Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change Relating to the Establishment of a Maximum Number of Quoting Participants Permitted in a Particular Option on the Exchange, 3185-3186 [E7-957]
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Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices
transactions executed through the
Linkage on December 1, 2006, with the
regular equity transaction fee payable on
that day because the difference in the
amount payable by customers would be
immaterial, but the Exchange would
incur significant costs in identifying
those transactions which should be
charged the lower fee rate.6
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange 7 and, in particular, the
requirements of Section 6(b) of the Act 8
and the rules and regulations
thereunder. Specifically, the
Commission finds that the proposal to
retroactively apply the increase in the
Linkage Order Fee is consistent with
Section 6(b)(4) of the Act,9 which
requires the equitable allocation of
reasonable dues, fees, and other charges
among Exchange members and other
persons using Exchange facilities.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (File No. SR–
NYSE–2006–110) be, and it hereby is,
approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–974 Filed 1–23–07; 8:45 am]
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BILLING CODE 8011–01–P
6 The Exchange estimates that the difference in
the amount of Linkage Order Fees payable under
the old rate as compared to the proposed revised
rate by customers for trades executed on December
1, 2006, would be less than $2,000.00. Telephone
conversation between John Carey, Assistant General
Counsel, NYSE, and Nathan Saunders, Special
Counsel, Division of Market Regulation,
Commission, December 7, 2006.
7 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(4).
10 Id.
11 17 CFR 200.30–3(a)(12).
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17:44 Jan 23, 2007
Jkt 211001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55114; File No. SR–Phlx–
2006–81]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Order Granting Approval to Proposed
Rule Change Relating to the
Establishment of a Maximum Number
of Quoting Participants Permitted in a
Particular Option on the Exchange
January 17, 2007.
I. Introduction
On December 5, 2006, the
Philadelphia Stock Exchange, Inc.
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’), 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Phlx Rule 507, which governs
the assignment of options to Streaming
Quote Traders (‘‘SQTs’’) 3 and Remote
Streaming Quote Traders (‘‘RSQRs’’),4
by adding commentary to the rule
establishing a maximum number of
quoting participants that may be
assigned to a particular equity option at
any one time. The proposed rule change
was published for comment in the
Federal Register on December 18,
2006.5 The Commission received no
comments regarding the proposal. This
order approves the proposed rule
change.
II. Description of the Proposal
The purpose of the proposed rule
change is to enable the Exchange to
manage its quotation traffic and
bandwidth capacity by limiting the
number of streaming quote market
participants that may be assigned to a
particular option at a given point in
time. The proposed amendments to Phlx
Rule 507 would establish: (i) A
maximum number of quoters (‘‘MNQ’’)
in equity options based on each option’s
monthly trading volume; (ii) a process
for recalculating the MNQ based upon
changes in an option’s monthly trading
volume; (iii) an increase to the MNQ
due to exceptional circumstances; (iv)
the process by which the Exchange will
notify market participants of changes to
the MNQ; and (v) additional criteria
relating to the process by which the
Exchange will assign SQT and/or RSQT
applicants in options in the event that
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Phlx Rule 1014(b)(ii)(A).
4 See Phlx Rule 1014(b)(ii)(B).
5 See Securities Exchange Act Release No. 54914
(December 11, 2006), 71 FR 75798.
2 17
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Fmt 4703
Sfmt 4703
3185
there are more applicants for assignment
in a particular option than there are
positions.
The Exchange proposes to limit the
number of participants that may be
assigned to a particular equity option at
any one time based upon each option’s
monthly national volume. Proposed
Commentary .02 to Phlx Rule 507 sets
forth tiered MNQ levels providing for 20
participants for the top 5% most
actively traded options; 15 participants
for next 10% most actively traded
options, and 10 market participants for
all other options.6 The ranking is based
upon the preceding month’s national
volumes. The MNQ would be
recalculated within the first five days of
each month based on the previous
month’s trading volume (‘‘new MNQ’’).
The Exchange would inform market
participants of changes to the MNQ via
Exchange circular.
The Exchange’s Options Allocation,
Evaluation and Securities Committee
(‘‘OAESC’’) 7 would be able to increase
the MNQ in exceptional circumstances.
Proposed Commentary .04 to Phlx Rule
507 describes the events that may be
considered ‘‘exceptional,’’ including
substantial trading volume (whether
actual or expected), a major news event,
or corporate event. The Exchange would
also be permitted to reduce the MNQ
following the cessation of the
exceptional circumstances, but would
be required to follow the same
procedures applicable for decreases to
the MNQ due to a change in volume.8
When relying on this provision, the
Exchange would submit a rule filing to
the Commission pursuant to Section
19(b)(3)(A) of the Act.9
The Exchange is also proposing to
amend Phlx Rule 507 by adding criteria
for the OAESC to consider when
determining whether to assign an option
to a member in the situation where there
are more applicants for assignment in a
particular option than there are
positions available. Specifically,
proposed paragraph (b)(iii) of Phlx Rule
507 would require the OAESC to
consider: (i) The financial and technical
resources available to the applicant; (ii)
6 The Exchange may increase the MNQ levels by
submitting to the Commission a rule filing pursuant
to Section 19(b)(3)(A) of the Act and may decrease
the MNQ levels upon Commission approval of a
rule filing submitted pursuant to 19(b)(2) of the Act.
See proposed Commentary .05 to Phlx Rule 507.
7 See Phlx By-Law Article X, Section 10–7. The
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 Phlx rules.
8 See proposed Commentary .03 to Phlx Rule 507.
9 15 U.S.C. 78s(b)(3)(A).
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Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices
the applicant’s experience and expertise
in market making or options trading;
and (iii) the applicant’s prior
performance as a specialist, SQT or
RSQT, based on evaluations conducted
pursuant to Phlx Rule 510, which
includes quantified measures of
performance.
Finally, the Exchange represents that
members assigned in a particular option
as of the date of Commission approval
of this proposed rule change will be
guaranteed a position as a quoting
participant in the particular option.
III. Discussion
After careful review of the proposal,
the Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.10 In
particular, the Commission finds that
the proposal is consistent with Section
6(b)(5) of the Act,11 which requires,
among other things, that the rules of an
exchange be 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.
The Commission believes that the
Exchange’s proposal, to establish a
maximum number of quoting
participants that may be assigned to a
particular equity option at any one time
based on the trading volume of that
option should enhance the Exchange’s
ability to manage its quotation traffic
and bandwidth capacity.
The Commission further believes that,
in the event that there are more
applicants for assignment in a particular
option than there are available
positions, the financial and technical
capacity of SQTs and RSQTs, as well as
prior performance, are appropriate
factors to consider and should assist the
OAESC in allocating the option on an
equitable basis to the benefit of the
Exchange and the public.
IV. Conclusion
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It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,12 that the
proposed rule change (SR–Phlx–2006–
81), be, and hereby is, approved.
10 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
11 15 U.S.C. 78f(b)(5).
12 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–957 Filed 1–23–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55121; File No. SR–Phlx–
2006–31]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule
Change and Amendment Nos. 1 and 2
Thereto, Relating to Limit Orders
Submitted by Streaming Quote Traders
January 18, 2007.
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 May 5,
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 December 8, 2006, the
Exchange filed Amendment No. 1 to the
proposed rule change. On January 11,
2007, the Exchange filed Amendment
No. 2 to the proposed rule change. 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 proposes to amend Phlx
Rule 1080(b)(i)(B) and Commentary .04
thereto to permit Streaming Quote
Traders (‘‘SQTs’’) 3 and Remote
Streaming Quote Traders (‘‘RSQTs’’) 4 to
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 An SQT is a Registered Options Trader (‘‘ROT’’)
who has received permission from the Exchange to
generate and submit option quotations
electronically through AUTOM in eligible options
in 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).
4 An RSQT is a 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).
1 15
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
enter Immediate or Cancel (‘‘IOC’’) 5
orders for their own account(s) through
an electronic interface with AUTOM; 6
to permit non-SQT ROTs 7 and
specialists to place proprietary limit
orders with a size of 10 contracts or
greater onto the limit order book; to
expand the type of order that non-SQT
ROTs and specialists may enter to
include IOC; and to permit non-SQT
ROTs and specialists to submit
proprietary limit orders with a size of
less than 10 contracts as IOC only. The
Exchange further proposes to amend
Commentary .02 and .03 of Phlx Rule
1082 to reduce the one-second
‘‘counting period’’ to 1⁄4 of one second
during which SQTs, RSQTs and/or
specialists may eliminate the locked or
crossed markets caused by their
electronic quotations.8 The text of the
proposed rule change is available at
Phlx, the Commission’s Public
Reference Room, and https://
www.phlx.com.
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.
5 An immediate-or-cancel order is an order that is
to be executed in whole or in part as soon as such
order is submitted. Any portion not so executed is
to be treated as cancelled.
6 AUTOM is the Exchange’s electronic order
delivery, routing, execution and reporting system,
which provides for the automatic entry and routing
of equity option and index option orders to the
Exchange trading floor. Orders delivered through
AUTOM may be executed manually, or certain
orders are eligible for AUTOM’s automatic
execution features, AUTO-X, Book Sweep and Book
Match. Equity option and index option specialists
are required by the Exchange to participate in
AUTOM and its features and enhancements. Option
orders entered by Exchange members into AUTOM
are routed to the appropriate specialist unit on the
Exchange trading floor. AUTOM is now commonly
referred to as Phlx XL. See Phlx Rule 1080.
7 A ROT is an on-floor options participant of the
Exchange who has received permission from the
Exchange to trade in options for his own account
in eligible options in which such ROT is assigned.
See Phlx Rule 1014(b)(i).
8 Any unresolved locked or crossed markets
remaining after the counting period are
automatically executed.
E:\FR\FM\24JAN1.SGM
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]]>Agencies
[Federal Register Volume 72, Number 15 (Wednesday, January 24, 2007)]
[Notices]
[Pages 3185-3186]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-957]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55114; File No. SR-Phlx-2006-81]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Relating to the
Establishment of a Maximum Number of Quoting Participants Permitted in
a Particular Option on the Exchange
January 17, 2007.
I. Introduction
On December 5, 2006, the Philadelphia Stock Exchange, Inc.
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''), \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Phlx Rule 507, which
governs the assignment of options to Streaming Quote Traders (``SQTs'')
\3\ and Remote Streaming Quote Traders (``RSQRs''),\4\ by adding
commentary to the rule establishing a maximum number of quoting
participants that may be assigned to a particular equity option at any
one time. The proposed rule change was published for comment in the
Federal Register on December 18, 2006.\5\ The Commission received no
comments regarding the proposal. This order approves the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Phlx Rule 1014(b)(ii)(A).
\4\ See Phlx Rule 1014(b)(ii)(B).
\5\ See Securities Exchange Act Release No. 54914 (December 11,
2006), 71 FR 75798.
---------------------------------------------------------------------------
II. Description of the Proposal
The purpose of the proposed rule change is to enable the Exchange
to manage its quotation traffic and bandwidth capacity by limiting the
number of streaming quote market participants that may be assigned to a
particular option at a given point in time. The proposed amendments to
Phlx Rule 507 would establish: (i) A maximum number of quoters
(``MNQ'') in equity options based on each option's monthly trading
volume; (ii) a process for recalculating the MNQ based upon changes in
an option's monthly trading volume; (iii) an increase to the MNQ due to
exceptional circumstances; (iv) the process by which the Exchange will
notify market participants of changes to the MNQ; and (v) additional
criteria relating to the process by which the Exchange will assign SQT
and/or RSQT applicants in options in the event that there are more
applicants for assignment in a particular option than there are
positions.
The Exchange proposes to limit the number of participants that may
be assigned to a particular equity option at any one time based upon
each option's monthly national volume. Proposed Commentary .02 to Phlx
Rule 507 sets forth tiered MNQ levels providing for 20 participants for
the top 5% most actively traded options; 15 participants for next 10%
most actively traded options, and 10 market participants for all other
options.\6\ The ranking is based upon the preceding month's national
volumes. The MNQ would be recalculated within the first five days of
each month based on the previous month's trading volume (``new MNQ'').
The Exchange would inform market participants of changes to the MNQ via
Exchange circular.
---------------------------------------------------------------------------
\6\ The Exchange may increase the MNQ levels by submitting to
the Commission a rule filing pursuant to Section 19(b)(3)(A) of the
Act and may decrease the MNQ levels upon Commission approval of a
rule filing submitted pursuant to 19(b)(2) of the Act. See proposed
Commentary .05 to Phlx Rule 507.
---------------------------------------------------------------------------
The Exchange's Options Allocation, Evaluation and Securities
Committee (``OAESC'') \7\ would be able to increase the MNQ in
exceptional circumstances. Proposed Commentary .04 to Phlx Rule 507
describes the events that may be considered ``exceptional,'' including
substantial trading volume (whether actual or expected), a major news
event, or corporate event. The Exchange would also be permitted to
reduce the MNQ following the cessation of the exceptional
circumstances, but would be required to follow the same procedures
applicable for decreases to the MNQ due to a change in volume.\8\ When
relying on this provision, the Exchange would submit a rule filing to
the Commission pursuant to Section 19(b)(3)(A) of the Act.\9\
---------------------------------------------------------------------------
\7\ See Phlx By-Law Article X, Section 10-7. The 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 Phlx rules.
\8\ See proposed Commentary .03 to Phlx Rule 507.
\9\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------
The Exchange is also proposing to amend Phlx Rule 507 by adding
criteria for the OAESC to consider when determining whether to assign
an option to a member in the situation where there are more applicants
for assignment in a particular option than there are positions
available. Specifically, proposed paragraph (b)(iii) of Phlx Rule 507
would require the OAESC to consider: (i) The financial and technical
resources available to the applicant; (ii)
[[Page 3186]]
the applicant's experience and expertise in market making or options
trading; and (iii) the applicant's prior performance as a specialist,
SQT or RSQT, based on evaluations conducted pursuant to Phlx Rule 510,
which includes quantified measures of performance.
Finally, the Exchange represents that members assigned in a
particular option as of the date of Commission approval of this
proposed rule change will be guaranteed a position as a quoting
participant in the particular option.
III. Discussion
After careful review of the proposal, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\10\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act,\11\ which
requires, among other things, that the rules of an exchange be 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.
---------------------------------------------------------------------------
\10\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the Exchange's proposal, to establish
a maximum number of quoting participants that may be assigned to a
particular equity option at any one time based on the trading volume of
that option should enhance the Exchange's ability to manage its
quotation traffic and bandwidth capacity.
The Commission further believes that, in the event that there are
more applicants for assignment in a particular option than there are
available positions, the financial and technical capacity of SQTs and
RSQTs, as well as prior performance, are appropriate factors to
consider and should assist the OAESC in allocating the option on an
equitable basis to the benefit of the Exchange and the public.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-Phlx-2006-81), be, and
hereby is, approved.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-957 Filed 1-23-07; 8:45 am]
BILLING CODE 8011-01-P
