Document ID: SEC-2006-0785-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-06-20T04:00Z

[Federal Register: June 20, 2006 (Volume 71, Number 118)]
[Notices]               
[Page 35475-35477]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jn06-79]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53979; File No. SR-Phlx-20006-30]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to Reducing Staffing 
Requirements for Options Specialist Units

June 14, 2006.
    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 May 4, 2006, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the

[[Page 35476]]

proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the Phlx. On June 6, 2006, the Phlx filed 
Amendment No. 1 to the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified the rationale for 
reducing staffing for foreign currency options and made non-
substantive changes to the proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend Phlx Rule 501(d) to reduce the mandatory 
staffing requirement to be approved as an options or foreign currency 
options specialist unit and to retain such status, while continuing to 
enable the Exchange's Options Allocation, Evaluation and Securities 
Committee (``Options Allocation Committee'') \4\ to require a unit to 
obtain additional staffing.
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    \4\ See Phlx By-Law Article X, Section 10-7. The Options 
Allocations Committee has jurisdiction over, among other things: the 
appointment of specialists on the options and foreign currency 
options trading floors; allocation, retention and transfer of 
privileges to deal in options on the trading floors; and 
administration of the 500 series of Phlx rules.
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    The text of the proposed rule change is set forth below. Proposed 
new language is in italics; proposed deletions are in [brackets]:
Rule 501. Specialist Appointment
    (a)-(c)--No Change.
    (d) To be approved as a specialist unit and to retain the privilege 
of such status, an options or foreign currency options specialist unit 
must maintain the approved clearing arrangements and capital structure 
stated on their application as described in (b)(2) and (b)(3) above. 
Changes regarding the requirements in (b)(4) must be submitted and 
approved by the Committee. In addition, each unit must consist of at 
least the following staff for each [quarter turret (or equivalent 
portion of a] trading floor specialist post[)]: (1) One head 
specialist; and (2)[two] one assistant specialist[s with respect to 
options specialist units (of which at least one] that must be 
associated with the specialist unit[); and (3) one specialist clerk]. 
The Committee, in its discretion, may require a unit to obtain 
additional staff depending upon the number of assigned options classes 
and associated order flow.
(e)-(f)--No Change.
    Commentary--No Change.

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, as 
amended, 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, as amended, is to provide 
flexibility in options and foreign currency options specialist unit 
staffing by reducing the mandatory staffing requirement, in light of 
increased automation respecting options trading.
    Currently, Phlx Rule 501(d) requires that in order to be approved 
as an options or foreign currency options specialist unit and retain 
such status, the specialist unit shall have at each quarter turret or 
trading post one head specialist, two assistant specialists (at least 
one of whom must be associated with the specialist unit), and one 
specialist clerk.\5\ However, as the Exchange and member organizations 
continue to enhance options trading technology and options orders are 
now automatically executed on the Exchange over 90% of the time, the 
need to maintain the present required staffing levels for every 
specialist unit (three specialists and a clerk) is significantly 
reduced.\6\ The Exchange believes that, in light of such technological 
advances, and in conjunction with requests from specialist units for 
greater staffing flexibility, requiring only one assistant specialist 
and eliminating the requirement for a specialist clerk is warranted.\7\
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    \5\ The Exchange is also proposing to make non-substantive 
changes to Phlx Rule 501(d) such as deletion of obsolete references 
to quarter turrets, which are no longer used on the floor.
    \6\ Furthermore, the Phlx believes that the number of foreign 
currency option orders executed on the Exchange does not warrant 
high staffing levels. In 2005, as an example, the number of foreign 
currency option orders executed on the Exchange was less than 1% of 
the overall number of option orders executed on the Exchange. 
Telephone conversation between Jurij Trypupenko, Director, Phlx and 
David Michehl, Special Counsel, Division of Market Regulation, 
Commission on June 13, 2006.
    \7\ The changes proposed in Phlx Rule 501(d) herein are not 
intended to alter other specialist unit obligations established by 
Phlx rules.
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2. Statutory Basis
    The Exchange believes that the proposal, as amended, 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 the 
proposal is designed to promote just and equitable principles of trade, 
and to protect investors and the public interest, by adding flexibility 
to specialist staffing requirements while retaining the ability of the 
Options Allocations Committee to require additional staffing where 
appropriate, which should enhance operational efficiencies.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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, as 
amended, 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, as amended; or
    B. Institute proceedings to determine whether the proposed rule 
change, as amended, should be 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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

[[Page 35477]]

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-2006-30 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2006-30. 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 such 
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-2006-30 and should be submitted on or before July 
11, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-9605 Filed 6-19-06; 8:45 am]

BILLING CODE 8010-01-P