[Federal Register Volume 74, Number 153 (Tuesday, August 11, 2009)]
[Notices]
[Pages 40265-40269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19143]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60431; File No. SR-Phlx-2009-59]


Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing of Proposed Rule Change, and Amendment No. 1 Thereto, Relating 
to the Exchange's By-Laws, Regulatory Oversight Committee and Referee 
Program

August 4, 2009.

    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 July 27, 2009, NASDAQ OMX PHLX, Inc. (``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. On July 
30, 2009, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ By Amendment No. 1, the Exchange updated its proposal to 
reflect that The NASDAQ Stock Market LLC and NASDAQ OMX BX, Inc. 
have already eliminated their audit committees.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its By-Laws to establish a 
regulatory oversight committee of the Board of Governors (the 
``Board''); describe the office and responsibilities of the chief 
regulatory officer in the By-Laws; eliminate the audit committee and 
compensation committee of the Board, with their duties being assigned 
to other board committees of Phlx or its parent corporation, The NASDAQ 
OMX Group, Inc. (``NASDAQ OMX''); amend the Exchange's By-Laws to 
delete the Referee process and establish a new Options Trade Review 
Committee in

[[Page 40266]]

lieu thereof; and make conforming changes to the Exchange's Rules and 
Options Floor Procedure Advice.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://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 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Modifications to the Regulatory Oversight Structure of the Board of 
Governors
    On July 24, 2008, Phlx was acquired by NASDAQ OMX. Following that 
acquisition, Phlx has been assessing means to improve its governance 
structure and conform it more closely to that of The NASDAQ Stock 
Market LLC (the ``NASDAQ Exchange''), an effort that has already 
resulted in the submission of several proposed rule changes to the 
Commission.\4\ In addition, Phlx--together with the NASDAQ Exchange and 
NASDAQ OMX BX, Inc. (formerly the Boston Stock Exchange, and also an 
exchange subsidiary of NASDAQ OMX)--has been evaluating means to 
realize synergies in the operations of these three exchanges while 
maintaining the separate identity and member representation structures 
of each.
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    \4\ See Securities Exchange Act Release No. 59764 (April 20, 
2009), 74 FR 18761 (April 24, 2009) (SR-Phlx-2009-17) (approving 
proposal to modify the process for nominating Governors of the 
Exchange); Securities Exchange Act Release No. 59697 (April 4, 
2009), 74 FR 16249 (April 9, 2009) (SR-Phlx-2009-23) (proposing to 
eliminate various standing committees of the Exchange and making 
other miscellaneous changes). The Commission notes that the latter 
filing was approved by the Commission on May 14, 2009. See 
Securities Exchange Act Release No. 59924 (May 14, 2009), 74 FR 
23759 (May 20, 2009).
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    In making this evaluation, Phlx and its sister exchanges have given 
consideration to the experiences of their respective boards and have 
reviewed the governance documents of other exchanges. In particular, 
Phlx and the other exchanges have reviewed the board structures 
established by NYSE Euronext and its exchange subsidiaries. In 
Securities Exchange Act Release No. 55293,\5\ the Commission approved a 
structure in which certain committees of the board of directors of NYSE 
Euronext, the public holding company, perform functions for exchange 
subsidiaries, which do not themselves have these committees. 
Specifically, the Commission's approval order states that ``the NYSE 
Euronext board of directors will have an audit committee, a human 
resource and compensation committee, and a nominating and governance 
committee. Each of the audit committee, human resource and compensation 
committee, and nominating and governance committee of the NYSE Euronext 
board of directors will consist solely of directors meeting the 
independence requirements of NYSE Euronext.
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    \5\ Securities Exchange Act Release No. 55293 (February 14, 
2007), 72 FR 8033 (February 22, 2007) (SR-NYSE-2006-120).
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    These committees also will perform relevant functions for NYSE 
Group,\6\ the Exchange,\7\ NYSE Market,\8\ NYSE Regulation,\9\ 
Archipelago,\10\ NYSE Arca,\11\ and NYSE Arca Equities,\12\ as well as 
other subsidiaries of NYSE Euronext, except that the board of directors 
of NYSE Regulation will continue to have its own compensation committee 
and nominating and governance committee.''
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    \6\ NYSE Group, Inc., the former public holding company of NYSE 
Euronext's U.S. exchanges.
    \7\ New York Stock Exchange LLC (``NYSE''), a registered 
national securities exchange.
    \8\ NYSE Market, Inc., a subsidiary of NYSE to which it has 
delegated certain operational authority.
    \9\ NYSE Regulation, Inc., a subsidiary of NYSE to which it has 
delegated certain operational authority.
    \10\ Archipelago Holdings, Inc., formerly the public holding 
company of the entities now known as NYSE Arca, Inc. and NYSE Arca 
Equities, Inc.
    \11\ NYSE Arca, Inc., a registered national securities exchange.
    \12\ NYSE Arca Equities, Inc., a subsidiary of NYSE Arca to 
which it has delegated certain operational authority.
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    Phlx and the other exchanges owned by NASDAQ OMX have also 
considered the experience of the NASDAQ Exchange in operating as a 
subsidiary of a public company since 2006. During the period, the board 
of each of the NASDAQ Exchange and its parent corporation (currently 
NASDAQ OMX, and formerly The Nasdaq Stock Market, Inc.) has appointed 
its own audit committee and management compensation committee. However, 
these committees at the NASDAQ Exchange level have generally found 
themselves duplicating the work of other committees at the exchange or 
holding company level. The NASDAQ OMX audit committee has broad 
authority to review the financial information that will be provided to 
shareholders and others, systems of internal controls, and audit, 
financial reporting and legal and compliance processes. Because NASDAQ 
OMX's financial statements are prepared on a consolidated basis that 
includes the financial results of NASDAQ OMX's subsidiaries, including 
Phlx and the other exchange subsidiaries, the NASDAQ OMX audit 
committee's purview necessarily includes these subsidiaries. The 
committee is composed of four or five directors, all of whom must be 
independent under the standards established by Section 10A(m) of the 
Act \13\ and Rule 4200(a) of the NASDAQ Exchange. All committee members 
must be able to read and understand financial statements, and at least 
one member must have past employment experience in finance or 
accounting, requisite professional certification in accounting, or any 
other comparable experience or background that results in the 
individual's financial sophistication.
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    \13\ 15 U.S.C. 78j-1(m).
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    By contrast, the audit committee of the NASDAQ Exchange has a more 
limited role, focused solely on the exchange entity and its 
subsidiaries that operate as facilities of the NASDAQ Exchange. As 
described in the current By-Laws of the NASDAQ Exchange (which are, in 
this respect, virtually identical to the current By-Laws of Phlx), the 
primary functions of the audit committee are (i) oversight over 
financial reporting, (ii) oversight over the systems of internal 
controls established by management and the Board and the legal and 
compliance process, (iii) selection and evaluation of independent 
auditors, and (iv) direction and oversight of the internal audit 
function. However, to the extent that the committee reviews financial 
and accounting matters, its activities are duplicative of the 
activities of the NASDAQ OMX audit committee, which is also charged 
with providing oversight over financial reporting and independent 
auditor selection for NASDAQ OMX and all of its subsidiaries, including 
the NASDAQ Exchange, BX, and Phlx and their subsidiaries. Similarly, 
the NASDAQ

[[Page 40267]]

OMX audit committee has general responsibility for oversight over 
internal controls and direction and oversight over the internal audit 
function for NASDAQ OMX and all of its subsidiaries. Thus, the 
responsibilities of the exchanges' audit committees are fully 
duplicated by the responsibilities of the NASDAQ OMX audit committee. 
Accordingly, the NASDAQ Exchange has eliminated its audit committee by 
amending Article III, Section 5 of the By-Laws.\14\
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    \14\ Securities Exchange Act Release No. 60276 (July 9, 2009), 
74 FR 34840 (July 17, 2009) (SR-NASDAQ-2009-042) (``Release No. 34-
60276''). Similarly, BX has eliminated its audit committee. 
Securities Exchange Act Release No. 60247 (July 17, 2009), 74 FR 
33495 (July 13, 2009) (SR-BX-2009-021) (``Release No. 34-60247'').
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    Similarly, drawing upon the model established by NYSE Euronext and 
the experience of the NASDAQ Exchange, Phlx is proposing to amend 
Section 10-9 of its By-Laws to eliminate its audit committee. While the 
committee formerly played a vital role in oversight of the preparation 
of Phlx's financial statements when Phlx was owned by a group of 
investors and sat at the top of a holding company structure, that role 
has been assumed by the NASDAQ OMX audit committee now that Phlx is a 
wholly owned subsidiary. Moreover, since Phlx does not currently have a 
regulatory oversight committee, Phlx is now proposing to establish such 
a committee so that regulatory oversight functions formerly performed 
by the audit committee may be assumed by the new committee.\15\ The new 
committee will oversee the adequacy and effectiveness of Phlx's 
regulatory and self-regulatory organization responsibilities; assess 
Phlx's regulatory performance; and assist the Board and its standing 
committees in reviewing the regulatory plan and the overall 
effectiveness of Phlx's regulatory functions. In furtherance of its 
functions, the committee shall (a) review Phlx's regulatory budget and 
specifically inquire into the adequacy of resources available in the 
budget for regulatory activities; (b) meet regularly with Phlx's chief 
regulatory officer in executive session; and (c) be informed about the 
compensation and promotion or termination of the chief regulatory 
officer and the reasons therefor.\16\ The committee shall consist of 
three members, each of whom shall be an independent governor.\17\
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    \15\ Section 10-9 of the By-Laws.
    \16\ The audit committee also currently performs functions 
relating to the Referee, who has authority to review certain 
decisions of Options Exchange Officials. As described below, the 
Exchange proposes to replace the Referee with a new Options Trade 
Review Committee.
    \17\ An independent governor is one who has no material 
relationship with Phlx or any affiliate of Phlx, any member of Phlx 
or any affiliate of such member, or any issuer of securities that 
are traded on Phlx or a facility of Phlx.
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    Phlx believes that even in light of the NASDAQ OMX audit 
committee's overall responsibilities for internal controls and the 
internal audit function, it is nevertheless important for the Phlx 
Board to maintain its own independent oversight over Phlx's controls 
and internal audit matters relating to Phlx's operations. In this 
regard, Phlx notes that its regulatory oversight committee, like the 
NASDAQ Exchange's regulatory oversight committee, will have broad 
authority to oversee the adequacy and effectiveness of Phlx's 
regulatory and self-regulatory organization responsibilities, and will 
therefore be able to maintain oversight over controls in tandem with 
the NASDAQ OMX audit committee's overall control oversight 
responsibilities. Similarly, it is already the practice of NASDAQ OMX's 
Internal Audit Department, which performs internal audit functions for 
all NASDAQ OMX subsidiaries, to report to the Phlx Board on all 
internal audit matters relating to Phlx. This practice will be formally 
reflected in the Department's written procedures, which will now direct 
such reports to the regulatory oversight committee. In addition, to 
ensure that the Phlx Board retains authority to direct the Department's 
activities with respect to Phlx, the Department's written procedures 
will be amended to stipulate that the Phlx regulatory oversight 
committee may, at any time, direct the Department to conduct an audit 
of a matter of concern to it and report the results of the audit both 
to the Phlx regulatory oversight committee and the NASDAQ OMX audit 
committee. Finally, although language regarding the audit committee's 
authority to conduct special reviews of any alleged improper conduct is 
being removed, Phlx believes that such authority is inherent in the 
powers of its Board, the NASDAQ OMX Board, and their respective 
committees. Accordingly, retaining this language for a specific 
committee is unnecessary.\18\
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    \18\ Phlx also notes that authority of the audit committee with 
respect to the Exchange's Code of Conduct and whistleblowing 
regarding accounting practices have been assumed by NASDAQ OMX, 
which, as a public company, maintains a Code of Ethics program and 
anonymous whistleblower hotline for NASDAQ OMX and its subsidiaries 
in compliance with the requirements of the Sarbanes-Oxley Act, 15 
U.S.C. 78j-1, 7264.
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    Although the position of chief regulatory officer has long existed, 
Phlx has concluded that the position should be formally described in 
the By-Laws. Accordingly, new Section 5-6 of the By-Laws will provide 
that the chief regulatory officer will have general supervision of 
Phlx's regulatory operations, including the responsibility for 
overseeing its surveillance, examination, and enforcement functions and 
for administering any regulatory services agreements with another self-
regulatory organization to which Phlx is a party. The chief regulatory 
officer shall meet with the regulatory oversight committee in executive 
session at regularly scheduled meetings, and at any time upon request 
of the chief regulatory officer or any member of the committee.
    Phlx also proposes to amend Section 4-13 of the By-Laws in order to 
follow the NYSE Euronext model with respect to allowing the elimination 
of its compensation committee and the performance of its function by 
the NASDAQ OMX compensation committee and/or subsidiary boards.\19\ The 
NASDAQ OMX By-Laws provide that its compensation committee considers 
and recommends compensation policies, programs, and practices for 
employees of NASDAQ OMX. Because many employees performing work for 
Phlx are also employees of NASDAQ OMX, its compensation committee 
already performs these functions for such employees. Moreover, certain 
of its senior officers are also officers of NASDAQ OMX and other NASDAQ 
OMX subsidiaries because their responsibilities relate to multiple 
entities within the NASDAQ OMX corporate structure. Accordingly, NASDAQ 
OMX pays these individuals and establishes compensation policy for 
them. Most notably, the former Chief Executive Officer of Phlx was also 
an ``executive officer'' of NASDAQ OMX within the meaning of NASDAQ 
Exchange Rule 4350.\20\ Under that rule, the compensation of executive 
officers of an issuer of securities, such as the common stock of NASDAQ 
OMX, that is listed on the NASDAQ Exchange, must be determined by, or 
recommended to the board of directors for determination by, a majority 
of independent directors or a compensation committee comprised

[[Page 40268]]

solely of independent directors. Accordingly, the NASDAQ OMX board of 
directors and/or its compensation committee was legally required to 
establish the compensation for this individual. Although the individual 
recently resigned his positions with NASDAQ OMX and its subsidiaries in 
order to pursue another opportunity, it is likely that his successor as 
Chief Executive Officer of Phlx will serve in a similar position at 
NASDAQ OMX and therefore be subject to comparable compensation 
requirements. To the extent that policies, programs, and practices must 
also be established for any Phlx officers or employees who are not also 
NASDAQ OMX officers or employees, the Phlx Board will perform such 
actions without the use of a compensation committee (but subject to the 
recusal of the Chief Executive Officer and the Stockholder 
Governor).\21\
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    \19\ The Commission notes that it recently approved proposals by 
BX and the NASDAQ Exchange to eliminate their compensation 
committees. See Release Nos. 34-60247 and 60276, supra note 14. 
These exchanges have eliminated those committees. See e-mail from 
Edith Hallahan, Counsel, Phlx, to Nancy Burke-Sanow, Assistant 
Director, Commission, dated August 3, 2009.
    \20\ The position of Chief Executive Officer of Phlx is 
currently vacant, pending selection of a successor.
    \21\ Two seats on the Phlx Board are reserved for the Chief 
Executive Officer and an officer, designee, director, or employee of 
NASDAQ OMX. To the extent that these Governors are officers or 
employees of both Phlx and NASDAQ OMX, they would be permitted to 
participate in discussions concerning compensation of Phlx 
employees, since the Phlx Board would not be responsible for setting 
their compensation. They would, however, recuse themselves from a 
vote on the subject to allow the determination to be made by 
directors that are not officers or employees of Phlx. If one of 
these Governors was an officer or employee of Phlx but not of NASDAQ 
OMX, that Governor would also absent himself or herself from any 
deliberations regarding his or her compensation.
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Replacement of the Exchange's Referee With an Options Trade Review 
Committee
    The Exchange proposes to replace the current Referee process with 
an Options Trade Review Committee, which is similar to the processes of 
other exchanges, including the NASDAQ Exchange.\22\ As explained 
further below, the Exchange believes that this committee should 
effectively provide fair and neutral review of Options Exchange 
Officials' rulings.
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    \22\ See NASDAQ Exchange By-Laws, Article III, Section 6(d).
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    Currently, the Exchange's By-Laws and rules provide that the 
Referee is an Exchange employee (or independent contractor), supervised 
by the audit committee,\23\ who reviews Options Exchange Official 
rulings concerning the nullification and/or adjustment of transactions. 
In addition, the Referee can act in the capacity of an Options Exchange 
Official respecting initial rulings concerning requests for relief from 
the requirements of certain Exchange rules, Equity Floor Procedure 
Advices and Option Floor Procedure Advices.\24\
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    \23\ For the establishment of the Referee program, see 
Securities Exchange Act Release No. 54009 (June 16, 2006), 71 FR 
36592 (June 27, 2006) (SR-Phlx-2005-42).
    \24\ See Rule 124.02(a)(i)-(iv).
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    The Exchange proposes to eliminate the Referee and replace that 
function with an Options Trade Review Committee, which will review 
Options Exchange Official rulings. Even though the Referee was able to, 
the Options Trade Review Committee will not act in the capacity of an 
Options Exchange Official; its function will be limited to reviewing 
such rulings.
    In order to implement the Options Trade Review Committee, the 
Exchange is proposing to delete the By-Law provision that currently 
vests supervision over the Referee in the audit committee and generally 
defines the Referee's role and background.\25\ Because the Exchange is 
proposing to eliminate its audit committee, and because appeals will 
now be handled by a committee, rather than an exchange employee (or 
independent contractor), the Exchange believes that the Options Trade 
Review Committee should be sufficiently neutral and independent of the 
regulatory processes and Options Exchange Officials. The Options Trade 
Review Committee will be appointed by the Board pursuant to new By-Law 
Article X, Section 10-10 as a standing committee of the Board and shall 
include a number of Member Representative members \26\ that is equal to 
at least 20 percent of the total number of members of the Committee; 
furthermore, no more than 50 percent of its members shall be engaged in 
market making activity or employed by an Exchange Member Organization 
whose revenues from market making activity exceed ten percent of its 
total revenues.\27\
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    \25\ See By-Law Article X, Section 10-9(d).
    \26\ See By-Law Article I, Section 1-1(pp).
    \27\ See proposed By-Law Article X, Section 10-10.
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    In addition, the Exchange proposes to amend various rules that 
refer to the Referee, including Rule 124, which currently outlines in 
detail the responsibilities of the Referee. Specifically, Rule 124 is 
being amended to establish the Options Trade Review Committee's role. 
In addition to the language in By-Law Article X, Section 10-10, 
proposed new language in Rule 124 will state that the Options Trade 
Review Committee may act through a panel with a minimum of three 
Committee members, of which no more than 50% can be engaged in market 
making activity or employed by an Exchange Member Organization whose 
revenues from market making activity exceed ten percent of its total 
revenues.\28\ The Exchange anticipates that in light of the time 
sensitivity of rendering decisions in the trading context, neither the 
entire Options Trade Review Committee nor a quorum thereof should be 
required. The Exchange also anticipates that the panel will be selected 
by Exchange regulatory staff from the Committee members on a rotating 
basis, taking into consideration availability and prompt response as 
well as frequency of service, keeping in mind the importance of 
assembling a panel quickly. The staff is likely to use electronic means 
to do so, and the panels would convene via conference call. In 
addition, all appeals will be presented to the panel on an anonymous 
basis to reduce the risk of conflict or bias. The staff would provide 
to the panel a verbal and/or written information packet containing 
relevant documents. Member firm-identifying information within the 
packet would be redacted to make it difficult or impossible to identify 
the parties to the appeal. Regulatory staff will present the 
information included in the kit to the participants anonymously, which 
may include written information provided by any parties to the appeal.
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    \28\ See NASDAQ Stock Market Rule 11890 and IM-11890-20 (Review 
by Panels of the MORC).
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    Commentary .02 to Rule 124 is proposed to be deleted, because it 
details the role of the Referee. The details regarding who can serve as 
Referee, how the Referee is appointed, designation of a Backup Referee, 
what additional functions the Referee can perform, and how the Referee 
is supervised and evaluated are no longer needed.
    Other than the role of the Referee, most aspects of the review 
process in Rule 124 are not being changed; for example, the time period 
to request a review, the fee for a review that sustains the ruling, and 
that rulings may be sustained, overturned or modified all remain 
unchanged. Decisions of the Options Trade Review Committee, like the 
Referee's decisions, would not be appealable. Because Advice F-27 
corresponds to Rule 124, corresponding changes to Advice F-27 are also 
proposed.
    Minor changes to Rule 124 include: (i) [sic] removing references to 
Referee decisions from Rule 124(b) in the sentence that deals with 
rulings being effective immediately and being complied with promptly, 
because the provision that Options Trade Review Committee decisions are 
effective immediately and must be complied with promptly will appear 
instead in the paragraph governing the Options Trade

[[Page 40269]]

Review Committee, in proposed sub-paragraph (d)(v). In addition, sub-
paragraph (d)(vi) is proposed to be deleted, because it duplicates a 
provision in paragraph (b). The Exchange is deleting the provision that 
an Options Exchange Official that fails to make any ruling in 
accordance with Exchange rules may be subject to possible disciplinary 
action by the Exchange, because this provision governs the Exchange's 
own personnel policies, which typically do not appear in exchange 
rules.
    Rule 1092 is also being changed to refer to the Options Trade 
Review Committee, rather than the Referee in paragraphs (f)(iv) and 
(g), which relate to requesting a review of obvious error and 
catastrophic error determinations.
    The changes to the remaining provisions are minor. Rule 1, 
Definitions, is being amended to state that the list of Options 
Exchange Officials will be maintained by the Chief Regulatory Officer 
rather than the Referee.\29\ Rule 163, Erroneous Transactions, is also 
being amended to replace the Referee with the Options Trade Review 
Committee, but, as a practical matter, is not significant, because the 
Exchange no longer operates an equity trading system for which Rule 163 
was adopted, such that Rule 163 cannot currently be invoked.
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    \29\ Rule 1(pp) is also being amended to delete reference to the 
specific Web site address where the list of Options Exchange 
Officials is maintained, which has changed. The Exchange will 
continue to post the list on its Web site, but would prefer not to 
put the actual Web site address into the rule text.
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    In summary, the Exchange believes that, under this proposal, the 
Options Trade Review Committee should further the goal of impartial, 
objective decisions, which should, in turn, result in fairness and 
certainty in the overall process of resolving trading disputes.
2. Statutory Basis
    Phlx believes that its proposal is consistent with Section 6(b) of 
the Act \30\ in general, and furthers the objectives of: (1) Section 
6(b)(1) of the Act,\31\ which requires a national securities exchange 
to be so organized and have the capacity to carry out purposes of the 
Act and to enforce compliance by its members and persons associated 
with its members with the provisions of the Act; and (2) Section 
6(b)(5) of the Act,\32\ in that it is designed, among other things, to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest. 
Specifically, the proposed rule change will eliminate two Board 
committees whose roles have been diminished by Phlx's new status as a 
wholly owned subsidiary of NASDAQ OMX, thereby allowing governors to 
focus greater attention on matters falling directly within the purview 
of the Board, including regulatory quality, market structure, new 
product initiatives, and review of proposed rule changes. In addition, 
the creation of a regulatory oversight committee and the inclusion of 
the chief regulatory officer in the By-Laws will underscore the 
importance of Phlx's regulatory function and specifically empower an 
independent committee of the Board to oversee regulation and meet 
regularly with the chief regulatory officer. Finally, the Exchange 
believes that replacing the Referee with a new Options Trade Review 
Committee should provide a prompt and objective process for reviewing 
rulings on trading disputes.
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    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78(b)(1).
    \32\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in 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 either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
such 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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#f280879e97df919d9f9f979c8681b2819791dc959d84"><span class="__cf_email__" data-cfemail="bccec9d0d991dfd3d1d1d9d2c8cffccfd9df92dbd3ca">[email protected]</span></a>. Please include 
File Number SR-Phlx-2009-59 on the subject line.

Paper Comments

    <bullet> 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-2009-59. 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 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 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-2009-59 and should be 
submitted on or before September 1, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-19143 Filed 8-10-09; 8:45 am]
BILLING CODE 8010-01-P


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