Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendments No. 1 and 2 Thereto Relating to Market Access Providers, 48720-48722 [E7-16755]
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48720
Federal Register / Vol. 72, No. 164 / Friday, August 24, 2007 / Notices
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
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
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–2007–57 and should
be submitted on or before September 14,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–16754 Filed 8–23–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56274; File No. SR–Phlx–
2007–54]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change and Amendments No. 1 and 2
Thereto Relating to Market Access
Providers
yshivers on PROD1PC66 with NOTICES
August 16, 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 August 6,
2007, the Philadelphia Stock Exchange,
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III, below, which Items
have been substantially prepared by the
Phlx. The Phlx filed Amendments No. 1
and 2 to the proposed rule change on
August 14, 2007 and August 16, 2007,
respectively. The Phlx filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(2) thereunder,4 which renders
the proposal effective upon filing with
the Commission. 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 its
schedule of fees to institute a new
subsidy program (the ‘‘Subsidy’’), which
would be available to qualifying Phlx
member organizations that offer to
customers automated order routing
systems and electronic market access to
U.S. options markets (‘‘Market Access
Providers’’ or ‘‘MAPs’’) and which
would provide such qualified Market
Access Providers incentives to route
additional option orders to the Phlx and
to offer to their customers certain
services that are intended to promote
the business of the Phlx.
The Subsidy would be applicable to
any Exchange member organization that
qualifies as a MAP who elects to
participate by submitting any
application(s) and/or form(s) required
by the Exchange and complying with
other conditions enumerated below. The
Subsidy would apply to any MAP that
has elected to participate for the
calendar month that commences
following the satisfaction by such MAP
of all conditions of participation, and
for each calendar month thereafter,
provided that such conditions continue
to be satisfied.
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,
16 17
1 15
VerDate Aug<31>2005
14:35 Aug 23, 2007
U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00112
Fmt 4703
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 provide incentives to
Exchange member organizations and
their customers.
For a MAP to be eligible for the
Subsidy, a MAP (an ‘‘Eligible MAP’’)
would be required to:
(1) Submit any required Exchange
applications and/or forms for Exchange
approval to participate as an Eligible
MAP;
(2) Provide to its customers systems
that enable the electronic routing of
equity option orders to all of the U.S.
options exchanges, including the Phlx;
(3) Provide to its customers current
consolidated market data from the U.S.
options exchanges;
(4) Interface with the Phlx’s API to
access the Exchange’s electronic options
trading platform, Phlx XL; 5
(5) Offer to its customers a customized
interface and routing functionality
(including sweep function described
below) such that:
(A) The Phlx will be the default
destination for all equity option orders
(whether marketable or not), provided
that in the case of marketable orders, the
Phlx is at the national best bid or offer
(‘‘NBBO’’) on the appropriate side of the
market (i.e., the contra-side of the order
that is routed to the Phlx), regardless of
size or time, up to the Phlx’s
disseminated size; and
(B) The MAP’s option order routing
functionality incorporates a feature that
causes equity option orders at a
specified price to be routed
simultaneously to multiple exchanges
with a single click (a ‘‘sweep function’’),
which is configured to route all such
orders (or, if such orders are for a size
larger than the size disseminated by the
Phlx on the opposite side of the market,
at least the portion of the order that
corresponds to the Phlx’s disseminated
size) to the Phlx as the default
destination for execution for a size up
to the full size quoted on the Phlx,
provided that, in the case of marketable
orders, the Phlx disseminated price on
the appropriate side of the market is at
the NBBO;
(6) Configure its own option order
routing functionality such that it is
configured as described in sub5 See Securities Exchange Act Release No. 50100
(July 27, 2004), 69 FR 46612 (August 3, 2004) (SR–
Phlx–2003–59).
3 15
Jkt 211001
and C below, of the most significant
aspects of such statements.
Sfmt 4703
E:\FR\FM\24AUN1.SGM
24AUN1
Federal Register / Vol. 72, No. 164 / Friday, August 24, 2007 / Notices
yshivers on PROD1PC66 with NOTICES
paragraphs 5(A) and (B) above, with
respect to all equity option orders as to
which the MAP has discretion as to
routing (‘‘MAP Routing Orders’’);
(7) Ensure that the customized
functionality described in subparagraphs (5) and (6) above permits
users submitting equity option orders
through such system(s) to manually
override the Phlx as the default
destination on an order-by-order basis;
and
(8) Enter into and maintain an
agreement with the Exchange to
function as an Eligible MAP and be in
compliance with all terms thereof.
The Agreement
In the agreement referred to in subparagraph (8) above, Eligible MAPs will
undertake to offer to their customers the
customized interface described in subparagraph (5) above. In addition,
Eligible MAPs will also undertake to
provide support for such customized
interface for those customers that
receive the service described in subparagraph (5) above. Nothing in the
agreement would obligate a MAP’s
customer to exclusively use an Eligible
MAP’s order routing system.
Furthermore, nothing in the
agreement would relieve Eligible MAPs
from complying with their best
execution obligations. Specifically, the
Eligible MAP would need to, on a
regular and at least a quarterly basis,
conduct best execution evaluations. If,
based upon its regular best execution
analysis, the Eligible MAP determines
that the routing of MAP Routing Orders
to the Phlx using the feature described
in sub-paragraph (6) above would, with
respect to particular options, be
inconsistent with the highest quality of
execution standards, then the Eligible
MAP may disable and suspend the
features described in sub-paragraphs (5)
and (6) above with respect to such
options and for such period the Eligible
MAP determines such inconsistency
exists.
Eligible MAPs will covenant to refrain
from entering into arrangements with
other exchanges or execution venues
where such exchange or execution
venue will have the same routing
position as, or priority over, the Phlx as
the default destination for option orders
described in sub-paragraphs (5) and (6)
above, unless the Phlx otherwise
consents. Such covenant will terminate
on the date which is the last calendar
day of the year that is one year from the
date of the agreement; provided that the
Phlx may, by giving written notice to
the Eligible MAP, elect to extend such
covenant for additional one-year terms,
in which case the per contract fee (as
VerDate Aug<31>2005
14:35 Aug 23, 2007
Jkt 211001
described in the first paragraph under
‘‘Calculation of the Subsidy’’ below)
during any extension period for that
Eligible MAP shall be $0.01 per contract
greater than the Subsidy Rate (as
defined below) then in effect at the date
of renewal, so long as such covenant
remains in effect. Notwithstanding the
termination of the covenant as described
above, the agreement shall otherwise
remain in effect.
Calculation of the Subsidy
The Subsidy, payable to Eligible
MAPs monthly, would be an amount
per contract (the ‘‘Subsidy Rate’’) of
$0.10 for each Eligible Contract (as
defined below) in the immediately
preceding calendar month above the
particular Eligible MAP’s Baseline
Order Flow (as defined below).
• ‘‘Eligible Contracts’’ means
contracts that result from the execution
on the Phlx of: (1) Equity option orders
(other than crosses) sent electronically
to an Eligible MAP (and routed to the
Phlx electronically by the Eligible MAP)
by its customers; and (2) MAP Routing
Orders (other than crosses) sent
electronically by the Eligible MAP.
• ‘‘Baseline Order Flow’’ for an
Eligible MAP means the higher of: (1)
500,000 contracts; or (2) the average
contracts per month, calculated for the
3-month period immediately preceding
the Eligible MAP entering into the
agreement with the Phlx as described in
sub-paragraph (8) above, that resulted
from the execution on the Phlx of equity
option orders (other than crosses) routed
to the Phlx electronically by such
Eligible MAP.
The Volume Bonus
The Exchange will pay each Eligible
MAP $50,000 per month (the ‘‘Volume
Bonus’’) for each month in which the
Eligible Contracts of such Eligible MAP
in the immediately preceding calendar
month exceed the higher of: (1)
1,500,000; or (2) three times the
Baseline Order Flow of such Eligible
MAP. The Volume Bonus shall be in
addition to the amount for any Subsidy
that is payable.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 6 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act 7 in particular, in that it is
designed to provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
issuers and other persons using its
6 15
7 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
Frm 00113
Fmt 4703
Sfmt 4703
48721
facilities, as well as to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open national
market system, and, in general, to
protect investors and the public interest,
by establishing a Subsidy that
encourages the routing of equity options
business to the Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition 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 either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 8 and Rule 19b–
4(f)(2) 9 thereunder, because it involves
a member due, fee, or other charge. At
any time within 60 days of the filing of
the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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–2007–54 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.
8 15
9 17
E:\FR\FM\24AUN1.SGM
U.S.C. 78(s)(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
24AUN1
48722
Federal Register / Vol. 72, No. 164 / Friday, August 24, 2007 / Notices
All submissions should refer to File
Number SR–Phlx–2007–54. 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
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
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–2007–54 and should
be submitted on or before September 14,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–16755 Filed 8–23–07; 8:45 am]
BILLING CODE 8010–01–P
notice is hereby given that on August
17, 2007 the Philadelphia Stock
Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which items
have been substantially prepared by the
Phlx. The Commission is publishing
this notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to extend and
expand a pilot program (the ‘‘Pilot’’)
that permits certain options series to be
quoted and traded in increments of
$0.01, through March 27, 2009. The
extended Pilot would include additional
options that are not part of the current
Pilot. The text of the proposed rule
change is available on the Exchange’s
Web site at (https://www.phlx.com), at
the offices of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56284; File No. SR–Phlx–
2007–62]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule
Change Relating to the Extension and
Expansion of a Pilot Program To Quote
and Trade Certain Option Series in
Increments of $0.01
yshivers on PROD1PC66 with NOTICES
August 17, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
10 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
14:35 Aug 23, 2007
Jkt 211001
The purpose of the proposed rule
change is to continue to permit
specified options series to be quoted
and traded in increments of $0.01 by
extending the Pilot through March 27,
2009, and to expand the Pilot to include
additional options, as described more
fully below. The Exchange believes that
including additional options in the Pilot
should provide greater breadth and
depth of experience in quoting and
trading options series in increments of
$0.01, and should therefore enable the
Exchange to better analyze the impact of
the Pilot on the options marketplace.
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
Current Pilot
The current Pilot began on January 26,
2007,3 and was thereafter extended
through September 27, 2007.4 All series
in options included in the Pilot (‘‘Pilot
Options,’’ listed below) trading at a
price of less than $3.00 are currently
quoted and traded in minimum
increments of $0.01, and Pilot Options
with a price of $3.00 or higher are
currently quoted and traded in
minimum increments of $0.05, except
that options overlying the Nasdaq-100
Index Tracking Stock (‘‘QQQQ’’) 5 are
quoted and traded in minimum
increments of $0.01 for all series
regardless of the price. A list of all Pilot
Options was communicated to
membership via Exchange circular.
The options included in the current
Pilot are:
Symbol
IWM .........
QQQQ .....
SMH .........
GE ...........
AMD .........
MSFT .......
INTC ........
CAT .........
WFMI .......
TXN .........
A ..............
FLEX ........
SUNW ......
Underlying security
Ishares Russell 2000
QQQQ
SemiConductor Holders
General Electric
Advanced Micro Devices
Microsoft
Intel
Caterpillar
Whole Foods
Texas Instruments
Agilent Tech Inc.
Flextronics International
Sun Micro
Expanded Pilot
The Exchange proposes to expand the
current Pilot to include additional
options in two phases, beginning on
September 28, 2007.
3 See Securities Exchange Act Release No. 55153
(January 23, 2007), 72 FR 4553 (January 31, 2007)
(SR–Phlx–2006–74). In that filing, the Exchange
also made conforming amendments to various
Exchange rules in order to be consistent with the
Pilot. These conforming changes were also
approved on a six-month pilot basis. Therefore, the
Exchange is proposing to extend the effective date
for these rules through March 27, 2009.
4 See Securities Exchange Act Release No. 56141
(July 24, 2007), 72 FR 42216 (August 1, 2007) (SR–
Phlx–2007–53).
5 The Nasdaq-100, Nasdaq-100 Index, Nasdaq,
The Nasdaq Stock Market, Nasdaq-100 SharesSM,
Nasdaq-100 TrustSM, Nasdaq-100 Index Tracking
StockSM, and QQQSM are trademarks or service
marks of The Nasdaq Stock Market, Inc. (Nasdaq)
and have been licensed for use for certain purposes
by the Philadelphia Stock Exchange pursuant to a
License Agreement with Nasdaq. The Nasdaq-100
Index (the Index) is determined, composed, and
calculated by Nasdaq without regard to the
Licensee, the Nasdaq-100 TrustSM, or the beneficial
owners of Nasdaq-100 SharesSM. Nasdaq has
complete control and sole discretion in
determining, comprising, or calculating the Index or
in modifying in any way its methods for
determining, comprising, or calculating the Index in
the future.
E:\FR\FM\24AUN1.SGM
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]]>Agencies
[Federal Register Volume 72, Number 164 (Friday, August 24, 2007)]
[Notices]
[Pages 48720-48722]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-16755]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56274; File No. SR-Phlx-2007-54]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
and Amendments No. 1 and 2 Thereto Relating to Market Access Providers
August 16, 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 August 6, 2007, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III, below, which Items have been substantially prepared by the
Phlx. The Phlx filed Amendments No. 1 and 2 to the proposed rule change
on August 14, 2007 and August 16, 2007, respectively. The Phlx filed
the proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal
effective upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to amend its schedule of fees to institute a new
subsidy program (the ``Subsidy''), which would be available to
qualifying Phlx member organizations that offer to customers automated
order routing systems and electronic market access to U.S. options
markets (``Market Access Providers'' or ``MAPs'') and which would
provide such qualified Market Access Providers incentives to route
additional option orders to the Phlx and to offer to their customers
certain services that are intended to promote the business of the Phlx.
The Subsidy would be applicable to any Exchange member organization
that qualifies as a MAP who elects to participate by submitting any
application(s) and/or form(s) required by the Exchange and complying
with other conditions enumerated below. The Subsidy would apply to any
MAP that has elected to participate for the calendar month that
commences following the satisfaction by such MAP of all conditions of
participation, and for each calendar month thereafter, provided that
such conditions continue to be satisfied.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Phlx included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Phlx has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to provide incentives to
Exchange member organizations and their customers.
For a MAP to be eligible for the Subsidy, a MAP (an ``Eligible
MAP'') would be required to:
(1) Submit any required Exchange applications and/or forms for
Exchange approval to participate as an Eligible MAP;
(2) Provide to its customers systems that enable the electronic
routing of equity option orders to all of the U.S. options exchanges,
including the Phlx;
(3) Provide to its customers current consolidated market data from
the U.S. options exchanges;
(4) Interface with the Phlx's API to access the Exchange's
electronic options trading platform, Phlx XL; \5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 50100 (July 27,
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59).
---------------------------------------------------------------------------
(5) Offer to its customers a customized interface and routing
functionality (including sweep function described below) such that:
(A) The Phlx will be the default destination for all equity option
orders (whether marketable or not), provided that in the case of
marketable orders, the Phlx is at the national best bid or offer
(``NBBO'') on the appropriate side of the market (i.e., the contra-side
of the order that is routed to the Phlx), regardless of size or time,
up to the Phlx's disseminated size; and
(B) The MAP's option order routing functionality incorporates a
feature that causes equity option orders at a specified price to be
routed simultaneously to multiple exchanges with a single click (a
``sweep function''), which is configured to route all such orders (or,
if such orders are for a size larger than the size disseminated by the
Phlx on the opposite side of the market, at least the portion of the
order that corresponds to the Phlx's disseminated size) to the Phlx as
the default destination for execution for a size up to the full size
quoted on the Phlx, provided that, in the case of marketable orders,
the Phlx disseminated price on the appropriate side of the market is at
the NBBO;
(6) Configure its own option order routing functionality such that
it is configured as described in sub-
[[Page 48721]]
paragraphs 5(A) and (B) above, with respect to all equity option orders
as to which the MAP has discretion as to routing (``MAP Routing
Orders'');
(7) Ensure that the customized functionality described in sub-
paragraphs (5) and (6) above permits users submitting equity option
orders through such system(s) to manually override the Phlx as the
default destination on an order-by-order basis; and
(8) Enter into and maintain an agreement with the Exchange to
function as an Eligible MAP and be in compliance with all terms
thereof.
The Agreement
In the agreement referred to in sub-paragraph (8) above, Eligible
MAPs will undertake to offer to their customers the customized
interface described in sub-paragraph (5) above. In addition, Eligible
MAPs will also undertake to provide support for such customized
interface for those customers that receive the service described in
sub-paragraph (5) above. Nothing in the agreement would obligate a
MAP's customer to exclusively use an Eligible MAP's order routing
system.
Furthermore, nothing in the agreement would relieve Eligible MAPs
from complying with their best execution obligations. Specifically, the
Eligible MAP would need to, on a regular and at least a quarterly
basis, conduct best execution evaluations. If, based upon its regular
best execution analysis, the Eligible MAP determines that the routing
of MAP Routing Orders to the Phlx using the feature described in sub-
paragraph (6) above would, with respect to particular options, be
inconsistent with the highest quality of execution standards, then the
Eligible MAP may disable and suspend the features described in sub-
paragraphs (5) and (6) above with respect to such options and for such
period the Eligible MAP determines such inconsistency exists.
Eligible MAPs will covenant to refrain from entering into
arrangements with other exchanges or execution venues where such
exchange or execution venue will have the same routing position as, or
priority over, the Phlx as the default destination for option orders
described in sub-paragraphs (5) and (6) above, unless the Phlx
otherwise consents. Such covenant will terminate on the date which is
the last calendar day of the year that is one year from the date of the
agreement; provided that the Phlx may, by giving written notice to the
Eligible MAP, elect to extend such covenant for additional one-year
terms, in which case the per contract fee (as described in the first
paragraph under ``Calculation of the Subsidy'' below) during any
extension period for that Eligible MAP shall be $0.01 per contract
greater than the Subsidy Rate (as defined below) then in effect at the
date of renewal, so long as such covenant remains in effect.
Notwithstanding the termination of the covenant as described above, the
agreement shall otherwise remain in effect.
Calculation of the Subsidy
The Subsidy, payable to Eligible MAPs monthly, would be an amount
per contract (the ``Subsidy Rate'') of $0.10 for each Eligible Contract
(as defined below) in the immediately preceding calendar month above
the particular Eligible MAP's Baseline Order Flow (as defined below).
``Eligible Contracts'' means contracts that result from
the execution on the Phlx of: (1) Equity option orders (other than
crosses) sent electronically to an Eligible MAP (and routed to the Phlx
electronically by the Eligible MAP) by its customers; and (2) MAP
Routing Orders (other than crosses) sent electronically by the Eligible
MAP.
``Baseline Order Flow'' for an Eligible MAP means the
higher of: (1) 500,000 contracts; or (2) the average contracts per
month, calculated for the 3-month period immediately preceding the
Eligible MAP entering into the agreement with the Phlx as described in
sub-paragraph (8) above, that resulted from the execution on the Phlx
of equity option orders (other than crosses) routed to the Phlx
electronically by such Eligible MAP.
The Volume Bonus
The Exchange will pay each Eligible MAP $50,000 per month (the
``Volume Bonus'') for each month in which the Eligible Contracts of
such Eligible MAP in the immediately preceding calendar month exceed
the higher of: (1) 1,500,000; or (2) three times the Baseline Order
Flow of such Eligible MAP. The Volume Bonus shall be in addition to the
amount for any Subsidy that is payable.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act \7\ in particular, in that it is
designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among its members and issuers and other persons
using its facilities, as well as to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open national market system, and, in general, to protect
investors and the public interest, by establishing a Subsidy that
encourages the routing of equity options business to the Exchange.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (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 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 either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-4(f)(2) \9\ thereunder,
because it involves a member due, fee, or other charge. At any time
within 60 days of the filing of the proposed rule change, the
Commission may summarily abrogate such rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.
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\8\ 15 U.S.C. 78(s)(b)(3)(A)(ii).
\9\ 17 CFR 240.19b-4(f)(2).
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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-2007-54 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.
[[Page 48722]]
All submissions should refer to File Number SR-Phlx-2007-54. 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
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. 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-2007-54 and should be
submitted on or before September 14, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-16755 Filed 8-23-07; 8:45 am]
BILLING CODE 8010-01-P
