Document ID: SEC-2007-1299-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-09-21T04:00Z

[Federal Register: September 21, 2007 (Volume 72, Number 183)]
[Notices]               
[Page 54090-54091]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21se07-148]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56443; File No. SR-Phlx-2007-64]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Trade Throughs for IOC Cross Orders on the XLE

September 14, 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 August 30, 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 prepared substantially by Phlx. Phlx 
filed the proposed rule change pursuant to section 19(b)(3)(A) of the 
Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it 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 remove the trade through restrictions for IOC 
Cross Orders\5\ entered during the Pre Market Session\6\ or the Post 
Market Session\7\ on XLE, Phlx's electronic equity trading platform. In 
addition, Phlx proposes to re-organize Phlx Rule 185(c)(2)(D), which 
should make it more readable.
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    \5\ See Phlx Rule 185(c)(2).
    \6\ See Phlx Rule 101 Supplementary Material .02(1).
    \7\ See Phlx Rule 101 Supplementary Material .02(3).
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    The text of the proposed rule change is available at http://www.phlx.com
, the Exchange, and 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, 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. 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 increase the 
competitiveness of XLE by allowing an additional circumstance in which 
IOC Cross Orders may trade through. In addition, Phlx proposes to make 
Phlx Rule 185(c)(2)(D) more readable by dividing the rule into 
subsections. Phlx accepts IOC Cross Orders on XLE during all three XLE 
trading sessions, from 8 a.m. until 6 p.m. An IOC Cross Order is a two-
sided order that matches, immediately and automatically on XLE, the buy 
side and sell side identified in the order, unless the price of the 
order would impermissibly trade at or through other orders on XLE or at 
away markets.\8\ Currently, IOC Cross Orders may trade through the 
Protected NBBO\9\ in four different situations as described in Phlx 
Rule 185(c)(2)(D). These four situations correspond with either 
exceptions\10\ to or an exemption\11\ from Rule 611(a) of Regulation 
NMS.\12\
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    \8\ See Phlx Rule 185(c)(2).
    \9\ See Phlx Rule 1(dd).
    \10\ Renumbered Phlx Rule 185(c)(2)(D)(i) corresponds with Rule 
611(b)(4) of Regulation NMS, 17 CFR 242.611(b)(4). Renumbered Phlx 
Rule 185(c)(2)(D)(ii) corresponds with Rule 611(b)(5) of Regulation 
NMS, 17 CFR 242.611(b)(5). Renumbered Phlx Rule 185(c)(2)(D)(iii) 
corresponds with Rule 611(b)(7) of Regulation NMS, 17 CFR 
242.611(b)(7).
    \11\ Renumbered Phlx Rule 185(c)(2)(D)(iv) corresponds with 
Securities Exchange Act Release No. 54389 (August 31, 2006), 71 FR 
52829 (September 7, 2006).
    \12\ 17 CFR 242.611(a).
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    At this time, Phlx proposes to add to Phlx Rule 185(c)(2)(D) 
another situation in which IOC Cross Orders may trade through the 
Protected NBBO. Proposed Phlx Rule 185(c)(2)(D)(v) would allow IOC 
Cross Orders that are entered during the Pre Market or Post Market 
Sessions to trade through the Protected NBBO. The Pre Market and Post 
Market Sessions take place outside of the hours 9:30 a.m. to 4 p.m. 
Rule 611(a) of Regulation NMS does not apply to trade throughs of, 
among other things, the Protected NBBO, outside of regular trading 
hours, which are 9:30 a.m. until 4 p.m.\13\ Therefore, Rule 611(a) of 
Regulation NMS would not prohibit IOC Cross Orders from trading through 
the Protected NBBO during the Pre Market or Post Market Sessions on 
XLE.\14\
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    \13\ As used in Rule 611(a) of Regulation NMS, 17 CFR 
242.611(a), the term ``trade through'' only applies during regular 
trading hours. 17 CFR 242.600(b)(77). Rule 600(b)(64) of Regulation 
NMS, 17 CFR 242.600(b)(64), defines regular trading hours as ``the 
time between 9:30 a.m. and 4 p.m. Eastern Time, or such other time 
as is set forth in the procedures established pursuant to Sec.  
242.605(a)(2).'' At this time, no such other time has been set 
forth, therefore the regular trading hours for all purposes is 9:30 
a.m. until 4 p.m.
    \14\ Although Rule 611(a) of Regulation NMS does not prohibit 
trade throughs during these times, a broker's duty of best execution 
still applies. See Securities Exchange Act Release No. 51808 (June 
9, 2005) 70 FR 37496 (June 29, 2005) (text at footnote 338).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \15\ in general, and furthers the objectives of section 
6(b)(5) of the Act \16\ 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

[[Page 54091]]

system, and, in general to protect investors and the public interest.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 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 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

    Written comments were neither solicited nor 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 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 public interest, it has 
become effective pursuant to section 19(b)(3)(A) of the Act \17\ and 
Rule 19b-4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    Normally, a proposed rule change filed under 19b-4(f)(6) may not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \19\ 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 set forth in Rule 19b-
4(f)(6)(iii) under the Act \20\ because it permits activity that is 
currently permitted by the Chicago Stock Exchange (``CHX'') pursuant to 
CHX Article 20, Rule 5(a).\21\ The Commission believes that the earlier 
operative date is consistent with the protection of investors and the 
public interest because the proposed rule change permits the Exchange 
to implement without further delay a proposal that is similar to the 
trade through protection currently effective on CHX. For these reasons, 
the Commission designates the proposal to be operative upon filing with 
the Commission.\22\
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    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of 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 Commission notes that Phlx has satisfied the five-
day pre-filing notice requirement.
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ CHX Article 20, Rule 5(a) permits orders submitted to CHX 
to trade through orders on markets other than CHX if such trade 
through is not prohibited by Rule 611 of Regulation NMS, 17 CFR 
242.611. Therefore, orders submitted to CHX outside of regular 
trading hours would be permitted to trade through orders on markets 
other than CHX.
    \22\ For purposes only of waiving the 30-day operative delay 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 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.

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-2007-64 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-2007-64. 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 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-2007-64 and should be 
submitted on or before October 12, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-18552 Filed 9-20-07; 8:45 am]

BILLING CODE 8010-01-P