Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Notices 70331 

6 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release Nos. 58179 

(July 17, 2008), 73 FR 42874 (July 23, 2008) (SR– 

Phlx–2008–31); and 58183 (July 17, 2008), 73 FR 

42850 (July 23, 2008) (SR–NASDAQ–2008–035). 

See also Securities Exchange Act Release No. 62783 

(August 27, 2010), 75 FR 54204 (September 3, 2010) 

(SR–Phlx–2010–104). 

4See Securities Exchange Act Release No. 59924 

(May 14, 2009), 74 FR 23759 (May 20, 2009) (SR– 

Phlx–2009–23) (approval order.) See also Rule 500. 

5A specialist unit may have one or more 

individual specialists. See proposed Supplementary 

Material .05 to Rule 511. 

6An SQT is a Registered Options Trader (‘‘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). 

7An 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). 

8Streaming Quote Traders also include Directed 

SQTs (‘‘DSQTs’’) and Directed RSQTs (‘‘DRSQTs’’), 

which are SQTs and RSQTs that receive a Directed 

Order. Exchange Rule 1080(l)(i)(A) defines Directed 

Order. 

9See, for example, Supplementary Material .01 to 

Rule 506 (specialist may not apply for a new 

allocation for a period of six months after an option 

allocation was taken away from the specialist in a 

disciplinary proceeding or an involuntary 

reallocation proceeding). See also Commentary .02 

to Rule 507 (establishing the Maximum Number of 

Quoters in assigned equity options). 

Number SR–MSRB–2010–13 and should 

be submitted on or before December 8, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–28982 Filed 11–16–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63305; File No. SR–Phlx– 

2010–153] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change To 

Update and Streamline the Process for 

Specialist Evaluations and Clarify the 

Time Within Which SQTs and RSQTs 

Begin To Electronically Quote After 

Assignment 

November 10, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on November 5, 2010, NASDAQ OMX 

PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been 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 Phlx 

By-Law Article XI (Appeals) Section 11– 

1; Phlx Rules 507 (Application for 

Approval as an SQT or RSQT and 

Assignment in Options), 508 (Allocation 

Application), 510 (SQT and RSQT 

Performance Evaluation), 511 (Specialist 

Performance Evaluation), and 515 

(Specialist Evaluations); and Phlx 

Options Floor Procedure Advice 

(‘‘OFPA’’) C–8 (Options Specialist 

Evaluations) to update the specialist 

evaluation process; ensure timely 

electronic quotations by Streaming 

Quote Traders and Remote Streaming 

Quote Traders; ensure the ability of the 

Exchange to control allocation transfers; 

and consolidate and delete unnecessary 

and obsolete rules and processes. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com, 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 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend By-Law Article XI 

Section 11–1; Phlx Rules 507, 508, 510, 

511, and 515; and OFPA C–8 to enhance 

the ability to gauge specialist 

performance in an ever-increasingly 

competitive electronic trading 

environment; ensure timely electronic 

quotations by Streaming Quote Traders 

and Remote Streaming Quote Traders; 

ensure the ability of the Exchange to 

control allocation transfers; and 

consolidate and delete unnecessary and 

obsolete rules and processes. 

Background 

After the merger of The NASDAQ 

OMX Group, Inc. (‘‘NASDAQ OMX’’) 

and the Philadelphia Stock Exchange, 

Inc. (now NASDAQ OMX PHLX LLC),3

the Commission in May 2009 approved 

a Phlx filing that, among other things, 

transferred all relevant duties from the 

Options Allocation, Evaluation and 

Securities Committee (‘‘Allocation 

Committee’’) to the Exchange staff and 

established that the Exchange 

administers Exchange Rules 500 

through 599 (the ‘‘Allocation and 

Assignment Rules’’).4

The Allocation and Assignment Rules 

generally describe the process for: 

Application for becoming and 

appointment of specialists; allocation of 

classes of options to specialist units and 

individual specialists; 5 application for 

becoming and approval of Streaming 

Quote Traders (‘‘SQTs’’) 6 and Remote 

Streaming Quote Traders (‘‘RQTs’’) 7

(together the ‘‘Streaming Quote 

Traders’’) 8 and assignment of options to 

them; and performance evaluations for 

specialist units and Streaming Quote 

Traders. The Allocation and Assignment 

Rules also indicate, among other things, 

under what circumstances new 

specialist allocations and Streaming 

Quote Trader assignments may not be 

made.9

Specialist Evaluations 

Rule 511 and Rule 515 deal with 

specialist evaluations and certain 

allocation procedures. Currently, Rule 

511 indicates, among other things, that 

specialist performance evaluations 

standards and procedures may be used 

in respect of Exchange decisions 

regarding allocating new options 

classes; reallocating options classes for 

substandard performance; determining 

whether a specialist that has been 

transferred an options class is 

performing adequately; and determining 

whether a staff reorganization or 

material change with respect to a 

specialist unit has affected the ability of 

the unit to continue to perform 

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70332 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Notices 

10Proposed Supplementary Material .05 to Rule 

511 states that reference to specialist unit within 

Rule 511 means the unit as a whole or any subpart 

of its operation that is acting in a specialist capacity 

on the Exchange and is subject to evaluation; and 

that a specialist unit may have one or more 

individual specialists. As such, individual 

specialist actions may be attributable to relevant 

specialist units in respect of matters discussed in 

this proposal such as evaluations. The proposed 

language in Rule 511 was moved from Rule 515 and 

updated to reflect current usage. 

11See proposed Rule 511(c). 

12See proposed Rule 511(d). 

13See proposed Rule 511(e). 

14 In proposed Rule 511(d) and Rule 511(e), a 

specialist has the right to request an appeal on 

behalf of his specialist unit. 

15By-Law Article XI Section 11–1(c) states that an 

appeal: shall be heard by a special committee of the 

Board of Governors composed of three (3) 

Governors, of whom at least one (1) shall be an 

Independent Governor. The person requesting 

review may appeal by filing a written notice thereof 

with the Secretary of the Exchange within ten (10) 

days after a decision. The person requesting review 

shall be permitted to submit a written statement to 

and/or appear before this special committee. The 

Secretary of the Exchange shall certify the record 

of the proceeding, if any and the written decision 

and shall submit these documents to the special 

committee. The special committee’s review of the 

action shall be based solely on the record, the 

written decision and any statement submitted by 

the person requesting the review. The special 

committee shall prepare and deliver to such person 

a written decision and reasons therefor. If the 

special committee affirms the action, the action 

shall become effective ten (10) days from the date 

of the special committee’s decision. There shall be 

no appeal to the Board of Governors from any 

decision of the special committee. 

The Exchange is correcting a reference in By-Law 

Article XI Section 11–1(c) from Rule 511(e) to Rule 

511(d) or (e), in light of the internal numbering 

changes proposed in Rule 511; and crossreferencing Rule 507, which notes the availability 

of the appeal process. 

16For consistency, the Exchange proposes appeal 

language in Rules 510 and 511 that is similar, in 

relevant part, to that of Rule 507: An appeal to the 

Board of Governors from a decision of the Exchange 

* * * may be requested * * * by filing with the 

Secretary of the Exchange written notice of appeal 

within ten (10) days after the decision has been 

rendered, in accordance with Exchange By-Law 

Article XI, Section 11–1. 

17See Securities Exchange Act Release No. 55080 

(January 10, 2007), 72 FR 2324 (January 18, 2007) 

(SR–Phlx–2006–51) (order approving performance 

standards for Streaming Quote Traders and Remote 

Streaming Traders). 

18Recognizing that among market participants on 

the Exchange specialists have diverse and at times 

greater market making responsibilities, which are 

not diminished by this filing, Specialist 

Performance Evaluations are available to the 

Exchange to review specialist performance and 

behavior (as discussed in more detail below). 

19 In that the Exchange is specifically establishing 

a measure of specialist performance on Phlx, the 

Exchange is changing the requirement to PBBO 

from NBBO (National Best Bid or Offer). A reference 

in Commentary .01 of Rule 510 is similarly changed 

to PBBO for the sake of conformity. 

20This rule change proposal makes no changes to 

current quoting requirements for specialists 

delineated in Rule 1014. Rule 1014 is written in 

terms of specialists; as noted in proposed 

Supplementary Material .05 to Rule 511, a specialist 

unit may have one or more specialists. See supra 

note 10. 

adequately in order to retain allocated 

securities. Rule 511 also discusses the 

process and timing for doing routine 

and special (cause) evaluations and 

reviews. Currently, Rule 515 similarly 

discusses specialist performance 

evaluations for options specialists and 

indicates, among other things, the 

timing and frequency of evaluations. 

The criterion to evaluate specialists may 

include, but is not limited to, quality of 

markets, observance of ethical 

standards, administrative 

responsibilities, and trade correction 

and exemptive relief data. Rule 515, like 

OFPA C–8, also discusses the use of 

floor broker questionnaires in the 

specialist evaluation process. 

The Exchange proposes to eliminate 

the floor broker questionnaire 

(‘‘questionnaire’’), which asks floor 

brokers their opinions of specialist 

performance and presumes that a 

specialist unit performed below 

minimum standards if the specialist 

unit was rated in the bottom 10% of all 

units in the aggregate results for all 

questionnaires. The Exchange has found 

that such questionnaires, being wholly 

subjective in nature and not based on 

any hard data, would generally provide 

limited, if any, substantial value in the 

current fast-paced, competitive trading 

environment that includes numerous 

market participants and liquidity 

providers. The Exchange believes that 

the various types of specialist 

performance evaluations that are 

discussed in this filing enhance the 

evaluation process and make it 

increasingly data-based, and make 

questionnaires unnecessary. As such, 

the Exchange is deleting OFPA C–8 and 

all references to floor broker 

questionnaires in its Allocation and 

Assignment Rules and OFPAs. 

The Exchange proposes to consolidate 

Rules 511 and 515 into Rule 511 and to 

adopt for specialist units 10 an objective 

review process that is similar to the 

process currently in use for Streaming 

Quote Traders per Rule 510, particularly 

in respect of minimum performance 

standards. The Exchange also proposes 

to relocate portions of the existing 

evaluation process from Rule 515 into 

Rule 511. As such, there would be two 

types of specialist evaluations or 

reviews per Rule 511: a) routine 

Specialist Performance Evaluations, 

which would be conducted on at least 

an annual basis,11 and would include 

monthly Minimum Performance 

Reviews; 12 and b) Special Circumstance 

Evaluations, which may be conducted if 

a specialist unit’s performance was so 

egregiously deficient as to call into 

question the Exchange’s integrity or 

impair the Exchange’s reputation for 

maintaining efficient, fair and orderly 

markets; and within six months after a 

new allocation and within four months 

after transfer of one or more options.13

The Exchange proposes changes to 

Rule 511 so that specialist suspension, 

termination, or restriction of allocations 

in one or more options may occur after 

two or more consecutive sub-standard 

Minimum Performance Reviews or after 

Special Circumstance Evaluations and 

after written notice. As discussed below, 

following substandard minimum 

performance, a specialist unit may have 

an opportunity for an informal meeting 

with Exchange staff; and following a 

Special Circumstance Evaluation may 

be afforded thirty days to improve 

performance. Moroever, after a 

Minimum Performance Review or a 

Special Circumstance Evaluation, a 

specialist or specialist unit 14 may 

appeal from a decision of the Exchange 

in accordance with Exchange By-Law 

Article XI, Section 11–1, after filing a 

written notice of appeal with the 

Exchange.15 The Exchange believes that 

this appeal process for specialists or 

specialist units per Rule 511, which is 

similar to the process afforded to 

Streaming Quote Traders per Rules 507 

and 510, is fair and equitable and 

promotes uniformity for the various 

market participant members of the 

Exchange.16 The Exchange is, for similar 

reasons of uniformity, establishing new 

minimum performance standards for 

specialist units. 

The minimum performance standards 

for specialist units in proposed Rule 

511(d), which are part of the Specialist 

Performance Evaluation process, are 

similar to the minimum performance 

standards for Streaming Quote Traders 

in Rule 510 Commentary .01.17 This is 

done to promote a minimum 

performance floor across the Exchange 

for specialist units and Streaming Quote 

Traders.18 Thus, proposed Rule 511(d) 

suggests the minimum acceptable 

performance for specialist units using 

the following criteria: (a) The percentage 

of time that the specialist unit 

represents or exceeds the Phlx Best Bid 

or Offer (‘‘PBBO’’) in the options 

allocated to the unit; 19 and (b) quoting 

requirements of specialist units 

pursuant to Rule 1014.20 Specifically, if 

the percentage of the total time that the 

options allocated to a specialist unit 

represent or exceed the PBBO is in the 

lowest quartile of all specialist units for 

two or more consecutive months, this 

may be considered sub-standard 

performance, that is, performance that 

does not attain minimum performance 

standards; and if a specialist unit fails 

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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Notices 70333 

21See supra note 15. The Minimum Performance 

Standards; remedial action by the Exchange if there 

is a failure to attain such performance standards; 

and appeal rights therefrom are substantially 

similar for specialist units and SQTs/RSQTs per 

Rules 511 and 510, respectively. 

22For purposes of conformity with the proposed 

six month period, 90 days is changed to 180 days 

(six months) in Rule 511(b). 

23While Special Circumstance Evaluations are 

optional during the noted four month and six 

month periods, the Exchange may also conduct 

independent Minimum Performance Reviews on a 

monthly basis. 

24See supra note 15. 

25 In an effort to streamline the specialist 

evaluation process, and in light of the noted 

Continued 

to meet the quoting requirements as 

prescribed by Rule 1014, this may be 

considered sub-standard performance. 

The Exchange proposes a process that 

would allow specialist to meet with 

Exchange staff regarding their substandard performance. 

The Exchange proposes in Rule 

511(d)(ii) that if the Exchange finds that 

a specialist unit failed to meet 

Minimum Performance Standards, it 

will provide written notice to the unit. 

The Exchange proposes in Rule 

511(d)(iii) that the specialist unit may 

request and the Exchange may hold an 

informal meeting with the head 

specialist and any other appropriate 

specialist of the specialist unit to 

discuss the failure to meet minimum 

standards and to explore possible 

remedies. The Exchange will give notice 

of the meeting and no verbatim record 

will be kept. If, after receiving such 

notice for the Exchange, the specialist 

unit refuses or otherwise fails without 

reasonable justification to meet with the 

Exchange, the Exchange may refer the 

matter to the Business Conduct 

Committee (a standing committee of the 

Exchange) for the commencement of 

formal disciplinary proceedings. If the 

Exchange believes there are no 

mitigating circumstances that would 

demonstrate substantial improvement of 

or reasonable justification for the failure 

to meet minimum standards, the 

Exchange may take remedial action 

pursuant to subparagraph (d)(ii). 

The Exchange proposes in Rule 

511(d)(ii) that if it finds sub-standard 

minimum performance by a specialist 

unit, the Exchange may take the 

following remedial actions: a) restriction 

of allocations in additional options 

(subsection (d)(ii)(A)); b) suspension, 

termination, or restriction of allocations 

in one or more options (subsection 

(d)(ii)(B)); or c) suspension, termination, 

or restriction of the specialist or 

specialist unit’s registration in general 

(subsection (d)(ii)(C)). Specialist units or 

specialists therein may appeal to the 

Board of Governors from a decision of 

the Exchange pursuant to subsection 

(d)(ii)(B) or subsection (d)(ii)(C) by filing 

the requisite notice of appeal.21

Minimum Performance Reviews will be 

conducted at least annually but may be 

conducted at monthly intervals. 

Routine Specialist Performance 

Evaluations pursuant to proposed Rule 

511(c) are conducted at annual (or 

shorter) intervals to determine whether 

specialists have fulfilled performance 

standards that may include, but are not 

limited to, trade correction data, 

exemptive relief data, quality of markets 

data, proper execution of duties as a 

specialist unit, competition among 

market makers and in representing the 

Exchange as specialist unit, observance 

of ethical standards, and administrative 

factors. The Exchange may also 

consider, when doing these routine 

evaluations, any other relevant 

information including, but not limited 

to, trading data, regulatory history, the 

number of requests for quote spread 

parameter relief, how a specialist unit 

optimizes the submission of quotes 

through the Specialized Quote Feed as 

defined in Rule 1080 by evaluating the 

number of individual quotes per quote 

block received by the Exchange, and 

such other factors and data as may be 

pertinent in the circumstances. 

The Exchange may also, but is not 

required to, conduct Special 

Circumstance Evaluations pursuant to 

proposed Rule 511(e) whenever the 

Exchange feels that circumstances 

warrant such reviews. These include, 

but are not limited to, where the 

Exchange believes that a specialist 

unit’s performance in a particular 

market situation was so egregiously 

deficient as to call into question the 

Exchange’s integrity or impair the 

Exchange’s reputation for maintaining 

efficient, fair and orderly markets. 

Special Circumstance Evaluations may 

incorporate the same review 

methodology and procedures as 

established for routine Specialist 

Performance Evaluations or Minimum 

Performance Reviews. However, Special 

Circumstance Evaluations may instead 

or in addition examine such other 

matters related to a specialist unit’s 

performance as the Exchange deems 

necessary and appropriate. Special 

Circumstance Evaluations may be done 

within six months of new allocations 22

and within four months of transfers of 

allocations to specialist units.23

The Exchange may determine, 

pursuant to a Rule 511 Special 

Circumstance Evaluation, that a 

specialist unit that received a new 

allocation has not complied with any of 

the commitments that it made when 

applying for the options class, including 

but not limited to commitments 

regarding capital, personnel and order 

flow (subsection (e)(i)(A)); or that the 

performance of a specialist unit was 

inadequate after the transfer of one or 

more options classes or when there has 

been a material change in the specialist 

unit (subsection (e)(i)(B)). After the 

Exchange indicates to the applicable 

specialist unit why its performance is 

inadequate, the specialist unit will be 

afforded thirty days in which to 

improve its performance. If the 

specialist unit does not improve its 

performance, the Exchange may, after 

written notice, remove and reallocate 

one or more securities that were 

allocated to such unit. Specialists units 

and specialists therein may appeal to 

the Board of Governors from a decision 

of the Exchange pursuant to proposed 

subsection (e)(ii) by filing the requisite 

notice of appeal.24

Additionally, the rules establish 

limits on the allocation of options to 

specialist units that fail to perform 

adequately. By virtue of proposed Rule 

511(e)(iii), if a specialist allocation in an 

option is terminated as a result of a 

Special Circumstance Evaluation, the 

specialist unit may not receive an 

allocation (or re-allocation) in the 

terminated option or options for a 

period not to exceed six months. 

Similarly, by virtue of proposed Rule 

511(d)(v), if an allocation is terminated 

because a specialist exhibits substandard performance in terms of best 

bid and offer or in terms of quoting 

requirements, such specialist may not 

receive an allocation (or re-allocation) in 

the terminated option or options for a 

period not to exceed six months; and if 

an allocation is terminated because a 

specialist unit exhibits sub-standard 

performance in terms of minimum 

quoting requirements per Rule 1014, 

such specialist unit may not receive an 

allocation (or re-allocation) in the 

terminated option or options for a 

period not to exceed twelve months. 

As discussed, all specialists and 

specialist units have the right to appeal 

from an Exchange decision that was 

taken pursuant to a Specialist 

Evaluation or a Special Circumstance 

Evaluation. Moreover, the rules indicate 

that the Exchange must provide written 

notice regarding the lack of adequate 

performance; and give specialist units 

an opportunity to discuss performance 

or improve performance before the 

Exchange takes remedial action. The 

Exchange feels that these procedures are 

fair, reasonable, and uniform for all 

specialists on the Exchange.25

mstockstill on DSKH9S0YB1PROD with NOTICES

70334 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Notices 

safeguards built into the Exchange’s rules and ByLaws, the Exchange is deleting the formal hearing 

process that is currently in Rule 511(e) and 

proposes an informal hearing process in Rule 510 

(regarding SQTs and RSQTs) and Rule 511 

(regarding specialists). 

26Rule 1014(b)(ii)(D) states that in addition to the 

other requirements for ROTs set forth in this Rule 

1014, except as provided in sub-paragraph (4) 

below, 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. 

27Regarding MNQ procedures in general, see 

Commentaries .01 to .05 to Rule 507. See also 

Securities Exchange Act Release No. 60688 

(September 18, 2009), 74 FR 49058 (September 25, 

2009) (SR–Phlx–2009–82) (order approving modest 

increase in MNQ levels). 

28Rule 1014 also sets forth circumstances in 

which market participants do not have quoting 

responsibilities. As an example, subsection 

(b)(ii)(D)(4) states that SQTs, DSQTs, RSQTs and 

DRSQTs are deemed not to be assigned, and 

therefore do not have quoting responsibilities, 

respecting Quarterly Option Series, adjusted option 

series, and series with an expiration of nine months 

or greater. Adjusted option series are defined as 

option series wherein one option contract in the 

series represents the delivery of other than 100 

shares of underlying stock or Exchange-Traded 

Fund Shares. See Securities Exchange Act Release 

No. 61095 (December 2, 2009), 74 FR 64786 

(December 8, 2009) (SR–Phlx–2009–99) (notice of 

filing and immediate effectiveness). 

29The Exchange has proposed other amendments 

to Rule 507 at SR–Phlx–2010–145 that should not 

impact this filing. Should it become necessary, 

however, the Exchange will propose additional rule 

text amendments. 

30The Exchange will notify relevant specialist 

units, specialists, or members regarding transfer 

applications pursuant to Rule 508. 

31This change in terminology conforms it to 

current usage. 

In Rule 510 (regarding SQTs and 

RSQTs) and Rule 511 (regarding 

specialists), the Exchange proposes to 

eliminate the right to appeal from an 

Exchange’s determination to restrict 

additional options allocations based on 

failure to meet minimum performance 

requirements. The Exchange believes 

that an appeals process for restriction of 

allocations or assignments in additional 

(not currently allocated or assigned) 

options, which would require a 10 day 

notice period followed by a potentially 

lengthy appeals proceeding, is not 

necessary and indeed may be 

counterproductive in light of the need to 

efficiently and timely allocate or assign 

additional options. 

Assignment in Options 

Rule 507 deals with the process of 

applying for approval as an SQT or 

RSQT on the Exchange and assignment 

of options to SQTs and RSQTs. These 

are Registered Options Traders that, 

similarly to other market makers on the 

Exchange such as specialists, provide 

depth and liquidity through two-sided 

quotes in the options in which they are 

assigned. Rule 1014 discusses, among 

other things, the quote obligations of 

market makers and participants on the 

Exchange.26 Rule 507 defines the 

Maximum Number of Quoters (‘‘MNQ’’) 

in equity options, which establishes the 

greatest number of SQT and RSQT 

assignments that the Exchange may 

make in a particular class of option. 

MNQ in equity options is currently set 

in Commentary .02 to Rule 507 at no 

more than: Twenty-four market 

participants (SQTs and RSQTs) for 

equity options in the top 5% most 

actively traded options; nineteen market 

participants for the next 10% most 

actively traded options; and seventeen 

market participants for all other 

options.27

Because the number of assignments 

that may be made by the Exchange are 

limited by MNQ, thereby resulting in 

situations where SQTs and RSQTs may 

not be able to get assignments that they 

applied (and may be eligible) for, the 

Exchange is striving to ensure that 

option assignments are used to provide 

liquidity within a reasonable time after 

assignment. It is for this reason that the 

Exchange proposes to add new 

Commentary .01 to Rule 507 to state that 

within not more than thirty business 

days after assignment of an option 

pursuant to this rule, an assigned SQTs 

or RSQTs shall begin to generate and 

submit electronic quotations for such 

option through the Exchange’s 

electronic quotation, execution, and 

trading system. Quoting requirements 

are, as previously noted, set forth in 

Rule 1014.28 Should an assigned SQT or 

RSQT not generate electronic quotes 

within the requisite time frame, the 

Exchange shall have the ability to 

terminate the assignment in question 

after providing written notice to the 

assigned SQT or RSQT, and make a reassignment, unless there are exigent 

circumstances that the Exchange 

believes may not have allowed timely 

generation and submission of electronic 

quotes.29

Transfer of Allocated Option Classes 

Rule 508 deals with agreements 

between specialist units to transfer one 

or more options classes that are already 

allocated by the Exchange to one of such 

units. This type of process tends to 

happen most often, and in fact is 

instrumental to facilitating the orderly 

transfer and continuation of markets in 

classes of allocated options, when a 

specialist unit significantly changes the 

scale or breadth of its specialist 

operation on the Exchange or withdraws 

from the Exchange. 

Currently, Rule 508 states that failure 

to provide the Exchange with prior 

notice of an arranged (agreed-upon) 

transfer of one or more already allocated 

options classes in accordance with this 

rule permits the Exchange to reallocate 

such options classes. The proposed 

change to Rule 508 states that failure to 

provide the Exchange prior notice of a 

transfer in accordance with this Rule, or 

failure to obtain Exchange approval of a 

transfer, permits the Exchange to 

recover the allocated securities and 

reallocate them. The Exchange believes 

that this is appropriate given that the 

Exchange initially makes the allocation 

of the option class after evaluating the 

relevant factors, and should continue to 

have a similar ability to evaluate the 

propriety of subsequent transfer of the 

same option class. 

Commentary .01 to Rule 508 also 

currently indicates that no member may 

effect a change in the floor trading 

location of any equity option or index 

option class until forty-five calendar 

days after final approval of the change 

by the Exchange has been disseminated 

to the option floor. The Exchange 

proposes to delete this provision. The 

Exchange believes that the forty-five day 

delay to affect a change is functionally 

obsolete and no longer necessary, 

particularly in the current fast-paced 

trading environment.30

Finally, the Exchange is proposing 

technical, housekeeping rule changes in 

respect of ensuring conformity of rule 

language and deleting references that 

are obsolete or no longer in use. For 

example, the reference to Registrant is 

changed to specialist or specialist unit 

in Rules 508 and 511, and the reference 

to grant is changed to allocate in Rule 

511 for purposes of conformity.31 The 

Exchange is proposing to clean up the 

language of Commentary .02 of Rule 510 

by removing reference to initial 

implementation of the existing rule. The 

Exchange is also proposing to conform 

Rule 511 language in light of the 

consolidation with Rule 515. Thus, 

reference to Specialist Performance 

Evaluations and Special Circumstance 

Evaluations, and reference to factors 

that may be considered by the Exchange 

(e.g., evaluations, trade correction data, 

exemptive relief data) are added to Rule 

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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Notices 70335 

32 15 U.S.C. 78f(b). 

33 15 U.S.C. 78f(b)(5). 34 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

511(b); and reference to Rule 515 is 

deleted. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 32 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 33

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 

updating and making more uniform the 

evaluation process for specialist units, 

ensuring timely electronic quotations by 

SQTs and RSQTs, and consolidating 

and deleting unnecessary and obsolete 

rules and processes. The Exchange 

believes that its rule change proposal 

does not engender unfair discrimination 

among specialists, specialist units, SQTs 

and RSQTs in that it proposes to amend 

rules and procedures that are equally 

applicable to all members and member 

organizations at the Exchange. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

No. SR–Phlx-2010–153 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–2010–153. 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 (http://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 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– 

2010–153 and should be submitted on 

or before December 8, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.34

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–28900 Filed 11–16–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63308; File No. SR–MSRB– 

2010–15] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing and Immediate 

Effectiveness of Rule D–13, on a 

Definition of ‘‘Municipal Advisory 

Activities’’, Rule D–14, on a Definition 

of ‘‘Appropriate Regulatory Agency’’, 

and Amendments to Rule D–11 

(‘‘Associated Persons’’), Rule G–40 on 

Electronic Mail Contacts, and Form G– 

40, on Electronic Mail Contacts 

November 12, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘the 

Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

10, 2010, the Municipal Securities 

Rulemaking Board (‘‘Board’’ or ‘‘MSRB’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared by the MSRB. The 

Board has designated the proposed rule 

change as concerned solely with the 

administration of the Board or other 

matters which the Commission, by rule, 

consistent with the public interest and 

the purposes of this subsection, may 

specify as without the provisions of 

Section 19(b)(2) of the Act. 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 MSRB is filing a proposed rule 

change relating to municipal advisors, 

consisting of: (i) Amendments to Rule 

D–11 (definition of ‘‘associated 

persons’’); (ii) new Rule D–13 (definition 

of ‘‘municipal advisory activities’’); (iii) 

new Rule D–14 (definition of 

‘‘appropriate regulatory agency’’); (iv) 

amendments to Rule G–40, on electronic 

mail contacts, by municipal advisors; 

and (v) amendments to Form G–40, on 

electronic mail contacts. The proposed 

rule change is effective immediately 

upon filing. 

The text of the proposed rule change 

is available on the MSRB’s Web site at 

http://www.msrb.org/Rules-andInterpretations/SEC-Filings/2010- 

Filings.aspx, at the MSRB’s principal 

office, and at the Commission’s Public 

Reference Room. 

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