Document ID: SEC-2009-1724-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-12-08T05:00Z

[Federal Register: December 8, 2009 (Volume 74, Number 234)]
[Notices]               
[Page 64786-64788]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de09-115]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61095; File No. SR-Phlx-2009-99]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. 
Regarding the Obligations of Streaming Quote Traders

December 2, 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 November 25, 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 is filing with the Commission a proposal to amend its 
Rule 1014 (Obligations and Restrictions Applicable to Specialists and 
Registered Options Traders) to indicate that certain market makers on 
the Exchange, specifically Streaming Quote Traders, Remote Streaming 
Quote Traders, Directed Streaming Quote Traders, and Directed Remote 
Streaming Quote Traders, will be deemed not to be assigned in Quarterly 
Option Series and adjusted option series.
    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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposal is to amend Rule 1014 to indicate that 
certain market makers on the Exchange, specifically Streaming Quote 
Traders, Remote Streaming Quote Traders, Directed Streaming Quote 
Traders, and Directed Remote Streaming Quote Traders, will [sic] deemed 
not to be assigned in Quarterly Option Series and adjusted option 
series; and to propose a definition of adjusted options series.
    Rule 1014 discusses the obligations and restrictions that are 
applicable to specialists and Registered Option Traders (``ROTs''). 
ROTs are market makers on the Exchange that include Streaming Quote 
Traders (``SQTs'');\3\

[[Page 64787]]

Remote Streaming Quote Traders (``RSQTs'');\4\ and Directed Streaming 
Quote Traders (``DSQTs'') and Directed Remote Streaming Quote 
Traders\5\ (``DRSQTs'') (together the ``Streaming Quote Traders''). 
Rule 1014 states that, in addition to other requirements, on a daily 
basis Streaming Quote Traders are responsible to quote two-sided 
markets in not less than a specified percentage of options assigned by 
the Exchange at the request of such Streaming Quote Traders, unless 
specifically exempted from such quoting responsibility.\6\ This 
exemption from quoting responsibilities, which is in Rule 
1014(b)(ii)(D)(4), currently states that Streaming Quote Traders are 
deemed not to be assigned, and as such do not have quoting 
responsibilities, in options series with an expiration of nine months 
or greater (the ``Exemption'').
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    \3\ An SQT is an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically 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 Rule 1014(b)(ii)(A). See also Securities 
Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 
2009) (SR-Phlx-2009-32) (approval order regarding enhancements to 
opening, linkage and routing, quoting, and order management 
processes in the Exchange's electronic options order entry, trading, 
and execution system PHLX XL II).
    \4\ 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 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 Rule 1014(b)(ii)(B).
    \5\ A DSQT is an SQT and a DRSQT is an RSQT that receives a 
Directed Order. Exchange Rule 1080(l)(i)(A) defines Directed Order 
as any customer order (other than a stop or stop-limit order as 
defined in Rule 1066) to buy or sell which has been directed to a 
particular specialist, RSQT, or SQT by an Order Flow Provider and 
delivered to the Exchange via its electronic quoting, execution and 
trading system.
    \6\ Rule 1014(b)(ii)(D) states in part: (1) In addition to the 
other requirements for ROTs set forth in this Rule 1014, except as 
provided in sub-paragraph (4) below, an SQT and an RSQT shall be 
responsible to quote two-sided markets in not less than 60% of the 
series in which such SQT or RSQT is assigned, provided that, on any 
given day, a Directed SQT (``DSQT'') or a Directed RSQT (``DRSQT'') 
(as defined in Rule 1080(l)(i)(C)) shall be responsible to quote 
two-sided markets in the lesser of 99% of the series listed on the 
Exchange or 100% of the series listed on the Exchange minus one 
call-put pair, in each case in at least 60% of the options in which 
such DSQT or DRSQT is assigned. Whenever a DSQT or DRSQT enters a 
quotation in an option in which such DSQT or DRSQT is assigned, such 
DSQT or DRSQT must maintain until the close of that trading day 
quotations for the lesser of 99% of the series of the option listed 
on the Exchange or 100% of the series of the option listed on the 
Exchange minus one call-put pair.
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    The Exchange hereby proposes to amend the Exemption. Specifically, 
the Exchange proposes to incorporate into the Exemption two additional 
types of options series: Quarterly Option Series \7\ and adjusted 
option series.\8\ As a result, Streaming Quote Traders would not be 
assigned in and would not have quoting obligations in respect of 
options that are longer that [sic] nine months in length, Quarterly 
Option Series, and adjusted option series.
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    \7\ Quarterly Options Series (``QOS'') are series in an options 
class that is approved for listing and trading on the Exchange in 
which the series is opened for trading on any business day and 
expires at the close of business on the last business day of a 
calendar quarter. See Rule 1000(b)43. QOS are traded pursuant to the 
QOS Program set forth in Commentary .08 to Rule 1012 and Rule 
1101A(b)(v).
    \8\ For purposes of the Exemption, an adjusted option series is 
defined as an option series wherein one option contract in the 
series represents the delivery of other than 100 shares of 
underlying stock or Exchange-Traded Fund Shares. See Rule 
1014(b)(ii)(D)(4).
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    The Exchange has recently noticed a reduction in liquidity in 
certain options classes that include adjusted option series and 
Quarterly Options Series, emanating from withdrawals from assignments 
in these classes. Streaming Quote Traders that have withdrawn from 
assignments in these classes have informed the Exchange that the 
withdrawals were based in part on the obligation to continuously quote 
adjusted options series and Quarterly Option Series, whereby the 
quoting obligations on these often less frequently traded option series 
impacted the risk parameters acceptable to the Streaming Quote Traders. 
By withdrawing from assignments, liquidity (as well as volume) has been 
negatively impacted in the affected options classes listed on the 
Exchange. The Exchange believes that its rule change proposal will 
ameliorate the liquidity impact by allowing Streaming Quote Traders to 
continue assignment in option classes.\9\
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    \9\ In that Streaming Quote Traders would not be deemed to be 
assigned in QOS and adjusted options series, they also would not 
enjoy any benefits stemming from being assigned in these series.
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    The Exchange believes that the proposed rule change should 
incentivize Streaming Quote Traders to continue assignments and thereby 
expand liquidity in options classes listed on the Exchange to the 
benefit of the Exchange and its members and public customers.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanisms of 
a free and open market and a national market system. The Exchange 
believes that the proposal to exempt Quarterly Option Series and 
adjusted option series from assignments will enhance liquidity in 
assigned option classes.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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.

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

    The Exchange believes that the foregoing proposed rule change may 
take effect upon filing with the Commission pursuant to Section 
19(b)(3)(A) \12\ of the Act and Rule 19b-4(f)(6)(iii) thereunder,\13\ 
because the foregoing proposed rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 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 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:

[[Page 64788]]

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 2009-99 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-2009-99. 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 2009-99 and should be 
submitted on or before December 29, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29204 Filed 12-7-09; 8:45 am]

BILLING CODE 8011-01-P