Document ID: SEC-2008-1034-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2008-07-23T04:00Z

[Federal Register: July 23, 2008 (Volume 73, Number 142)]
[Notices]               
[Page 42888-42890]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jy08-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58185; File No. SR-Phlx-2008-54]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Participation Guarantees for Crossing and Facilitation 
Orders

July 17, 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 July 14, 2008, the Philadelphia Stock Exchange, 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 Phlx. 
The Phlx has submitted the proposed rule change as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend Exchange Rule 1064, ``Crossing, 
Facilitation and Solicited Orders,'' to

[[Page 42889]]

provide that the percentage of the order which a Floor Broker is 
entitled to cross in equity, index and U.S. dollar-settled foreign 
currency options, after all public customer orders that were (1) on the 
limit order book and then (2) represented in the trading crowd at the 
time the market was established have been satisfied, is 40% of the 
remaining contracts in the order if the order is traded at or between 
the best bid or offer given by the crowd in response to the Floor 
Broker's initial request for a market.
    The text of the proposed rule change is available at the Exchange, 
the Commission's Public Reference Room, and http://www.phlx.com/
regulatory/reg_rulefilings.aspx.

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 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 IV below. The 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 purpose of the proposed rule change is to enhance the 
Exchange's ability to compete for order flow in all options traded on 
the Exchange by establishing uniform participation guarantee rules.
    Exchange Rule 1064, Commentary .02 currently guarantees a 
participation percentage to Floor Brokers representing crossing and 
facilitation orders in open outcry. The percentage of the order which a 
Floor Broker is entitled to cross, after all public customer orders 
that were (1) on the limit order book and then (2) represented in the 
trading crowd at the time the market was established have been 
satisfied, is currently 40% of the remaining contracts in the order 
respecting equity options, and 20% of the remaining contracts in the 
order respecting index options and U.S. dollar-settled foreign currency 
options.
    Under the proposal, the participation guarantee would be the same 
for all options traded on the Exchange. Specifically, Rule 1064, 
Commentary .02 (iii) would continue to allow a participation guarantee 
to Floor Brokers of 40% for equity options (including options overlying 
Exchange Traded Fund shares), and would increase the participation 
guarantee to Floor Brokers representing crossing and facilitation 
orders in index options and U.S. dollar-settled foreign currency 
options from the current 20% to 40%. Thus, the participation guarantee 
for all options traded on the Exchange would be 40%.
    The proposed rule change would have an effect on the Enhanced 
Specialist Participation \5\ respecting index options and U.S. dollar-
settled foreign currency options. Rule 1064, Commentary .02(vi)(A) 
currently states that, respecting orders for index options and U.S. 
dollar-settled foreign currency options, the Enhanced Specialist 
Participation may only be 20% of the original order after customer 
orders have been executed for orders crossed pursuant to paragraph (vi) 
unless the Floor Broker has chosen to cross less than its 20% 
entitlement, in which case the Enhanced Specialist Participation will 
be a percentage that combined with the percentage the firm crossed is 
no more than 40% of the original order. The proposed rule change would 
increase the ``20% entitlement'' specified in the rule to 40%. Thus, 
the Enhanced Specialist Participation will apply only to the extent 
that the Floor Broker elects not to cross his or her entire 40% 
entitlement.
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    \5\ The ``Enhanced Specialist Participation'' entitles the 
specialist to a greater than equal share of the portion of an 
executed order that is divided among the specialist and any non-
customer accounts that were bidding or offering at the same 
execution price. See Exchange Rule 1014(g).
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    For purposes of simplicity, the Exchange proposes to amend 
Commentary .02(vi)(B) to state that the specialist shall not be 
entitled to receive the Enhanced Specialist Participation in equity, 
index and U.S. dollar-settled foreign currency options unless the Floor 
Broker has chosen to cross less than its 40% entitlement, and to 
incorporate this text into one single paragraph (A), since it would no 
longer be necessary to differentiate index options and U.S. dollar-
settled foreign currency options from all other options traded on the 
Exchange for purposes of the crossing and facilitation participation 
guarantee.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ 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 enabling the Exchange to better compete for order flow through an 
increase to the participation guarantee for crossing and facilitation 
orders in index options and U.S. dollar-settled foreign currency 
options.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \8\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\9\ Because the Phlx has designated the proposed rule change 
as one that: (1) Does not significantly affect the protection of 
investors or the public interest; (2) does not impose any significant 
burden on competition; and (3) does not become operative for 30 days 
from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
hereunder. As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file the 
proposed rule change at least five business days prior to filing the 
proposal with the Commission.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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.

[[Page 42890]]

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-2008-54 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2008-54. 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 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 Number SR-Phlx-2008-54 and should be 
submitted on or before August 13, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16837 Filed 7-22-08; 8:45 am]

BILLING CODE 8010-01-P