Document ID: SEC-2009-1361-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to the Maximum Number of Quoters ("MNQ") Permitted To Be Assigned in Equity Options
Posted Date: 2009-09-25T04:00Z

[Federal Register: September 25, 2009 (Volume 74, Number 185)]
[Notices]               
[Page 49058-49059]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se09-151]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60688; File No. SR-Phlx-2009-82]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to the Maximum Number of Quoters (``MNQ'') Permitted To Be Assigned in 
Equity Options

September 18, 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 September 17, 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.
---------------------------------------------------------------------------

    \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 Exchange Rule 507, Application for 
Approval as an SQT or RSQT and Assignment in Options, which governs the 
assignment of options to Streaming Quote Traders (``SQTs'').\3\ and 
Remote Streaming Quote Traders (``RSQTs''),\4\ by establishing a higher 
maximum number of quoting participants (``Maximum Number of Quoters'' 
or ``MNQ'') in equity options.\5\
---------------------------------------------------------------------------

    \3\ An SQT is an Exchange Registered Options Trader (``ROT'') 
who has received permission from the Exchange to generate and submit 
options 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 Exchange Rule 1014(b)(ii)(A).
    \4\ An RSQT is a 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 Exchange Rule 
1014(b)(ii)(B).
    \5\ The Exchange notes that a separate proposed rule change has 
been pre-filed (the ``separate filing'') that would amend various 
Exchange rules, including certain portions of Rule 507. The instant 
proposed amendments to Commentary .02 of Rule 507 are not affected 
by, and do not affect, the proposed amendments in the separate 
filing. The term ``no change'' used in this proposal applies only to 
the instant proposed rule change and does not override or negate any 
proposed changes in the separate filing.
---------------------------------------------------------------------------

    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 provide additional 
liquidity in equity options on the Exchange by increasing the MNQ in 
equity options.\6\
---------------------------------------------------------------------------

    \6\ Commentary .05 to Rule 507 states that the Exchange may 
increase the MNQ levels established in this Commentary by submitting 
to the SEC a rule filing pursuant to Section 19(b)(3)(A) of the 
Exchange Act. The Exchange may decrease the MNQ levels established 
in this Commentary upon SEC approval of a rule filing submitted 
pursuant to Section 19(b)(2) of the Exchange Act.
---------------------------------------------------------------------------

    Currently, the Exchange limits the number of participants that may 
be assigned to a particular equity option at any one time based upon 
each option's monthly national volume. Commentary .02 to Rule 507 
currently sets forth tiered MNQ levels permitting assignment of trading 
privileges to 22 market participants for the top 5% most actively 
traded options; 17 market participants for next 10% most actively 
traded options, and 15 market participants for all other options.\7\ 
The

[[Page 49059]]

ranking is based upon the preceding month's national volumes.
---------------------------------------------------------------------------

    \7\ When initially adopted, Commentary .02(a)-(c) established 
MNQ levels of 20 market participants for the top 5% most actively 
traded options; 15 market participants for next 10% most actively 
traded options, and 10 market participants for all other options. 
See Securities Exchange Act Release No. 55114 (January 17, 2007), 72 
FR 3185 (January 24, 2007) (SR-Phlx-2006-81). These MNQ levels were 
subsequently increased to levels of 22, 17, and 12, respectively. 
See Securities Exchange Act Release No. 56261 (August 15, 2007), 72 
FR 47112 (August 22, 2007) (SR-Phlx-2007-51). The MNQ levels were 
then increased to the current 22, 17 and 15 respectively. See 
Securities Exchange Act Release No. 58906 (November 6, 2008), 73 FR 
67239 (November 13, 2008) (SR-Phlx-2008-76).
---------------------------------------------------------------------------

    The Exchange proposes to increase the MNQ levels from 22 to 24 
market participants for equity options in the top 5% most actively 
traded options; from 17 market participants to 19 market participants 
for next 10% most actively traded options; and from 15 market 
participants to 17 market participants for all other options.
    All new applicants for trading privileges will be subject to the 
process for assignment described in Rule 507. The Exchange considers 
all applicants for assignment in options using the objective criteria 
set forth in Exchange Rule 507(b). The objective criteria are used by 
the Exchange in determining the most beneficial assignment of options 
for the Exchange and the public.
    After careful analysis, the Exchange believes it has the capacity 
to increase the MNQ as proposed. The Exchange believes that the effect 
of an increase in the MNQ fosters competition in that it increases the 
number of market participants that may quote electronically in a 
product. Pursuant to Commentary .05 to Rule 507, The Exchange will 
announce all changes regarding MNQ levels to the membership on the 
Exchange's Web site.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \9\ 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 adding depth and liquidity to the Exchange's markets in equity 
options.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange further believes that increasing the MNQ in equity 
options is pro-competitive, because it adds depth and liquidity to the 
Exchange's markets by permitting additional participants to compete on 
the Exchange.

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.

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

    The proposed rule change is designated by the Exchange as a ``non-
controversial'' rule pursuant to Section 19(b)(3)(A) \10\ of the Act 
and subparagraph (f)(6) of Rule 19b-4 thereunder,\11\ because the 
proposed rule change: (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, provided that the Exchange has given 
the Commission written notice of its intent to file the proposed rule 
change at least five business days prior to the filing of the proposed 
rule change.\12\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the Exchange to give the Commission written 
notice of the Exchange's intent to file the proposed rule change 
along with a brief description and the 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. The Exchange has satisfied the pre-filing requirement.
---------------------------------------------------------------------------

    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-2009-82 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-2009-82. 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 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-2009-82 and should be 
submitted on or before October 16, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-23097 Filed 9-24-09; 8:45 am]

BILLING CODE 8010-01-P