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, 3186-3188 [E7-977]

Download as PDF 3186 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 pwalker on PROD1PC71 with NOTICES 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). VerDate Aug<31>2005 17:44 Jan 23, 2007 Jkt 211001 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 http:// 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 24JAN1 Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 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 offer an additional mechanism for participants on the Exchange’s electronic trading platform for options, Phlx XL,9 to trade against orders and electronic quotations. Currently, only non-SQT ROTs and specialists may enter limit orders, and such limit orders may only be submitted with a minimum size of 10 contracts as Good-Till-Cancelled, day limit and simple cancel orders. Under the proposal, the Exchange would expand limit order entry to SQTs and RSQTs, who would be permitted to enter IOC orders with no size limitation. The proposal would include limitations on the eligible order type and permissible order size, depending on the status of the participant submitting the order. Specifically, nonSQT ROTs and specialists would be permitted to submit limit orders with a size of 10 contracts or greater as GoodTill-Cancelled, day limit, IOC or simple cancel order types. Orders for less than 10 contracts submitted by non-SQT ROTs and specialists would be required to be submitted as IOC only.10 SQTs and RSQTs would be permitted to submit limit orders of any size,11 provided that all limit orders submitted must be IOC. Thus, limit orders submitted by SQTs and RSQTs would not be eligible to rest on the limit order book, and would be cancelled if not executed immediately. If only a part of such an order is executed immediately, the remaining unexecuted contracts in such an order would be cancelled. Under the proposal, specialists and non-SQT ROTs that submit limit orders with a size of less than 10 contracts must submit such orders as IOC only. According to the Exchange, this is to ensure that limit orders with a size of less than 10 contracts are not placed on pwalker on PROD1PC71 with NOTICES 9 See Securities Exchange Act Release No. 50100 (July 27, 2004), 69 FR 46612 (August 3, 2004) (SR– Phlx–2003–59). 10 Currently, the IOC order type is not eligible for submission by non-SQT ROTs and specialists, and all orders must be for a minimum size of 10 contracts. The proposal would permit orders with a size of less than 10 contracts, provided that such orders must be submitted as IOC only. Orders submitted by non-SQT ROTs and specialists with a size of 10 contracts or greater would be eligible to be placed on the limit order book. 11 Currently, the Exchange permits SQTs to submit electronic quotations only. The proposal would permit SQTs to submit IOC limit orders in addition to electronic quotations. The quoting obligations applicable to SQTs contained in Exchange Rule 1014(b)(ii)(D) would be unchanged. VerDate Aug<31>2005 17:44 Jan 23, 2007 Jkt 211001 the limit order book. The Exchange believes that this provision should encourage liquidity on the Exchange and limit orders on the limit order book that represent the Exchange’s best bid or offer and would thus result in a disseminated size of at least 10 contracts on the Exchange. The purpose of the proposed change to Commentary .02 and .03 of Phlx Rule 1082 is to improve the speed by which the Exchange’s systems can automatically execute locked or crossed quotations against one another and eliminate the locked or crossed market situation,12 which should, in turn, facilitate compliance with firm quote obligations.13 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,14 in general, and furthers the objectives of Section 6(b)(5) of the Act,15 in particular, in that the proposal 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 increasing the efficiency of options trading on the Exchange by allowing on-floor participants to electronically enter an additional type of order, which should increase the number of automatic executions. The Exchange believes that this new functionality should increase order interaction between market participants on the Exchange and the electronic limit order book. The Exchange also believes that reducing the counting period during which market participants may resolve locked and crossed markets should improve market efficiency by eliminating locked and crossed markets in a more timely fashion. 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. 12 Any unresolved locked or crossed markets remaining after the counting period are automatically executed. 13 See Phlx Rule 1082. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 3187 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which 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 rulecomments@sec.gov. Please include File Number SR–Phlx–2006–31 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–2006–31. 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 E:\FR\FM\24JAN1.SGM 24JAN1 3188 Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 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–2006–31 and should be submitted on or before February 14, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.16 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–977 Filed 1–23–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55111; File No. SR–Phlx– 2006–59] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval of Proposed Rule Change as Modified by Amendments No. 1 and 2 Thereto Relating to an Amendment to a Philadelphia Board of Trade Market Data Distribution Network Fee January 16, 2007. pwalker on PROD1PC71 with NOTICES I. Introduction On September 26, 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 proposal to increase a fee assessed by the Exchange’s wholly owned subsidiary, the Philadelphia Board of Trade (‘‘PBOT’’), on market data vendors for certain index values that subscribers receive over PBOT’s Market Data Distribution Network (‘‘MDDN’’). The Phlx filed Amendment No. 1 to the proposed rule change on November 1, 2006 and filed Amendment No. 2 on December 6, 2006. The proposed rule change, as amended, was published for comment in the Federal Register on December 13, 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Aug<31>2005 17:44 Jan 23, 2007 Jkt 211001 2006.3 The Commission received no comments regarding the proposal. This order approves the proposed rule change, as amended. II. Description of the Proposal The Phlx proposes to amend one of the fees charged by the PBOT for certain market data disseminated over the MDDN.4 The Phlx has licensed the current and closing index values underlying most of the Phlx’s proprietary indexes to PBOT for the purpose of selling, reproducing, and distributing the index values over PBOT’s MDDN. On each trading day, the Exchange or its third party designee calculates and makes available to PBOT a real-time index value every 15 seconds and a closing index value at the end of the day. In exchange for subscriber fees paid to PBOT, market data vendors are allowed to widely disseminate this market data for all the values of Phlx’s proprietary indexes to their subscribers.5 As approved by the Commission, the market data fees charged by PBOT included a $.00025 per request fee for ‘‘snapshot data,’’ which is essentially market data that is refreshed no more frequently than once every 60 seconds.6 The Exchange is now proposing to increase that fee from $.00025 to $.0025 per request for snapshot data.7 3 See Securities Exchange Act Release No. 54890 (December 7, 2006), 71 FR 74975. 4 The MDDN is an internet protocol multicast network developed by PBOT and SAVVIS Communications. 5 Approximately 65 vendors, including for example Bloomberg L.P., Telekurs Financial Information Ltd. and Thomson Financial, have already entered into such market data agreements with PBOT. The PBOT has contracted with one or more major Market Data Vendors to receive realtime and closing index values over the MDDN and promptly redistribute such values. At least three of the vendors have elected to offer only the continuous real-time market data and will not offer snapshot or delayed data. The fees described in this proposed rule change cover values of all the indexes disseminated over the MDDN. 6 See Securities Exchange Act Release No. 53790 (May 11, 2006), 71 FR 28738 (May 17, 2006) (‘‘Original Approval Order’’). The subscriber fees are set out in agreements that PBOT executed with various market data vendors for the right to receive, store, and retransmit the current and closing index values transmitted over the MDDN. In its original proposal, the Exchange stated that, under these vendor agreements PBOT may change any of the fees enumerated in the agreement by giving the vendor or subvendor advance written notice of such changes. The Commission conditioned any such fee change on the submission by Phlx of a proposed rule change under Section 19(b) of the Act, and approval of such proposal. See 71 FR at 28740. 7 The Commission notes that all market data vendors which provide market data to 200,000 or more Devices in any month qualify for a 15% Administrative Fee credit for that month, to be deducted from the monthly Subscriber Fees that they collect and are obligated to pay PBOT under the Vendor/Subvendor Agreement. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 III. Discussion After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 8 and, in particular, the requirements of Section 6 of the Act.9 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,10 which requires, among other things, that the rules of a national securities 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 continues to believe that Phlx’s proposal is consistent with Rule 603 under the Act.11 In this regard, the Commission notes that the Exchange represented that PBOT’s proposed fee increase reflects a more accurate valuation of the value of snapshot data to investors than the original snapshot data fee did, consistent with Rule 603 under the Act.12 The Commission believes that the proposal is consistent with Section 6(b)(4) of the Act,13 in that the proposed rule change provides for the equitable allocation of reasonable dues, fees, and other charges among the Exchange’s members and issuers and other persons using its facilities. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,14 that the proposed rule change (SR–Phlx–2006– 59), as amended, is hereby approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–958 Filed 1–23–07; 8:45 am] BILLING CODE 8011–01–P 8 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78f. 10 15 U.S.C. 78f(b)(5). 11 17 CFR 242.603. See Original Approval Order, 71 FR at 28739, supra note 6, noting that the subscriber fees were consistent with Rule 603 under the Act. 12 17 CFR 242.603. 13 15 U.S.C. 78f(b)(4). 14 15 U.S.C. 78s(b)(2). 15 17 CFR 200.30–3(a)(12). E:\FR\FM\24JAN1.SGM 24JAN1

Agencies

[Federal Register Volume 72, Number 15 (Wednesday, January 24, 2007)]
[Notices]
[Pages 3186-3188]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-977]


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

    \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 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 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 
http://www.phlx.com.
---------------------------------------------------------------------------

    \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).
    \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.
---------------------------------------------------------------------------

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.

[[Page 3187]]

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 offer an additional 
mechanism for participants on the Exchange's electronic trading 
platform for options, Phlx XL,\9\ to trade against orders and 
electronic quotations. Currently, only non-SQT ROTs and specialists may 
enter limit orders, and such limit orders may only be submitted with a 
minimum size of 10 contracts as Good-Till-Cancelled, day limit and 
simple cancel orders. Under the proposal, the Exchange would expand 
limit order entry to SQTs and RSQTs, who would be permitted to enter 
IOC orders with no size limitation.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 50100 (July 27, 
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59).
---------------------------------------------------------------------------

    The proposal would include limitations on the eligible order type 
and permissible order size, depending on the status of the participant 
submitting the order. Specifically, non-SQT ROTs and specialists would 
be permitted to submit limit orders with a size of 10 contracts or 
greater as Good-Till-Cancelled, day limit, IOC or simple cancel order 
types. Orders for less than 10 contracts submitted by non-SQT ROTs and 
specialists would be required to be submitted as IOC only.\10\
---------------------------------------------------------------------------

    \10\ Currently, the IOC order type is not eligible for 
submission by non-SQT ROTs and specialists, and all orders must be 
for a minimum size of 10 contracts. The proposal would permit orders 
with a size of less than 10 contracts, provided that such orders 
must be submitted as IOC only. Orders submitted by non-SQT ROTs and 
specialists with a size of 10 contracts or greater would be eligible 
to be placed on the limit order book.
---------------------------------------------------------------------------

    SQTs and RSQTs would be permitted to submit limit orders of any 
size,\11\ provided that all limit orders submitted must be IOC. Thus, 
limit orders submitted by SQTs and RSQTs would not be eligible to rest 
on the limit order book, and would be cancelled if not executed 
immediately. If only a part of such an order is executed immediately, 
the remaining unexecuted contracts in such an order would be cancelled.
---------------------------------------------------------------------------

    \11\ Currently, the Exchange permits SQTs to submit electronic 
quotations only. The proposal would permit SQTs to submit IOC limit 
orders in addition to electronic quotations. The quoting obligations 
applicable to SQTs contained in Exchange Rule 1014(b)(ii)(D) would 
be unchanged.
---------------------------------------------------------------------------

    Under the proposal, specialists and non-SQT ROTs that submit limit 
orders with a size of less than 10 contracts must submit such orders as 
IOC only. According to the Exchange, this is to ensure that limit 
orders with a size of less than 10 contracts are not placed on the 
limit order book. The Exchange believes that this provision should 
encourage liquidity on the Exchange and limit orders on the limit order 
book that represent the Exchange's best bid or offer and would thus 
result in a disseminated size of at least 10 contracts on the Exchange.
    The purpose of the proposed change to Commentary .02 and .03 of 
Phlx Rule 1082 is to improve the speed by which the Exchange's systems 
can automatically execute locked or crossed quotations against one 
another and eliminate the locked or crossed market situation,\12\ which 
should, in turn, facilitate compliance with firm quote obligations.\13\
---------------------------------------------------------------------------

    \12\ Any unresolved locked or crossed markets remaining after 
the counting period are automatically executed.
    \13\ See Phlx Rule 1082.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\15\ in particular, in that the proposal 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 increasing the efficiency of options trading on the 
Exchange by allowing on-floor participants to electronically enter an 
additional type of order, which should increase the number of automatic 
executions. The Exchange believes that this new functionality should 
increase order interaction between market participants on the Exchange 
and the electronic limit order book. The Exchange also believes that 
reducing the counting period during which market participants may 
resolve locked and crossed markets should improve market efficiency by 
eliminating locked and crossed markets in a more timely fashion.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 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 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

    No written comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which 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-2006-31 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-2006-31. 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

[[Page 3188]]

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-2006-31 and should be submitted on or before February 14, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-977 Filed 1-23-07; 8:45 am]
BILLING CODE 8011-01-P