Document ID: SEC-2009-0623-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-05-06T04:00Z

[Federal Register: May 6, 2009 (Volume 74, Number 86)]
[Notices]               
[Page 21037-21039]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06my09-149]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59842; File No. SR-Phlx-2009-37]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing of Proposed Rule Change Relating to Quoting Requirements for 
Streaming Quote Traders, Remote Streaming Quote Traders and Specialists

April 29, 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 April 21, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``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. 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 make specified technical adjustments to 
the quoting requirements for streaming quote traders, remote streaming 
quote traders and specialists contained in Exchange Rule 1014.
    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.

[[Page 21038]]

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 make minor 
adjustments to the quoting requirements for Streaming Quote Traders 
(``SQTs''), Remote Streaming Quote Traders (``RSQTs'') and specialists 
contained in Exchange Rule 1014.\3\ Currently, Rule 1014 requires an 
SQT and an RSQT (other than a DSQT or a DRSQT) to quote continuous, 
two-sided markets in not less than 60% of the series in each option in 
which such SQT or RSQT is assigned. The same rule requires a DSQT and a 
DRSQT on any given day to quote continuous, two-sided markets in not 
less than 99% of the series listed on the Exchange in at least 60% of 
the options in which such DSQT or DRSQT is assigned. Moreover, whenever 
on a given trading day a DSQT or DRSQT enters a quotation in an option 
in which such DSQT or DRSQT is assigned, the DSQT or DRSQT must 
maintain continuous quotations for not less than 99% of the series of 
the option listed on the Exchange until the close of that trading day. 
Finally, Rule 1014 requires each specialist to quote continuous, two-
sided markets in not less than 99% of the series in each option in 
which such specialist is assigned.
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    \3\ The terms SQTs and RSQTs are defined in Rule 1014(b)(ii)(A) 
and (B) and generally connote participants who have received 
permission from the Exchange to trade in options for their own 
accounts and to generate and submit option quotations 
electronically. The terms Directed SQTs (``DSQTs'') and Directed 
RSQTs (``DRSQTs'') are defined in Rule 1080(l)(i)(c) and refer to 
SQTs and RSQTs that receive certain customer orders (known as 
``Directed Orders'') that have been directed specifically to them.
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    Currently, any of the ``continuous'' quoting requirements 
referenced above may be deemed unsatisfied whenever there is an 
interruption in quoting during the trading day, no matter how brief in 
duration. The Exchange is, therefore, proposing to replace the 
continuous quoting requirement with a reference to the portion of the 
trading day when a quote must be available. Specifically, a market 
participant that is currently subject to any of the above-described 
continuous quoting obligations would, instead, be required to maintain 
a two-sided quote in a series for a total time equal to at least 90% 
(or higher, if so announced by the Exchange in advance) of the duration 
of the trading day. For example, on a normal trading day, which lasts 
390 minutes (from 9:30 a.m. to 4 p.m.), quoting in a series would need 
to be maintained for the total of at least 351 minutes in order to meet 
the 90%-of-the-trading-day threshold.
    In a shortened trading session, the total number of minutes the 
quote must be maintained would be lowered proportionately (and the same 
percentage threshold would apply). If a technical failure or limitation 
of a system of the Exchange prevents a participant from maintaining, or 
prevents a participant from communicating to the Exchange, timely and 
accurate quotes, the duration of such failure or limitation would also 
not be included in any of the calculations with respect to the affected 
quotes. The Exchange would have the ability to consider other 
exceptions to the quoting requirements based on demonstrated legal or 
regulatory requirements or other mitigating circumstances.\4\
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    \4\ Another exchange recently modified its rules to set its 
market makers' quoting obligation at 90% of the time that the 
exchange is open for business. That exchange also provided for 
similar automatic exceptions for technical failures and 
discretionary exceptions based on demonstrated legal or regulatory 
requirements or other mitigating circumstances. Securities Exchange 
Act Release No. 57186 (Jan. 22, 2008), 73 FR 4931 (Jan. 28, 2008) 
(approving SR-NYSEArca-2007-121).
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    Under the proposal, the Exchange would also have the discretion to 
set the threshold above 90% by publishing an appropriate advance 
announcement, which would then be available on the Exchange's Web site. 
In the illustration above, if the Exchange set the threshold, for 
example, at 99% (rather than 90%), then on a normal trading day, 
quoting would need to be maintained for 386 (rather than 351) minutes 
out of the total of 390 minutes.
    The Exchange is also proposing to make a minor adjustment to the 
99%-of-the-series provisions. As explained above, on a given trading 
day, each DSQT and DRSQT is required to maintain two-sided quotations 
for at least 99% of the listed series: (a) in at least 60% of its total 
option assignments, and (b) in any assignment after entering a 
quotation in it. A specialist must maintain quotes in at least 99% of 
the series in each of its option assignments. The proposed adjustment 
would replace the 99% requirement in all of these instances with the 
lesser of two alternatives: 99% of the series, or 100% minus a single 
call-and-put ``pair.'' The eligible pair in this case would consist of 
two individual options, one call and one put, which cover the same 
underlying instrument and have the same expiration date and exercise 
price. Failure to maintain a qualifying (90% of the trading day or 
higher, as discussed above) quote in just one call, one put, or in one 
call and one ``paired'' put, would not by itself (assuming all other 
series of a given option are being quoted as required) constitute a 
violation of the 99%-of-the-series requirement. The purpose of this 
particular modification is to make the rules more flexible with respect 
to those assignments that contain relatively fewer series and to avoid 
situations when failure to quote 90% of the trading day in merely one 
individual option or one pair breaches the 99% requirement.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \6\ 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 removing unnecessary rigidity from the existing quotation 
requirements, reducing the associated burdens on the affected market 
participants, and ultimately making the Exchange more competitive.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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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

    Within 35 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 self-regulatory organization consents, the Commission will:
    (a) By order approve such proposed rule change, or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 21039]]

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-2009-37 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-2009-37. 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-
Phlx-2009-37 and should be submitted on or before May 27, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
Elizabeth M. Murphy,
Secretary.
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    \7\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-10447 Filed 5-5-09; 8:45 am]

BILLING CODE 8010-01-P