Document ID: SEC-2006-1508-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-11-22T05:00Z

[Federal Register: November 22, 2006 (Volume 71, Number 225)]
[Notices]               
[Page 67687-67689]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no06-143]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54760; File No. SR-Phlx-2006-76]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt Rule 185A, Intermarket Sweep Orders--Temporary

November 15, 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 November 13, 2006, 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 prepared by the Phlx. The Exchange 
filed the proposal as a ``non-controversial'' rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which rendered 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 Phlx proposes to adopt Phlx Rule 185A, Intermarket Sweep 
Orders--Temporary, which describes: (1) The obligations of the Exchange 
sending orders to other market centers, and (2) the obligations of XLE 
Participants sending Intermarket Sweep Orders (``ISOs'') \5\ or IOC 
Cross Orders that are marked as meeting the requirement to route to 
other market centers \6\ (both types of orders hereinafter are referred 
to as ``Incoming Sweep Orders''). Specifically, before Rule 611 of 
Regulation NMS \7\ is operative on the Exchange (the ``Trading Phase 
Date''),\8\ Phlx would use away market obligations instead of 
immediate-or-cancel intermarket sweep orders. An away market obligation 
is an immediate or cancel limit order for an NMS stock generated by 
Phlx in connection with

[[Page 67688]]

the execution of an order by Phlx and routed to one or more away market 
centers to execute against all better-priced protected quotations 
displayed by the other market centers up to their displayed size. If 
the away market center is capable of receiving an intermarket sweep 
order, the Exchange may generate and utilize an intermarket sweep order 
as the away market obligation. In addition, before the Trading Phase 
Date, the proposed new rule would expressly require XLE Participants 
sending Incoming Sweep Orders to simultaneously send an intermarket 
sweep order (or comparable order) for the full displayed size of the 
top of book of every other market center displaying a better-priced 
protected quotation. The text of the proposed rule change is available 
on Phlx's Web site, http://www.phlx.com, at Phlx's principal office, 

and at the Commission's Public Reference Room.
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    \5\ See Phlx Rule 185(b)(2)(C).
    \6\ See Phlx Rule 185(c)(2)(D).
    \7\ 17 CFR 242.611.
    \8\ The Trading Phase Date is February 5, 2007. SeeSecurities 
Exchange Act Release No. 53829 (May 18, 2006), 71 FR 30038 (May 24, 
2006) (File No. S7-10-04).
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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 Phlx 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 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 is to clarify the operation 
of XLE's outbound routing and Incoming Sweep Orders before the Trading 
Phase Date. Currently, Phlx Rules 185(b)(1)(C)(i)-(ii) and (b)(2)(B) 
state that when routing out to away market centers, Phlx will use 
``immediate-or-cancel intermarket sweep orders'' to execute against any 
away market centers with better-priced quotations. However, prior to 
the Trading Phase Date, not all away market centers will accept 
intermarket sweep orders. Therefore, in order to implement away routing 
before the Trading Phase Date, Phlx will use ``away market 
obligations'' instead of ``immediate-or-cancel intermarket sweep 
orders.'' In addition, before the Trading Phase Date, Phlx will require 
XLE Participants who send Incoming Sweep Orders to the Exchange to 
simultaneously send an intermarket sweep order (or comparable order) 
for the full displayed size of the top of book of every other market 
center displaying a better-priced protected quotation. This requirement 
is intended to mirror the requirement, which will be operative after 
the Trading Phase Date, that all such Incoming Sweep Orders meet the 
requirement of intermarket sweep orders in Rule 600(b)(30) of 
Regulation NMS.\9\ The Exchange notes that it has requested an 
exemption from the provisions of the Intermarket Trading System Plan to 
allow, among other things, the Exchange and its XLE Participants to 
implement outbound routing and Incoming Sweep Orders in this manner 
prior the Trading Phase Date.\10\
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    \9\ 17 CFR 242.600(b)(30).
    \10\ See Letter from John Dayton, Director and Counsel,Phlx, to 
Nancy M. Morris, Secretary, Commission, dated November 9, 2006. See 
also Letter from David Shillman, Associate Director, Division of 
Market Regulation, Commission, to John Dayton, Director and Counsel, 
Phlx, dated November 14, 2006.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 by the 
Exchange.

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

    Because the foregoing rule (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, 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 date 
of filing of the proposed rule change or such shorter time as 
designated by the Commission, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\ As required under Rule 19b-4(f)(6)(iii) under 
the Act,\15\ Phlx provided the Commission with written notice of its 
intent to file the proposed rule change, along with a brief description 
and text of the proposed rule change, prior to the date of the filing 
of the proposed rule change.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) under the Act 
\16\ normally may not become operative prior to 30 days after the date 
of filing. However, Rule 19b-4(f)(6)(iii) under the Act \17\ permits 
the Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay, 
which would make the rule change effective and operative upon filing. 
The Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest, 
because it allows the Exchange to implement this proposal without delay 
in order to accommodate the Exchange's plans to commence operation of 
XLE. The Commission notes that the Exchange has represented that the 
proposed rule change is based upon a proposed rule change of the 
American Stock Exchange LLC (``Amex'').\18\ For these reasons, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\19\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ See Securities Exchange Act Release No. 54709 (November 3, 
2006), 71 FR 65847 (November 9, 2006) (SR-Amex-2006-72) (approval 
order for Amex's new electronic trading system on a pilot basis, 
specifically Amex Rules 126A-AEMI-One and 131-AEMI-One).
    \19\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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

[[Page 67689]]

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.\20\
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    \20\ See 15 U.S.C. 78s(b)(3)(C).
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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-2006-76 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-2006-76. 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 the 
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-2006-76 and should be submitted on or before 
December 13, 2006.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
Nancy M. Morris,
Secretary.
[FR Doc. E6-19730 Filed 11-21-06; 8:45 am]

BILLING CODE 8011-01-P