Document ID: SEC-2009-1616-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Extension of a Pilot Program Concerning Non Firm Quote Conditions
Posted Date: 2009-11-17T05:00Z

[Federal Register: November 17, 2009 (Volume 74, Number 220)]
[Notices]               
[Page 59275-59277]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17no09-113]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60951; File No. SR-Phlx-2009-95]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Extension of a Pilot Program Concerning Non Firm Quote Conditions

November 6, 2009.
    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 29, 2009, NASDAQ OMX PHLX, Inc. (``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend, until September 30, 2010, a pilot 
program under which the Exchange disseminates option quotations with a 
price of $0.00 or $200,000, and a size of one contract, when the 
Exchange's disseminated size on one side of the market is exhausted 
(the ``pilot''). The current pilot is scheduled to expire November 30, 
2009.
    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.

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 the proposed rule change is to extend the pilot 
through September 30, 2010.
    In June 2009, the Exchange added several significant enhancements 
to its automated options trading platform (known as PHLX XL II), and 
adopted rules to reflect those enhancements.\3\ As part of the system 
enhancements, the Exchange proposed to disseminate a quote condition of 
``non-firm'' on a single bid quotation or offer quotation when the size 
associated with such bid or offer was exhausted on the Exchange and 
there were no new quotations submitted on the exhausted side of the 
market in the affected series. The non-exhausted side of the Exchange's 
disseminated quotation would remain firm up to its disseminated size. 
Currently, however, while the Options

[[Page 59276]]

Price Reporting Authority (``OPRA'') disseminates option quotations for 
which both sides of the quotation are marked ``non-firm,'' OPRA 
currently does not disseminate a ``non-firm'' condition for one side of 
a quotation while the other side of the quotation remains firm.
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    \3\ See Securities Exchange Act Release No. 59995 (May 28, 
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
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    Accordingly, the Exchange proposed, for a pilot period scheduled to 
expire November 30, 2009, to disseminate quotations in such a 
circumstance with (i) a bid price of $0.00, with a size of one contract 
if the remaining size is a seller, or (ii) an offer price of $200,000, 
with a size of one contract if the remaining size is a buyer.
    The relevant sections of the following rules are effective for a 
pilot period scheduled to expire November 30, 2009: Proposed Rules 
1082(a)(ii)(B)(3)(b); 1082(a)(ii)(B)(3)(g)(iv)(A)(3); 
1082(a)(ii)(B)(3)(g)(iv)(A)(4); 1082(a)(ii)(B)(3)(g)(iv)(B)(2); 
1082(a)(ii)(B)(3)(g)(iv)(C); 1082(a)(ii)(B)(4)(b); and 
1082(a)(ii)(B)(4)(d)(iv)(E). The Exchange proposes to amend these rules 
to reflect the extension of the pilot through September 30, 2010.
    In its proposed rule change adopting the system enhancements and 
rules, the Exchange represented that it would work with OPRA during the 
pilot period to explore the development of a ``non-firm'' condition for 
one side of a quotation while the other side of the quotation remains 
firm. The Exchange represents that it has worked with OPRA during the 
pilot period and currently OPRA does not support the ``non-firm'' 
condition for one side of a quotation.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \5\ 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 ensuring the orderly continuity of the pilot.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    In the situations described herein where the Exchange disseminates 
quotations with a price of $0.00 or $200,000 and a size of one 
contract, the Exchange is relieved of its obligations under the SEC 
Quote Rule.\6\ The fact that there is no quote from any Phlx XL II 
participant is an unusual market condition which requires the Phlx XL 
II system to disseminate a market with a price of $0.00 or $200,000 to 
indicate that there is a non-firm condition on the side of the market 
that is exhausted. Currently, OPRA disseminates option quotations for 
which both sides of the quotation are marked ``non-firm.'' OPRA 
currently does not disseminate a ``non-firm'' condition for one side of 
a quotation while the other side of the quotation remains firm. The 
current rule and functionality is simply a method for indicating that 
one side of the Phlx disseminated market is firm while the other side 
is in a non-firm condition.
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    \6\ 17 CFR 242.602.
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    This unusual market condition renders the Exchange incapable of 
collecting, processing, and making available to vendors the requisite 
data for a particular option series in a manner that accurately 
reflects the current state of the market on the Exchange. The $0.00 or 
$200,000 quote with a size of one contract will notify all ``specified 
persons'' of the determination that one side of the quotation is in a 
non-firm condition. Accordingly, in this circumstance, the Exchange is 
relieved of its obligations under Rules 602(a)(1) \7\ and (2) \8\ under 
the Act.\9\
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    \7\ 17 CFR 242.602(a)(1).
    \8\ 17 CFR 242.602(a)(2).
    \9\ 17 CFR 242.602(a)(3).
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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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
\11\ thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
Phlx has satisfied this requirement.
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    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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2009-95 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-2009-95. 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 the Exchange. All 
comments received will be posted

[[Page 59277]]

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-2009-95 and should be submitted on or before 
December 8, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27464 Filed 11-16-09; 8:45 am]

BILLING CODE 8011-01-P