Federal Register / Vol. 72, No. 11 / Thursday, January 18, 2007 / Notices 2325 

7See Phlx Rule 1014(c)(i)(A). 

8Phlx Rule 1014(b)(ii)(D)(1) provides that an SQT 

and an RSQT shall be responsible to quote 

continuous, two-sided markets in not less than 60% 

of the series in each option 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 Phlx Rule 1080(l)(i)(C)) 

shall be responsible to quote continuous, two-sided 

markets in not less than 99% of the series listed on 

the Exchange 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 continuous 

quotations for not less than 99% of the series of the 

option listed on the Exchange until the close of that 

trading day. 

9Phlx Rule 1034 establishes maximum allowable 

bid/ask differentials on the Exchange. 

10A quote ‘‘block’’ is a component of the 

Exhange’s SQF application that allows for delivery 

of a set of multiple quotations from the SQT or 

RSQT to the Exchange. Within a single ‘‘block,’’ the 

SQT or RSQT can deliver quotes for any number 

of option series ranging from 1 to 99. 

11 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 12 15 U.S.C. 78f(b)(5). 

13 15 U.S.C. 78s(b)(2). 

14 17 CFR 200.30–3(a)(12). 

parameters on the Exchange 7 and 

efficiency of quote submission through 

the Specialized Quote Feed (‘‘SQF’’), as 

defined in Phlx Rule 1080, Commentary 

.01. Failure to meet established 

minimum performance requirements 

could result in restriction by the OAESC 

of additional options assignments; 

suspension, termination, or restriction 

of an existing assignment on one or 

more options; or suspension, 

termination, or restriction of an SQT’s 

or RSQT’s status as such. 

Phlx Rule 510 would establish 

specific criteria for each option assigned 

to an SQT or RSQT that would be 

regularly evaluated by the Exchange. 

First, the Exchange would evaluate the 

percentage of total quotes submitted by 

the SQT or RSQT that represent the 

NBBO. If the percentage of the total 

quotes that represent the NBBO is in the 

lowest quartile of all SQTs or RSQTs for 

two or more consecutive months, this 

may be considered sub-standard 

performance. Second, the Exchange 

would evaluate the SQT or RSQT’s 

adherence to the Exchange’s established 

quoting requirements pursuant to Phlx 

Rule 1014.8 If an SQT or RSQT fails to 

meet the quoting requirements as 

prescribed by the rule, this may be 

considered sub-standard performance. 

Third, the Exchange would consider the 

number of requests for quote spread 

parameter 9 relief for the purposes of 

evaluating performance standards. 

Finally, to evaluate efficient quote 

submission to the Exchange, the 

Exchange would consider how an SQT 

or RSQT optimizes the submission of 

quotes through the SQF, as defined in 

Phlx Rule 1080, by evaluating the 

number of individual quotes per quote 

‘‘block’’ received by the Exchange.10 An 

SQT or RSQT is assigned a number of 

ports or lines on which they can send 

quote blocks. The number of lines 

assigned dictates the number of blocks 

that may be sent simultaneously by the 

SQT or RSQT. The number of lines 

assigned to an SQT or RSQT is generally 

a function of the number of products 

being quoted, taking into account the 

throughput required to minimize quote 

latency risk. The Exchange intends to 

evaluate the average number of quotes 

(1–99) submitted within the SQT or 

RSQT’s quote blocks. The number of 

quotes delivered in each block would 

generally be a measure of the SQT or 

RSQT’s quoting efficiency. For example, 

a firm sending an average of 1 quote in 

each block may be considered 

inefficient while a firm sending an 

average of 99 quotes in each block 

would be considered very efficient. 

The Exchange explained that, in 

general, the expenditure of systemic 

resources required to process an 

inefficient block is nearly equal to the 

expenditure of systemic resources 

required to process an efficient block. 

Therefore, an efficient SQT or RSQT can 

achieve a much higher level of quote 

submission than an inefficient SQT or 

RSQT using nearly the same amount of 

exchange system resources. The 

Exchange believes that the regular 

monitoring of quoting efficiency in this 

fashion will result in more efficient 

quoting on the Exchange (i.e., more 

quotes submitted per block), thus 

preserving and maximizing Exchange 

system capacity for handling quote 

traffic. 

III. Discussion 

After careful review of the proposal, 

the Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.11 In 

particular, the Commission finds that 

the proposal is consistent with Section 

6(b)(5) of the Act,12 which requires, 

among other things, that the rules of an 

exchange be designed to promote just 

and equitable principles of trade, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

The Commission believes that the 

Exchange’s proposal to establish 

performance requirements for SQTs and 

RSQTs should, among other things, 

encourage Exchange traders to enhance 

quoting efficiency, preserve system 

capacity, and minimize requests for 

relief from quote spread parameters. 

Consequently, the proposal should 

encourage Phlx SQTs and RSQTs to 

strive to improve their performance as 

market makers on the Exchange, as well 

as help to mitigate the Exchange’s quote 

message traffic. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,13 that the 

proposed rule change (SR–Phlx–2006–

51), be, and hereby is, approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–586 Filed 1–17–07; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Advisory Committee on Veterans 

Business Affairs; Public Meeting 

The U.S. Small Business 

Administration (SBA), pursuant to the 

Veterans Entrepreneurship and Small 

Business Development Act of 1999 (Pub. 

L. 106–50), Advisory Committee on 

Veterans Business Affairs will host a 

public meeting on Friday, January 26, 

2007, starting at 9 a.m. until 5 p.m. EST. 

The meeting will take place at SBA, 409 

3rd Street, SW., Eisenhower Conference 

Room, Side B, 2nd Floor, Washington, 

DC 20416. 

The purpose of the meeting is to 

select the Committee’s Chairman and 

Vice-Chairman and outline the agenda 

for 2007. 

Anyone wishing to attend must 

contact Cheryl Clark, Program Liaison, 

Office of Veterans Business 

Development at (202) 205–6773, or send 

e-mail to cheryl.clark@sba.gov. 

Matthew Teague, 

Committee Management Officer. 

[FR Doc. E7–613 Filed 1–17–07; 8:45 am] 

BILLING CODE 8025–01–P 


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