Document ID: SEC-2007-1564-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-11-19T05:00Z

[Federal Register: November 19, 2007 (Volume 72, Number 222)]
[Notices]               
[Page 65120-65121]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no07-113]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56776; File No. SR-Phlx-2007-81]

 
 Self-Regulatory Organizations; Philadelphia Stock Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change Relating to the Exchange's Automated Opening System

November 9, 2007.
    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 October 16, 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 Exchange. 
The Exchange filed the proposal as a ``non-controversial'' proposed 
rule change pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 
19b-4(f)(6) thereunder,\4\ which renders 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 Exchange proposes to amend Exchange Rule 1017 ``Openings in 
Options'' to establish additional criteria to determine the single 
opening price in a particular option series when the Exchange's system 
could open trading in such series at two or more prices.\5\ The text of 
the proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.phlx.com.
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    \5\ The Exchange has advised that it anticipates implementing 
the proposed rule change on December 1, 2007. The Exchange states 
that, if this date is delayed, it will inform its members through a 
circular. Telephone conversation among Richard Rudolph, Vice 
President and Counsel, Exchange, and Hong-Anh Tran and Michou H.M. 
Nguyen, Special Counsels, Division of Market Regulation, Commission 
on November 6, 2007.
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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. Phlx has substantially 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 Exchange states that the purpose of the proposed rule change is 
to ensure that the Exchange's opening price in a particular option 
series is established at a single price when two or more opening prices 
would satisfy the requirement in Exchange Rule 1017(c) that such price 
be the price at which the maximum quantity of contracts will trade. The 
Exchange believes that this proposal should facilitate fair and orderly 
markets on the opening of a particular option series on the Exchange at 
a single price.
    Rule 1017(c) sets forth the methodology by which the Exchange's 
system establishes the opening price of a series. Generally, the 
opening price of a series is the price at which the maximum quantity of 
contracts will be traded. The Exchange notes that frequently, however, 
there will be more than one price that will satisfy the ``maximum 
quantity'' test in determining the opening price of a series. 
Accordingly, Rule 1017(c) lists a number of ``tie-breakers'' used by 
the

[[Page 65121]]

system to determine the actual opening price of a series.
    Currently, Rule 1017(c)(i) defines the opening price as the price 
at which the maximum quantity of contracts would be traded. The rule 
establishes a series of ``tie-breakers,'' which are additional criteria 
that the system follows in establishing the opening price when two or 
more prices would satisfy the maximum quantity criteria. Specifically, 
when the maximum quantity of contracts could be traded at two or more 
prices, the system establishes the opening price based on the following 
criteria, in the following order: (1) The price at which the greatest 
number of customer orders would be traded; (2) the price at which the 
maximum number of Phlx XL participants would trade; and (3) the price 
that is closest to the closing price from the previous trading 
session.\6\
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    \6\ For a complete description of the Exchange's automated 
opening system, see Securities Exchange Act Release No. 52667 
(October 25, 2005), 70 FR 65953 (November 1, 2005) (SR-Phlx-2005-
25).
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    The Exchange has observed that the existing ``tie-breakers'' in 
Rule 1017(c) can still result in the situation where two or more prices 
could satisfy the maximum quantity criteria. Accordingly, the Exchange 
proposes to add another ``tie-breaker'' to be used in determining the 
opening price when two or more prices satisfy the maximum quantity 
criteria.
    Specifically, the Exchange proposes to amend Rule 1017(c) to 
provide that, after all existing ``tie-breakers'' have been exhausted, 
should there continue to be two or more prices that satisfy the maximum 
quantity criteria, the opening price will be the mid-point of the 
highest possible price and lowest possible price that satisfy the 
maximum quantity criteria (rounded as needed to the side of the market 
with the greatest number of Phlx XL participants).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ in particular, because 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 clarifying the single opening 
price in a particular series on the Exchange when two or more prices 
would result in the maximum number of contracts traded at the opening 
in such series.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 would 
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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Because the proposed rule change 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 after the date of filing (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 \9\ and subparagraph (f)(6) 
of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 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 the 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-2007-81 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-2007-81. 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-2007-81 and should be 
submitted on or before December 10, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22484 Filed 11-16-07; 8:45 am]

BILLING CODE 8011-01-P