Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Permanent Approval of the Exchange's Directed Order Program, 30988-30990 [E8-11932]
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30988
Federal Register / Vol. 73, No. 104 / Thursday, May 29, 2008 / Notices
general, to protect investors and the
public interest.
The Commission believes that the
proposal will continue to provide
customers with an opportunity for price
improvement over the NBBO. The
Commission notes that once a Crossing
Transaction is submitted into the PIM
auction, the Crossing Transaction may
not be cancelled.13 Therefore, the
Agency Order submitted to the PIM
auction when ISE’s BBO is not equal to
the NBBO will be guaranteed an
execution price of at least the NBBO
and, moreover, will be given an
opportunity for execution at a price
better than the NBBO.
The Commission does not agree with
the concerns raised by the commenter.
Under the proposal, the PIM will
continue to provide an opportunity for
customer orders to receive an execution
at a price better than NBBO. All orders
entered into the PIM will continue to be
exposed to all ISE members before the
submitting member can execute against
the Agency Order. Moreover, the
Commission believes the proposal may
increase the likelihood of members
entering Agency Orders into the PIM
because the member will only be
required to guarantee an execution at
the NBBO when ISE’s BBO is not equal
to the NBBO, which would provide
additional customer orders an
opportunity for price improvement over
the NBBO. The proposal also may
encourage increased participation in a
PIM by ISE members willing to trade
with an agency order at the NBBO but
not better than the NBBO. Increased
participation by ISE members would
decrease the proportion of an Agency
Order that would be internalized by the
submitting member.14
The Commission thus believes that
ISE’s proposal is consistent with the
requirements of the Act.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,15 that the
proposed rule change (File No. SR–ISE–
2008–29), be, and it hereby is, approved.
jlentini on PROD1PC65 with NOTICES
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Nancy M. Morris,
Secretary.
[FR Doc. E8–11931 Filed 5–28–08; 8:45 am]
BILLING CODE 8010–01–P
13 See
ISE Rule 723(b)(3).
ISE Rule 723(d)(4).
15 15 U.S.C. 78s(b)(2).
16 17 CFR 200.30–3(a)(12).
14 See
17:45 May 28, 2008
[Release No. 34–57844; File No. SR–Phlx–
2008–39]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Order Granting
Accelerated Approval of Proposed
Rule Change Relating to Permanent
Approval of the Exchange’s Directed
Order Program
May 21, 2008.
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 20,
2008, 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 and II, 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 and is approving the proposal
on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to adopt, on a
permanent basis, a pilot program
concerning Exchange Rule 1080,
Philadelphia Stock Exchange
Automated Options Market (AUTOM) 3
and Automatic Execution System
(AUTO–X), and Exchange Rule 1014,
Obligations And Restrictions Applicable
To Specialists And Registered Options
Traders. Specifically, the current pilot
program covers: (1) Exchange Rule
1080(l), Directed Orders, under which
Exchange specialists, Streaming Quote
Traders (‘‘SQTs’’),4 and Remote
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 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. 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 today more commonly referred to as
Phlx XL. See Exchange Rule 1080.
4 An SQT is an Exchange Registered Options
Trader who has received permission from the
Exchange to generate and submit option quotations
electronically through an electronic interface with
AUTOM via an Exchange approved proprietary
electronic quoting device in eligible options to
which such SQT is assigned. See Exchange Rule
1014(b)(ii)(A).
2 17
IV. Conclusion
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SECURITIES AND EXCHANGE
COMMISSION
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Streaming Quote Traders (‘‘RSQTs’’) 5
trading on the Exchange’s electronic
options trading platform, Phlx XL,6
receive Directed Orders (as defined
below); and (2) Exchange Rule
1014(g)(viii), which sets forth the trade
allocation algorithm for electronically
executed and allocated trades involving
Directed Orders. This proposal is in
connection with a pilot program that is
currently scheduled to expire on May
27, 2008.7 The text of the proposed rule
change is available at the Phlx, the
Commission’s Public Reference Room,
and https://www.phlx.com/exchange/
phlx_rule_fil.html.
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 III 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 adopt, on a permanent
basis, a pilot that: (i) permits specialists,
SQTs, and RSQTs assigned in options
that trade on Phlx XL to receive directed
orders (‘‘Directed Orders’’) 8 from a
member or member organization
(‘‘Order Flow Provider’’ or ‘‘OFP’’) 9 that
submits, as agent, a customer order to
the Exchange electronically, and (ii)
establishes a trade allocation algorithm
for Directed Orders that are
electronically executed and allocated to
reward such Directed Specialists, SQTs,
5 An RSQT is a participant in the Exchange’s
electronic trading system, Phlx XL, who has
received permission from the Exchange to trade in
options for his own account and to generate and
submit option quotations electronically from off the
floor of the Exchange through AUTOM in eligible
options to which such RSQT has been assigned. See
Exchange Rule 1014(b)(ii)(B).
6 See Securities Exchange Act Release No. 50100
(July 27, 2004), 69 FR 46612 (August 3, 2004) (SR–
Phlx–2003–59).
7 See Securities Exchange Act Release No. 55803
(May 23, 2007), 72 FR 30413 (May 31, 2007) (SR–
Phlx–2007–37).
8 See Exchange Rule 1080(l)(i)(A).
9 See Exchange Rule 1080(l)(i)(B).
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Federal Register / Vol. 73, No. 104 / Thursday, May 29, 2008 / Notices
and RSQTs 10 with a participation
guarantee for attracting such order flow
to the Exchange. The proposed rule is
subject to a pilot program scheduled to
expire on May 27, 2008.11
Pursuant to Exchange Rule 1080(l),
OFPs must transmit Directed Orders to
a particular specialist, SQT, or RSQT
through AUTOM. If the Exchange’s
disseminated best bid or offer is at the
National Best Bid or Offer (‘‘NBBO’’)
when the Directed Order is received, the
Directed Order is automatically
executed on Phlx XL and allocated to
the orders and quotes represented in the
Exchange’s quotation. A Directed
Specialist, SQT, or RSQT will receive a
participation allocation pursuant to
Exchange Rule 1014(g)(viii) if the
Directed Specialist, SQT, or RSQT was
quoting at the NBBO at the time that the
Directed Order was received.12
Otherwise, the automatic execution will
be allocated to those quotations and
orders at the NBBO pursuant to
Exchange Rule 1014(g)(vii).13 The
specialist will manually execute
Directed Orders that are received when
the Exchange is not quoting at the
NBBO.14
The Exchange believes that the
current pilot program rewards
specialists, SQTs, and RSQTs for
actively engaging in marketing activities
and establishing relationships with
OFPs that generate Directed Orders sent
to the Exchange by such OFPs. The
Exchange believes that the permanent
adoption of this rule will continue to
result in additional order flow to the
Exchange, thus adding depth and
liquidity to the Exchange’s markets, and
enabling the Exchange to continue to
compete effectively with other options
exchanges for order flow.
2. Statutory Basis
jlentini on PROD1PC65 with NOTICES
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 15 in general and furthers the
objectives of Section 6(b)(5) of the Act 16
in particular in that it 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
10 The term ‘‘Directed Specialist, RSQT, or SQT’’
means a specialist, RSQT, or SQT that receives a
Directed Order. See Exchange Rule 1080(l)(i)(C).
The word ‘‘Directed’’ modifies all three; that is, it
is referring to a Directed Specialist, Directed SQT,
and Directed RSQT.
11 See note 7 supra.
12 See Exchange Rule 1080(l)(ii).
13 See Exchange Rule 1080(l)(iii).
14 See Exchange Rule 1080(l)(iv).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
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17:45 May 28, 2008
Jkt 214001
investors and the public interest, by
continuing to permit specialists, SQTs,
and RSQTs trading options on Phlx XL
to receive Directed Orders and by
encouraging the capture of order flow
on the Exchange by rewarding Directed
Order recipients with a participation
guarantee in trades involving Directed
Orders.
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.
30989
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 am and 3 pm.
Copies of such 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–2008–39 and should
be submitted on or before June 19, 2008.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
After careful consideration, the
Commission finds that the proposed
III. Solicitation of Comments
rule change is consistent with the
Interested persons are invited to
requirements of Section 6 of the Act 17
submit written data, views, and
and the rules and regulations
arguments concerning the foregoing,
thereunder applicable to a national
including whether the proposed rule
securities exchange, and, in particular,
change is consistent with the Act.
the requirements of Section 6(b)(5) of
Comments may be submitted by any of
the Act.18 Section 6(b)(5) requires,
the following methods:
among other things, that the rules of a
Electronic Comments
national securities exchange be
designed to prevent fraudulent and
• Use the Commission’s Internet
manipulative acts and practices, to
comment form (https://www.sec.gov/
promote just and equitable principles of
rules/sro.shtml); or
trade, to remove impediments to and
• Send an e-mail to ruleperfect the mechanism of a free and
comments@sec.gov. Please include File
open market and a national market
Number SR–Phlx–2008–39 on the
system, and, in general, to protect
subject line.
investors and the public interest. The
Paper Comments
Commission notes that the Exchange’s
• Send paper comments in triplicate
Directed Order program was approved
to Nancy M. Morris, Secretary,
on a pilot basis.19 The Exchange has
Securities and Exchange Commission,
asked the Commission to approve the
100 F Street, NE., Washington, DC
Exchange’s program on a permanent
20549–1090.
basis. For the reasons noted by the
All submissions should refer to File
Commission when it initially approved
Number SR–Phlx–2008–39. This file
the Exchange’s Directed Order program
number should be included on the
on a pilot basis, the Commission
subject line if e-mail is used. To help the continues to believe that the program
Commission process and review your
does not jeopardize market integrity or
comments more efficiently, please use
the incentive for market participants to
only one method. The Commission will post competitive quotes. Accordingly,
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
17 15 U.S.C. 78f.
rules/sro.shtml). Copies of the
18 15.U.S.C. 78f(b)(5).
submission, all subsequent
19 The Commission initially approved the
Exchange’s Directed Order program on a one-year
amendments, all written statements
pilot basis to expire on May 27, 2006. See Securities
with respect to the proposed rule
Exchange Act Release No. 51759 (May 27, 2005), 70
change that are filed with the
FR 32860 (June 6, 2005) (SR–Phlx–2004–91). The
Commission, and all written
Commission subsequently extended to the pilot
period for an additional one-year period to expire
communications relating to the
on May 27, 2007. See Securities Exchange Act
proposed rule change between the
Commission and any person, other than Release No. 53870 (May 25, 2006), 71 FR 31251
(June 1, 2006) (SR–Phlx–2006–27). The Commission
those that may be withheld from the
again extended the pilot for another one-year period
to expire on May 27, 2008. See note 7 supra.
public in accordance with the
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30990
Federal Register / Vol. 73, No. 104 / Thursday, May 29, 2008 / Notices
the Commission finds that the proposal
is consistent with the Act.20
The Exchange has requested that the
Commission find good cause for
approving the proposed rule change
prior to the thirtieth day after
publication of notice thereof in the
Federal Register. The Commission
believes that granting accelerated
approval of the proposed rule change
would allow the Exchange’s Directed
Order program to continue without
disruption. Accordingly, the
Commission finds good cause,
consistent with Section 19(b)(2) of the
Act,21 for approving the proposed rule
change prior to the thirtieth day after
publication of notice thereof in the
Federal Register.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (SR–Phlx–2008–
39) is hereby approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Nancy M. Morris,
Secretary.
[FR Doc. E8–11932 Filed 5–28–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57842; File No. SR–
NASDAQ–2008–031]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Amend Rule 4350 Related to the Direct
Registration Programs
May 20, 2008.
jlentini on PROD1PC65 with NOTICES
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 April 1,
2008, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change described in
Items I, II, and III below, which items
have been prepared primarily by
Nasdaq. The Commission is publishing
this notice to solicit comments on the
20 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
21 15 U.S.C. 78s(b)(2).
22 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Aug<31>2005
17:45 May 28, 2008
Jkt 214001
proposed rule change from interested
parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to modify the
requirement for a foreign private issuer
to be eligible to rely on an exception to
the requirement to participate in a
Direct Registration Program and to
clarify the applicability of the
requirement to book-entry-only
securities. Nasdaq will implement the
proposed change related to book-entryonly securities immediately upon
approval and the proposed change
affecting foreign private issuers on
March 31, 2009.
The text of the proposed rule change
is below. Proposed new language is in
italicized; proposed deletions are in
brackets.3
Rule 4350. Qualitative Listing
Requirements for Nasdaq Issuers
Except for Limited Partnerships
(a) Applicability
(1) Foreign Private Issuers. A foreign
private issuer may follow its home
country practice in lieu of the
requirements of Rule 4350, provided,
however, that such an issuer shall:
Comply with Rules 4350(b)(1)(B),
4350(j) and 4350(m), have an audit
committee that satisfies Rule 4350(d)(3),
and ensure that such audit committee’s
members meet the independence
requirement in Rule 4350(d)(2)(A)(ii). In
addition, a foreign private issuer must
be eligible to participate in a Direct
Registration Program, as required by
Rule 4350(l), unless prohibited from
complying by a law or regulation in its
home country. A foreign private issuer
that follows a home country practice in
lieu of one or more provisions of Rule
4350 shall disclose in either its annual
reports filed with the Commission or on
its website each requirement of Rule
4350 that it does not follow and shall
describe the home country practice
followed by the issuer in lieu of such
requirements. In addition, a foreign
private issuer making its initial public
offering or first U.S. listing on Nasdaq
shall make the same disclosures in
either its registration statement or on its
website.
(2)—(5) No change.
(b)—(k) No change.
(l) Direct Registration Program
(1) All securities initially listing on
Nasdaq on or after January 1, 2007, must
3 Changes are marked to the rule text that appears
in the electronic manual of Nasdaq found at https://
nasdaq.complinet.com.
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be eligible for a Direct Registration
Program operated by a clearing agency
registered under Section 17A of the
Exchange Act. This provision does not
extend to: (i) Additional classes of
securities of companies which already
have securities listed on Nasdaq; (ii)
companies which immediately prior to
such listing had securities listed on
another registered securities exchange
in the U.S; or, (iii) [non-equity]
securities which are book-entry-only.
(2)(A) Except as indicated in
paragraph (2)(B) below, on [On] and
after March 31, 2008, all securities listed
on Nasdaq (except [non-equity]
securities which are book-entry-only)
must be eligible for a Direct Registration
Program operated by a clearing agency
registered under Section 17A of the
Exchange Act.
(B) Until March 31, 2009, a foreign
private issuer may follow its home
country practice in lieu of the
requirements of this Rule 4350(l),
provided, however, that such an issuer
must follow the requirements of Rule
4350(a) and IM–4350–6 for doing so.
Thereafter, the listed securities of such
issuers (except securities which are
book-entry-only) must be eligible for a
Direct Registration Program operated by
a clearing agency registered under
Section 17A of the Exchange Act unless
prohibited from complying by a law or
regulation in its home country.
(3) No change.
(m)–(n) No change.
IM 4350–6 Applicability
1. Foreign Private Issuer Exception
and Disclosure. A foreign private issuer
(as defined in Rule 3b–4 under the
Exchange Act) listed on Nasdaq may
follow the practice in such issuer’s
home country (as defined in General
Instruction F of Form 20–F) in lieu of
some of the provisions of Rule 4350,
subject to several important exceptions.
First, such an issuer shall comply with
Rule 4350(b)(1)(B) (Disclosure of Going
Concern Opinion), Rule 4350(j) (Listing
Agreement) and Rule 4350(m)
(Notification of Material
Noncompliance). Second, such an issuer
shall have an audit committee that
satisfies Rule 4350(d)(3). Third,
members of such audit committee shall
meet the criteria for independence
referenced in Rule 4350(d)(2)(A)(ii) (the
criteria set forth in Rule 10A–3(b)(1),
subject to the exemptions provided in
Rule 10A–3(c) under the Exchange Act).
Fourth, a foreign private issuer must
comply with Rule 4350(l) (Direct
Registration Program) unless prohibited
from complying by a law or regulation
in its home country. Finally, a foreign
private issuer that elects to follow home
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]]>Agencies
[Federal Register Volume 73, Number 104 (Thursday, May 29, 2008)]
[Notices]
[Pages 30988-30990]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-11932]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57844; File No. SR-Phlx-2008-39]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change Relating to Permanent Approval of the Exchange's Directed
Order Program
May 21, 2008.
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 20, 2008, 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 and
II, 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 and is approving the
proposal on an accelerated basis.
---------------------------------------------------------------------------
\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 adopt, on a permanent basis, a pilot program
concerning Exchange Rule 1080, Philadelphia Stock Exchange Automated
Options Market (AUTOM) \3\ and Automatic Execution System (AUTO-X), and
Exchange Rule 1014, Obligations And Restrictions Applicable To
Specialists And Registered Options Traders. Specifically, the current
pilot program covers: (1) Exchange Rule 1080(l), Directed Orders, under
which Exchange specialists, Streaming Quote Traders (``SQTs''),\4\ and
Remote Streaming Quote Traders (``RSQTs'') \5\ trading on the
Exchange's electronic options trading platform, Phlx XL,\6\ receive
Directed Orders (as defined below); and (2) Exchange Rule
1014(g)(viii), which sets forth the trade allocation algorithm for
electronically executed and allocated trades involving Directed Orders.
This proposal is in connection with a pilot program that is currently
scheduled to expire on May 27, 2008.\7\ The text of the proposed rule
change is available at the Phlx, the Commission's Public Reference
Room, and https://www.phlx.com/exchange/phlx_rule_fil.html.
---------------------------------------------------------------------------
\3\ 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. 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 today more commonly referred to
as Phlx XL. See Exchange Rule 1080.
\4\ An SQT is an Exchange Registered Options Trader who has
received permission from the Exchange to generate and submit option
quotations electronically through an electronic interface with AUTOM
via an Exchange approved proprietary electronic quoting device in
eligible options to which such SQT is assigned. See Exchange Rule
1014(b)(ii)(A).
\5\ An RSQT is a participant in the Exchange's electronic
trading system, Phlx XL, who has received permission from the
Exchange to trade in options for his own account and to generate and
submit option quotations electronically from off the floor of the
Exchange through AUTOM in eligible options to which such RSQT has
been assigned. See Exchange Rule 1014(b)(ii)(B).
\6\ See Securities Exchange Act Release No. 50100 (July 27,
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59).
\7\ See Securities Exchange Act Release No. 55803 (May 23,
2007), 72 FR 30413 (May 31, 2007) (SR-Phlx-2007-37).
---------------------------------------------------------------------------
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 III 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 adopt, on a permanent
basis, a pilot that: (i) permits specialists, SQTs, and RSQTs assigned
in options that trade on Phlx XL to receive directed orders (``Directed
Orders'') \8\ from a member or member organization (``Order Flow
Provider'' or ``OFP'') \9\ that submits, as agent, a customer order to
the Exchange electronically, and (ii) establishes a trade allocation
algorithm for Directed Orders that are electronically executed and
allocated to reward such Directed Specialists, SQTs,
[[Page 30989]]
and RSQTs \10\ with a participation guarantee for attracting such order
flow to the Exchange. The proposed rule is subject to a pilot program
scheduled to expire on May 27, 2008.\11\
---------------------------------------------------------------------------
\8\ See Exchange Rule 1080(l)(i)(A).
\9\ See Exchange Rule 1080(l)(i)(B).
\10\ The term ``Directed Specialist, RSQT, or SQT'' means a
specialist, RSQT, or SQT that receives a Directed Order. See
Exchange Rule 1080(l)(i)(C). The word ``Directed'' modifies all
three; that is, it is referring to a Directed Specialist, Directed
SQT, and Directed RSQT.
\11\ See note 7 supra.
---------------------------------------------------------------------------
Pursuant to Exchange Rule 1080(l), OFPs must transmit Directed
Orders to a particular specialist, SQT, or RSQT through AUTOM. If the
Exchange's disseminated best bid or offer is at the National Best Bid
or Offer (``NBBO'') when the Directed Order is received, the Directed
Order is automatically executed on Phlx XL and allocated to the orders
and quotes represented in the Exchange's quotation. A Directed
Specialist, SQT, or RSQT will receive a participation allocation
pursuant to Exchange Rule 1014(g)(viii) if the Directed Specialist,
SQT, or RSQT was quoting at the NBBO at the time that the Directed
Order was received.\12\ Otherwise, the automatic execution will be
allocated to those quotations and orders at the NBBO pursuant to
Exchange Rule 1014(g)(vii).\13\ The specialist will manually execute
Directed Orders that are received when the Exchange is not quoting at
the NBBO.\14\
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\12\ See Exchange Rule 1080(l)(ii).
\13\ See Exchange Rule 1080(l)(iii).
\14\ See Exchange Rule 1080(l)(iv).
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The Exchange believes that the current pilot program rewards
specialists, SQTs, and RSQTs for actively engaging in marketing
activities and establishing relationships with OFPs that generate
Directed Orders sent to the Exchange by such OFPs. The Exchange
believes that the permanent adoption of this rule will continue to
result in additional order flow to the Exchange, thus adding depth and
liquidity to the Exchange's markets, and enabling the Exchange to
continue to compete effectively with other options exchanges for order
flow.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \15\ in general and furthers the objectives of Section
6(b)(5) of the Act \16\ in particular in that it 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 continuing to permit specialists, SQTs, and RSQTs trading options on
Phlx XL to receive Directed Orders and by encouraging the capture of
order flow on the Exchange by rewarding Directed Order recipients with
a participation guarantee in trades involving Directed Orders.
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\15\ 15 U.S.C. 78f(b).
\16\ 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 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. 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-2008-39 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-2008-39. 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
am and 3 pm. Copies of such 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-2008-39 and should be
submitted on or before June 19, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of Section 6 of the Act
\17\ and the rules and regulations thereunder applicable to a national
securities exchange, and, in particular, the requirements of Section
6(b)(5) of the Act.\18\ Section 6(b)(5) requires, among other things,
that the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, 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 notes that the Exchange's Directed Order program was
approved on a pilot basis.\19\ The Exchange has asked the Commission to
approve the Exchange's program on a permanent basis. For the reasons
noted by the Commission when it initially approved the Exchange's
Directed Order program on a pilot basis, the Commission continues to
believe that the program does not jeopardize market integrity or the
incentive for market participants to post competitive quotes.
Accordingly,
[[Page 30990]]
the Commission finds that the proposal is consistent with the Act.\20\
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\17\ 15 U.S.C. 78f.
\18\ 15.U.S.C. 78f(b)(5).
\19\ The Commission initially approved the Exchange's Directed
Order program on a one-year pilot basis to expire on May 27, 2006.
See Securities Exchange Act Release No. 51759 (May 27, 2005), 70 FR
32860 (June 6, 2005) (SR-Phlx-2004-91). The Commission subsequently
extended to the pilot period for an additional one-year period to
expire on May 27, 2007. See Securities Exchange Act Release No.
53870 (May 25, 2006), 71 FR 31251 (June 1, 2006) (SR-Phlx-2006-27).
The Commission again extended the pilot for another one-year period
to expire on May 27, 2008. See note 7 supra.
\20\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
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The Exchange has requested that the Commission find good cause for
approving the proposed rule change prior to the thirtieth day after
publication of notice thereof in the Federal Register. The Commission
believes that granting accelerated approval of the proposed rule change
would allow the Exchange's Directed Order program to continue without
disruption. Accordingly, the Commission finds good cause, consistent
with Section 19(b)(2) of the Act,\21\ for approving the proposed rule
change prior to the thirtieth day after publication of notice thereof
in the Federal Register.
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\21\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-Phlx-2008-39) is hereby approved on
an accelerated basis.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Nancy M. Morris,
Secretary.
[FR Doc. E8-11932 Filed 5-28-08; 8:45 am]
BILLING CODE 8010-01-P
