Federal Register / Vol. 77, No. 72 / Friday, April 13, 2012 / Notices 22365 

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

2 17 CFR 240.19b–4. 

3An ROT is defined in Exchange Rule 1014(b) as 

a regular member of the Exchange located on the 

trading floor who has received permission from the 

Exchange to trade in options for his own account. 

See Exchange Rule 1014 (b)(i) and (ii). 

4An SQT is defined in Exchange Rule 

1014(b)(ii)(A) as an ROT who has received 

permission from the Exchange to generate and 

submit option quotations electronically in options 

to which such SQT is assigned. 

5An RSQT is defined in Exchange Rule in 

1014(b)(ii)(B) as 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. 

6See Securities Exchange Act Release No. 65644 

(October 27, 2011), 76 FR 67786 (November 2, 2011) 

(approving SR–Phlx–2011–123). 

If you do not have access to ADAMS, 

or if there are problems in accessing the 

documents located in ADAMS, please 

contact the NRC Public Document Room 

(PDR) Reference staff at 1–800–397– 

4209, 301–415–4737, or by email to 

pdr.resource@nrc.gov. These documents 

may also be viewed electronically on 

the public computers located at the 

NRC’s PDR, O1F21, One White Flint 

North, 11555 Rockville Pike Rockville, 

MD 20852. The PDR reproduction 

contractor will copy documents for a 

fee. 

Dated at Rockville, Maryland this 5th day 

of April 2012. 

For the U.S. Nuclear Regulatory 

Commission. 

Kevin Ramsey, 

Acting Chief, Fuel Manufacturing Branch, 

Division of Fuel Cycle Safety and Safeguards, 

Office of Nuclear Material Safety and 

Safeguards. 

[FR Doc. 2012–8917 Filed 4–12–12; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66767; File No. SR–Phlx– 

2012–40] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change 

Relating to Quarterly Trading 

Requirements Applicable to Registered 

Options Traders 

April 6, 2012. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1, and Rule 19b–4 2 thereunder, 

notice is hereby given that on March 26, 

2012, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II 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 proposes to amend 

Exchange Rules 1014, Obligations and 

Restrictions Applicable to Specialists 

and Registered Options Traders, and 

1093, Phlx XL Risk Monitor Mechanism, 

and Options Floor Procedure Advice B– 

3, Trading Requirements, to change 

trading requirements applicable to 

certain Registered Options Traders 

trading electronically, as described 

below. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room, and on the Commission’s Web 

site at http://www.sec.gov. 

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 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 eliminate unnecessary and 

outdated potential burdens on certain 

Exchange market makers arising from 

their use of electronic orders to trade on 

the Exchange. The general term ‘‘market 

makers’’ on the Exchange includes 

specialists and registered options 

traders (‘‘ROTs’’).3 ROTs can be either 

Streaming Quote Traders (‘‘SQTs’’) 4, 

Remote Streaming Quote Traders 

(‘‘RSQTs’’) 5 or non-Streaming Quote 

Trader ROTs (‘‘non-SQT ROTs’’) which 

by definition are neither SQTs nor 

RSQTs. The Exchange is proposing to 

amend Rule 1014, Commentary .13 to 

permit non-SQT ROTs to meet an inperson trading requirement set forth in 

that section using electronic orders. The 

Exchange also proposes to amend Rule 

1014(b)(ii)(E) to eliminate a trading 

requirement applicable to a non-SQT 

ROT who transacts more than 20% of 

his/her contract volume in an option 

electronically versus in open outcry 

during any calendar quarter. A 

conforming change is proposed to 

Section (a) of Rule 1093, Phlx XL Risk 

Monitor Mechanism. Finally, changes 

are proposed to Options Floor 

Procedure Advice B–3 and to Rule 

1014(b)(ii)(E)(1) to conform to a recent 

amendment by the Exchange of Rule 

1014, Commentary .01, as explained 

below. 

Recent Rule 1014, Commentary .01 

Amendment 

The Exchange has recently amended 

Commentary .01 of Rule 1014. 6 Prior to 

the amendment Commentary .01 

required that in order for an ROT (other 

than an RSQT or a Remote Specialist) to 

receive specialist margin treatment for 

off-floor orders in any calendar quarter, 

the ROT was required among other 

things to execute the greater of 1,000 

contracts or 80% of his total contracts 

that quarter in person and not through 

the use of orders (the ‘‘80% in-person 

test’’). 

The only way to participate in trades 

other than through the use of orders is 

by quoting. As the Exchange explained 

in the proposed rule change, non-SQT 

ROTs do not ‘‘stream’’ quotes, meaning 

send quotes electronically to the 

Exchange. Instead, pursuant to 

Commentary .18 of Rule 1014, they 

submit limit orders electronically and 

respond to floor brokers verbally. While 

SQTs quote electronically by 

‘‘streaming’’ quotations into the 

Exchange, non-SQT ROTs quote 

verbally in response to floor brokers 

representing orders in the trading crowd 

verbally. 

The Exchange explained in the filing 

that the limitation on the use of orders 

to satisfy the 80% in-person test with 

respect to non-SQT ROTs was obsolete 

as, over time, following the movement 

toward a more electronic trading 

platform in options, it had become 

difficult for such ROTs to comply with 

the trading requirement without using 

orders. The Exchange explained that in 

order to comply with their quarterly 

trading requirements, non-SQT ROTs 

have to proactively enter orders that 

provide or take liquidity. While some 

time ago, ROTs were able to place their 

liquidity on the book by verbally 


pmangrum on DSK3VPTVN1PROD with NOTICES
22366 Federal Register / Vol. 77, No. 72 / Friday, April 13, 2012 / Notices 

7The 50% in-person test is separate and distinct 

from the 80% in-person test and applies whether or 

not the ROT seeks to receive specialist margin 

treatment for off-floor orders. 

8 In addition to deleting Rule 1014(b)(ii)(E)(2), the 

Exchange proposes to delete introductory language 

from the beginning of Rule 1014(b)(ii)(E) that would 

no longer be necessary. The substantive provisions 

of Rule 1014(e)(1) governing non-SQT ROT 

obligations, as proposed to be renumbered and 

amended, would continue to apply. 

9 In addition to removing the electronic quoting 

obligation of Rule 1014(b)(ii)(E)(2)(b), the 

amendment would also remove a reference to the 

quote spread requirements of Rule 1014(c)(i) found 

in Rule 1014(b)(ii)(E)(2)(a). The removal of Rule 

1014(b)(ii)(E)(2)(a) does not change non-SQT ROTs’ 

quote spread parameter requirements, as Rule 

1014(c)(i) will continue to apply to them. See also 

Rule 1014(b)(ii)(E)(1)(b), which is proposed to be 

renumbered as Rule 1014(b)(ii)(E)(2), which will 

continue to require non-SQT ROTs to comply with 

the quote spread parameter requirements of Rule 

1014(c)(i). 

10See Securities Exchange Act Release No. 65644 

(October 27, 2011), 76 FR 67786 (November 2, 2011) 

(approving SR- Phlx–2011–123). 

11 15 U.S.C. 78f(b). 

12 15 U.S.C. 78f(b)(5). 

informing the specialist the proposed 

rule change explained that this is no 

longer the case. The Exchange observed 

that non-SQT ROTs could only meet the 

80% in person test by participating in 

crowd trades which they cannot control 

in terms of frequency. The 80% inperson test was therefore amended to 

permit non-SQT ROTs to count orders 

entered in person to meet the test. 

The 50% in-person test. 

Exchange Rule 1014 Commentary .13 

contains a separate in-person 

requirement. It provides that within 

each quarter an ROT must execute in 

person, and not through the use of 

orders, a specified number of contracts, 

such number to be determined from 

time to time by the Exchange. Pursuant 

to Commentary .13, Options Floor 

Procedure Advice B–3 currently 

requires an ROT (other than an RSQT or 

a Remote Specialist) to trade in person, 

and not through the use of orders, the 

greater of 1000 contracts or 50% of his 

contract volume on the Exchange each 

quarter (the ‘‘50% in person test’’).7

For the same reasons discussed above 

in connection with the recent 

modification of the 80% in-person test, 

the Exchange proposes to amend Rule 

1013 Commentary .13 and the 50% inperson test of Options Floor Procedure 

Advice B–3 to permit non-SQT ROTs to 

use orders entered in person to meet the 

test. 

The ‘‘20%’’ Test 

Currently, Rule 1014(b)(ii)(E)(2) 

provides that if a non-SQT ROT 

transacts more than 20% of his/her 

contract volume in an option 

electronically (i.e., by way of placing 

limit orders on the limit order book that 

are executed electronically and 

allocated automatically in accordance 

with Rule 1014(g)(vii)) versus in open 

outcry during any calendar quarter (the 

‘‘20% test’’), commencing the next 

calendar quarter such non-SQT ROT 

will be subject to certain quoting 

obligations for as long as the non-SQT 

ROT trades the option. Among other 

things, the non-SQT ROT would be 

required to submit two-sided electronic 

quotations, or stream quotes, in a 

designated percentage of series within 

options in which he is assigned, in 

accordance with a schedule set forth in 

Rule 1014(b)(ii)(E)(2)(b). 

Streaming quotes would be 

burdensome to non-SQT ROTS who are 

generally not equipped to undertake this 

new form of trading. Requiring a nonSQT ROT to begin streaming would 

result in a significant increase of fixed 

costs to the non-SQT ROT. The 

Exchange believes this will likely result 

in these ROTs leaving the trading floor. 

While meeting the 20% test has become 

more difficult due to the erosion of open 

outcry trading, the Exchange still 

believes price improvement, quality of 

execution, and especially price 

discovery will suffer if these non-SQT 

ROT’s are forced out of open outcry 

market making. 

The Exchange therefore proposes to 

eliminate the 20% test and its 

associated requirements as a vestige of 

the early days of electronic trading.8

The Exchange believes the provision no 

longer makes sense in the current 

environment where electronic trading 

predominates. For the same reasons the 

Exchange deleted the restriction on non 

SQT ROTs’ use of orders from the 80% 

in-person test and the 50% in-person 

test, it is proposing to eliminate the 

requirements of Rule 1014(b)(ii)(E)(2) 

that currently apply if a non-SQT ROT 

transacts more than 20% of his/her 

contract volume in an option 

electronically during any calendar 

quarter.9 The proposed amendment is 

particularly critical given the recent 

adoption by the Exchange in Rule 1014, 

Commentary .01, of a general trading 

requirement that an ROT (other than an 

RSQT or a Remote Specialist) is 

required to trade 1,000 contracts and 

300 transactions on the Exchange each 

quarter, not including transactions 

executed in the trading crowd where the 

contra-side is an ROT.10 The non-SQT 

ROT cannot control the size and 

frequency of crowd trades, even less so 

crowd trades where the contra-side is 

not an ROT. As a practical matter, the 

non-SQT ROT may have no other option 

but to use electronic orders to meet the 

new general trading requirement, thus 

triggering the 20% test which will 

prohibit any further trading of the 

option unless he begins streaming 

quotes in the option in accordance with 

Rule 1014(b)(ii)(E)(2). 

Finally, a reference to non-SQT ROTs 

is proposed to be deleted from Section 

(a) of Rule 1093, Phlx XL Risk Monitor 

Mechanism, which currently refers to 

non-SQT ROTs who are required to 

submit continuous two-sided electronic 

quotations pursuant to Rule 

1014(b)(ii)(E) which is proposed to be 

deleted as discussed above. This is 

simply a conforming change to the 

proposed deletion of Rule 1014(b)(ii)(E). 

Conforming Change—Deletion of Rule 

1014(b)(ii)(E)(1)(c) 

The Exchange also proposes to delete 

Rule 1014(b)(ii)(E)(1)(c) which provides 

that any volume transacted 

electronically will not count towards a 

non-SQT ROT’s 80% in-person test 

contained in Commentary .01 to Rule 

1014. As discussed above, the Exchange 

recently amended Commentary .01 to 

eliminate this restriction. The Exchange 

is deleting Rule 1014(b)(ii)(E)(1)(c) 

simply as a conforming change. 

Conforming Change—Options Floor 

Procedures Advice B–3 

Options Floor Procedure Advice B–3, 

Section (b), also requires an ROT (other 

than an RSQT or a Remote Specialist) in 

order to receive Specialist margin 

treatment for off-floor orders to meet the 

80% in-person test (not through the use 

of orders). The Exchange proposes to 

amend Options Floor Procedure Advice 

B–3 to conform it to the recently revised 

language of Rule 1014 Commentary .01 

such that non-streaming ROTs can use 

orders entered in person to meet the 

80% in-person test. This change is 

simply a conforming change to the 

earlier amendment. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 11 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 12

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 

eliminating a restriction on non-SQT 

ROTs’ use of orders to meet an inperson trading requirement, by 

eliminating burdensome requirements 

triggered by non-SQT ROTs’ use of 

orders to transact more than 20% of 

their contract volume in an option, and 


pmangrum on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 72 / Friday, April 13, 2012 / Notices 22367 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

by making clarifying and conforming 

changes to previously amended text. 

It would be unjust and inequitable to 

continue to impose in-person trading 

requirements on non-SQT ROTs without 

counting orders entered electronically 

given that their ability to trade other 

than by the use of orders has 

substantially diminished over the years. 

Making the changes proposed herein 

will remove impediments to and perfect 

the mechanism of a free and open 

market and a national market system by 

eliminating an in-person trading 

requirement that non-SQT ROTs will 

have difficulty meeting given the 

current electronic trading environment, 

thus enabling them to continue making 

markets by open outcry, to the extent 

they are able, to the benefit of investors. 

Investors and the public interest are 

protected by including as market makers 

those individuals who, while unable or 

unwilling to invest resources necessary 

for streaming, are able to provide 

liquidity in the open outcry trading that 

does remain on the floor of the 

Exchange. The changes that conform 

rule text to an earlier Exchange 

amendment benefit investors and the 

public interest by providing clarity and 

eliminating potential confusion. 

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 email to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2012–40 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2012–40. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (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 will 

also be available for inspection and 

copying at the Exchange’s principal 

office. 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 publicly available. All 

submissions should refer to File 

Number SR–Phlx–2012–40 and should 

be submitted on or before May 4, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–8877 Filed 4–12–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66772; File No. SR–MSRB– 

2012–05] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing of a Proposed 

Rule Change Consisting of a 

Restatement of an Interpretive Notice 

Concerning the Application of MSRB 

Rule G–17 to Sophisticated Municipal 

Market Professionals 

April 9, 2012. 

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

Securities Exchange Act of 1934 (‘‘the 

Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on March 26, 2012, 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, II, and 

III below, which Items have been 

prepared by the MSRB. 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 with the SEC a 

proposed rule change consisting of a 

restatement of an interpretive notice 

(the ‘‘Existing SMMP Notice’’ and the 

‘‘Restated SMMP Notice,’’ respectively) 

concerning the application of MSRB 

Rule G–17 (on conduct of municipal 

securities and municipal advisory 

activities) to sophisticated municipal 

market professionals (‘‘SMMPs’’). 

Because of the relationship between the 

proposed rule change and FINRA Rule 

2111 (on suitability), the MSRB requests 

that the proposed rule change be made 

effective on July 9, 2012, which is the 

date on which FINRA Rule 2111 will 

become effective. 

The text of the proposed rule change 

is available on the MSRB’s Web site at 

www.msrb.org/Rules-andInterpretations/SEC-Filings/2012- 

Filings.aspx, at the MSRB’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 

MSRB included statements concerning 

the purpose of and basis for the 


pmangrum on DSK3VPTVN1PROD with NOTICES