Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices 16247 

3See Securities Exchange Act Release No. 59425 

(February 19, 2009), 74 FR 8829. 

4The term ‘‘Voluntary Professional’’ is defined in 

CBOE’s rules as any person or entity that is not a 

broker or dealer in securities that elects, in writing, 

to be treated in the same manner as a broker or 

dealer in securities for purposes of specified rules 

relating to priority in the execution of orders, and 

for cancellation fee calculation purposes. See Rule 

1.1(fff) and Securities Exchange Act Release No. 

58327 (August 7, 2008), 73 FR 47988 (August 15, 

2008) (SR–CBOE–2008–09). As part of this 

proposed rule change, the Exchange is proposing to 

amend Rule 1.1(fff) to provide that a Voluntary 

Professional will be treated in the same manner as 

a broker or dealer in securities for purposes of Rule 

6.8C. 

5The Commission has considered the proposed 

rule change’s impact on efficiency, competition and 

capital formation. 15 U.S.C. 78c(f). 

6 15 U.S.C. 78f. 

7 15 U.S.C. 78f(b)(5). 

8See Securities Exchange Act Release No. 57478 

(March 12, 2008), 73 FR 14521 (March 18, 2008) 

(approving rules governing the trading of options on 

the NASDAQ Options Market). 

9See Securities Exchange Act Release No. 59472 

(February 27, 2009), 74 FR 9843 (March 6, 2009) 

(approval of rules for the trading of listed options 

on NYSEAlternext). 

The Commission notes that any entity that acts 

as ‘‘dealer,’’ as defined in Section 3(a)(5) of the Act, 

15 U.S.C. 78c(a)(5), would be required to register 

with the Commission under Section 15 of the Act, 

15 U.S.C. 78o, and the rules and regulations 

thereunder, or qualify for any exception or 

exemption from registration. Activity that may 

cause a person to be deemed a dealer includes 

‘‘ ‘quoting a market in or publishing quotes for 

securities (other than quotes on one side of the 

market on a quotations system generally available 

to non-broker-dealers, such as a retail screen broker 

for government securities).’ ’’ See Definitions of 

Terms in and Specific Exemptions for Banks, 

Savings Associations, and Savings Banks Under 

Sections 3(a)(4) and 3(a)(5) of the Securities 

Exchange Act of 1934, Securities Exchange Act 

Release No. 47364, 68 FR 8686, 8689, note 26 

(February 24, 2003) (quoting OTC Derivatives 

Dealers, Securities Exchange Act Release No. 40594 

(October 23, 1998), 63 FR 59362, 59370, note 61 

(November 3, 1998)). 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

from functioning as market makers. The 

proposed rule change was published for 

comment in the Federal Register on 

February 26, 2009.3 The Commission 

received no comments on the proposal. 

This order approves the proposal. 

II. Description of the Proposal 

The Exchange proposes to amend 

Rule 6.8C, Prohibition Against Members 

Functioning as Market Makers, to 

eliminate certain of its restrictions. Rule 

6.8C currently provides that a member, 

acting either as principal or agent, may 

neither enter nor permit the entry of 

orders into the Exchange’s electronic 

order routing system if (i) the orders are 

limit orders for the account or accounts 

of the same beneficial owner(s); and (ii) 

the limit orders are entered in such a 

manner that the beneficial owner(s) 

effectively is operating as a market 

maker by holding itself out as willing to 

buy and sell such securities on a regular 

or continuous basis. The Exchange 

proposes that these restrictions be 

amended to apply only to customer 

orders (i.e., non-broker-dealer orders) 

that are not Voluntary Professional 

orders.4 The restrictions would no 

longer be applicable to instances where 

a member is acting as principal on its 

own behalf or is acting as agent on 

behalf of other broker-dealer orders or 

Voluntary Professional orders. The 

Exchange noted that it is retaining the 

restriction for customers who are not 

Voluntary Professionals because such 

customers have priority at any price 

over the bids and offers of market 

makers, other broker-dealers, and 

Voluntary Professionals. 

In addition, in those instances where 

its restrictions are applicable, Rule 6.8C 

currently provides that, in determining 

whether a beneficial owner effectively is 

operating as a market maker, the 

Exchange will consider, among other 

things, the simultaneous or near 

simultaneous entry of limit orders to 

buy and sell the same security, the entry 

of multiple limit orders at different 

prices in the same security, and the 

multiple acquisition and liquidation of 

positions in the security during the 

same day. The Exchange proposes to 

remove the last condition pertaining to 

the multiple acquisition and liquidation 

of positions from its list of factors used 

for determining whether a beneficial 

owner is operating as a market maker. 

The Exchange noted that this activity no 

longer should be considered as a factor 

in determining whether a beneficial 

owner is effectively acting as a market 

maker. 

III. Discussion 

After careful review, 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 5 and, in particular, 

the requirements of Section 6 of the 

Act.6 Specifically, the Commission finds 

that the proposal is consistent with 

Section 6(b)(5) of the Act,7 in that the 

proposal has been designed to promote 

just and equitable principles of trade, 

and to protect investors and the public 

interest. 

The Commission believes that it is 

consistent with the Act for an options 

exchange not to prohibit a user of its 

market from operating as a market 

maker without registering as such. The 

Commission previously approved rules 

at other options exchanges that do not 

impose such a prohibition,8 or impose 

such a prohibition on customers only.9

The Commission notes that while the 

Exchange will continue to prohibit 

customers who are not Voluntary 

Professionals from operating as market 

makers, those customers will continue 

to have priority over the bids and offers 

of market makers, other broker-dealers, 

and Voluntary Professionals. 

The Commission also believes that the 

Exchange’s proposal to remove the 

condition pertaining to the multiple 

acquisition and liquidation of positions 

from its list of factors used for 

determining whether a beneficial owner 

is operating as a market maker is 

consistent with the Act. The 

Commission believes that the remaining 

factors are sufficient to enable the 

Exchange to determine whether a user 

of its market is operating as a market 

maker. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–CBOE–2009– 

09) is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–8002 Filed 4–8–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59701; File No. SR–ISE– 

2009–15] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Quoting 

Obligations of Second Market 

Competitive Market Makers 

April 3, 2009. 

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 March 25, 

2009, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission the proposed 

rule change as described in Items I, II, 

and III 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. 


dwashington3 on PROD1PC60 with NOTICES
16248 Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices 

3See Securities Exchange Act Release No. 54580 

(October 6, 2006), 71 FR 60781 (October 16, 2006) 

(SR–ISE–2006–40). 4 17 CFR 240.19b–4(f)(6). 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE proposes to amend the 

quoting obligations of Second Market 

Competitive Market Makers. The text of 

the proposed rule change is as follows, 

with deletions in [brackets] and 

additions in italics: 

Rule 904. Market Maker Quotes and 

Orders 

(a) Quotes. Except as provided below, 

all of the requirements of Rules 803, 

804, and 805 related to quoting 

obligations of Primary Market Makers 

and Competitive Market Makers apply 

to SMPMMs and SMCMMs respectively. 

For purposes of the Rules, SMCMMs are 

considered appointed to all of the 

options classes listed in the Second 

Market. 

(1) SMCMMs are not required to make 

markets in a minimum number of 

options classes in the Second Market. 

SMCMMs may choose whether to make 

markets in one or more options classes 

traded in the Second Market on a daily 

basis. 

(2) If an SMCMM chooses to make 

markets in one or more options classes 

in the Second Market, it must 

[participate in the opening rotation and] 

make markets and enter into any 

resulting transactions on a continuous 

basis in all of the series of the options 

class until the close of trading that day. 

Further, SMCMMs may [not] initiate 

quoting in an additional number of 

options classes intraday, up to the 

number of options classes for which 

they participated in the opening 

rotation on that day. 

(b) No Change. 

* * * * * 

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 these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization 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 proposed rule 

change is to amend the quoting 

obligations of Second Market 

Competitive Market Makers 

(‘‘SMCMMs’’). Pursuant to Commission 

approval, ISE currently lists for trading 

a number of low-volume options classes 

that qualify for listing under its Rule 

502 in a ‘‘Second Market.’’ 3 Among 

other things, the Second Market has 

allowed the Exchange to provide an 

opportunity for additional members to 

provide liquidity as market makers. 

Specifically, the Second Market trading 

rules allow SMCMMs to choose whether 

to make markets in one or more options 

classes on a daily basis. Under the 

current rules, if a SMCMM chooses to 

make markets in an options class, it 

must participate in the opening rotation 

and continue to quote all of the series 

of the options class through the close 

that day. Further, SMCMMs are not 

allowed to initiate quoting in an options 

class intraday. 

The Exchange proposes to amend its 

Second Market rules as follows: (1) 

Permit SMCMMs to quote in a greater 

number of options classes intraday, and 

(2) relax the requirement that SMCMMs 

must participate in the opening rotation 

in the options class that it chooses to 

make a market in on a specific day. 

With this proposed rule change, 

SMCMMs may initiate quoting in an 

options class intraday. However, the 

number of options classes in which a 

SMCMM may initiate quoting shall be 

limited to a number equal to the number 

of classes in which the SMCMM 

participated in the opening rotation on 

that day. For example, if a SMCMM 

participates in the opening rotation for 

30 options classes, it may initiate 

quoting intraday in an additional 30 

classes. Once an SMCMM starts quoting, 

it will continue to be required to quote 

all of the series through the remainder 

of the day. 

The Exchange believes that relaxing 

the obligation for SMCMMs to 

participate in the opening and 

permitting this class of market makers to 

quote in a greater number of options 

classes intraday will encourage 

additional SMCMM participation and 

add liquidity to these low-volume 

options classes. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) and the rules and regulations 

thereunder and, in particular, the 

requirements of section 6(b) of the Act. 

Specifically, the Exchange believes the 

proposed rule change is consistent with 

Section 6(b)(5) requirements that the 

rules of an exchange be designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts, to remove 

impediments to and perfect the 

mechanism for a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. In particular, the 

proposed rule change is designed to 

attract additional liquidity in lowvolume options classes by providing for 

open access to market makers. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose 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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

This proposed rule change does not 

significantly affect the protection of 

investors or the public interest, does not 

impose any significant burden on 

competition, and, by its terms, does not 

become operative for 30 days after the 

date of the filing, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest. The 

Exchange provided the Commission 

with written notice of its intent to file 

the proposed rule change, along with a 

brief description and text of the 

proposed rule change, at least five 

business days prior to the date of filing 

the proposed rule change as required by 

Rule 19b–4(f)(6).4 The proposed 

amendment to ISE Rule 904 will allow 

SMCMMs to quote in a greater number 

of options classes intraday and thus 

provide additional liquidity in the lowVerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 E:\FR\FM\09APN1.SGM 09APN1

dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices 16249 

5 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3OFPAs are discussed in Rule 970, which sets 

forth the criteria for the imposition of a fine (not 

to exceed $5,000) on any member, member 

organization, or any partner, officer, director or 

person employed by or associated with any member 

or member organization, for any violation of an 

OFPA, which violation the Exchange determined is 

minor in nature (known as the ‘‘Minor Rule Plan’’). 

Such a fine would be imposed in lieu of 

commencing a ‘‘disciplinary proceeding’’ as that 

term is used in Exchange Rules 960.1–960.12, and 

would be subject to Rule 19d–1 under the Act. 

4Certain changes proposed in the present filing 

may be affected by SR–Phlx–2009–17, which is 

pending. See Securities Exchange Act Release No. 

59538 (March 9, 2009), 74 FR 11152 (March 16, 

2009). We would amend the present filing if 

necessary upon approval of SR–Phlx–2009–17. 

volume options classes that trade in the 

Exchange’s Second Market. Further, no 

other exchange requires its market 

makers to participate in the opening 

rotation in 100% of the series in options 

classes in which it makes a market. For 

the foregoing reasons, this rule filing 

qualifies for immediate effectiveness as 

a ‘‘non-controversial’’ rule change under 

paragraph (f)(6) of Rule 19b–4 of the 

Act, as it does not raise any new, unique 

or substantive issues, and is beneficial 

for competitive purposes and to 

promote a free and open market for the 

benefit of investors. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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–ISE–2009–15 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–ISE–2009–15. 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, 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–ISE– 

2009–15 and should be submitted on or 

before April 30, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.5

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–8066 Filed 4–8–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59697; File No. SR–Phlx– 

2009–23] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing of a Proposed Rule Change and 

Amendment No. 1 Thereto To Amend 

the By-Laws, Rules and Option Floor 

Procedure Advices of NASDAQ OMX 

PHLX, Inc. 

April 2, 2009. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on March 13, 

2009, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ or the ‘‘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 March 25, 2009, Phlx filed 

Amendment No. 1 to the proposed rule 

change. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

By-Laws, Rules of the Board of 

Governors and Options Rules (the two 

sets of rules are together known as the 

‘‘Rules’’), and Option Floor Procedure 

Advices (‘‘OFPAs’’ or ‘‘Advices’’) 3 to 

make changes to certain standing 

committees and processes of the 

Exchange. Specifically, the Exchange 

proposes to eliminate: (a) The 

Admissions Committee; (b) the Options 

Allocation, Evaluation and Securities 

Committee; (c) the Options Committee; 

(d) the Foreign Currency Options 

Committee; and (e) the Weekly Bulletin. 

Additionally, the Exchange proposes to: 

(a) make the Finance Committee 

optional; (b) change the structure of the 

Business Conduct Committee and 

eliminate reference to the Hearing 

Officer; and (c) authorize action in the 

event of an emergency or extraordinary 

market conditions.4

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. 


dwashington3 on PROD1PC60 with NOTICES