Document ID: SEC-2011-1445-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-09-27T04:00Z

[Federal Register Volume 76, Number 187 (Tuesday, September 27, 2011)]
[Notices]
[Pages 59764-59765]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-24798]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65373; File No. SR-Phlx-2011-127]

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

September 21, 2011.
    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 15, 2011, NASDAQ OMX PHLX LLC (``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 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'') that will apply to all equity options listed for trading on 
the Exchange.
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    \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).
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    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 
all equity options.\5\ 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 24 market participants for the top 
5% most actively traded options; 19 market participants for next 10% 
most actively traded options, and 17 market participants for all other 
options.\6\ The ranking is currently based upon the preceding month's 
national volumes. Because the MNQ will now be the same for all equity 
options traded on the Exchange, there is no longer a need to calculate 
and establish multiple MNQ levels based upon monthly national volume. 
Accordingly, the Exchange proposes to delete current Commentary .03 to 
Rule 507, which states that, within the first five days of each month, 
a new MNQ will be set based on the previous month's trading volume 
(``new MNQ''), and which sets forth rules that apply to those options 
for which the new MNQ decreases the previous MNQ.\7\
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    \5\ Commentary .05 to Rule 507 (which is proposed to be re-
numbered as Commentary .04) 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, and will continue to require any proposed decrease in MNQ to be 
filed with the Commission pursuant to Section 19(b)(2) of the Act.
    \6\ 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 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 current MNQ levels of 24, 
19 and 17, respectively, were established in September, 2009. See 
Securities Exchange Act Release No. 60688 (September 18, 2009), 74 
FR 49058 (September 25, 2009) (SR-Phlx-2009-82).
    \7\ See supra note 5.
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    The Exchange proposes to increase the MNQ level to 30 for all 
equity options listed for trading on the Exchange. After careful 
analysis, the Exchange believes it has sufficient 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 SQTs and RSQTs that may quote electronically in a product. Pursuant 
to re-numbered Commentary .04 to Rule 507, the Exchange will

[[Page 59765]]

announce all changes regarding MNQ levels to the membership on the 
Exchange's Web site.
    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.
    The Exchange also proposes technical changes to Commentaries .04 
and .05 to the rule, which are being re-numbered to account for the 
deletion of Commentary .03.
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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange further believes that increasing the MNQ, and 
establishing an MNQ level that will apply to all equity options traded 
on the Exchange, 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 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

    Because the foregoing 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 the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) \11\ 
thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 summarily may temporarily suspend 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-2011-127 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-2011-127. 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 Web site viewing and 
printing 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-2011-127 and should be 
submitted on or before October 18, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-24798 Filed 9-26-11; 8:45 am]
BILLING CODE 8011-01-P