT ................
WFMI .............
TXN ................
A .....................
FLEX ..............
SUNW ............
Underlying security
Ishares Russell 2000
QQQQ
SemiConductor Holders
General Electric
Advanced Micro Devices
Microsoft
Intel
Caterpillar
Whole Foods
Texas Instruments
Agilent Tech Inc.
Flextronics International
Sun Micro
The Exchange proposes to adopt Phlx
Rule 1034(a)(i)(B), which would provide
that the options included in the pilot
would be quoted in minimum
increments of $0.01 for all series in such
options with a price of less than $3.00,
and in minimum increments of $0.05 for
all series in such options with a price
of $3.00 or higher, except that options
overlying the QQQQ would be quoted
and traded in minimum increments of
$0.01 for all series regardless of the
price. A list of all such options would
be communicated to Phlx’s membership
via Exchange circular.
Automatic Executions During Crossed
Markets
The Exchange anticipates that the
instance of crossed markets (where the
bid price is greater than the offer price)
will increase in options traded in penny
increments. Accordingly, the Exchange
proposes to amend its rules concerning
automatic executions during crossed
markets, and its exemption from TradeThrough 8 liability when a TradeThrough occurs due to an automatic
execution when the Exchange’s
disseminated market is crossed, or
crosses the disseminated market of
another options exchange, and the
Exchange’s disseminated price on the
opposite side of the market for the
8 ‘‘Trade-Through’’ means a transaction in an
options series at a price that is inferior to the
National Best Bid or Offer (‘‘NBBO’’), but shall not
include a transaction that occurs at a price that is
one minimum quoting increment inferior to the
NBBO provided a Linkage Order is
contemporaneously sent to each Participant
Exchange disseminating the NBBO for the full size
of the Participant Exchange’s bid (offer) that
represents the NBBO. See Phlx Rule 1083(t).
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Federal Register / Vol. 71, No. 239 / Wednesday, December 13, 2006 / Notices
incoming order establishes, or is equal
to, the NBBO.
Currently, orders on the Exchange
that are otherwise eligible for automatic
execution are handled manually by the
specialist when the Exchange’s
disseminated market is crossed by more
than one minimum trading increment
(as defined in Phlx Rule 1034) (i.e., 2.10
bid, 2 offer), or crosses the disseminated
market of another options exchange by
more than one minimum trading
increment.9 The effect of this is that the
Exchange currently provides automatic
executions during crossed markets
when the Exchange’s disseminated
market is crossed by not more than one
minimum trading increment, or crosses
the disseminated market of another
options exchange by not more than one
minimum trading increment, and the
Exchange’s disseminated price on the
opposite side of the market for the
incoming order establishes, or is equal
to, the NBBO.10 The Exchange proposes
to delete Phlx Rule 1080(c)(iv)(A),
which would thereby mean that the
Exchange will provide automatic
executions in options where the
Exchange’s disseminated market is the
NBBO 11 and is crossed, or crosses the
disseminated market of another options
exchange, regardless of the amount by
which such market is crossed.12
Trade-Throughs
Currently, Phlx Rule 1085(b) affords
Exchange members several exemptions
from Trade-Through liability and the
requirements under Phlx’s rules and the
Plan for the Purpose of Creating and
Operating an Intermarket Option
Linkage concerning satisfaction of
Trade-Throughs. Among the exemptions
from such liability and satisfaction
responsibility is current Phlx Rule
1085(b)(10), which provides an
exemption when the Trade-Through
was the result of an automatic execution
when the Exchange’s disseminated
market is the NBBO and is crossed by
not more than one minimum trading
increment (as defined in Phlx Rule
1034), or crosses the disseminated
market of another options exchange by
not more than one minimum trading
increment.
9 See
Phlx Rule 1080(c)(iv)(A).
Phlx Rule 1085(b)(10). See also Securities
Exchange Act Release No. 53449 (March 8, 2006),
71 FR 13441 (March 15, 2006) (SR–Phlx–2005–45).
11 The Exchange provides automatic executions
only when its disseminated market is the NBBO.
See Phlx Rule 1080(c)(iv)(E).
12 The Exchange notes that another options
exchange currently provides automatic executions
during crossed markets regardless of the amount by
which the market is crossed. See Securities
Exchange Act Release No. 54229 (July 27, 2006), 71
FR 44058 (August 3, 2006) (SR–CBOE–2005–90).
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10 See
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In order to be consistent with the
proposed rule change (described above)
to provide automatic executions when
the Exchange’s disseminated market is
the NBBO regardless of the amount by
which the market is crossed, the
Exchange proposes to amend the rule to
state that there would be an exemption
from such liability and satisfaction
responsibility when the Trade-Through
was the result of an automatic execution
when the Exchange’s disseminated
market is the NBBO and is crossed, or
crosses the disseminated market of
another options exchange. The proposed
rule change would delete the current
language contained in Phlx Rule
1085(b)(10) that limits the exemption
from Trade-Through and satisfaction
liability to automatic executions at the
NBBO during markets that are crossed
by one minimum trading increment.
The Exchange believes that the
proposed rule change would facilitate
the prompt resolution of crossed
markets by permitting automatic
executions when the Exchange’s
disseminated market is crossed, or
crosses the disseminated market of
another options exchange, regardless of
the amount by which the market is
crossed.
Report to the Commission
Proposed Phlx Rule 1034(a)(i)(C)
would require the Exchange to prepare
and submit an analytical report to the
Commission that addresses the impact
of the first three months of the pilot on
the quality of the Exchange’s markets
and options quote traffic and capacity
on or before the last day of the fourth
month of the pilot. The purpose of this
provision is to comply with the
Commission’s mandate that the
Exchange submit such a report within
the time frame specified in the rule.
Zero-Bid Option Series
Currently, Phlx Rule 1080(i) states
that the Exchange’s AUTOM System
will convert market orders to sell a
particular option series to limit orders to
sell with a limit price of $0.05 that are
received when the bid price for such
series is zero. The proposal would
amend Phlx Rule 1080(i) to state that
the system will convert such orders to
limit orders to sell with a limit price of
the minimum trading increment
applicable to such series. The effect of
this with respect to options quoted and
traded in minimum increments of $0.01
would be that such conversion would be
to a limit order to sell at $0.01, rather
than $0.05.
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Quote Mitigation
The Exchange recognizes that quoting
and trading in $0.01 increments will
most assuredly result in a greater
number of quotations submitted in
options that are included in the pilot.
Therefore, in order to mitigate quote
traffic, the Exchange proposes to amend
Phlx Rule 1082, Firm Quotations, by
adopting new Phlx Rule 1082(a)(ii)(C),
which would modify the Exchange’s
definition of ‘‘disseminated size’’ such
that the Exchange will disseminate
fewer updated quotations.
Specifically, proposed Phlx Rule
1082(a)(ii)(C) would set forth the
conditions under which the Exchange
would disseminate updated quotations
based on changes in the Exchange’s
disseminated price and/or size. The
proposed rule would require the
Exchange to disseminate an updated bid
and offer price, together with the size
associated with such bid and offer,
when: (1) The Exchange’s disseminated
bid or offer price increases or decreases;
(2) the size associated with the
Exchange’s disseminated bid or offer
decreases; or (3) the size associated with
the Exchange’s bid (offer) increases by
an amount greater than or equal to a
percentage (never to exceed 20%) of the
size associated with previously
disseminated bid (offer). Such
percentage, which would never exceed
20%, would be determined on an issueby-issue basis by the Exchange and
announced to membership via Exchange
circular. The percentage size increase
necessary to give rise to a refreshed
quote may vary from issue to issue,
depending, without limitation, on the
liquidity, average volume, and average
number of quotations submitted in the
issue. Proposed Phlx Rule 1082(b)(ii)(C)
would not be limited to options
included in the pilot, and would thus
apply to all options traded on the
Exchange.
The Exchange represents that
participants on its system would not be
notified of any incremental increase in
the size of the Exchange’s quote under
proposed Phlx Rule 1082(a)(ii)(C)(3)
until such quote is disseminated to
OPRA. Therefore, no participant on the
Exchange’s system would have
information that is unavailable to
another participant.
The Exchange believes that the
limitation on dissemination of
quotations that increase in size by a
nominal amount should significantly
mitigate the amount of options quote
traffic on the Exchange, and addresses
issues of options quote capacity on the
Exchange and in the National Market
System.
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In addition to the measures proposed
above concerning mitigation of quote
traffic on the Exchange, the Exchange
has filed other proposed rule changes
that the Exchange believes should
reduce the number of quotations
generated on the Exchange.
Specifically, the Commission recently
approved a proposed rule change stating
that, on a six-month pilot basis,
Streaming Quote Traders (‘‘SQTs’’),13
Remote Streaming Quote Traders
(‘‘RSQTs’’),14 and SQTs and RSQTs that
receive Directed Orders 15 (‘‘DSQTs’’
and ‘‘DRSQTs’’ respectively) are
deemed not to be assigned in any option
series until the time to expiration for
such series is less than nine months.16
Accordingly, the market making
obligations described in Phlx Rule
1014(b)(ii)(D) do not apply to SQTs,
RSQTs, DSQTs and DRSQTs respecting
series with an expiration of nine months
or greater, and thus they will be
required to submit fewer quotes.
Additionally, the Exchange filed a
proposed rule change authorizing the
Exchange’s Options Allocation,
Evaluation and Securities Committee
(‘‘OAESC’’) 17 to assign trading
privileges in options to SQTs and
RSQTs by ‘‘root symbol,’’ as applied by
the Options Clearing Corporation, such
that an SQT or RSQT, on request, may
be assigned in only certain series of an
13 An SQT is an Exchange Registered Options
Trader (‘‘ROT’’) who has received permission from
the Exchange to generate and submit option
quotations electronically through AUTOM in
eligible options to which such SQT is assigned. An
SQT may only submit such quotations while such
SQT is physically present on the floor of the
Exchange. See Phlx Rule 1014(b)(ii)(A).
14 An RSQT is an ROT that is a member or
member organization with no physical trading floor
presence who has received permission from the
Exchange to generate and submit option quotations
electronically through AUTOM in eligible options
to which such RSQT has been assigned. An RSQT
may only submit such quotations electronically
from off the floor of the Exchange. See Phlx Rule
1014(b)(ii)(B).
15 The term ‘‘Directed Order’’ means any
customer order (other than a stop or stop-limit order
as defined in Phlx Rule 1066) to buy or sell which
has been directed to a particular specialist, RSQT,
or SQT by an Order Flow Provider. See Phlx Rule
1080(l)(i)(A).
16 See Securities Exchange Act Release No. 54648
(October 24, 2006), 71 FR 63375 (October 30, 2006)
(SR–Phlx–2006–52).
17 The OAESC is a standing committee of the
Exchange that has jurisdiction over the allocation,
retention and transfer of the privileges to deal in all
options to, by and among members on the options
and foreign currency options trading floors. It is
responsible for appointing specialists, alternate or
assistant specialists or odd-lot dealers on the
options and foreign currency options trading floors.
It also establishes standards for the periodic review
and evaluation of their performance and is
empowered to suspend or revoke their
appointments upon showing of reasonable cause
therefore. See Phlx By-Law Article X, Section 10–
7(a); see also Phlx Rule 500.
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option.18 The market making obligations
applicable to SQTs and RSQTs thus
would not apply to series in which an
SQT or RSQT is not assigned, which
should reduce the number of quotations
required to be submitted.
The Exchange has also submitted a
separate proposal to establish a
maximum number of quoting
participants that may be assigned to a
particular equity option at any one
time.19 This would limit the number of
participants quoting in a particular
equity option and thus should limit the
number of quotations submitted in such
equity options.
In another separate submission, the
Exchange has proposed to establish
monthly Performance Evaluations by
the Exchange of its member
organizations that have 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.20
Under that proposal, 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. The Exchange
believes that such evaluations and
possible consequences for failure to
meet specific minimum standards
should encourage efficient quoting and
use of the Exchange’s capacity and
bandwidth by providing a disincentive
for SQTs and RSQTs to submit
quotations that do not improve the
Exchange’s disseminated price or
materially increase the Exchange’s
disseminated size.
system, and, in general, to protect
investors and the public interest, by
establishing rules concerning the pilot,
while simultaneously mitigating quote
traffic.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,21 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,22 in particular, in that the
proposed rule change 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
• 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
No. SR–Phlx–2006–74 on the subject
line.
18 See Securities Exchange Act Release No. 54807
(November 21, 2006), 71 FR 69173 (November 29,
2006) (SR–Phlx–2006–53).
19 See SR–Phlx–2006–81.
20 See Securities Exchange Act Release No. 54859
(December 1, 2006) (SR–Phlx–2006–51).
21 15 U.S.C. 78f(b).
22 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
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 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.
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
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 No.
SR–Phlx–2006–74. This file number
should be included on the subject line
if e-mail is used. To help the
Commission process and review your
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comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site at https://www.sec.gov/
rules/sro.shtml. Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File No.
SR–Phlx–2006–74 and should be
submitted on or before January 3, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.23
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6–21171 Filed 12–12–06; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments and Recommendations
Notice and request for
comments.
ACTION:
In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s intentions to request
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
February 12, 2007.
ADDRESSES: Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collection, to
Veronica Dymond, Public Affairs
Support Specialist, Office of
Communications and Public Liaison,
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SUMMARY:
23 17
CFR 200.30–3(a)(12).
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Small Business Administration, 409 3rd
Street, SW., 7th Floor, Wash., DC 20416.
FOR FURTHER INFORMATION CONTACT:
Veronica Dymond, Public Affairs
Support Specialist, Office of
Communications and Public Liaison
202–205–6746
veronica.dymond@sba.gov; Curtis B.
Rich, Management Analyst, 202–205–
7030 curtis.rich@sba.gov.
SUPPLEMENTARY INFORMATION: 15
U.S.C.A. 637(b)(1)(A)(iv) authorizes the
Administrator of the U.S. Small
Business Administration (SBA) to
recognize achievements of small
businesses through appropriate events
and activities. In recognition of the
small business community’s
contributions to the nation’s economy,
the President of the United States
designates one week each year as Small
Business Week. Leading up to that
week, the U.S. Small Business
Administration seeks nominations for
various recognition awards honoring the
nation’s small business owners and
entrepreneurs, small business
advocates, and small businesses. The
information collected through the
proposed Information Form will be used
to identify an actual or apparent conflict
of interest, to verify the accuracy of the
information submitted with the
nomination, and to determine whether a
nominee is eligible for a recognition
award.
Title: ‘‘Small Business Week Award
Nominees.’’
Description of Respondents:
Respondents are entrepreneurs and
small business, owners nominated for
SBA’s National Small, Business Week
awards.
Form No: N/A.
Annual Responses: 600.
Annual Burden: 450.
Jacqueline White,
Chief, Administrative Information Branch.
[FR Doc. E6–21194 Filed 12–12–06; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
CommunityExpress Pilot Program
U.S. Small Business
Administration (SBA).
ACTION: Notice of Pilot Program
extension.
The CommunityExpress Pilot
Program is extended under this notice
until March 31, 2007.
FOR FURTHER INFORMATION CONTACT:
Charles Thomas, Office of Financial
Assistance, U.S. Small Business
Administration, 409 Third Street, SW.,
Washington, DC 20416; Telephone (202)
205–6490; charles.thomas@sba.gov.
SUPPLEMENTARY INFORMATION: The
CommunityExpress Pilot Program was
established in 1999 as a subprogram of
the Agency’s SBAExpress Program.
Lenders approved for participation in
CommunityExpress are authorized to
use the expedited loan processing
procedures in place for the SBAExpress
Program, but the loans approved under
this Program must be to distressed or
underserved markets. To encourage
lenders to make these loans, SBA
provides its standard 75–85 percent
guaranty, which contrasts to the 50
percent guaranty the Agency provides
under SBAExpress. However, under
CommunityExpress participating
lenders must arrange, and when
necessary, pay for appropriate technical
assistance for any borrowers under the
program. Maximum loan amounts under
this Program are limited to $250,000.
SBA previously extended
CommunityExpress until November 30,
2005 (70 FR 56962), again to May 31,
2006 (70 FR 71363), and then again to
December 31, 2006 (71 FR 29703), to
consider possible changes and
enhancements to the Program.
The further extension of this program
until March 31, 2007, will allow the
SBA to complete its analyses and
internal discussions of possible changes
and enhancements to the program. It
will also allow SBA to further consult
with its lending partners, the small
business community and its oversight
authorities about the Program.
DATES:
(Authority: 13 CFR 120.3)
Janet A. Tasker,
Acting Associate Administrator for Financial
Assistance.
[FR Doc. E6–21137 Filed 12–12–06; 8:45 am]
BILLING CODE 8025–01–P
AGENCY:
This notice announces SBA’s
extension of the CommunityExpress
Pilot Program until March 31, 2007.
This extension will allow time for the
Agency to complete its analyses of this
program and also complete internal
discussions regarding potential
modifications and enhancements.
SUMMARY:
PO 00000
Frm 00087
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DEPARTMENT OF STATE
[Public Notice 5639]
Culturally Significant Objects Imported
for Exhibition Determinations: ‘‘Jeff
Wall’’
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
E:\FR\FM\13DEN1.SGM
13DEN1
]]>Agencies
[Federal Register Volume 71, Number 239 (Wednesday, December 13, 2006)]
[Notices]
[Pages 74979-74982]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-21171]
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-54886; File No. SR-Phlx-2006-74]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change, and Amendment Nos. 1 and 2
Thereto, Relating To a Pilot Program to Quote and Trade Options in
Penny Increments
December 6, 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 13, 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. On November 22, 2006, the Exchange filed Amendment No. 1 to the
proposed rule change.\3\ The Exchange filed Amendment No. 2 to the
proposed rule change on December 5, 2006.\4\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced the original filing in its
entirety.
\4\ Amendment No. 2 replaced the previous filing in its
entirety.
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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 \5\ and Rule 19b-
4 thereunder,\6\ proposes to amend various Exchange rules in order to
establish a six-month pilot period, beginning on January 26, 2007 (the
``pilot''), during which certain options would be quoted and traded on
the Exchange in minimum increments of $0.01 for all series in such
options with a price of less than $3.00, and in minimum increments of
$0.05 for all series in such options with a price of $3.00 or higher,
except that options overlying the Nasdaq-100 Index Tracking Stock
(``QQQQ'') \7\ would be quoted and traded in minimum increments of
$0.01 for all series regardless of the price. A list of all such
options would be communicated to Phlx's membership via Exchange
circular.
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\5\ 15 U.S.C. 78s(b)(1).
\6\ 17 CFR 240.19b-4.
\7\ The Nasdaq-100[supreg], Nasdaq-100 Index[supreg],
Nasdaq[supreg], The Nasdaq Stock Market[supreg], Nasdaq-100
SharesSM, Nasdaq-100 TrustSM, Nasdaq-100 Index
Tracking StockSM, and QQQSM are trademarks or
service marks of The Nasdaq Stock Market, Inc. (Nasdaq) and have
been licensed for use for certain purposes by the Philadelphia Stock
Exchange pursuant to a License Agreement with Nasdaq. The Nasdaq-100
Index[supreg] (the Index) is determined, composed, and calculated by
Nasdaq without regard to the Licensee, the Nasdaq-100
TrustSM, or the beneficial owners of Nasdaq-100
SharesSM. Nasdaq has complete control and sole discretion
in determining, comprising, or calculating the Index or in modifying
in any way its method for determining, comprising, or calculating
the Index in the future.
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The text of the proposed rule change, including Exhibit 2 (a draft
Exchange circular which includes a list of all options to be included
in the pilot), is available on the Phlx's 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to establish a six-month
pilot program during which certain options would be quoted and traded
in increments of $0.01.
Scope of the Pilot
Proposed Phlx Rule 1034(a)(i)(B) states that the pilot would begin
on January 26, 2007, and would extend for a six-month period. There
will be 13 options included in the pilot as determined by the
Commission, subject to a rollout schedule to be determined. The rollout
would begin on January 26, 2007. The options included in the pilot are:
------------------------------------------------------------------------
Symbol Underlying security
------------------------------------------------------------------------
IWM.................................... Ishares Russell 2000
QQQQ................................... QQQQ
SMH.................................... SemiConductor Holders
GE..................................... General Electric
AMD.................................... Advanced Micro Devices
MSFT................................... Microsoft
INTC................................... Intel
CAT.................................... Caterpillar
WFMI................................... Whole Foods
TXN.................................... Texas Instruments
A...................................... Agilent Tech Inc.
FLEX................................... Flextronics International
SUNW................................... Sun Micro
------------------------------------------------------------------------
Changes to Minimum Increments
The Exchange proposes to adopt Phlx Rule 1034(a)(i)(B), which would
provide that the options included in the pilot would be quoted in
minimum increments of $0.01 for all series in such options with a price
of less than $3.00, and in minimum increments of $0.05 for all series
in such options with a price of $3.00 or higher, except that options
overlying the QQQQ would be quoted and traded in minimum increments of
$0.01 for all series regardless of the price. A list of all such
options would be communicated to Phlx's membership via Exchange
circular.
Automatic Executions During Crossed Markets
The Exchange anticipates that the instance of crossed markets
(where the bid price is greater than the offer price) will increase in
options traded in penny increments. Accordingly, the Exchange proposes
to amend its rules concerning automatic executions during crossed
markets, and its exemption from Trade-Through \8\ liability when a
Trade-Through occurs due to an automatic execution when the Exchange's
disseminated market is crossed, or crosses the disseminated market of
another options exchange, and the Exchange's disseminated price on the
opposite side of the market for the
[[Page 74980]]
incoming order establishes, or is equal to, the NBBO.
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\8\ ``Trade-Through'' means a transaction in an options series
at a price that is inferior to the National Best Bid or Offer
(``NBBO''), but shall not include a transaction that occurs at a
price that is one minimum quoting increment inferior to the NBBO
provided a Linkage Order is contemporaneously sent to each
Participant Exchange disseminating the NBBO for the full size of the
Participant Exchange's bid (offer) that represents the NBBO. See
Phlx Rule 1083(t).
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Currently, orders on the Exchange that are otherwise eligible for
automatic execution are handled manually by the specialist when the
Exchange's disseminated market is crossed by more than one minimum
trading increment (as defined in Phlx Rule 1034) (i.e., 2.10 bid, 2
offer), or crosses the disseminated market of another options exchange
by more than one minimum trading increment.\9\ The effect of this is
that the Exchange currently provides automatic executions during
crossed markets when the Exchange's disseminated market is crossed by
not more than one minimum trading increment, or crosses the
disseminated market of another options exchange by not more than one
minimum trading increment, and the Exchange's disseminated price on the
opposite side of the market for the incoming order establishes, or is
equal to, the NBBO.\10\ The Exchange proposes to delete Phlx Rule
1080(c)(iv)(A), which would thereby mean that the Exchange will provide
automatic executions in options where the Exchange's disseminated
market is the NBBO \11\ and is crossed, or crosses the disseminated
market of another options exchange, regardless of the amount by which
such market is crossed.\12\
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\9\ See Phlx Rule 1080(c)(iv)(A).
\10\ See Phlx Rule 1085(b)(10). See also Securities Exchange Act
Release No. 53449 (March 8, 2006), 71 FR 13441 (March 15, 2006) (SR-
Phlx-2005-45).
\11\ The Exchange provides automatic executions only when its
disseminated market is the NBBO. See Phlx Rule 1080(c)(iv)(E).
\12\ The Exchange notes that another options exchange currently
provides automatic executions during crossed markets regardless of
the amount by which the market is crossed. See Securities Exchange
Act Release No. 54229 (July 27, 2006), 71 FR 44058 (August 3, 2006)
(SR-CBOE-2005-90).
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Trade-Throughs
Currently, Phlx Rule 1085(b) affords Exchange members several
exemptions from Trade-Through liability and the requirements under
Phlx's rules and the Plan for the Purpose of Creating and Operating an
Intermarket Option Linkage concerning satisfaction of Trade-Throughs.
Among the exemptions from such liability and satisfaction
responsibility is current Phlx Rule 1085(b)(10), which provides an
exemption when the Trade-Through was the result of an automatic
execution when the Exchange's disseminated market is the NBBO and is
crossed by not more than one minimum trading increment (as defined in
Phlx Rule 1034), or crosses the disseminated market of another options
exchange by not more than one minimum trading increment.
In order to be consistent with the proposed rule change (described
above) to provide automatic executions when the Exchange's disseminated
market is the NBBO regardless of the amount by which the market is
crossed, the Exchange proposes to amend the rule to state that there
would be an exemption from such liability and satisfaction
responsibility when the Trade-Through was the result of an automatic
execution when the Exchange's disseminated market is the NBBO and is
crossed, or crosses the disseminated market of another options
exchange. The proposed rule change would delete the current language
contained in Phlx Rule 1085(b)(10) that limits the exemption from
Trade-Through and satisfaction liability to automatic executions at the
NBBO during markets that are crossed by one minimum trading increment.
The Exchange believes that the proposed rule change would facilitate
the prompt resolution of crossed markets by permitting automatic
executions when the Exchange's disseminated market is crossed, or
crosses the disseminated market of another options exchange, regardless
of the amount by which the market is crossed.
Report to the Commission
Proposed Phlx Rule 1034(a)(i)(C) would require the Exchange to
prepare and submit an analytical report to the Commission that
addresses the impact of the first three months of the pilot on the
quality of the Exchange's markets and options quote traffic and
capacity on or before the last day of the fourth month of the pilot.
The purpose of this provision is to comply with the Commission's
mandate that the Exchange submit such a report within the time frame
specified in the rule.
Zero-Bid Option Series
Currently, Phlx Rule 1080(i) states that the Exchange's AUTOM
System will convert market orders to sell a particular option series to
limit orders to sell with a limit price of $0.05 that are received when
the bid price for such series is zero. The proposal would amend Phlx
Rule 1080(i) to state that the system will convert such orders to limit
orders to sell with a limit price of the minimum trading increment
applicable to such series. The effect of this with respect to options
quoted and traded in minimum increments of $0.01 would be that such
conversion would be to a limit order to sell at $0.01, rather than
$0.05.
Quote Mitigation
The Exchange recognizes that quoting and trading in $0.01
increments will most assuredly result in a greater number of quotations
submitted in options that are included in the pilot. Therefore, in
order to mitigate quote traffic, the Exchange proposes to amend Phlx
Rule 1082, Firm Quotations, by adopting new Phlx Rule 1082(a)(ii)(C),
which would modify the Exchange's definition of ``disseminated size''
such that the Exchange will disseminate fewer updated quotations.
Specifically, proposed Phlx Rule 1082(a)(ii)(C) would set forth the
conditions under which the Exchange would disseminate updated
quotations based on changes in the Exchange's disseminated price and/or
size. The proposed rule would require the Exchange to disseminate an
updated bid and offer price, together with the size associated with
such bid and offer, when: (1) The Exchange's disseminated bid or offer
price increases or decreases; (2) the size associated with the
Exchange's disseminated bid or offer decreases; or (3) the size
associated with the Exchange's bid (offer) increases by an amount
greater than or equal to a percentage (never to exceed 20%) of the size
associated with previously disseminated bid (offer). Such percentage,
which would never exceed 20%, would be determined on an issue-by-issue
basis by the Exchange and announced to membership via Exchange
circular. The percentage size increase necessary to give rise to a
refreshed quote may vary from issue to issue, depending, without
limitation, on the liquidity, average volume, and average number of
quotations submitted in the issue. Proposed Phlx Rule 1082(b)(ii)(C)
would not be limited to options included in the pilot, and would thus
apply to all options traded on the Exchange.
The Exchange represents that participants on its system would not
be notified of any incremental increase in the size of the Exchange's
quote under proposed Phlx Rule 1082(a)(ii)(C)(3) until such quote is
disseminated to OPRA. Therefore, no participant on the Exchange's
system would have information that is unavailable to another
participant.
The Exchange believes that the limitation on dissemination of
quotations that increase in size by a nominal amount should
significantly mitigate the amount of options quote traffic on the
Exchange, and addresses issues of options quote capacity on the
Exchange and in the National Market System.
[[Page 74981]]
In addition to the measures proposed above concerning mitigation of
quote traffic on the Exchange, the Exchange has filed other proposed
rule changes that the Exchange believes should reduce the number of
quotations generated on the Exchange.
Specifically, the Commission recently approved a proposed rule
change stating that, on a six-month pilot basis, Streaming Quote
Traders (``SQTs''),\13\ Remote Streaming Quote Traders (``RSQTs''),\14\
and SQTs and RSQTs that receive Directed Orders \15\ (``DSQTs'' and
``DRSQTs'' respectively) are deemed not to be assigned in any option
series until the time to expiration for such series is less than nine
months.\16\ Accordingly, the market making obligations described in
Phlx Rule 1014(b)(ii)(D) do not apply to SQTs, RSQTs, DSQTs and DRSQTs
respecting series with an expiration of nine months or greater, and
thus they will be required to submit fewer quotes.
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\13\ An SQT is an Exchange Registered Options Trader (``ROT'')
who has received permission from the Exchange to generate and submit
option quotations electronically through AUTOM in eligible options
to which such SQT is assigned. An SQT may only submit such
quotations while such SQT is physically present on the floor of the
Exchange. See Phlx Rule 1014(b)(ii)(A).
\14\ An RSQT is an ROT that is a member or member organization
with no physical trading floor presence who has received permission
from the Exchange to generate and submit option quotations
electronically through AUTOM in eligible options to which such RSQT
has been assigned. An RSQT may only submit such quotations
electronically from off the floor of the Exchange. See Phlx Rule
1014(b)(ii)(B).
\15\ The term ``Directed Order'' means any customer order (other
than a stop or stop-limit order as defined in Phlx Rule 1066) to buy
or sell which has been directed to a particular specialist, RSQT, or
SQT by an Order Flow Provider. See Phlx Rule 1080(l)(i)(A).
\16\ See Securities Exchange Act Release No. 54648 (October 24,
2006), 71 FR 63375 (October 30, 2006) (SR-Phlx-2006-52).
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Additionally, the Exchange filed a proposed rule change authorizing
the Exchange's Options Allocation, Evaluation and Securities Committee
(``OAESC'') \17\ to assign trading privileges in options to SQTs and
RSQTs by ``root symbol,'' as applied by the Options Clearing
Corporation, such that an SQT or RSQT, on request, may be assigned in
only certain series of an option.\18\ The market making obligations
applicable to SQTs and RSQTs thus would not apply to series in which an
SQT or RSQT is not assigned, which should reduce the number of
quotations required to be submitted.
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\17\ The OAESC is a standing committee of the Exchange that has
jurisdiction over the allocation, retention and transfer of the
privileges to deal in all options to, by and among members on the
options and foreign currency options trading floors. It is
responsible for appointing specialists, alternate or assistant
specialists or odd-lot dealers on the options and foreign currency
options trading floors. It also establishes standards for the
periodic review and evaluation of their performance and is empowered
to suspend or revoke their appointments upon showing of reasonable
cause therefore. See Phlx By-Law Article X, Section 10-7(a); see
also Phlx Rule 500.
\18\ See Securities Exchange Act Release No. 54807 (November 21,
2006), 71 FR 69173 (November 29, 2006) (SR-Phlx-2006-53).
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The Exchange has also submitted a separate proposal to establish a
maximum number of quoting participants that may be assigned to a
particular equity option at any one time.\19\ This would limit the
number of participants quoting in a particular equity option and thus
should limit the number of quotations submitted in such equity options.
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\19\ See SR-Phlx-2006-81.
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In another separate submission, the Exchange has proposed to
establish monthly Performance Evaluations by the Exchange of its member
organizations that have 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.\20\ Under
that proposal, 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. The Exchange
believes that such evaluations and possible consequences for failure to
meet specific minimum standards should encourage efficient quoting and
use of the Exchange's capacity and bandwidth by providing a
disincentive for SQTs and RSQTs to submit quotations that do not
improve the Exchange's disseminated price or materially increase the
Exchange's disseminated size.
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\20\ See Securities Exchange Act Release No. 54859 (December 1,
2006) (SR-Phlx-2006-51).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\21\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\22\ in particular, in that
the proposed rule change 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
rules concerning the pilot, while simultaneously mitigating quote
traffic.
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\21\ 15 U.S.C. 78f(b).
\22\ 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 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 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.
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 No. SR-Phlx-2006-74 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 No. SR-Phlx-2006-74. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your
[[Page 74982]]
comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's Internet Web site at https://
www.sec.gov/rules/sro.shtml. Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for inspection and copying in the Commission's Public
Reference Room. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-Phlx-2006-74 and should be
submitted on or before January 3, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-21171 Filed 12-12-06; 8:45 am]
BILLING CODE 8011-01-P
