49816 Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 

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

2 17 CFR 240.19b–4. 

3An 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). 

4An 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). 

5An 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). 

6A Specialist (which includes an off-floor Remote 

Specialist) is an Exchange member who is 

registered as an options specialist pursuant to Rule 

1020(a). 

7See Securities Exchange Act Release No. 59995 

(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– 

Phlx–2009–32)(order approving Phlx XL II). Phlx 

XL II is the Exchange’s electronic order delivery 

and reporting system, which provides for the 

automatic entry and routing of Exchange-listed 

equity options, index options and U.S. dollarsettled foreign currency options orders to the 

Exchange trading floor. Rule 1080(a). 

8 In addition, Rule 1080 deals with, among other 

things, how quotations interact with limit orders on 

the book, order routing through the electronic 

interface, Price Improvement XL (known as 

‘‘PIXL’’), specialized quote feed (known as ‘‘SQF’’), 

qualified contingent cross orders, and complex 

orders. 

9Rule 1080(b)(i)(A). This section states that for 

purposes of Exchange options trading, an agency 

order is any order entered on behalf of a public 

customer, and does not include any order entered 

for the account of a broker-dealer, or any account 

in which a broker-dealer or an associated person of 

a broker-dealer has any direct or indirect interest. 

10Commentary .04 of Rule 1080 states that Orders 

for the proprietary accounts of SQTs, RSQTs and 

non-SQT ROTs that may be entered for delivery 

through the electronic interface (through the use of 

Exchange approved proprietary systems to interface 

with the electronic interface of the Exchange) shall 

be for a minimum of one (1) contract. Orders for the 

proprietary account(s) of non-SQT ROTs with a size 

of less than 10 contracts shall be submitted as IOC 

only. Orders for the proprietary account(s) of SQTs 

and RSQTs shall be submitted as IOC only. 

11Rule 1066 discusses certain order types. 

12Subsection (b)(i)(B)(1), states that the following 

types of orders for the proprietary account(s) of 

non-SQT ROTs and specialists with a size of 10 

contracts or greater are eligible for entry via 

electronic interface with AUTOM: GTC, day limit, 

IOC, ISO, limit on opening and simple cancel. The 

subsection states also that orders for the proprietary 

account(s) of non-SQT ROTs and specialists with a 

size of less than 10 contracts shall be submitted as 

IOC only. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65050; File No. SR–Phlx– 

2011–101] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change 

Regarding Streaming Quote Traders 

and Remote Streaming Quote Traders 

Entering Certain Option Day Limit 

Orders 

August 5, 2011. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1, and Rule 19b–42 thereunder, 

notice is hereby given that on July 27, 

2011, 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 allow entry of 

day limit orders for the proprietary 

accounts of Streaming Quote Traders 

and Remote Streaming Quote Traders. 

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 these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposal is to 

amend two subsections of Exchange 

Rule 1080 to allow entry of day limit 

orders for the proprietary accounts of 

Streaming Quote Traders (SQTs’’) and 

Remote Streaming Quote Traders 

(‘‘RSQTs’’). The proposal will promote 

consistency among Registered Options 

Traders (‘‘ROT’’) on the Exchange by 

allowing SQTs and RSQTs to enter day 

limit orders exactly as non-SQT ROTs 

may currently do under the rules. 

Background 

There are several types of market 

makers on the Exchange, including 

ROTs,3 SQTs,4 RSQTs,5 and specialists.6

Each option class and series listed on 

the Exchange must currently have a 

specialist that is either a floor-based 

specialist or an off-floor specialist 

known as a Remote Specialist. The 

specialist system remains un-impacted 

by this proposal. This proposal deals 

exclusively with the electronic entry of 

day limit orders in SQT and RSQT 

proprietary accounts. 

Current Rule 1080 (Phlx XL and XL II) 

discusses the Exchange’s enhanced 

electronic order, trading, and execution 

system (the ‘‘electronic interface’’). The 

current iteration of the Exchange’s 

electronic interface is known as Phlx XL 

II.7 Rule 1080 states that it governs the 

orders, execution reports and 

administrative order messages 

transmitted between the offices of 

member organizations and the trading 

floors of the Exchange. Rule 1080 also 

discusses what agency and proprietary 

orders are eligible for entry into the 

Exchange’s electronic interface.8

Subsection (b)(i)(A) of Rule 1080 

indicates the types of agency orders that 

are eligible for entry via electronic 

interface.9 The Exchange does not 

propose any changes regarding entry of 

agency orders. 

Subsection (b)(i)(B) of Rule 1080 

indicates the types of proprietary (nonagency) orders that are eligible for entry 

via electronic interface. This subsection 

states that certain types of proprietary 

orders are eligible for entry via 

electronic interface subject to 

Commentary .04 of Rule 1080, discussed 

below.10

Subsection (b)(i)(B)(1) of Rule 1080 

indicates the types of non-SQT ROTs 

and specialists proprietary orders that 

are eligible for entry via electronic 

interface, including GTC, day limit, IOC, 

ISO, limit on opening, and simple 

cancel orders.11 The Exchange does not 

propose any changes regarding this 

subsection.12

Subsection (b)(i)(B)(2) states that the 

following types of orders for the 

proprietary account(s) of SQTs and 

RSQTs are eligible for entry via 

electronic interface: Limit on opening, 

IOC, and ISO. Currently, there is no 

ability for SQTs and RSQTs to enter day 

limit orders in their proprietary 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 49817 

13Also, subsection (b)(i)(B)(1) allows non-SQTs 

and specialists to enter certain day limit orders (10 

or more contracts) in their proprietary accounts. 

14Such orders have to be for a minimum of one 

(1) contract. 

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

16 15 U.S.C. 78f(b)(5). 

accounts. The proposal corrects this 

limitation by allowing day limit orders 

for the proprietary account(s) of SQTs 

and RSQTs to be entered pursuant to 

subsection (b)(i)(B)(2). The proposed 

change will promote consistency among 

ROTs by allowing SQTs and RSQTs to 

do what Commentary .04 of Rule 1080 

now allows non-SQT ROTs to do: enter 

certain day limit orders (10 or more 

contracts) in their proprietary 

accounts.13

Commentary .04 of Rule 1080 states 

that orders for the proprietary accounts 

of SQTs, RSQTs and non-SQT ROTs 

may be entered for delivery via 

electronic interface through the use of 

Exchange approved proprietary systems 

of members that interface with the 

Exchange’s electronic interface.14

Currently, proprietary non-SQT ROT 

orders with a size of less than 10 

contracts have to be submitted as IOC 

and larger orders may be submitted as 

day limit and other order types; while 

proprietary SQT and RSQT orders may 

only be submitted as IOC. 

The Exchange is proposing to put all 

the ROTs (SQTs, RSQTs and non-SQT 

ROTs) on an equal footing. Specifically, 

the Exchange proposes to state in 

Commentary .04 that orders for the 

proprietary account(s) of SQTs, RSQTs, 

and non-SQT ROTs with a size of less 

than 10 contracts shall be submitted as 

IOC only. Thus, where SQT and RSQT 

orders under the current rule could only 

be submitted as IOC, the proposed 

change to Commentary .04 would allow 

these SQTs and RSQTs to enter non IOC 

orders (e.g. day orders) in proprietary 

accounts if they are for 10 or more 

contracts. 

The Exchange is proposing to amend 

subsection (b)(i)(B)(2) and 

Commentary.04 of Exchange Rule 1080 

in order to encourage more liquidity by 

allowing market makers to rest more 

orders on the book. Initially with the 

onset of electronic quoting, the 

Exchange wanted to encourage 

electronic quoting and trading and thus 

did not accept day or day limit orders 

in the proprietary accounts of liquidity 

providers such as RSQTs and SQTs nor 

allow SQTs and RSQTs to submit nonIOC orders. With the extensive 

development of electronic market 

making, however, the Exchange has 

come to believe that allowance of day 

orders per subsection (b)(i)(B)(2) and 

Commentary .04 would enhance 

liquidity rather than discourage 

electronic quoting and trading on the 

Exchange, to the benefit of traders and 

public customers. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 15 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 16

in particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system by further 

enhancing liquidity to the benefit of 

traders and public customers. This 

would be achieved by conforming 

subsection (b)(i)(B)(2) and Commentary 

.04 of Rule 1080 and thereby promoting 

consistency through uniformly allowing 

day limit orders for the proprietary 

account(s) of Registered Options Traders 

(SQTs, RSQTs, and non-SQT ROTs) to 

be entered via the Exchange’s electronic 

interface. Prior to this proposal, such 

orders were allowed only for non-SQT 

ROTs. 

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 

(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 or disapprove 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 

• 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 

Number SR–Phlx–2011–101 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–2011–101. 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 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– 

2011–101 and should be submitted on 

or before September 1, 2011. 


srobinson on DSK4SPTVN1PROD with NOTICES
49818 Federal Register / Vol. 76, No. 155 / Thursday, August 11, 2011 / Notices 

17 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The NYSE Arca System is configured to 

automatically reject a QCC entered when the order 

is for less than 1,000 contracts, is entered at a price 

worse than the national best bid or offer (‘‘NBBO’’) 

or is entered at the same price as Customer orders 

in the Exchange’s Consolidated Book. 

5See Securities Exchange Act Release No. 64688 

(June 16, 2011), 76 FR 36606 (June 22, 2011) (SR– 

Phlx–2011–56). 

6See Securities Exchange Act Release No. 64086 

(March 17, 2011), 76 FR 16021 (March 22, 2011) 

(SR–NYSEArca–2011–09) (‘‘NYSE Arca Electronic 

QCC Filing’’). 

7A QCT is a transaction consisting of two or more 

component orders, executed as agent or principal, 

where: (a) At least one component is an NMS stock, 

as defined in Rule 600 of Regulation NMS under the 

Exchange Act; (b) all components are effected with 

a product or price contingency that either has been 

agreed to by all the respective counterparties or 

arranged for by a broker-dealer as principal or 

agent; (c) the execution of one component is 

contingent upon the execution of all other 

components at or near the same time; (d) the 

specific relationship between the component orders 

(e.g., the spread between the prices of the 

component orders) is determined by the time the 

contingent order is placed; (e) the component 

orders bear a derivative relationship to one another, 

represent different classes of shares of the same 

issuer, or involve the securities of participants in 

mergers or with intentions to merge that have been 

announced or cancelled; and (f) the transaction is 

fully hedged (without regard to any prior existing 

position) as a result of other components of the 

contingent trade. See Securities Exchange Act 

Release No. 57620 (April 4, 2008), 73 FR 19271 

(April 9, 2008) (the ‘‘QCT Release’’). That release 

superseded a release initially granting the QCT 

exemption. See Securities Exchange Act Release 

No. 54389 (August 31, 2006), 71 FR 52829 

(September 7, 2006) (‘‘Original QCT Exemption’’). 

8See Securities Exchange Act Release No. 63955 

(February 24, 2011), 76 FR 11533 (March 2, 2011) 

(SR–ISE–2010–73) (‘‘ISE Approval’’). See also 

Securities Exchange Act Release No. 62523 (July 16, 

2010), 75 FR 43211 (July 23, 2010) (SR–ISE–2010– 

73) (‘‘ISE QCC Proposal’’). 

9The Exchange notes that letters commenting on 

the ISE Proposal were submitted on its behalf by the 

Exchange’s parent company, NYSE Euronext. See 

e.g., letters dated August 9, 2010 and October 21, 

2010 from Janet L. McGinness, Senior Vice 

President—Legal & Corporate Secretary, Legal & 

Government Affairs, NYSE Euronext. 

10First, the Exchange requires OTP Holders to 

properly mark all QCCs as such. In addition, the 

Financial Industry Regulatory Authority (‘‘FINRA’’), 

on behalf of the Exchange, has implemented an 

examination and surveillance program to assess 

OTP Holder compliance with the requirements 

applicable to QCCs, including the requirement that 

the stock leg of the transaction be executed at or 

near the same time as the options leg. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20390 Filed 8–10–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65048; File No. SR– 

NYSEArca–2011–52] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending NYSE Arca 

Options Rule 6.90 To Permit Qualified 

Contingent Cross Orders To Be 

Electronically Submitted to the NYSE 

Arca System From the Floor of the 

Exchange for Potential Execution 

August 5, 2011. 

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 1, 

2011, NYSE Arca, Inc. (the ‘‘Exchange’’ 

or ‘‘NYSE Arca’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

NYSE Arca Options Rule 6.90 to permit 

Qualified Contingent Cross Orders 

(‘‘QCCs’’) to be electronically submitted 

to the NYSE Arca System from the Floor 

of the Exchange for potential execution. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.nyse.com, on the 

Commission’s Web site at http:// 

www.sec.gov, at the Exchange’s 

principal office, 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 purpose of this filing is to amend 

Rule 6.90 to permit QCCs to be 

electronically submitted to the NYSE 

Arca System from the Floor of the 

Exchange for potential execution.4 This 

filing is modeled after a recently 

approved rule change by NASDAQ 

OMX PHLX (‘‘PHLX’’).5

Background 

The Exchange recently adopted rules 

that permit OTP Holders to submit 

QCCs electronically from off the Floor 

through the NYSE Arca System.6 The 

QCC permits an NYSE Arca OTP Holder 

to effect a qualified contingent trade 

(‘‘QCT’’) in a Regulation NMS stock and 

cross the options leg of the trade on the 

Exchange immediately upon entry and 

without order exposure if the order is 

for at least 1,000 contracts, is part of a 

QCT, is executed at a price at least equal 

to the NBBO and if there are no 

Customer Orders in the Exchange’s 

Consolidated Book at the same price.7

The NYSE Arca Electronic QCC Filing 

was based on an International Securities 

Exchange (‘‘ISE’’) rule approved by the 

Commission.8 The ISE QCC Proposal 

was controversial, attracting opposition 

from multiple exchanges including 

NYSE Arca.9 The Commission, 

however, ultimately approved the ISE 

QCC Proposal, finding it to be consistent 

with the Securities Exchange Act of 

1934 (the ‘‘Act’’). NYSE Arca 

implemented the NYSE Arca Electronic 

QCC Filing, and is proposing this rule 

change, as a competitive response to the 

approval of the PHLX floor-based QCC 

filing. 

Under the NYSE Arca Electronic QCC 

Filing, QCCs currently may only be 

submitted electronically from off the 

Floor through the NYSE Arca System. In 

this regard, OTP Holders on the Floor of 

the Exchange are not allowed to enter 

QCCs into the NYSE Arca System, or 

otherwise effect them in open outcry. To 

provide a mechanism for the Exchange 

to surveil for whether QCCs were 

entered from off of the Floor, the 

Exchange adopted Commentary .01 to 

Rule 6.90, which requires OTP Holders 

to maintain books and records 

demonstrating that each QCC was 

routed to the NYSE Arca System from 

off of the Floor. Presently, any QCC that 

does not have a corresponding record 

required by this provision would be 

deemed to have been entered from on 

the Floor in violation of Rule 6.90. In 

addition, the Exchange has adopted 

policies and procedures to ensure that 

OTP Holders use the QCC properly.10

Discussion 

QCCs permit OTP Holders to provide 

their customers a net price for the entire 


srobinson on DSK4SPTVN1PROD with NOTICES