Document ID: SEC-2012-0028-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2012-01-09T05:00Z

[Federal Register Volume 77, Number 5 (Monday, January 9, 2012)]
[Notices]
[Pages 1099-1101]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-95]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66079; File No. SR-Phlx-2011-178]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing of Proposed Rule Change Relating to Stock Execution Clerks

 January 3, 2012.
    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 December 20, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, pursuant to Section 19(b)(1) of the Act \3\ and Rule 
19b-4 thereunder,\4\ proposes to eliminate the stock execution clerk 
category from its Rules.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    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, on the Commission's Web site 
at http://www.sec.gov/, 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

[[Page 1100]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to eliminate the 
category of stock execution clerk from the Exchange's Rules. This 
registration capacity is outdated and no longer necessary.
    A stock execution clerk is currently defined in Exchange Rule 1090 
as any clerk other than a specialist clerk on the Exchange trading 
floor who functions as an intermediary in a transaction (i) Consummated 
on the Exchange; (ii) entered verbally for execution other than on the 
Exchange; or (iii) entered into a third party system designed to 
execute transactions other than on the Exchange.\5\ A stock execution 
clerk is intended to provide a service to Exchange members on the 
Options Floor by accepting orders for the purchase and sale of 
securities underlying options transactions. Once such orders are 
accepted, the stock execution clerk forwards such orders to the 
appropriate marketplace for execution. The transactions executed are 
typically hedging transactions in underlying stocks for Exchange 
specialists and Registered Options Traders.\6\ Any member or member 
organization engaged as a stock execution clerk is required to register 
that person as such with the Exchange's Membership Department. A stock 
execution clerk that performs any function other than a solely clerical 
or ministerial function shall, prior to performing any function as a 
stock execution clerk, (i) Comply with the registration requirement(s) 
set forth in Exchange Rule 604, where applicable; (ii) disclose in 
detail to the Exchange, on an annual basis, the specific nature of such 
additional function(s); and (iii) in accordance with Exchange Rule 748, 
submit to the Exchange written supervisory procedures relating to such 
member or member organization's activities as a stock execution 
clerk.\7\
---------------------------------------------------------------------------

    \5\ See Exchange Rule 1090, Commentary .01(a). Further, no stock 
execution clerk shall: (i) Act as an intermediary in any transaction 
other than under the direct supervision of a member; (ii) enter into 
any clearing transaction or participate in any clearing process; 
(iii) have discretion or independent authority over any account or 
transaction. See Exchange Rule 1090, Commentary .01(d).
    \6\ A Registered Options Trader (``ROT'') includes a SQT, a RSQT 
and a Non-SQT, which by definition is neither a SQT or a RSQT. A 
Registered Option Trader is defined in Exchange Rule 1014(b) as a 
regular member or a foreign currency options participant of the 
Exchange located on the trading floor who has received permission 
from the Exchange to trade in options for his own account. See 
Exchange Rule 1014(b)(i) and (ii).
    \7\ See Exchange Rule 1090, Commentary .01(b).
---------------------------------------------------------------------------

    In 1999, the Exchange adopted Exchange Rule 620 entitled ``Trading 
Floor Registration'' and required all trading floor personnel, 
including clerks, interns, stock execution clerks and other associated 
persons of a member to register with the Exchange in order to more 
efficiently monitor individuals on the Exchange's trading floor and 
their current status.\8\ In 2001, the Exchange adopted Rule 1090 
entitled ``Clerk'' to specifically define a clerk as any registered on-
floor person employed by or associated with a member or member 
organization who is not a member and is not eligible to effect 
transactions on the Options Floor as a Specialist, Registered Options 
Trader, or Floor Broker in order to identify a category of all persons 
that are not members of the Exchange and who are not eligible to effect 
transactions, but are located on the Exchange's Options Floor.\9\ 
Further, the Exchange specifically identified two types of clerks, a 
stock execution clerk and a specialist clerk.\10\ In that rule change, 
the Exchange noted that stock execution clerks must clear transactions 
through a NASD (now the Financial Industry Regulatory Authority or 
``FINRA'') member firm, and determine whether their activities as stock 
execution clerks require them to be registered as NASD (now FINRA) 
members.\11\ The Exchange intended that the activities of stock 
execution clerks should be conducted consistently with the Act and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 42365 (January 28, 
2000), 65 FR 5922 (February 7, 2000) (SR-Phlx-99-46).
    \9\ See Securities Exchange Act Release No. 46505 (September 17, 
2002), 67 FR 60273 (September 25, 2002) (SR-Phlx-2001-104). The 
Exchange notes that only Exchange members may bid for and offer 
securities in the open market on the Exchange Floor. See Exchange 
Rule 104.
    \10\ See Rule 1090 at Commentary .01 and 02.
    \11\ See Securities Exchange Act Release No. 46505 (September 
17, 2002), 67 FR 60273 (September 25, 2002) (SR-Phlx-2001-104). See 
also Section 15(b)(8) of the Act.
---------------------------------------------------------------------------

    The Exchange is proposing to eliminate this registration category 
because there are no clerks registered as a stock execution clerks 
today on the trading floor. There are still persons registered as 
clerks and specialist clerks pursuant to Rule 1090, but there are not 
individuals performing the duties of a stock execution clerk at the 
Exchange, nor has there been for some time.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \13\ 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 eliminating a registration category that is no longer 
necessary. Today, the function of a stock execution clerk has become 
largely automated. The transactions that were handled by stock 
execution clerks take place off-floor today and mostly occur 
electronically. This type of business is not conducted on the 
Exchange's trading floor today. For these reasons and in the interest 
of maintaining current and updated Rules, the Exchange believes that 
eliminating the stock execution clerk category provides greater clarity 
to members.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

[[Page 1101]]

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 email to rule-comments@sec.gov. Please include 
File No. SR-Phlx-2011-178 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 No. SR-Phlx-2011-178. This file 
number should be included on the subject line if email 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 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 No. SR-Phlx-2011-178 and should be 
submitted on or before January 30, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-95 Filed 1-6-12; 8:45 am]
BILLING CODE 8011-01-P