Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Rule 1014, 51835-51837 [2012-20969]
Download as PDF
<![CDATA[
51835
Federal Register / Vol. 77, No. 166 / Monday, August 27, 2012 / Notices
ESTIMATE OF ANNUAL RESPONDENT BURDEN
[The estimated annual respondent burden is as follows]
Form No.
Annual
responses
Time
(minutes)
Burden
(hours)
GL–99 ..........................................................................................................................................
4,000
2
133
Additional Information or Comments:
To request more information or to
obtain a copy of the information
collection justification, forms, and/or
supporting material, contact Dana
Hickman at (312) 751–4981 or
Dana.Hickman@RRB.GOV. Comments
regarding the information collection
should be addressed to Charles
Mierzwa, Railroad Retirement Board,
844 North Rush Street, Chicago, Illinois
60611–2092 or emailed to
Charles.Mierzwa@RRB.GOV. Written
comments should be received within 60
days of this notice.
Charles Mierzwa,
Chief of Information Resources Management.
[FR Doc. 2012–20980 Filed 8–24–12; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67700; File No. SR–Phlx–
2012–108]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Regarding Rule
1014
August 21, 2012.
pmangrum on DSK3VPTVN1PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4) 2 thereunder,
notice is hereby given that on August
13, 2012, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. 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 is filing with the
Commission a proposal to amend Rule
1014 (Obligations and Restrictions
Applicable to Specialists and Registered
Options Traders) to indicate that
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Mar<15>2010
15:04 Aug 24, 2012
Jkt 226001
compliance with specified market
making obligations pursuant to the rule
will be determined on a monthly basis.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxphlx.cchwallstreet.com/
NASDAQOMXPHLX/Filings/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to amend Rule 1014 to
indicate that compliance with specified
market making obligations pursuant to
the rule will be determined on a
monthly basis.
Background
Market makers on the Exchange
include Registered Options Traders
(‘‘ROTs’’),3 Streaming Quote Traders
(‘‘SQTs’’),4 Remote Streaming Quote
3 An ROT is a regular member or a foreign
currency options participant of the Exchange
located on the trading floor who has received
permission from the Exchange to trade in options
for his own account. See Rule 1014 (b)(i).
4 An SQT is an ROT who has received permission
from the Exchange to generate and submit option
quotations electronically in options to which such
SQT is assigned. An SQT may only submit such
quotations while such SQT is physically present on
the floor of the Exchange. See Rule 1014(b)(ii)(A).
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
Traders (‘‘RSQTs’’),5 specialists,6 and
Remote Specialists.7 As set forth in Rule
1014, market makers have an obligation
to make two-sided markets in products
listed on the Exchange. This rule change
proposal does not negate any of the
general market making obligations
established in Rule 1014. These Rule
1014 market making obligations
continue in force. This proposal only
clarifies one discreet part of Rule 1014
to make it identical to the rules of other
options exchanges, as discussed below.
Market Making Obligations
Currently, Rule 1014 sets forth the
market making obligations of all market
makers. Sub-section (b)(ii)(D)(1) of Rule
1014 states that SQTs and RSQTs (when
they do not function as Remote
Specialists) shall be responsible to quote
two-sided markets in not less than 60%
of the series in which such SQTs or
RSQTs are assigned; provided that, on
any given day, a DRSQT or DSQT shall
be responsible to quote two-sided
markets in the lesser of 99% of the
series listed on the Exchange or 100%
of the series listed on the Exchange
minus one call-put pair. The sub-section
states also that whenever a DSQT or
DRSQT enters a quotation in an option
in which such DSQT or DRSQT is
assigned, such DSQT or DRSQT must
maintain until the close of that trading
day quotations for the lesser of 99% of
the series of the option listed on the
Exchange or 100% of the series of the
5 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 in options to which such RSQT has
been assigned. An RSQT may only submit such
quotations electronically from off the floor of the
Exchange. See Rule 1014(b)(ii)(B).
Rule 1014 also discusses other market makers
including Directed SQTs and Directed RSQTs,
which receive Directed Orders as defined in Rule
1080(l)(i)(A). Specialists may likewise receive
Directed Orders.
6 A member may not act as an options specialist
(to include a Remote Specialist as defined in Rule
1020(a)(ii)) in any option unless such member is
registered as an options specialist in such option by
the Exchange pursuant to Rule 501 and such
registration may be revoked or suspended at any
time by the Exchange. See Rule 1020(a)(i).
7 A Remote Specialist is an options specialist in
one or more classes that does not have a physical
presence on an Exchange floor and is approved by
the Exchange pursuant to Rule 501. See Rule
1020(a)(ii).
E:\FR\FM\27AUN1.SGM
27AUN1
51836
Federal Register / Vol. 77, No. 166 / Monday, August 27, 2012 / Notices
option listed on the Exchange minus
one call-put pair. Subsection (b)(ii)(D)(2)
of Rule 1014 states that a specialist
(including the RSQT functioning as a
Remote Specialist in particular options)
shall be responsible to quote two-sided
markets in the lesser of 99% of the
series or 100% of the series minus one
call-put pair in each option in which
such specialist is assigned. To satisfy
the requirement of subsection
(b)(ii)(D)(2) with respect to quoting a
series, the specialist must quote such
series 90% of the trading day (as a
percentage of the total number of
minutes in such trading day) or such
higher percentage as the Exchange may
announce in advance.8
3. Determining Compliance on a
Monthly Basis
Rule 1014 does not currently indicate
the timeframe within which the
Exchange can review whether a member
has met the quoting obligations in subsection (b)(ii)(D).9 In contrast, NYSE
Arca establishes a time period of a
month to determine whether a market
maker or lead market maker has met his
quoting obligation, stating that
compliance with the two-sided quoting
obligation will be determined on a
monthly basis.10 The Exchange now
proposes to insert a similar monthly
time frame into its quoting rules.
pmangrum on DSK3VPTVN1PROD with NOTICES
8 For
all market making obligations, see Rule
1014(b)(ii)(D).
9 Sub-section (b)(ii)(D) currently states, in
relevant part: ‘‘In addition to the other requirements
for ROTs set forth in this Rule 1014, except as
provided in sub-paragraph (4) below, and except as
provided in subparagraph (2) below when an RSQT
functions as a Remote Specialist in particular
options, an SQT and an RSQT shall be responsible
to quote two-sided markets in not less than 60% of
the series in which such SQT or RSQT is assigned,
provided that, on any given day, a Directed SQT
(‘‘DSQT’’) or a Directed RSQT (‘‘DRSQT’’) (as
defined in Rule 1080(l)(i)(C)) shall be responsible to
quote two-sided markets in the lesser of 99% of the
series listed on the Exchange or 100% of the series
listed on the Exchange minus one call-put pair, in
each case in at least 60% of the options in which
such DSQT or DRSQT is assigned. Whenever a
DSQT or DRSQT enters a quotation in an option in
which such DSQT or DRSQT is assigned, such
DSQT or DRSQT must maintain until the close of
that trading day quotations for the lesser of 99% of
the series of the option listed on the Exchange or
100% of the series of the option listed on the
Exchange minus one call-put pair. To satisfy the
applicable requirements of this subparagraph (D)(1)
with respect to quoting a series, an SQT, RSQT,
DSQT, or DRSQT must quote such series 90% of the
trading day (as a percentage of the total number of
minutes in such trading day) or such higher
percentage as the Exchange may announce in
advance. The Exchange may consider exceptions to
the requirement to quote 90% (or higher) of the
trading day based on demonstrated legal or
regulatory requirements or other mitigating
circumstances.’’
10 See NYSE Arca Rule 6.37B. See also NYSE
MKT (NYSE Amex) Rule 925.1NY (establishing a
time period of a month to determine compliance).
VerDate Mar<15>2010
15:04 Aug 24, 2012
Jkt 226001
Specifically, the Exchange proposes to
state in sub-sections (b)(ii)(D)(1) and
(b)(ii)(D)(2) of Rule 1014 that
compliance with the quoting obligation
will be determined on a monthly basis.
The proposed language is exactly the
same language used by another options
exchange, NYSE Arca.11 The proposed
change puts the Exchange and its
members on an equal footing with other
options markets in terms of compliance
with the noted quoting obligations.
The proposal ensures that compliance
standards for two-sided quoting will be
the same on the Exchange as on other
options exchanges. The proposal does
not, however, change the quoting
requirements set forth in Rule 1014 or
the Exchange’s regulatory oversight
(monitoring) of the requirements. To the
contrary, subsequent to the approval of
this proposal, the quoting requirements
will remain and the Exchange will
continue to monitor (surveil) market
maker quoting behavior on a daily basis
with an eye toward whether market
makers meet Rule 1014 quoting
requirements.12
While quoting will continue to be
monitored daily, the Exchange believes
that it is appropriate, fair and generally
more efficient for the Exchange and
market participants to evaluate
compliance on a monthly rather than
daily basis. Thus, a market maker that
may have quoted less on a single day of
a month may meet his overall Rule 1014
quoting obligations, and still be
compliant with the Rule, by posting
substantially more two-sided quotes on
the other days of the month. The
Exchange believes that the proposal will
not diminish, and in fact may increase,
market making activity on the Exchange,
by establishing a quoting compliance
standard that is reasonable and is
already in use on other options
exchanges.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 13 in general, and furthers the
11 Id.
12 On
the basis of the daily monitoring activity,
the Exchange will continue to have the ability to
let market makers know if they are failing to
achieve their quoting requirements. Moreover, on
the basis of the daily monitoring activity, the
Exchange can determine whether market makers
violated any other Exchange rules such as, for
example, Rule 707 regarding just and equitable
principles of trade. Such daily monitoring will
allow the Exchange to investigate unusual activity
and to take appropriate regulatory action (e.g.,
consideration of a Rule 707 violation proceeding
based on market maker stoppage of quoting and
total withdrawal from the market during market
disturbances).
13 15 U.S.C. 78f(b).
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
objectives of Section 6(b)(5) of the Act 14
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. The
Exchange would do this though a
proposed rule change indicating that
compliance with market making quoting
obligations will be determined on a
monthly basis. The specified one month
review period clarifies how compliance
will be monitored, which should
enhance compliance efforts by market
makers and the Exchange and is
consistent with requirements currently
in place on other exchanges.
The proposal ensures that compliance
standards for two-sided quoting will be
the same on the Exchange as on other
options exchanges. The Exchange
believes that the proposal will not
diminish, and in fact may increase,
market making activity on the Exchange,
by establishing a quoting compliance
standard that is reasonable and is
already in use on other options
exchanges, while continuing to monitor
quoting activity on a daily basis.
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. To the
contrary, the Exchange believes the
proposal is pro-competitive. The
proposal would enable the Exchange to
provide members with rules that are
similar to those of other options
exchanges, and to add clarity to its
rules. This should promote trading and
hedging activity on the Exchange to the
benefit of the Exchange, its members,
and market participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange believes that the
foregoing proposed rule change may
take effect upon filing with the
Commission pursuant to Section
19(b)(3)(A) 15 of the Act and Rule 19b–
14 15
15 15
E:\FR\FM\27AUN1.SGM
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(3)(A).
27AUN1
Federal Register / Vol. 77, No. 166 / Monday, August 27, 2012 / Notices
4(f)(6)(iii) thereunder 16 because the
foregoing 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 from the date on
which it was filed, or such shorter time
as the Commission may designate.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
pmangrum on DSK3VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–Phlx–2012–108 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–Phlx–2012–108. This file
number should be included on the
subject line if email 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
16 17
CFR 240.19b–4(f)(6)(iii).
VerDate Mar<15>2010
15:04 Aug 24, 2012
Jkt 226001
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing 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 offices 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–2012–108 and should
be submitted on or before September 17,
2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–20969 Filed 8–24–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67702; File No. SR–
NYSEMKT–2012–43]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the NYSE
Amex Options LLC Limited Liability
Company Agreement To Eliminate
Certain Restrictions Relating to the
Qualification of Founding Firm
Advisory Committee Members
August 21, 2012.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on August
17, 2012, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
17 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
51837
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Amex Options LLC (‘‘NYSE
Amex Options’’) Limited Liability
Company Agreement (‘‘LLC
Agreement’’) to eliminate certain
restrictions relating to the qualification
of Founding Firm Advisory Committee
Members. The text of the proposed rule
change is available on the Exchange’s
Web site at www.nyse.com, at the
principal office of the Exchange, on the
Commission’s Web site at www.sec.gov,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
LLC Agreement to eliminate certain
restrictions relating to the qualification
of Founding Firm 4 Advisory Committee
(‘‘Advisory Committee’’) Members. The
LLC Agreement is the source of NYSE
Amex Options’ governance and
operating authority and, therefore,
functions in a similar manner as articles
of incorporation and by-laws function
4 Founding Firm means each of the Initial
Members (NYSE MKT, Goldman, Sachs & Co.,
Citadel Securities LLC, Banc of America Strategic
Investments Corporation, Citigroup Financial
Strategies, Inc., Datek Online Management Corp.,
UBS Americas Inc., and Barclays Electronic
Commerce Holdings Inc.) other than NYSE MKT
and any permitted transferee(s) of such Initial
Member, (ii) any required transferee deemed to be
a Founding Firm by the Board of NYSE Amex
Options, and (iii) any other Member (a person who
is a signatory to the LLC Agreement, other than
NYSE Euronext, or who has been admitted to NYSE
Amex Options as a Member in accordance with the
LLC Agreement and has not ceased to be a Member
in accordance with the LLC Agreement or for any
other reason), other than NYSE MKT, deemed to be
a Founding Firm by the Board of NYSE Amex
Options. See LLC Agreement, Section 1.1.
E:\FR\FM\27AUN1.SGM
27AUN1
]]>Agencies
[Federal Register Volume 77, Number 166 (Monday, August 27, 2012)]
[Notices]
[Pages 51835-51837]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20969]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67700; File No. SR-Phlx-2012-108]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
Rule 1014
August 21, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4) \2\ thereunder, notice is hereby given
that on August 13, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposal to amend Rule
1014 (Obligations and Restrictions Applicable to Specialists and
Registered Options Traders) to indicate that compliance with specified
market making obligations pursuant to the rule will be determined on a
monthly basis.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to amend Rule 1014 to
indicate that compliance with specified market making obligations
pursuant to the rule will be determined on a monthly basis.
Background
Market makers on the Exchange include Registered Options Traders
(``ROTs''),\3\ Streaming Quote Traders (``SQTs''),\4\ Remote Streaming
Quote Traders (``RSQTs''),\5\ specialists,\6\ and Remote
Specialists.\7\ As set forth in Rule 1014, market makers have an
obligation to make two-sided markets in products listed on the
Exchange. This rule change proposal does not negate any of the general
market making obligations established in Rule 1014. These Rule 1014
market making obligations continue in force. This proposal only
clarifies one discreet part of Rule 1014 to make it identical to the
rules of other options exchanges, as discussed below.
---------------------------------------------------------------------------
\3\ An ROT is a regular member or a foreign currency options
participant of the Exchange located on the trading floor who has
received permission from the Exchange to trade in options for his
own account. See Rule 1014 (b)(i).
\4\ An SQT is an ROT who has received permission from the
Exchange to generate and submit option quotations electronically in
options to which such SQT is assigned. An SQT may only submit such
quotations while such SQT is physically present on the floor of the
Exchange. See Rule 1014(b)(ii)(A).
\5\ 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 in options to which such RSQT has been assigned. An
RSQT may only submit such quotations electronically from off the
floor of the Exchange. See Rule 1014(b)(ii)(B).
Rule 1014 also discusses other market makers including Directed
SQTs and Directed RSQTs, which receive Directed Orders as defined in
Rule 1080(l)(i)(A). Specialists may likewise receive Directed
Orders.
\6\ A member may not act as an options specialist (to include a
Remote Specialist as defined in Rule 1020(a)(ii)) in any option
unless such member is registered as an options specialist in such
option by the Exchange pursuant to Rule 501 and such registration
may be revoked or suspended at any time by the Exchange. See Rule
1020(a)(i).
\7\ A Remote Specialist is an options specialist in one or more
classes that does not have a physical presence on an Exchange floor
and is approved by the Exchange pursuant to Rule 501. See Rule
1020(a)(ii).
---------------------------------------------------------------------------
Market Making Obligations
Currently, Rule 1014 sets forth the market making obligations of
all market makers. Sub-section (b)(ii)(D)(1) of Rule 1014 states that
SQTs and RSQTs (when they do not function as Remote Specialists) shall
be responsible to quote two-sided markets in not less than 60% of the
series in which such SQTs or RSQTs are assigned; provided that, on any
given day, a DRSQT or DSQT shall be responsible to quote two-sided
markets in the lesser of 99% of the series listed on the Exchange or
100% of the series listed on the Exchange minus one call-put pair. The
sub-section states also that whenever a DSQT or DRSQT enters a
quotation in an option in which such DSQT or DRSQT is assigned, such
DSQT or DRSQT must maintain until the close of that trading day
quotations for the lesser of 99% of the series of the option listed on
the Exchange or 100% of the series of the
[[Page 51836]]
option listed on the Exchange minus one call-put pair. Subsection
(b)(ii)(D)(2) of Rule 1014 states that a specialist (including the RSQT
functioning as a Remote Specialist in particular options) shall be
responsible to quote two-sided markets in the lesser of 99% of the
series or 100% of the series minus one call-put pair in each option in
which such specialist is assigned. To satisfy the requirement of
subsection (b)(ii)(D)(2) with respect to quoting a series, the
specialist must quote such series 90% of the trading day (as a
percentage of the total number of minutes in such trading day) or such
higher percentage as the Exchange may announce in advance.\8\
---------------------------------------------------------------------------
\8\ For all market making obligations, see Rule 1014(b)(ii)(D).
---------------------------------------------------------------------------
3. Determining Compliance on a Monthly Basis
Rule 1014 does not currently indicate the timeframe within which
the Exchange can review whether a member has met the quoting
obligations in sub-section (b)(ii)(D).\9\ In contrast, NYSE Arca
establishes a time period of a month to determine whether a market
maker or lead market maker has met his quoting obligation, stating that
compliance with the two-sided quoting obligation will be determined on
a monthly basis.\10\ The Exchange now proposes to insert a similar
monthly time frame into its quoting rules.
---------------------------------------------------------------------------
\9\ Sub-section (b)(ii)(D) currently states, in relevant part:
``In addition to the other requirements for ROTs set forth in this
Rule 1014, except as provided in sub-paragraph (4) below, and except
as provided in subparagraph (2) below when an RSQT functions as a
Remote Specialist in particular options, an SQT and an RSQT shall be
responsible to quote two-sided markets in not less than 60% of the
series in which such SQT or RSQT is assigned, provided that, on any
given day, a Directed SQT (``DSQT'') or a Directed RSQT (``DRSQT'')
(as defined in Rule 1080(l)(i)(C)) shall be responsible to quote
two-sided markets in the lesser of 99% of the series listed on the
Exchange or 100% of the series listed on the Exchange minus one
call-put pair, in each case in at least 60% of the options in which
such DSQT or DRSQT is assigned. Whenever a DSQT or DRSQT enters a
quotation in an option in which such DSQT or DRSQT is assigned, such
DSQT or DRSQT must maintain until the close of that trading day
quotations for the lesser of 99% of the series of the option listed
on the Exchange or 100% of the series of the option listed on the
Exchange minus one call-put pair. To satisfy the applicable
requirements of this subparagraph (D)(1) with respect to quoting a
series, an SQT, RSQT, DSQT, or DRSQT must quote such series 90% of
the trading day (as a percentage of the total number of minutes in
such trading day) or such higher percentage as the Exchange may
announce in advance. The Exchange may consider exceptions to the
requirement to quote 90% (or higher) of the trading day based on
demonstrated legal or regulatory requirements or other mitigating
circumstances.''
\10\ See NYSE Arca Rule 6.37B. See also NYSE MKT (NYSE Amex)
Rule 925.1NY (establishing a time period of a month to determine
compliance).
---------------------------------------------------------------------------
Specifically, the Exchange proposes to state in sub-sections
(b)(ii)(D)(1) and (b)(ii)(D)(2) of Rule 1014 that compliance with the
quoting obligation will be determined on a monthly basis. The proposed
language is exactly the same language used by another options exchange,
NYSE Arca.\11\ The proposed change puts the Exchange and its members on
an equal footing with other options markets in terms of compliance with
the noted quoting obligations.
---------------------------------------------------------------------------
\11\ Id.
---------------------------------------------------------------------------
The proposal ensures that compliance standards for two-sided
quoting will be the same on the Exchange as on other options exchanges.
The proposal does not, however, change the quoting requirements set
forth in Rule 1014 or the Exchange's regulatory oversight (monitoring)
of the requirements. To the contrary, subsequent to the approval of
this proposal, the quoting requirements will remain and the Exchange
will continue to monitor (surveil) market maker quoting behavior on a
daily basis with an eye toward whether market makers meet Rule 1014
quoting requirements.\12\
---------------------------------------------------------------------------
\12\ On the basis of the daily monitoring activity, the Exchange
will continue to have the ability to let market makers know if they
are failing to achieve their quoting requirements. Moreover, on the
basis of the daily monitoring activity, the Exchange can determine
whether market makers violated any other Exchange rules such as, for
example, Rule 707 regarding just and equitable principles of trade.
Such daily monitoring will allow the Exchange to investigate unusual
activity and to take appropriate regulatory action (e.g.,
consideration of a Rule 707 violation proceeding based on market
maker stoppage of quoting and total withdrawal from the market
during market disturbances).
---------------------------------------------------------------------------
While quoting will continue to be monitored daily, the Exchange
believes that it is appropriate, fair and generally more efficient for
the Exchange and market participants to evaluate compliance on a
monthly rather than daily basis. Thus, a market maker that may have
quoted less on a single day of a month may meet his overall Rule 1014
quoting obligations, and still be compliant with the Rule, by posting
substantially more two-sided quotes on the other days of the month. The
Exchange believes that the proposal will not diminish, and in fact may
increase, market making activity on the Exchange, by establishing a
quoting compliance standard that is reasonable and is already in use on
other options exchanges.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \13\ in general, and furthers the objectives of Section
6(b)(5) of the Act \14\ 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. The Exchange would do this though a proposed rule change
indicating that compliance with market making quoting obligations will
be determined on a monthly basis. The specified one month review period
clarifies how compliance will be monitored, which should enhance
compliance efforts by market makers and the Exchange and is consistent
with requirements currently in place on other exchanges.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposal ensures that compliance standards for two-sided
quoting will be the same on the Exchange as on other options exchanges.
The Exchange believes that the proposal will not diminish, and in fact
may increase, market making activity on the Exchange, by establishing a
quoting compliance standard that is reasonable and is already in use on
other options exchanges, while continuing to monitor quoting activity
on a daily basis.
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. To the contrary, the Exchange
believes the proposal is pro-competitive. The proposal would enable the
Exchange to provide members with rules that are similar to those of
other options exchanges, and to add clarity to its rules. This should
promote trading and hedging activity on the Exchange to the benefit of
the Exchange, its members, and market participants.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange believes that the foregoing proposed rule change may
take effect upon filing with the Commission pursuant to Section
19(b)(3)(A) \15\ of the Act and Rule 19b-
[[Page 51837]]
4(f)(6)(iii) thereunder \16\ because the foregoing 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 from the date on which it was filed,
or such shorter time as the Commission may designate.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2012-108 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2012-108. This file
number should be included on the subject line if email 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 Web site viewing and
printing 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 offices 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-2012-108 and
should be submitted on or before September 17, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20969 Filed 8-24-12; 8:45 am]
BILLING CODE 8011-01-P
