Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Catastrophic Errors, 36581-36583 [E8-14566]
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Federal Register / Vol. 73, No. 125 / Friday, June 27, 2008 / Notices
to give the arbitrator additional time to
take the training.28 FINRA also stated
that this suggestion would create a
significant administrative burden on
staff, as staff would be required to
monitor continuously the arbitrators’
training reports to ensure that they have
completed the chair training prior to
IPHCs.29 For these reasons, FINRA
declined to amend the proposal to
implement this suggestion.30
One commenter requested that FINRA
make available arbitrator selection
records, beyond information publicly
available from the Arbitration Awards
Online database, so that it could be
analyzed to determine whether
arbitrators who award punitive or large
compensatory awards are appointed to
cases with less frequency due to strikes
from industry parties, and whether the
fragmentation of the random selection
process through a chair-qualified slot
exacerbates the problem.31
FINRA responded that its arbitrator
selection records are proprietary and
confidential.32 FINRA explained, that
the arbitrator selection records are
generated during the resolution of a
private matter between parties and
contain the parties’ confidential
information, such as their striking and
ranking choices.33 Further, FINRA
stated that it does not make this
information available to the public
because it could inhibit the parties’
decisions during the arbitration process,
which would compromise the integrity
of the arbitration process.34 For these
reasons, FINRA declined to make this
information available.35
Finally, four commenters objected to
the existence of the separate chair
roster.36 FINRA stated that it is not
proposing to amend the structure of its
arbitrator rosters in this rule filing.37
Further, FINRA noted that these same
concerns were addressed by FINRA in
connection with the proposal and
adoption of the Codes,38 and the
changes to the arbitrator rosters were
approved by the SEC.39 FINRA stated
28 Id.
29 Id.
30 Id.
31 Cornell
32 FINRA
letter.
letter.
that these comments are, therefore,
outside the scope of the rule filing.40
IV. Discussion and Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act, and the rules and regulations
thereunder that are applicable to a
national securities association.41 In
particular, the Commission believes that
the proposed rule change is consistent
with the provisions of section 15A(b)(6)
of the Act,42 because it would enhance
the fairness and neutrality of FINRA’s
arbitration forum by making the
chairperson eligibility rules more
objective and uniform.
V. Conclusions
It Is Therefore Ordered, pursuant to
section 19(b)(2) of the Act,43 that the
proposed rule change (SR–FINRA–
2008–009) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.44
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–14568 Filed 6–26–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58002; File No. SR–Phlx–
2008–42]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to Catastrophic
Errors
June 23, 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 June 17,
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
Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
33 Id.
40 Id.
34 Id.
35 Id.
jlentini on PROD1PC65 with NOTICES
36 Bernstein,
Cornell, PIABA, and Estell letters.
37 FINRA letter.
38 Id. citing Response to Comments and
Amendment No. 5, May 4, 2006 (File No. SR–
NASD–2003–158), at 21–22; see also Response to
Comments and Partial Amendment 7, August 15,
2006 (File No. SR–NASD–2003–158), at 8.
39 FINRA letter.
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18:47 Jun 26, 2008
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41 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition and capital formation. See
15 U.S.C. 78c(f).
42 15 U.S.C. 78o–(b)(6).
43 15 U.S.C. 78s(b)(2).
44 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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36581
proposed rule change pursuant to
section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(6) 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
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to adopt
amendments to Exchange Rule 1092
(‘‘Rule’’) to: (i) Define a ‘‘Catastrophic
Error’’; (ii) extend the time period for
member notification to Exchange staff
that the member believes it has
participated in a trade that resulted from
a Catastrophic Error; and (iii) state in
the Rule that, if the parties to such a
trade do not agree on an adjustment
price, trades resulting from a
Catastrophic Error will be adjusted to
the Theoretical Price of the affected
option series, plus or minus a predetermined adjustment value,
depending on the Theoretical Price of
the series.
The text of the proposed rule change
is available at the Exchange, 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
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. 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 Exchange states that the purpose
of the proposed rule change is to help
its members better manage risk by
affording them relief from trades that
result from a Catastrophic Error.
The proposed rule change would
address particularly egregious options
trading errors, called Catastrophic
Errors. An Options Exchange Official 5
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
5 See Exchange Rules 124(a) and (b).
4 17
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36582
Federal Register / Vol. 73, No. 125 / Friday, June 27, 2008 / Notices
would determine that a Catastrophic
Error occurred when the execution price
of a transaction is higher or lower than
the Theoretical Price for the series by an
amount equal to at least the minimum
amount shown below:
Theoretical price
Minimum
amount
Below $2 ...............................
$2 to $5 ................................
Above $5 to $10 ...................
Above $10 to $50 .................
Above $50 to $100 ...............
Above $100 ..........................
$1
2
5
10
20
30
The proposed rule change would also
set forth the procedure to be followed
when an Exchange member believes that
he/she has participated in a trade
resulting from a Catastrophic Error.
Significantly, the time period within
which such a member would be
required to notify the Exchange’s Market
Surveillance staff that such an error may
have occurred would be extended well
beyond the time period applicable to an
Obvious Error under current Phlx Rule
1092. Members would have until 8:30
a.m. Eastern Time on the first trading
day following the date on which the
Catastrophic Error occurred to make
such a notification, except that for such
transactions in an expiring options
series that take place on an expiration
day, an Exchange member must notify
the Exchange by 5 p.m. Eastern Time
that same day.
If it is determined that a Catastrophic
Error has occurred, unless both (all)
parties agree to adjust the transaction to
a different price, the execution price(s)
of the transaction(s) will be adjusted to
the theoretical price: (i) Plus the
adjustment value provided below for
erroneous buy transactions; and (ii)
minus the adjustment value provided
for erroneous sell transactions, as
described below:
Theoretical price
Adjustment
value
jlentini on PROD1PC65 with NOTICES
Below $2 ...................................
$2 to $5 ....................................
Above $5 to $10 .......................
Above $10 to $50 .....................
Above $50 to $100 ...................
Above $100 ..............................
$1
2
3
5
7
10
The Exchange believes that the
proposed longer time period is
appropriate to allow members to
discover, and seek relief from, trading
errors that result in extreme losses. At
the same time, the Exchange believes
that the proposed Minimum Amounts
required for a trade to qualify as a
Catastrophic Error, in combination with
the large Adjustment Values, assures
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18:47 Jun 26, 2008
Jkt 214001
that only those transactions where the
price of the execution results in very
high losses will be eligible for
adjustment under the new provisions.
While the Exchange believes it is
important to identify and resolve
trading errors quickly, it also believes it
is important to the integrity of the
marketplace to have the authority to
mitigate extreme losses resulting from
errors.
A member that requests a review
under the proposed rule would be
charged $5,000 by the Exchange if there
is no adjustment or nullification of the
transaction. The initial ruling by the
Options Exchange Official would be
appealable to the Exchange’s Referee.6
The Exchange states that it has
weighed carefully the need to assure
that one market participant is not
permitted to receive a windfall at the
expense of another market participant
that made an Obvious Error, against the
need to assure that market participants
are not simply being given an
opportunity to reconsider poor trading
decisions. The Exchange states that,
while it believes that the Obvious Error
Rule strikes the correct balance in most
situations, in some extreme situations,
trade participants may not be aware of
errors that result in very large losses
within the time periods currently
required under the rule. In this type of
extreme situation, the Exchange believes
its members should be given more time
to seek relief so that there is a greater
opportunity to mitigate very large losses
and reduce the corresponding large
wind-falls. However, to maintain the
appropriate balance, the Exchange
believes members should only be given
more time when the execution price is
much further away from the theoretical
price than is required for Obvious Errors
so that relief is only provided in
extreme circumstances.7
Under the proposed rule, members
will have until 8:30 a.m. Eastern Time
on the trading day following the trade
to notify the Exchange of a potential
Catastrophic Error. For trades that take
place in an expiring series on the day of
expiration, members must notify the
Exchange’s Market Surveillance
Department of a potential Catastrophic
Error by 5 p.m. Eastern Time that same
day. Once a member has notified Market
Surveillance of a potential Catastrophic
6 See Exchange Rule 124, Commentary .02 and
current Exchange Rule 1092(f).
7 The Exchange does not believe the type of
extreme situation that is covered by the proposed
rule would occur in the normal course of trading.
Rather, this type of situation could potentially
occur as a result of, for example, an error in a
member’s quotation system that causes a market
maker to severely misprice an option.
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
Error, within the required time period,
an Options Exchange Official would
review and make a determination as to
the claim.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,8 in general, and
furthers the objectives of section 6(b)(5)
of the Act,9 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 helping Exchange
members better manage risk through the
Catastrophic Error rule. In particular,
the proposal would allow members a
longer opportunity to seek relief from
errors that result in large losses.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would 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
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
filing (or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest), the proposed rule
change has become effective pursuant to
section 19(b)(3)(A) of the Act 10 and
subparagraph (f)(6) of Rule 19b–4
thereunder.11
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of filing.12 However, Rule 19b–
4(f)(6)(iii) permits the Commission to
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15 U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6)(iii). The Exchange has
satisfied the five-day pre-filing requirement of Rule
19b–4(f)(6)(iii).
9 15
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Federal Register / Vol. 73, No. 125 / Friday, June 27, 2008 / Notices
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay and designate the proposed rule
change operative upon filing. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Given that the
Exchange’s proposed catastrophic error
rule is substantially similar to that of the
International Securities Exchange and
that of NYSE Arca,13 the proposal does
not appear to present any novel
regulatory issues. Therefore, the
Commission designates the proposal
operative upon filing.14
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 the 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–2008–42 on the
subject line.
jlentini on PROD1PC65 with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2008–42. 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
13 See Securities Exchange Act Release Nos.
57398 (February 28, 2008), 73 FR 12240 (March 6,
2008) (SR–ISE–2007–112) and 57653 (April 11,
2008), 73 FR 20996 (April 17, 2008) (SR–
NYSEArca–2008–41).
14 For purposes only of waiving the operative
delay of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
VerDate Aug<31>2005
18:47 Jun 26, 2008
Jkt 214001
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 such filing also will be
available for inspection and copying at
the principal office of the Exchange. 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–2008–42 and should
be submitted on or before July 18, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–14566 Filed 6–26–08; 8:45 am]
BILLING CODE 8010–01–P
DEPARTMENT OF STATE
[Public Notice 6279]
Culturally Significant Objects Imported
for Exhibition Determinations:
‘‘Giorgio Morandi, 1890–1964’’
SUMMARY: Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, Delegation of Authority
No. 236 of October 19, 1999, as
amended, and Delegation of Authority
No. 257 of April 15, 2003 [68 FR 19875],
I hereby determine that the objects to be
included in the exhibition ‘‘Giorgio
Morandi, 1890–1964’’ to be displayed at
The Metropolitan Museum of Art, New
York, New York, imported from abroad
for temporary exhibition within the
United States, are of cultural
15 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00093
Fmt 4703
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36583
significance. The objects are imported
pursuant to loan agreements with the
foreign owners or custodians. I also
determine that the exhibition or display
of the exhibit objects at The
Metropolitan Museum of Art, New York,
New York, from on or about September
16, 2008, until on or about December 14,
2008, and at possible additional
exhibitions or venues yet to be
determined, is in the national interest.
Public Notice of these Determinations is
ordered to be published in the Federal
Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a list of
the exhibit objects, contact Wolodymyr
Sulzynsky, Attorney-Adviser, Office of
the Legal Adviser, U.S. Department of
State (telephone: 202/453–8050). The
address is U.S. Department of State, SA–
44, 301 4th Street, SW., Room 700,
Washington, DC 20547–0001.
Dated: June 20, 2008.
C. Miller Crouch,
Principal Deputy Assistant Secretary for
Educational and Cultural Affairs, Department
of State.
[FR Doc. E8–14637 Filed 6–26–08; 8:45 am]
BILLING CODE 4710–05–P
DEPARTMENT OF STATE
[Public Notice 6278]
Culturally Significant Objects Imported
for Exhibition Determinations: ‘‘Hearst
the Collector’’
SUMMARY: Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, Delegation of Authority
No. 236 of October 19, 1999, as
amended, and Delegation of Authority
No. 257 of April 15, 2003 [68 FR 19875],
I hereby determine that the objects to be
included in the exhibition ‘‘Hearst the
Collector’’, imported from abroad for
temporary exhibition within the United
States, are of cultural significance. The
objects are imported pursuant to loan
agreements with the foreign owners or
custodians. I also determine that the
exhibition or display of the exhibit
objects at the Los Angeles County
Museum of Art, Los Angeles, California,
from on or about November 9, 2008,
until on or about February 1, 2009, and
at possible additional exhibitions or
venues yet to be determined, is in the
national interest. Public Notice of these
E:\FR\FM\27JNN1.SGM
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]]>Agencies
[Federal Register Volume 73, Number 125 (Friday, June 27, 2008)]
[Notices]
[Pages 36581-36583]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-14566]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58002; File No. SR-Phlx-2008-42]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Catastrophic Errors
June 23, 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 June 17, 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 Exchange.
The Exchange filed the proposal as a ``non-controversial'' proposed
rule change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule
19b-4(f)(6) 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 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)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to adopt amendments to Exchange Rule 1092
(``Rule'') to: (i) Define a ``Catastrophic Error''; (ii) extend the
time period for member notification to Exchange staff that the member
believes it has participated in a trade that resulted from a
Catastrophic Error; and (iii) state in the Rule that, if the parties to
such a trade do not agree on an adjustment price, trades resulting from
a Catastrophic Error will be adjusted to the Theoretical Price of the
affected option series, plus or minus a pre-determined adjustment
value, depending on the Theoretical Price of the series.
The text of the proposed rule change is available at the Exchange,
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 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. 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 Exchange states that the purpose of the proposed rule change is
to help its members better manage risk by affording them relief from
trades that result from a Catastrophic Error.
The proposed rule change would address particularly egregious
options trading errors, called Catastrophic Errors. An Options Exchange
Official \5\
[[Page 36582]]
would determine that a Catastrophic Error occurred when the execution
price of a transaction is higher or lower than the Theoretical Price
for the series by an amount equal to at least the minimum amount shown
below:
---------------------------------------------------------------------------
\5\ See Exchange Rules 124(a) and (b).
------------------------------------------------------------------------
Theoretical price Minimum amount
------------------------------------------------------------------------
Below $2................................................ $1
$2 to $5................................................ 2
Above $5 to $10......................................... 5
Above $10 to $50........................................ 10
Above $50 to $100....................................... 20
Above $100.............................................. 30
------------------------------------------------------------------------
The proposed rule change would also set forth the procedure to be
followed when an Exchange member believes that he/she has participated
in a trade resulting from a Catastrophic Error. Significantly, the time
period within which such a member would be required to notify the
Exchange's Market Surveillance staff that such an error may have
occurred would be extended well beyond the time period applicable to an
Obvious Error under current Phlx Rule 1092. Members would have until
8:30 a.m. Eastern Time on the first trading day following the date on
which the Catastrophic Error occurred to make such a notification,
except that for such transactions in an expiring options series that
take place on an expiration day, an Exchange member must notify the
Exchange by 5 p.m. Eastern Time that same day.
If it is determined that a Catastrophic Error has occurred, unless
both (all) parties agree to adjust the transaction to a different
price, the execution price(s) of the transaction(s) will be adjusted to
the theoretical price: (i) Plus the adjustment value provided below for
erroneous buy transactions; and (ii) minus the adjustment value
provided for erroneous sell transactions, as described below:
------------------------------------------------------------------------
Adjustment
Theoretical price value
------------------------------------------------------------------------
Below $2................................................... $1
$2 to $5................................................... 2
Above $5 to $10............................................ 3
Above $10 to $50........................................... 5
Above $50 to $100.......................................... 7
Above $100................................................. 10
------------------------------------------------------------------------
The Exchange believes that the proposed longer time period is
appropriate to allow members to discover, and seek relief from, trading
errors that result in extreme losses. At the same time, the Exchange
believes that the proposed Minimum Amounts required for a trade to
qualify as a Catastrophic Error, in combination with the large
Adjustment Values, assures that only those transactions where the price
of the execution results in very high losses will be eligible for
adjustment under the new provisions. While the Exchange believes it is
important to identify and resolve trading errors quickly, it also
believes it is important to the integrity of the marketplace to have
the authority to mitigate extreme losses resulting from errors.
A member that requests a review under the proposed rule would be
charged $5,000 by the Exchange if there is no adjustment or
nullification of the transaction. The initial ruling by the Options
Exchange Official would be appealable to the Exchange's Referee.\6\
---------------------------------------------------------------------------
\6\ See Exchange Rule 124, Commentary .02 and current Exchange
Rule 1092(f).
---------------------------------------------------------------------------
The Exchange states that it has weighed carefully the need to
assure that one market participant is not permitted to receive a
windfall at the expense of another market participant that made an
Obvious Error, against the need to assure that market participants are
not simply being given an opportunity to reconsider poor trading
decisions. The Exchange states that, while it believes that the Obvious
Error Rule strikes the correct balance in most situations, in some
extreme situations, trade participants may not be aware of errors that
result in very large losses within the time periods currently required
under the rule. In this type of extreme situation, the Exchange
believes its members should be given more time to seek relief so that
there is a greater opportunity to mitigate very large losses and reduce
the corresponding large wind-falls. However, to maintain the
appropriate balance, the Exchange believes members should only be given
more time when the execution price is much further away from the
theoretical price than is required for Obvious Errors so that relief is
only provided in extreme circumstances.\7\
---------------------------------------------------------------------------
\7\ The Exchange does not believe the type of extreme situation
that is covered by the proposed rule would occur in the normal
course of trading. Rather, this type of situation could potentially
occur as a result of, for example, an error in a member's quotation
system that causes a market maker to severely misprice an option.
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Under the proposed rule, members will have until 8:30 a.m. Eastern
Time on the trading day following the trade to notify the Exchange of a
potential Catastrophic Error. For trades that take place in an expiring
series on the day of expiration, members must notify the Exchange's
Market Surveillance Department of a potential Catastrophic Error by 5
p.m. Eastern Time that same day. Once a member has notified Market
Surveillance of a potential Catastrophic Error, within the required
time period, an Options Exchange Official would review and make a
determination as to the claim.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\8\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\9\ 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 helping Exchange members better
manage risk through the Catastrophic Error rule. In particular, the
proposal would allow members a longer opportunity to seek relief from
errors that result in large losses.
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\8\ 15 U.S.C. 78f(b).
\9\ 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 would
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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days after the date of filing (or such shorter time as the Commission
may designate if consistent with the protection of investors and the
public interest), the proposed rule change has become effective
pursuant to section 19(b)(3)(A) of the Act \10\ and subparagraph (f)(6)
of Rule 19b-4 thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of filing.\12\
However, Rule 19b-4(f)(6)(iii) permits the Commission to
[[Page 36583]]
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay and
designate the proposed rule change operative upon filing. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Given that the Exchange's proposed catastrophic error rule is
substantially similar to that of the International Securities Exchange
and that of NYSE Arca,\13\ the proposal does not appear to present any
novel regulatory issues. Therefore, the Commission designates the
proposal operative upon filing.\14\
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\12\ 17 CFR 240.19b-4(f)(6)(iii). The Exchange has satisfied the
five-day pre-filing requirement of Rule 19b-4(f)(6)(iii).
\13\ See Securities Exchange Act Release Nos. 57398 (February
28, 2008), 73 FR 12240 (March 6, 2008) (SR-ISE-2007-112) and 57653
(April 11, 2008), 73 FR 20996 (April 17, 2008) (SR-NYSEArca-2008-
41).
\14\ For purposes only of waiving the operative delay of 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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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 the 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 rule-comments@sec.gov. Please include
File Number SR-Phlx-2008-42 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2008-42. 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 such filing also will be available for inspection and
copying at the principal office of the Exchange. 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-2008-42 and should be submitted on
or before July 18, 2008.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-14566 Filed 6-26-08; 8:45 am]
BILLING CODE 8010-01-P
