Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Quotation Size Decrementation, 55190-55192 [E8-22378]
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55190
Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
nor received.
jlentini on PROD1PC65 with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this 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 13 and
Rule 19b–4(f)(6) thereunder.14
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory
organization to provide the Commission
with written notice of its intent to file
the proposed rule change, along with a
brief description and text of the
proposed rule change, at least five
business days prior to the date of filing
of the proposed rule change, or such
shorter time as designated by the
Commission. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay as well
as the five business-day pre-filing
requirement so that the Exchange is able
to compete with other options
exchanges that are currently permitted
to list and trade options on IndexLinked Securities. The Commission
believes that waiving the 30-day
operative delay and five business-day
pre-filing requirement is consistent with
the protection of investors and the
public interest.15 The Commission notes
the proposal is substantively identical to
proposals that were recently approved
by the Commission, and does not raise
13 15
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6).
15 For purposes only of waiving the 30-day
operative delay and five business-day pre-filing
requirement, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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17:26 Sep 23, 2008
Jkt 214001
any new regulatory issues.16 For these
reasons, the Commission designates the
proposed rule change as operative upon
filing.
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–2008–60 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–2008–60. 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
16 See Securities Exchange Act Release Nos.
58203 (July 22, 2008), 73 FR 43812 (July 28, 2008)
(SR–NYSEArca–2008–57) and 58204 (July 22,
2008), 73 FR 43807 (July 28, 2008) (SR–CBOE–
2008–64).
PO 00000
Frm 00170
Fmt 4703
Sfmt 4703
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–2008–60 and should
be submitted on or before October 15,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8–22249 Filed 9–23–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58582; File No. SR–Phlx–
2008–66]
Self-Regulatory Organizations;
NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Quotation Size Decrementation
September 18, 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
September 16, 2008, the NASDAQ OMX
PHLX, 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 prepared by Phlx. Phlx filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(6) thereunder,4 which renders
it 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 Exchange, pursuant to Section
19(b)(1) of the Act 5 and Rule 19b–4
thereunder,6 proposes to amend
Exchange Rule 1082, Firm Quotations,
to reflect a change to its fully electronic
17 17
CFR 200.30–3(a)(12).
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).
5 15 U.S.C. 78s(b)(1).
6 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices
trading platform for options, Phlx XL,7
in which automatic executions will
decrement the Exchange’s disseminated
size by the amount of the automatic
execution.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.phlx.com/regulatory/
reg_rulefilings.aspx.
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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
jlentini on PROD1PC65 with NOTICES
1. Purpose
The purpose of the proposed rule
change is to enhance the ability of
Exchange Streaming Quote Traders
(‘‘SQTs’’),8 Remote Streaming Quote
Traders (‘‘RSQTs’’),9 non-SQT ROTs,10
and specialists (collectively, ‘‘Phlx XL
participants’’) to better manage risk by
modifying the Phlx XL system such that
when a trade occurs, the Phlx XL system
will decrement the quote size by the
number of contracts traded in the
affected option series on the side of the
market that has traded (i.e., bid size for
sell transactions and offer size for buy
transactions).
Phlx XL currently does not decrement
quotation size in real time. Instead, a
7 See Securities Exchange Act Release No. 50100
(July 27, 2004), 69 FR 44612 (August 3, 2004) (SR–
Phlx–2003–59). [sic]
8 An SQT is a Registered Options Trader (‘‘ROT’’)
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).
9 An RSQT is an ROT that is a member or member
organization with no physical trading floor
presence who has received permission from the
Exchange to generate and submit option quotations
electronically through AUTOM in eligible options
to which such RSQT has been assigned. An RSQT
may only submit such quotations electronically
from off the floor of the Exchange. See Exchange
Rule 1014(b)(ii)(B).
10 A non-SQT ROT is an ROT who is neither an
SQT nor an RSQT. See Exchange Rule
1014(b)(ii)(C).
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17:26 Sep 23, 2008
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Phlx XL participant has control over his
or her quotation size and can refresh the
size (and price) for which he or she is
firm at the disseminated price. Phlx XL
participants have experienced situations
where they execute more contracts at a
particular price than they intended due
to the fact that Phlx XL currently does
not decrement quote size in real time.
The following example illustrates the
issue that the proposed system change
would solve:
A Phlx XL participant submits an
electronic quotation (a bid) to buy 100
contracts. Under the current system
functionality, if a single trade of 100
contracts to sell interacts with that bid
for 100 contracts, all 100 contracts will
be executed and the Phlx XL
participant’s quotation will be
exhausted and removed from the market
place until that Phlx XL participant
refreshes his or her quotation.11
If, however, a single trade of 100
contracts to sell interacts with that bid
for anything less than its full size, the
Phlx XL system currently does not
decrement the size of the bid, and the
bid is still firm for the full original size
of 100 contracts. For example, a single
trade of 90 contracts occurs on the bid
price, all 90 contracts would be
executed automatically, but the
disseminated size of the quotation will
continue to be 100 contracts. Phlx XL
participants have experienced situations
where a quotation could be for a size of
100 contracts and an execution occurs
for 99 contracts, followed by an
additional execution of 100 contracts at
the same price before the Phlx XL
participant can revise his or her
quotation in the affected series, for a
total execution of 199 contracts when
the quotation was only intended to be
for a size of 100 contracts at the
disseminated price. The Exchange
believes that this aspect of the current
system exposes Phlx XL participants to
undue risk respecting the size for which
they are firm at a particular price in a
particular option series.
Accordingly, under the proposal,
every trade executed automatically in
the Phlx XL system would cause the
Exchange’s disseminated size to be
reduced by the number of contracts
traded in the affected series at the
disseminated price. Receipt of a revised
quote from the affected Phlx XL
participant would reset the price and
size for that series.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
11 See
PO 00000
Exchange Rule 1082(a)(ii)(B)(1).
Frm 00171
Fmt 4703
Sfmt 4703
55191
of the Act 12 in general, and furthers the
objectives of Section 6(b)(5) of the Act 13
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
providing Phlx XL participants with
additional protection from exposure to
undue market risk through the real-time
decrementation of the Exchange’s
disseminated size.
The Exchange further believes that the
proposed rule change is consistent with
the Act because the risk protection
afforded Phlx XL participants should
encourage them to quote options series
with greater size, adding liquidity to the
Exchange’s markets against which
customers can trade.
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
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i)
Does not significantly affect the
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; and
(iii) does not become operative for 30
days after the date of the 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 14 and Rule 19b–
4(f)(6) thereunder.15
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
14 15 U.S.C. 78s(b)(3)(A).
15 17 CFR 240.19b–4(f)(6). Pursuant to Rule 19b–
4(f)(6)(iii) under the Act, the Exchange is required
to give the Commission written notice of its intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has requested that the Commission waive the 5-day
pre-filing notice requirement. The Commission has
determined to waive this requirement.
13 15
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55192
Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices
Act 16 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 17
permits the Commission to 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. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. The Commission notes
that under the proposal, the Exchange’s
disseminated size should accurately
reflect revised quotation sizes based on
automatic executions through Phlx XL
in real time. Accordingly, the
Commission designates that the
proposed rule change become operative
immediately.18
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
the 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.
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 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–2008–66 and should
be submitted on or before October 15,
2008.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8–22378 Filed 9–23–08; 8:45 am]
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–2008–66 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–2008–66. 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/
16 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
18 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
17 17
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17:26 Sep 23, 2008
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BILLING CODE 8010–01–P
[Release No. 34–58569; File No. SR–
NASDAQ–2008–033]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Approving Proposed Rule Change as
Modified by Amendment Nos. 1 and 2
Related to Submission of Non-Tape
Reports
September 17, 2008.
I. Introduction
On April 18, 2008, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange Act’’
or ‘‘Act’’) 1 and Rule 19b–4 thereunder,2
a proposed rule change related to
submission of non-tape reports. On July
3, 2008, Nasdaq filed Amendment No. 1
to the proposed rule change. The
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00172
Fmt 4703
Sfmt 4703
proposed rule change was published for
comment in the Federal Register on July
11, 2008.3 Two comments were received
in support of the proposed rule change.4
On August 11, 2008, Nasdaq filed
Amendment No. 2 to the proposed rule
change to make certain technical, nonsubstantive modifications to the original
rule filing. This order approves the
proposed rule change, as amended.
II. Description of the Proposal
The proposed rule change would:
Expand the scope of step-outs 5 to
include all securities transfers from one
Nasdaq member to another provided the
transfer does not constitute a reportable
trade,6 eliminate the requirement for an
authorizing agreement when Nasdaq
members use the Automated
Confirmation Transaction service
(‘‘ACT’’) to effect a step-out along with
the transfer of a sales fee or similar fee,7
describe riskless transactions,8 state that
members may not use the step-out
function in lieu of reporting a trade,9
and establish a fee for the use of the
step-out function to transfer a
transaction fee.10
Nasdaq will allow members to submit
records for riskless transfers using the
following capacities: ‘‘Riskless
Principal’’ where the member acted as
principal on the trade or trades related
to the riskless submission; ‘‘Agent’’
where the member acted as agent on the
trade or trades related to the riskless
submission; and ‘‘Intra-Broker’’ where
the transfer is occurring strictly within
a member firm.
Transaction Fees
According to Nasdaq, trade reporting
rules of other SROs allow transaction
fees to be included in clearing reports.
Nasdaq proposes to permit members to
include transaction fees in clearing
reports submitted under Rule 7038 or
7042, if the members agree in advance
to transfer the transaction fee and if they
are parties to a written agreement
3 See Securities Exchange Act Release No. 58101
(July 3, 2008), 73 FR 40002.
4 See e-mail from Kirk Allen, Managing Director,
Trading, NWQ Investment Management, dated
August 1, 2008 (‘‘NWQ Investment Letter’’) and
letter from William D. Edick, Pickard and Djinis
LLP, to Florence E. Harmon, Acting Secretary,
Commission, dated September 11, 2008 (‘‘Pickard
Letter’’).
5 Nasdaq states that a step-out is a clearing entry
used to transfer a broker’s position in a security to
another broker, or within accounts at a firm.
6 Rule 7038(b).
7 Rule 7038(c).
8 Rule 7042. Nasdaq states that this requirement
follows the general standard for riskless principal
transactions articulated in Financial Industry
Regulatory Authority (‘‘FINRA’’) Rule 4632(d)(3)(B).
9 Rule 7038(d), 7042(b) and 7043(a).
10 Rule 7043.
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]]>Agencies
[Federal Register Volume 73, Number 186 (Wednesday, September 24, 2008)]
[Notices]
[Pages 55190-55192]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22378]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58582; File No. SR-Phlx-2008-66]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Quotation Size Decrementation
September 18, 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 September 16, 2008, the NASDAQ OMX PHLX, 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 prepared by Phlx. Phlx filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) thereunder,\4\ which renders it 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 Exchange, pursuant to Section 19(b)(1) of the Act \5\ and Rule
19b-4 thereunder,\6\ proposes to amend Exchange Rule 1082, Firm
Quotations, to reflect a change to its fully electronic
[[Page 55191]]
trading platform for options, Phlx XL,\7\ in which automatic executions
will decrement the Exchange's disseminated size by the amount of the
automatic execution.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(1).
\6\ 17 CFR 240.19b-4.
\7\ See Securities Exchange Act Release No. 50100 (July 27,
2004), 69 FR 44612 (August 3, 2004) (SR-Phlx-2003-59). [sic]
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at https://www.phlx.com/regulatory/reg_rulefilings.aspx.
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.
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 enhance the ability
of Exchange Streaming Quote Traders (``SQTs''),\8\ Remote Streaming
Quote Traders (``RSQTs''),\9\ non-SQT ROTs,\10\ and specialists
(collectively, ``Phlx XL participants'') to better manage risk by
modifying the Phlx XL system such that when a trade occurs, the Phlx XL
system will decrement the quote size by the number of contracts traded
in the affected option series on the side of the market that has traded
(i.e., bid size for sell transactions and offer size for buy
transactions).
---------------------------------------------------------------------------
\8\ An SQT is a Registered Options Trader (``ROT'') 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).
\9\ An RSQT is an ROT that is a member or member organization
with no physical trading floor presence who has received permission
from the Exchange to generate and submit option quotations
electronically through AUTOM in eligible options to which such RSQT
has been assigned. An RSQT may only submit such quotations
electronically from off the floor of the Exchange. See Exchange Rule
1014(b)(ii)(B).
\10\ A non-SQT ROT is an ROT who is neither an SQT nor an RSQT.
See Exchange Rule 1014(b)(ii)(C).
---------------------------------------------------------------------------
Phlx XL currently does not decrement quotation size in real time.
Instead, a Phlx XL participant has control over his or her quotation
size and can refresh the size (and price) for which he or she is firm
at the disseminated price. Phlx XL participants have experienced
situations where they execute more contracts at a particular price than
they intended due to the fact that Phlx XL currently does not decrement
quote size in real time.
The following example illustrates the issue that the proposed
system change would solve:
A Phlx XL participant submits an electronic quotation (a bid) to
buy 100 contracts. Under the current system functionality, if a single
trade of 100 contracts to sell interacts with that bid for 100
contracts, all 100 contracts will be executed and the Phlx XL
participant's quotation will be exhausted and removed from the market
place until that Phlx XL participant refreshes his or her
quotation.\11\
---------------------------------------------------------------------------
\11\ See Exchange Rule 1082(a)(ii)(B)(1).
---------------------------------------------------------------------------
If, however, a single trade of 100 contracts to sell interacts with
that bid for anything less than its full size, the Phlx XL system
currently does not decrement the size of the bid, and the bid is still
firm for the full original size of 100 contracts. For example, a single
trade of 90 contracts occurs on the bid price, all 90 contracts would
be executed automatically, but the disseminated size of the quotation
will continue to be 100 contracts. Phlx XL participants have
experienced situations where a quotation could be for a size of 100
contracts and an execution occurs for 99 contracts, followed by an
additional execution of 100 contracts at the same price before the Phlx
XL participant can revise his or her quotation in the affected series,
for a total execution of 199 contracts when the quotation was only
intended to be for a size of 100 contracts at the disseminated price.
The Exchange believes that this aspect of the current system exposes
Phlx XL participants to undue risk respecting the size for which they
are firm at a particular price in a particular option series.
Accordingly, under the proposal, every trade executed automatically
in the Phlx XL system would cause the Exchange's disseminated size to
be reduced by the number of contracts traded in the affected series at
the disseminated price. Receipt of a revised quote from the affected
Phlx XL participant would reset the price and size for that series.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \12\ in general, and furthers the objectives of Section
6(b)(5) of the Act \13\ 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 providing Phlx XL participants with additional protection
from exposure to undue market risk through the real-time decrementation
of the Exchange's disseminated size.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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The Exchange further believes that the proposed rule change is
consistent with the Act because the risk protection afforded Phlx XL
participants should encourage them to quote options series with greater
size, adding liquidity to the Exchange's markets against which
customers can trade.
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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days after the date of the 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 \14\ and
Rule 19b-4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has requested that the Commission waive the 5-day pre-
filing notice requirement. The Commission has determined to waive
this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
[[Page 55192]]
Act \16\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the
Commission to 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. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission notes that under the proposal, the Exchange's
disseminated size should accurately reflect revised quotation sizes
based on automatic executions through Phlx XL in real time.
Accordingly, the Commission designates that the proposed rule change
become operative immediately.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
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 the 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 rule-comments@sec.gov. Please include
File Number SR-Phlx-2008-66 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-2008-66. 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 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-2008-66 and should be
submitted on or before October 15, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8-22378 Filed 9-23-08; 8:45 am]
BILLING CODE 8010-01-P
