Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Notices 67427 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Options Floor Procedure Advices (‘‘OFPAs’’ or 

‘‘Advices’’) generally correspond to Exchange rules. 

For example, OFPA B–3 is a corresponding Advice 

to Rule 1014 Commentary .01 and OFPA A–10 is 

a corresponding Advice to Rule 1063. OFPAs are 

part of the Exchange’s minor rule plan (‘‘MRP’’ or 

‘‘Minor Rule Plan’’), which consists of Advices with 

preset fines, pursuant to Rule 19d–1(c) under the 

Act. 17 CFR 240.19d–1(c). See Securities Exchange 

Act Release No. 50997 (January 7, 2005), 70 FR 

2444 (January 13, 2005) (SR–Phlx–2003–40) 

(approval order establishing Floor Broker 

Management System in OFPA C–2 and Rule 1063). 

The Exchange is not proposing to change the fines 

in any Advices. 

4An 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). 

5An 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). 

(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–NYSEAmex–2010–100 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–NYSEAmex–2010–100. 

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 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–NYSEAmex–2010–100 and 

should be submitted on or before 

November 23, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27659 Filed 11–1–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63192; File No. SR–Phlx– 

2010–145] 

Self-Regulatory Organizations; The 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change To 

Establish Remote Specialists 

October 27, 2010. 

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 October 

14, 2010, 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 amend 

Exchange Rule 501 (Specialist 

Appointment), Rule 506 (Allocation 

Application), Rule 507 (Application for 

Approval as an SQT or RSQT and 

Assignment in Options), Rule 1014 

(Obligations and Restrictions Applicable 

to Specialists and Registered Options 

Traders), and Rule 1020 (Registration 

and Functions of Options Specialists) to 

allow certain Exchange members to act 

as option specialists that are not 

physically present on the option trading 

floor. The Exchange also proposes to 

amend Options Floor Procedure 

Advices A–7 (Responsibility To Cancel), 

A–10 (Specialist Trading With Book), 

B–3 (Trading Requirements), and E–1 

(Required Staffing of Options Floor) 3 to 

conform them with the proposed rule 

changes. 

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, on the 

Commission’s Web site at http:// 

www.sec.gov; 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 this proposal is to 

amend Exchange Rules 501, 506, 507, 

1014, and 1020 and Option Floor 

Procedure Advices A–7, A–10, B–3, and 

E–1 to allow certain Exchange members 

to act as option specialists that are not 

physically present on the option trading 

floor. 

Background 

There are several types of market 

makers on the Exchange, including 

Registered Options Traders (‘‘ROTs’’),4

Streaming Quote Traders (‘‘SQTs’’),5

Remote Streaming Quote Traders 


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6An 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). 

7Rule 1014 also discusses other market makers 

including Directed SQTs and Directed RSQTs, 

which receive Directed Orders as defined in Rule 

1080(l)(i)(A). Specialists may likewise receive 

Directed Orders. 

8The Exchange proposes to delete the word 

‘‘commission’’ from Rule 1020(b) to clarify that 

orders entrusted to specialists and [sic] are not 

limited to only commission orders. 

9See Securities Exchange Act Release No. 59924 

(May 14, 2009), 74 FR 23759 (May 20, 2009) (SR– 

Phlx–2009–23) (approval order that, among other 

things, established that Exchange staff administers 

Rules 500 through 599). See also Rule 500. 

10See, e.g., Supplementary Material .01 to Rule 

506 (specialist may not apply for a new allocation 

for a period of six months after an option allocation 

was taken away from the specialist in a disciplinary 

proceeding or an involuntary reallocation 

proceeding). 11At least one exchange that uses a specialist 

system has allowed certain option series to trade 

without a designated lead market maker (specialist). 

See Securities Exchange Act Release No. 56001 

(July 2, 2007), 72 FR 37557 (July 10, 2007) (SR– 

NYSEArca–2007–34) (order approving). And at 

least one exchange that does not have a specialist 

system has allowed options to be traded without 

any market maker. See Securities Exchange Act 

Release No. 61735 (March 18, 2010), 75 FR 14227 

(March 24, 2010) (SR–NASDAQ–2010–007) (order 

approving). 12An Options Floor Broker is an individual who 

is registered with the Exchange for the purpose, 

while on the Options Floor, of accepting and 

executing options orders received from members 

and member organizations. An Options Floor 

Broker shall not accept an order from any other 

source unless he is the nominee of a member 

organization qualified to transact business with the 

public in which event he may accept orders from 

public customers of the organization. See Rule 

1060. 13See Rule 1080 regarding the Exchange’s 

electronic order, trading, and execution system. See 

also Securities Exchange Act Release Nos. 46763 

(November 1, 2002), 67 FR 68898 (November 13, 

2002) (SR–Phlx–2002–04) (order approving the 

Exchange’s electronic interface for specialists and 

ROTs, AUTOM); 50100 (July 27, 2004), 69 FR 46612 

(August 3, 2004) (SR–Phlx–2003–59) (order 

approving the Exchange’s electronic platform for 

options, XL); and 59995 (May 28, 2009), 74 FR 

26750 (June 3, 2009) (SR–Phlx–2009–32) (order 

approving the Exchange’s enhanced electronic 

platform, XL II). 

14The current Phlx market model combining 

open outcry and electronic trading is also used by 

other options exchanges, such as Chicago Board 

Options Exchange, Inc. (‘‘CBOE’’), NYSE Amex LLC 

(‘‘NYSE Amex’’) and NYSE Arca, Inc. (‘‘NYSE 

Arca’’). Only electronic options trading is done on 

other exchanges, such as the International 

Securities Exchange, LLC (‘‘ISE’’) and The NASDAQ 

Stock Market LLC (‘‘NASDAQ’’). 

15The Exchange has a process whereby certain 

options (e.g. securities of a subsidiary, or 

convertible into the securities of the issuer, issued 

in connection with a name change or a reverse stock 

split, or created in connection of a merger or 

acquisition or a ‘‘spin-off’’ transaction), are 

automatically allocated to the specialist that is 

already allocated the related options. See 

Supplementary Material .02 to Rule 506 and 

Exchange Act Release No. 60455 (August 6, 2009), 

74 FR 40857 (August 13, 2009) (SR–Phlx–2009–62) 

(notice of filing and immediate effectiveness). 

(‘‘RSQTs’’),6 and specialists.7 Specialists 

are Exchange members who are 

registered as options specialists 

pursuant to Rule 1020(a). Paragraph (b) 

of Rule 1020 states that as a condition 

of a member being registered as a 

specialist in one or more options, it is 

understood that, in addition to the 

execution of commission orders 8

entrusted to him in such options, a 

specialist is to engage in a course of 

dealings for his own account to assist in 

the maintenance, insofar as reasonably 

practicable, of a fair and orderly market 

on the Exchange in such options. 

Paragraph (c) states that a specialist or 

his member organization shall not effect 

on the Exchange purchases or sales of 

any option in which such specialist is 

registered, for any account in which he 

or his member organization is directly 

or indirectly interested, unless such 

dealings are reasonably necessary to 

permit such specialist to maintain a fair 

and orderly market. Paragraph (d) sets 

forth criteria for a specialist dealing in 

his own account in relation to assisting 

in the maintenance, insofar as 

reasonably practicable, of a fair and 

orderly market in the options in which 

he is registered. 

Specialists apply for allocation of 

options issues pursuant to Rule 501 and 

RSQTs apply for assignment in options 

pursuant to Rule 507. The Exchange 

administers Rules 500 through 599 (the 

‘‘Allocation and Assignment Rules’’), 

including Rules 501, 506, and 507 as 

proposed herein.9

The Allocation and Assignment Rules 

generally describe the process for: 

Application for becoming and 

appointment of specialists; allocation of 

classes of options to specialist units and 

individual specialists; application for 

becoming and approval of SQTs and 

RSQTs and assignment of options to 

them; and specialist, SQT, and RSQT 

performance evaluations. The 

Allocation and Assignment Rules also 

indicate under what circumstances new 

allocations may not be made.10

Each options class and series listed on 

the Exchange must currently have a 

specialist that has a physical presence 

on the options floor (‘‘floor-based 

specialist’’).11 The floor-based specialist 

system is historically based in the 

traditional open outcry auction market 

system that has trading crowds at 

physical trading posts on the floor and 

Floor Brokers 12 that represent orders on 

the floor on behalf of others (‘‘auction 

market system’’ or ‘‘open outcry 

system’’). The auction market system is 

necessary, and indeed invaluable, to 

certain types of market participants 

(e.g., institutional traders and certain 

large-volume traders). The Exchange has 

developed, in parallel to the auction 

market system, an extensive electronic 

means to execute option orders.13 As a 

result, the Exchange operates an options 

market that combines a traditional open 

outcry auction market trading floor with 

electronic trading (the ‘‘current Phlx 

market’’).14

The Exchange has found that it can be 

difficult, if not impossible, to allocate 

certain option products; and has found 

that specialists may at times relinquish 

their options privileges. This could 

occur when, as an example, underlying 

securities are involved in a takeover, a 

merger/acquisition situation, or some 

type of rights offering. Without a 

specialist that is willing to accept, or 

retain, allocation of an option, however, 

the Exchange may not list such options, 

to the detriment of market participants 

and public investors. This filing seeks to 

remedy the inability to allocate options 

where no floor-based specialists are 

available for allocation.15

Specialist Rights and Obligations 

The Exchange initially proposes to 

define remote specialist in Rule 1020. In 

particular, the Exchange proposes to 

add sub-paragraph (a)(ii) stating that a 

Remote Specialist is a qualified RSQT 

approved by the Exchange to function as 

a specialist in one or more options if the 

Exchange determines that it cannot 

allocate such options to a non-remote 

specialist (that is, a floor based 

specialist) (‘‘Remote Specialist’’). 

A Remote Specialist has all the rights 

and obligations of a specialist, unless 

Exchange rules provide otherwise. The 

Exchange believes that the concept of 

specialist rights and obligations 

applying to all specialists, including 

Remote Specialists, is paramount to the 

proposal and therefore uniformly 

applicable. The Exchange proposes to 

underscore this principle by indicating 

in Rule 1020(a) that the term specialist 

includes a Remote Specialist as defined 

in Rule 1020(a)(ii) and registered 

pursuant to Rule 501; and indicating 

that a Remote Specialist has all the 

rights and obligations of an options 

specialist unless Exchange rules provide 

otherwise. 

Becoming a Remote Specialist 

The Exchange proposes to amend 

Rule 501, which generally deals with 

the process of applying for approval as 

a specialist, and to amend the rule to 

indicate that in certain circumstances 

RSQTs may act as specialists. 

In particular, the Exchange proposes 

new paragraph (f)(i) to state that RSQTs, 


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16A ‘‘specialist unit’’ including a Remote 

Specialist unit, may have one or more individual 

‘‘specialists.’’ 17For Exchange trading hours, see Rule 101. 18To the extent necessary, the Exchange will 

announce such communication arrangements to its 

members via an Options Trading Alert (‘‘OTA’’) or 

Options Regulatory Alert (‘‘ORA’’). 19Paragraph (b) of Rule 501 states, in relevant 

part, that initial application(s) to become a 

specialist unit shall be in a form and/or format 

prescribed by the Exchange and shall include the 

following: the identity of the unit’s staff positions 

and who will occupy those positions; the unit’s 

clearing arrangements; the unit’s capital structure, 

including any lines of credit; and the unit’s back up 

arrangements endorsed by the parties. 

Paragraph (d) of Rule 501 states, in relevant part, 

that each unit must consist of at least the following 

staff for each trading floor specialist post: one head 

specialist; and one assistant specialist that must be 

associated with the specialist unit. 

20Moreover, recognizing that the market making 

functions of Remote Specialists and RSQTs may be 

similar in many respects but are not identical, the 

Exchange notes that current RSQTs, who also have 

constrained open outcry capabilities, have been 

fulfilling market making requirements on the 

Exchange (e.g. making two-sided market quotations) 

for years without specific back-up personnel 

requirements. See Securities Exchange Act Release 

No. 50100 (July 27, 2004), 69 FR 46612 (SR–Phlx– 

2003–59) (approval order relating to the Exchange’s 

electronic trading platform XL and, among other 

things, Rule 507). See also Rules 507 and 1014. 

21This concept follows through to the OFPAs. 

The Exchange proposes to clarify Advice E–1 to 

exempt a Remote Specialist from the specialist 

obligation to have personnel on the trading floor, 

while retaining the Remote Specialist obligation to 

have a representative available telephonically. 

22For all RSQT application and approval criteria, 

see Rule 507(a)(i)(A) through (a)(i)(G). 

23Regarding RSQT market making obligations, 

Rule 1014(b)(ii)(D)(1) states, in relevant part, that in 

Continued 

as defined in Rule 1014, may submit an 

application to be an approved specialist 

unit.16 Upon application by a qualified 

RSQT (which has to become an RSQT 

pursuant to Rule 507), the Exchange 

will approve such organization as an 

approved off-floor Remote Specialist 

unit which may function as a specialist 

unit in one or more options. The 

Exchange could approve a Remote 

Specialist if the Exchange determines 

that it cannot allocate such options to a 

floor specialist. A Remote Specialist 

would not, in contrast to an on-floor 

specialist, have any physical presence 

on the options floor. Therefore, a 

Remote Specialist would not, in contrast 

to an on-floor specialist, have any duties 

emanating from having a floor presence. 

The Exchange clarifies in proposed Rule 

501(f)(iii) that, as stated in Rule 

1020(a)(ii), all specialist rights and 

obligations apply to Remote Specialists 

unless otherwise noted in the rules. 

The Exchange believes that it is 

important that each Remote Specialist is 

available and reachable at all times 

during trading hours. The Exchange 

therefore proposes language in Rule 

501(f)(ii) stating that every Remote 

Specialist must be accessible to 

exchange staff and members throughout 

all trading hours for the products 

allocated to the specialist.17 To ensure 

that each Remote Specialist is reachable, 

the Exchange proposes language in subparagraph (f)(ii) stating that a Remote 

Specialist shall provide Exchange staff 

and members with telephone access to 

such specialist and/or associated staff at 

all times during trading hours.18

Rule 501(b) currently indicates that 

each specialist unit will include in the 

initial application the unit’s back up 

specialist arrangements; and Rule 501(d) 

indicates that each specialist unit will 

indicate its assistant specialist.19

Remote Specialists will not need to 

meet the assistant specialist staffing or 

the back-up specialist unit requirement. 

The Exchange believes that this is 

rational and appropriate for Remote 

Specialists, who have constrained open 

outcry capabilities.20 As such, the 

Exchange proposes to amend Rule 501 

to indicate that back up specialist 

arrangements and assistant specialist 

requirements are not applicable to 

Remote Specialists.21 All other Rule 501 

application requirements will be 

applicable to Remote Specialists. 

The requirement that each specialist 

designates an assistant specialist and a 

back-up specialist was initially 

established to help ensure that there 

would be adequate liquidity in a given 

issue in the event the appointed 

specialist was unavailable. At the time, 

the Exchange options market was 

strictly a floor-based auction market and 

there may have only been a few market 

makers (or market participants) in any 

given issue. It was therefore necessary to 

have an assistant or back-up specialist 

ready to take over as specialist if the 

appointed specialist was unable to 

fulfill its obligations. The rationale 

underlying the assistant/back-up 

requirement has become antiquated 

with the development of the classic 

auction system into the current Phlx 

market with extensive electronic-based 

trading. As such, RSQTs are assigned in 

the same options that are allocated to 

specialists and, in conjunction with 

other market makers on the Exchange, 

are able to provide liquidity in the event 

of a specialist’s temporary absence. 

Moreover, since nearly all option issues 

traded on the Exchange are traded on 

multiple exchanges, the historical risk 

to be managed by the current assistant/ 

backup requirement (namely, the ability 

of the Exchange to foster the provision 

of liquidity for investors) is no longer 

present. 

The Exchange proposes clarifying 

changes to Rule 506, which deals with 

the process of qualified specialist units 

(that is, specialist units approved 

pursuant to Rule 501) applying for, and 

receiving, allocation of a class of 

options; and indicates under what 

circumstances new allocations cannot 

be made. Paragraph (b) currently states 

that an allocation application shall, at a 

minimum, include the name and 

background of the head specialist and 

assistant specialist(s), the unit’s 

experience and capitalization 

demonstrating an ability to trade the 

particular options class sought, and any 

other reasons why the unit believes it 

should be assigned or allocated the 

security. In addition, the Exchange may 

require that the application include 

other information such as system 

acceptance/execution levels and 

guarantees. The Exchange proposes to 

indicate in paragraph (b) that the 

assistant specialist requirement is not 

applicable to Remote Specialists. 

Paragraph (c) currently states that the 

Exchange’s decisions regarding 

allocation of specialist privileges are 

communicated in writing to floor 

members. In light of the off-floor Remote 

Specialist proposal, the Exchange would 

modify paragraph (c) to indicate that 

communications would not be confined 

only to floor members, but would be 

made to all Exchange members (e.g. 

specialists, RSQTs, SQTs and ROTs). 

Finally in terms of the application 

process, the Exchange proposes to 

clarify the parameters of Rule 507. This 

rule currently describes the process and 

criteria for successfully becoming an 

RSQT or SQT, which includes: 

Significant market-making and/or 

specialist experience; superior 

resources, including capital, technology 

and personnel; demonstrated history of 

stability, superior electronic capacity, 

and superior operational capacity; and 

proven ability to interact with order 

flow in all types of markets.22

After a market maker on the Exchange 

applies and is approved pursuant to 

Rule 507 to be an RSQT, the RSQT may 

then apply to become a Remote 

Specialist pursuant to the separate 

process set forth in Rule 501. The 

Exchange clarifies this two-step process 

in proposed new paragraph (f) of Rule 

507, which states that nothing in Rule 

507 shall be construed to automatically 

qualify an RSQT to be a Remote 

Specialist on the Exchange. 

Quoting Obligations and Priority 

Rule 1014 sets forth the quoting 

(market making) obligations for all 

market makers on the Exchange, with 

quoting requirements for RSQTs 

specified in Rule 1014(b)(ii)(D)(1) 23 and 


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addition to the other requirements for ROTs set 

forth in this Rule 1014, except as provided in subparagraph (4) below, an SQT and an RSQT shall be 

responsible to quote two-sided markets in not less 

than 60% of the series 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 Rule 1080(l)(i)(C)) shall be 

responsible to quote two-sided markets in the lesser 

of 99% of the series listed on the Exchange or 100% 

of the series listed on the Exchange minus one callput pair, in each case 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 

until the close of that trading day quotations for the 

lesser of 99% of the series of the option listed on 

the Exchange or 100% of the series of the option 

listed on the Exchange minus one call-put pair. To 

satisfy the applicable requirements of this subparagraph (D)(1) with respect to quoting a series, an 

SQT, RSQT, DSQT, or DRSQT must quote such 

series 90% of the trading day (as a percentage of 

the total number of minutes in such trading day) or 

such higher percentage as the Exchange may 

announce in advance. The Exchange may consider 

exceptions to the requirement to quote 90% (or 

higher) of the trading day based on demonstrated 

legal or regulatory requirements or other mitigating 

circumstances. 

24Regarding specialist market making obligations, 

Rule 1014(b)(ii)(D)(2) states, in relevant part, that 

the specialist shall be responsible to quote twosided markets in the lesser of 99% of the series or 

100% of the series minus one call-put pair in each 

option in which such specialist is assigned. To 

satisfy the requirement of this sub-paragraph (D)(2) 

with respect to quoting a series, the specialist must 

quote such series 90% of the trading day (as a 

percentage of the total number of minutes in such 

trading day) or such higher percentage as the 

Exchange may announce in advance. The Exchange 

may consider exceptions to the requirement to 

quote 90% (or higher) of the trading day based on 

demonstrated legal or regulatory requirements or 

other mitigating circumstances. 

25QOS are options series that expire at the close 

of business on the last business day of a calendar 

quarter. See Commentary .08 to Rule 1012. For 

index QOS, see Rule 1101A. 

26Adjusted option series are defined in Rule 

1014(b)(ii)(D)(4) as an option series wherein one 

option contract in the series represents the delivery 

of other than 100 shares of underlying stock or 

Exchange-Traded Fund Shares. 

27The Exchange has submitted an immediately 

effective filing proposing to delete obsolete 

terminology from certain Exchange rules including 

Rule 1014, which filing is subject to a 30 day 

operative delay. See Securities Exchange Act 

Release No. 63036 (October 4, 2010), 75 FR 62621 

(October 12, 2010) (SR–Phlx–2010–131) (notice of 

filing and immediate effectiveness). SR–Phlx–2010– 

131 has proposed changes to the rule text of certain 

rules that are discussed in this filing, specifically 

sub-paragraph (b)(i)(B) and Commentary .05 of Rule 

1014, and the text of these rules in Exhibit 5 reflects 

the changes made in SR–Phlx–2010–131 that are 

operative as of October 27, 2010. 

quoting requirements for specialists 

specified in Rule 1014(b)(ii)(D)(2).24 The 

Exchange proposes to clarify that the 

two-sided market quoting requirements 

for specialists are applicable to Remote 

Specialists. The Exchange proposes also 

to clarify that RSQTs will have different 

quoting requirements when they are 

acting as Remote Specialists as opposed 

to when they are acting as RSQTs. 

Specifically, the Exchange proposes to 

state in Rule 1014(b)(ii)(D)(2) that 

RSQTs functioning as Remote 

Specialists in particular options shall be 

responsible to quote two-sided markets 

just as on-floor specialists are now 

required to do. The Exchange also 

proposes to state in Rule 

1014(b)(ii)(D)(1) that the RSQT quoting 

requirements found therein are not 

applicable to RSQTs when they are 

acting as Remote Specialists (in which 

case the specialist quoting requirements 

found in sub-paragraph (D)(2) are 

applicable). The Exchange believes that 

this appropriately establishes quoting 

equivalency among on-floor specialists 

and Remote Specialists. 

Rule 1014 establishes that the market 

making (quoting) obligations do not 

apply to RSQTs (as well as to SQTs, 

DSQTs, and DRSQTs) in terms of certain 

types of options products. In particular, 

Rule 1014(b)(ii)(D)(4) states that RSQTs 

and the other market makers shall be 

deemed not to be assigned in any 

Quarterly Option Series (‘‘QOS’’),25 any 

adjusted option series,26 and any option 

series until the time to expiration for 

such series is less than nine months; 

and thereby establishes an exemption 

for RSQTs and the other market makers 

from the obligations set forth in Rule 

1014 in the noted categories of products. 

The Exchange proposes to add new 

language to sub-paragraph (D)(4) to 

indicate that these exemptions apply to 

RSQTs only when they are acting as 

RSQTs, and do not apply to RSQTs 

when they are functioning as Remote 

Specialists in particular options. 

Rule 1014(b)(ii)(B) currently indicates 

that no person who is either directly or 

indirectly affiliated with an RSQT 

(‘‘affiliated RSQT’’) is allowed to submit 

quotations as a specialist, SQT, RSQT or 

non-SQT ROT in options in which such 

affiliated RSQT is assigned. These 

restrictions remain. The Exchange 

proposes to amend sub-paragraph 

(b)(ii)(B) only to indicate that an RSQT 

cannot quote both as RSQT and as 

Remote Specialist in a particular 

security. That is, if an RSQT is a Remote 

Specialist in a particular security, the 

Remote specialist must make a market 

(submit quotations) as a specialist and 

may not make a market as an RSQT in 

that particular security. 

On-floor specialists currently 

participate in trades that are affected in 

open outcry, as well as electronically. In 

general, a trading crowd (including an 

on-floor specialist) has priority over outof-crowd SQTs and RSQTs at the 

execution price for orders with the size 

of at least 500 contracts, while out-of 

crowd SQTs and RSQTs have priority 

for orders of less than 500 contracts. In 

light of the central concept that to the 

extent practicable (and unless otherwise 

noted in Exchange rules), specialists 

and Remote Specialists are treated the 

same, that is, have similar rights and 

obligations, both specialists and Remote 

Specialists would have similar priority 

rights to the extent practicable. As such, 

Remote Specialist priority rights would 

be coextensive with their ability to 

submit electronic quotations via the 

Exchange’s electronic order, execution, 

and trading system, Phlx XL, while not 

being on the floor. For example, 

Commentary .05(c)(ii) states that 

respecting crossing, facilitation and 

solicited orders (as defined in Rule 

1064) with a size of at least 500 

contracts on each side that are 

represented and executed in open 

outcry, priority shall be afforded to incrowd participants over RSQTs and outof crowd SQTs, and that such orders 

shall be allocated in accordance with 

Exchange rules. The Exchange proposes 

to add Remote Specialists to 

Commentary .05(c)(ii) so that they are 

treated similarly for priority purposes 

because they do not engage in open 

outcry floor trading. 

Commentary .05(b) to Rule 1014 states 

that SQTs and RSQTs can submit orders 

electronically via XL, the Exchange’s 

electronic order, execution and trading 

system. The Exchange proposes to add 

Remote Specialists to Commentary 

.05(b) so that they can likewise submit 

quotes electronically; and to confirm 

that, similarly to RSQTs, the Exchange 

has the ability to allocate one or more 

options to Remote Specialists. 

Commentary .05(C)(i) indicates that if a 

Floor Broker presents a non-electronic 

order in an option assigned to an RSQT, 

such RSQT or SQT may not participate 

in trades stemming from the nonelectronic order unless the order is 

executed at the price quoted by the noncrowd RSQT or SQT at the time of 

execution. The Exchange proposes to 

include Remote Specialists in 

Commentary .05(C)(i) to establish 

priority that is coextensive with Remote 

Specialist electronic quoting and trading 

capabilities.27

The Exchange proposes to clarify 

several OFPAs commensurate with a 

Remote Specialist’s off-floor electronic 

quoting and trading capabilities. In 

particular, the Exchange proposes to 

state in Advice A–10 that a Remote 

Specialist is exempted from the 

specialist duty of ensuring that at least 

one ROT is present in a floor trading 

crowd before such specialist can 

participate as principal in a trade. The 

Exchange proposes to state in Advice 


hsrobinson on DSK69SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Notices 67431 

28See Securities Exchange Act Release Nos. 

55531 (March 26, 2007), 72 FR 15736 (April 2, 

2007) (SR–CBOE–2006–94) (order approving 

proposal to establish off-floor Delegated Primary 

Market-Makers); 57747 (April 30, 2008), 73 FR 

25811 (May 7, 2008) (SR–CBOE–2008–49) (notice of 

filing and immediate effectiveness to establish offfloor Lead Market-Makers); 57568 (March 26, 2008), 

73 FR 18016 (April 2, 2008) (SR–CBOE–2008–32 

(notice of filing and immediate effectiveness to 

establish ability of off-floor Delegated Primary 

Market-Makers to operate in any options class 

traded on Hybrid); and 52827 (November 23, 2005), 

70 FR 72139 (December 1, 2005) (SR–PCX–2005– 

56) (approval order establishing Lead Market 

Makers). 

29 15 U.S.C. 78f(b). 

30 15 U.S.C. 78f(b)(5). 31 17 CFR 200.30–3(a)(12). 

A–7 that a Remote Specialist is 

exempted from the specialist obligation 

to advise a Floor Broker about 

cancellations. Additionally, the 

Exchange proposes to state in Advice B– 

3 that a Remote Specialist is exempted 

from the requirement that an ROT, 

including a specialist, trade a certain 

percentage of volume on the Exchange 

in person. 

Surveillance 

The Exchange has developed 

surveillance procedures for its auction 

and electronic markets. The Exchange 

will use the surveillance procedures 

now in place regarding specialists to 

perform surveillance of Remote 

Specialists. 

Conclusion 

The Exchange believes that its 

proposal to enable Remote Streaming 

Quote Traders to act as Remote 

Specialists where no on-floor specialists 

are willing to accept, or retain, an 

option allocation would enable Remote 

Specialists to provide a market that does 

not otherwise exist on the Exchange to 

the benefit of traders, investors, and 

public customers making hedging and 

trading decisions. The Exchange 

believes that allowing specialists to 

function off-floor also removes an 

operational issue by allowing off-floor 

specialists that are not required to be 

present on the trading floor in respect of 

certain option issues. Accordingly, the 

Exchange believes that the proposed 

rule change is designed to promote just 

and equitable principles of trade and to 

be in the public interest. 

Finally, the Exchange notes that the 

Commission has approved, or options 

exchanges have filed for immediate 

effectiveness, proposals that allow these 

exchanges to have off-floor (remote) 

market makers that are similar in 

concept to the proposed Remote 

Specialists.28 The Exchange does not 

believe that this filing raises any novel 

issues. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 29 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 30

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 

allowing Exchange option specialists 

that are not on an Exchange floor where 

the Exchange determines that it cannot 

allocate options to a floor based 

specialist. 

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–2010–145 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–2010–145. 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 such 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 No. SR–Phlx–2010– 

145 and should be submitted on or 

before November 23, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27645 Filed 11–1–10; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice: 7221] 

State-40, Employee Contact Records 

SUMMARY: Notice is hereby given that 

the Department of State proposes to 


hsrobinson on DSK69SOYB1PROD with NOTICES