Document ID: SEC-2007-0650-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-05-08T04:00Z

[Federal Register: May 8, 2007 (Volume 72, Number 88)]
[Notices]               
[Page 26192-26194]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08my07-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55689; File No. SR-Phlx-2007-36]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Quoting Obligations in Long Term Options

May 1, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 26193]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 24, 2007, 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 Phlx. The 
Exchange filed the proposal 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\ which rendered the proposal effective upon 
filing with the Commission. 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 adopt, on a permanent basis, Phlx Rule 
1014(b)(ii)(D)(4), which currently states that Streaming Quote Traders 
(``SQTs''),\5\ Remote Streaming Quote Traders (``RSQTs''),\6\ and SQTs 
and RSQTs that receive Directed Orders \7\ (``DSQTs'' and ``DRSQTs'' 
respectively) are deemed not to be assigned in any option series until 
the time to expiration for such series is less than nine months. 
Accordingly, the obligations to quote continuous, two-sided markets 
described in Phlx Rule 1014(b)(ii)(D) currently do not apply to SQTs, 
RSQTs, DSQTs and DRSQTs respecting series with an expiration of nine 
months or greater. The Exchange originally adopted the rule on a six-
month pilot basis (the ``pilot'').\8\ The pilot was scheduled to expire 
on April 24, 2007.
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    \5\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
option quotations electronically through AUTOM in eligible 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 Phlx Rule 1014(b)(ii)(A).
    \6\ An 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 through AUTOM in eligible options to which such RSQT 
has been assigned. An RSQT may only submit such quotations 
electronically from off the floor of the Exchange. See Phlx Rule 
1014(b)(ii)(B).
    \7\ The term ``Directed Order'' means any customer order (other 
than a stop or stop-limit order as defined in Phlx Rule 1066) to buy 
or sell which has been directed to a particular specialist, RSQT, or 
SQT by an Order Flow Provider. See Phlx Rule 1080(l)(i)(A).
    \8\ See Securities Exchange Act Release No. 54648 (October 24, 
2006), 71 FR 63375 (October 30, 2006) (SR-Phlx-2006-62).
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    The text of the proposed rule change is available at the Phlx, the 
Commission's Public Reference Room, and http://www.phlx.com.

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 adopt Phlx Rule 
1014(b)(ii)(D)(4) on a permanent basis in order to continue to mitigate 
the Exchange's quote traffic by relaxing the quoting obligations 
applicable to SQTs, RSQTs, DSQTs and DRSQTs, thereby reducing the 
number of quotations required to be submitted on the Exchange.
    The pilot is part of an overall strategy to mitigate options quote 
traffic on the Exchange, under which SQTs, RSQTs, DSQTs and DRSQTs are 
deemed not to be assigned in any option series until the time to 
expiration for such series is less than nine months. The effect of this 
is to relax these traders quoting obligations, and ultimately the 
number of quotes they are required to submit, because the continuous 
quoting obligations described in Phlx Rule 1014(b)(ii)(D)(1) apply only 
to those options in which they are assigned.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \10\ 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 relaxing the quoting requirements in option series with an 
expiration greater than nine months, thereby reducing the number of 
options quotations required to be submitted, which should enable the 
Exchange to mitigate quote traffic.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 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 written comments were either solicited or received by the 
Exchange.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) thereunder,\12\ 
because the foregoing proposed rule 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 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30-days after the date of filing.\13\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\14\ The Exchange has requested that 
the Commission waive the 30-day operative delay. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
will ensure continuity of the Exchange's rules. Furthermore, the 
proposed rule change

[[Page 26194]]

does not present any novel regulatory issues. The Commission notes that 
this proposal is consistent with the approach in current Phlx Rule 
1012, Commentary .03, which states that strike price interval, bid/ask 
differential and continuity rules will not apply to such long term 
option series until the time to expiration is less than nine 
months.\15\ For these reasons, the Commission designates the proposal 
to be operative upon filing with the Commission.\16\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission notice of its intent to file the proposed rule change, 
along with a brief description and text of 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 the five-day pre-filing requirement.
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See Securities Exchange Act Release No. 29103 (April 18, 
1991), 56 FR 19132 (April 25, 1991) (SR-Phlx-91-18).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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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.\17\
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    \17\ See 15 U.S.C. 78s(b)(3)(C).
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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-2007-36 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 20549-1090.

All submissions should refer to File Number SR-Phlx-2007-36. 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. Copies of the filing 
also will be available for inspection and copying at the principal 
office of the 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-2007-36 and should be submitted on or before May 29, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-8736 Filed 5-7-07; 8:45 am]

BILLING CODE 8010-01-P