Document ID: SEC-2008-0713-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2008-05-16T04:00Z

[Federal Register: May 16, 2008 (Volume 73, Number 96)]
[Notices]               
[Page 28541-28543]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16my08-128]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57806; File No. SR-Phlx-2008-34]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change Consolidating Into a Single Rule Certain Requirements for 
Products Traded on the Exchange Pursuant to Unlisted Trading Privileges

May 9, 2008.
    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 May 5, 2008, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
This order provides notice of the proposed rule change and approves the 
proposal on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to consolidate into a 
single rule certain requirements for products traded on the Exchange 
pursuant to unlisted trading privileges (``UTP'') that have been 
established in various new products proposals previously approved by 
the Commission. The text of the proposed rule change is available at 
the Exchange's principal office, on the Exchange's Web site 
(www.phlx.com), 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, Phlx 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 III below. Phlx 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 Exchange proposes to amend its rules to consolidate into a 
single rule certain requirements for products traded on the Exchange 
pursuant to UTP. Many of these products have been established in 
various new products proposals previously approved by the Commission. 
The Exchange proposes to amend Phlx Rule 803 to set forth a new rule, 
Phlx Rule 803(o), regarding the extension of UTP to an NMS stock that 
is listed on another national securities exchange. Any such security 
will be subject to all Exchange trading rules applicable to NMS stocks, 
unless otherwise noted. The Exchange will file with the Commission a 
Form 19b-4(e) with respect to any such security that is a ``new 
derivative securities product'' (``NDSP'') as defined in Rule 19b-4(e) 
under the Act.\3\ In addition, any NDSP traded on the Exchange pursuant 
to proposed Phlx Rule 803(o) will be subject to the following criteria.
---------------------------------------------------------------------------

    \3\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

    Proposed Phlx Rule 803(o)(2)(A) provides that the Exchange will 
distribute an information circular prior to the commencement of trading 
in such

[[Page 28542]]

NDSP which generally will include the same information as the 
information circular provided by the listing exchange, including: (1) 
The special risks of trading the NDSP; (2) the Exchange's rules that 
will apply to the NSDP, including the suitability rule; (3) information 
about dissemination of the value of the underlying assets or indexes; 
and (4) the risks of trading during the Pre Market and Post Market 
Sessions \4\ due to the lack of calculation or dissemination of the 
underlying index value, the Intraday Indicative Value, the Indicative 
Optimized Portfolio Value, or other comparable estimate of the value of 
a share of the NDSP.
---------------------------------------------------------------------------

    \4\ See Phlx Rule 101, Supplementary Material .02(1), (3).
---------------------------------------------------------------------------

    Proposed Phlx Rule 803(o)(2)(B) reminds members and member 
organizations that they are subject to the prospectus delivery 
requirements under the Securities Act of 1933, unless the NDSP is the 
subject of an order by the Commission exempting the product from 
certain prospectus delivery requirements under Section 24(d) of the 
Investment Company Act of 1940, the product is not otherwise subject to 
prospectus delivery requirements under the Securities Act of 1933. The 
Exchange shall inform its members and member organizations regarding 
the application of the provisions of this subparagraph to an NDSP by 
means of an information circular.
    Phlx Rule 136(c)-(e) addresses trading halts in NDSPs traded on the 
Exchange pursuant to UTP. Phlx Rule 136(e)(1) would be amended to state 
that the term ``Derivative Securities Product'' is modified to ``New 
Derivative Securities Product'' and shall have the same meaning as new 
derivative securities product in Rule 803(o). The term ``New Derivative 
Securities Product'' is intended to include any products that are 
included in the current term ``Derivative Securities Product.'' In 
addition, throughout Phlx Rule 136(c)-(e), the term ``Derivative 
Securities Product'' is modified to ``New Derivative Securities 
Product'' to reflect the change in Phlx Rule 136(e)(1).
    Phlx Rule 136(d)(1) provides that, if an NDSP begins trading on XLE 
in the Pre Market Session and subsequently a temporary interruption 
occurs in the calculation or wide dissemination of an applicable 
Required Value,\5\ XLE may continue to trade the NDSP for the remainder 
of the Pre Market Session. Phlx Rule 136(d)(2) provides that, during 
the Core Session,\6\ if a temporary interruption occurs in the 
calculation or wide dissemination of an applicable Required Value, and 
the listing market halts trading in the NDSP, Phlx, upon notification 
by the listing market of a halt due to such temporary interruption, 
also shall immediately halt trading in the NDSP on XLE. Phlx 136(d)(3) 
provides that, if an applicable Required Value continues not to be 
calculated or widely disseminated after the close of the Core Session, 
XLE may trade the NDSP in the Post Market Session only if the listing 
market traded the NDSP until the close of its regular trading session 
without a halt. Further, if an applicable Required Value continues not 
to be calculated or widely disseminated as of the beginning of the Pre 
Market Session on the next trading day, XLE shall not commence trading 
of the NDSP in the Pre Market Session that day. If an interruption in 
the calculation or wide dissemination of an applicable Required Value 
continues, XLE may resume trading in the NDSP only if calculation and 
wide dissemination of the applicable Required Value resumes or trading 
in the NDSP resumes in the listing market. Finally, proposed Phlx Rule 
136(d)(4) provides that, for an NDSP where a net asset value (and, in 
the case of managed fund share or actively managed exchange-traded 
fund, a ``disclosed portfolio'') is disseminated, Phlx will immediately 
halt trading in such security upon notification by the listing market 
that the net asset value and if applicable, such disclosed portfolio is 
not being disseminated to all market participants at the same time. 
Phlx may resume trading in the NDSP only when trading in the NDSP 
resumes on the listing market.
---------------------------------------------------------------------------

    \5\ Proposed Phlx 136(e)(2) states that ```Required Value' shall 
mean (1) the value of any security or index underlying a New 
Derivative Securities Product, and (2) the Intraday Indicative Value 
(as defined in Rule 803), or the Indicative Optimized Portfolio 
Value or other comparable estimate of the value of a share of a New 
Derivative Securities Product updated regularly during the trading 
day.''
    \6\ See Phlx Rule 101, Supplementary Material .02(2).
---------------------------------------------------------------------------

    Proposed Phlx Rule 803(o)(2)(C) provides for restrictions for any 
XLE Participant registered as a Market Maker (``Restricted Market 
Maker'') in an NDSP that derives its value from one or more currencies, 
commodities, or derivatives based on one or more currencies or 
commodities, or is based on a basket or index comprised of currencies 
or commodities (collectively, ``Reference Assets''). Specifically, 
proposed Phlx Rule 803(o)(2)(C)(i) provides that a Restricted Market 
Maker in an NDSP is prohibited from acting or registering as a market 
maker in any Reference Asset of that NDSP or any derivative instrument 
based on a Reference Asset of that NDSP (collectively, with Reference 
Assets, ``Related Instruments''). Proposed Phlx Rule 803(o)(2)(C)(ii) 
provides that a Restricted Market Maker shall, in a manner prescribed 
by Phlx, file with Phlx and keep current a list identifying any 
accounts (``Related Instrument Trading Accounts'') for which Related 
Instruments are traded: (1) In which the Restricted Market Maker holds 
an interest; (2) over which it has investment discretion; or (3) in 
which it shares in the profits and/or losses. In addition, a Restricted 
Market Maker may not have an interest in, exercise investment 
discretion over, or share in the profits and/or losses of a Related 
Instrument Trading Account which has not been reported to Phlx as 
required by this rule. Proposed Phlx Rule 803(o)(2)(C)(iii) provides 
that, in addition to the existing obligations under Phlx rules 
regarding the production of books and records, a Restricted Market 
Maker shall, upon request by Phlx, make available to Phlx any books, 
records, or other information pertaining to any Related Instrument 
Trading Account or to the account of any registered or non-registered 
employee affiliated with the Restricted Market Maker for which Related 
Instruments are traded. Finally, proposed Phlx Rule 803(o)(2)(C)(iv) 
provides that a Restricted Market Maker shall not use any material 
nonpublic information in connection with trading a Related Instrument.
    Lastly, Phlx represents that the Exchange's surveillance procedures 
for NDSPs traded on the Exchange pursuant to UTP will be similar to the 
procedures used for equity securities traded on the Exchange and will 
incorporate and rely upon existing Exchange surveillance systems. The 
Exchange will closely monitor activity in NDSPs traded on the Exchange 
pursuant to UTP and deter any potential improper trading activity. 
Proposed Phlx Rule 803(o)(2)(D) also provides that the Exchange will 
enter into a comprehensive surveillance sharing agreement (``CSSA'') 
with a market trading components of the index or portfolio on which the 
new derivative securities product is based to the same extent as the 
listing exchange's rules require the listing market to enter into a 
CSSA with such market.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ in particular, in that it is designed to

[[Page 28543]]

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 providing for the trading of securities, including NDSPs, 
on Phlx pursuant to UTP, subject to consistent and reasonable 
standards.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that 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

    No comments were either solicited or received.

III. 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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2008-34 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-Phlx-2008-34. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of Phlx. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2008-34 and should be 
submitted on or before June 6, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    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.\9\ 
In particular, the Commission finds that the proposal is consistent 
with Section 6(b)(5) of the Act 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, 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.
---------------------------------------------------------------------------

    \9\ In approving this 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).
---------------------------------------------------------------------------

    This proposal would consolidate into a single rule various 
provisions related to UTP that have been established in other new 
products proposals previously approved by the Commission.\10\ The 
Commission finds good cause for approving the proposed rule change 
prior to the 30th day after the date of publication of the notice of 
filing thereof in the Federal Register. Phlx's proposal does not raise 
any novel issues, and accelerated approval thereof will expedite the 
trading of additional products by the Exchange, subject to consistent 
and reasonable standards. Therefore, the Commission finds good cause, 
consistent with Section 19(b)(2) of the Act, to approve the proposed 
rule change on an accelerated basis.
---------------------------------------------------------------------------

    \10\ See ISE Rule 2101 and Securities Exchange Act Release No. 
57387 (February 27, 2008), 73 FR 11965 (March 5, 2008) (SR-ISE-2007-
99); NSX Rule 15.9 and Securities Exchange Act Release No. 57448 
(March 6, 2008), 73 FR 13597 (March 13, 2008)(SR-NSX-2008-05); NYSE 
Arca Equities Rule 5.2(j)(6), Commentary .01(a)-(d) and Securities 
Exchange Act Release No. 54189 (July 21, 2006), 71 FR 43263 (July 
31, 2006) (NYSEArca-2006-17) (in connection with Phlx Rule 
803(o)(2)(C)).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-Phlx-2008-34) is hereby 
approved on an accelerated basis.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-10944 Filed 5-15-08; 8:45 am]

BILLING CODE 8010-01-P