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]
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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
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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.
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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
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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.
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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).
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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 (https://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 (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
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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
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17:44 Jan 23, 2007
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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.
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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).
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]]>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]
-----------------------------------------------------------------------
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
https://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.
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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.
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\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.
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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\
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\12\ Any unresolved locked or crossed markets remaining after
the counting period are automatically executed.
\13\ See Phlx Rule 1082.
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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.
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\14\ 15 U.S.C. 78f(b).
\15\ 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
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 (https://
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 (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
[[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
