Document ID: SEC-2006-1619-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-12-13T05:00Z

[Federal Register: December 13, 2006 (Volume 71, Number 239)]
[Notices]               
[Page 74977-74979]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13de06-85]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54889; File No. SR-Phlx-2006-80]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Assignment of Options Trading Privileges to Streaming 
Quote Traders and Remote Streaming Quote Traders

December 6, 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 December 5, 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 amend Phlx Rule 507,\5\ which governs the 
assignment of options to Streaming Quote Traders (``SQTs'') \6\ and 
Remote Streaming Quote Traders (``RSQTs''),\7\ by: (i) Clarifying that 
all options traded on the Exchange are Streaming Quote Options; \8\ 
(ii) deleting outdated requirements contained in paragraph (f) under 
Phlx Rule 507 regarding the assignment of options during the first six 
months of the roll-out of streaming quote technology; (iii) moving the 
existing text of Phlx Rule 507(a) to the first paragraph of (b) and 
naming paragraph (b) ``Assignment in Options;'' (iv) moving the 
language in 507(b)(iii) to paragraph (a) and renaming it ``Approval as 
an SQT and RSQT;'' and (v) applying some of the current criteria for 
RSQT applicants (formerly in Phlx Rule 507(b)(iii)) to SQT applicants 
as well.
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    \5\ Phlx Rule 507 sets forth the process by which the Committee 
assigns or reassigns equity options to eligible Streaming Quote 
Traders and Remote Streaming Quote Traders. See Phlx Rule 507.
    \6\ 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 Phlx Rule 1014(b)(ii)(A).
    \7\ 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 Phlx Rule 
1014(b)(ii)(B).
    \8\ A Streaming Quote Option is an option for which the Options 
Committee determines the SQTs may generate and submit options 
quotations from the Exchange floor and that RSQTs may generate and 
submit options quotations from off of the Exchange floor, 
electronically. See Phlx Rule 1080(k).
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    The text of the proposed rule change is available on the Phlx's Web 
site, http://www.phlx.com, at the Phlx's principal office, 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 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 update Phlx Rule 507 
to reflect the current status of options trading on the Exchange.
    First, the proposed amendments modify outdated concepts and 
requirements contained in Phlx Rule 507 by: (i) Clarifying that all 
options traded on the Exchange are ``Streaming Quote Options,'' and 
(ii) deleting obsolete requirements for the assignment of options 
contained in paragraph (f) of Phlx Rule 507. The Exchange's 
introduction of the Phlx XL technology allowed, among other things, 
SQTs and RSQTs to generate and submit electronic quotations. Initially, 
RSQTs and SQTs could only stream electronic quotations in designated 
options until such technology was fully rolled-out to all options, 
which occurred in February 2005. The Exchange is proposing to amend 
Phlx Rule 507 to clarify the fact that all options listed for trading 
on the Exchange are now ``Streaming Quote Options.''
    For the same reason, the Exchange is also proposing to delete the 
requirements contained in paragraph (f) under Phlx Rule 507 that were 
applicable to member firms seeking option assignments as an RSQT or SQT 
during the first six months of the streaming quote roll-out. This 
amendment will update the Exchange's rules and remove rule text that 
may cause confusion.
    Second, the Exchange is proposing to reorganize Phlx Rule 507(a) 
and (b) so that paragraph (a) covers the approval of SQTs and RSQTs as 
such, and paragraph (b) covers the assignment of options to SQTs and 
RSQTs. In order to clarify that paragraph (b) covers the assignment of 
specific options to SQTs and RSQTs, paragraph (b)(i) would be titled 
``Assignment in Options,'' and the introductory phrase, ``When an 
option is to be assigned or reassigned by the Committee, the Committee 
will solicit applications from all eligible SQTs and RSQTs, as defined 
in Phlx Rule 1014(b)(ii)'' is proposed to be deleted from current 
paragraph (a) and inserted into paragraph (b). The Exchange believes 
that this should distinguish paragraph (a), which covers applications 
for approval of an applicant's status as an SQT or RSQT on the 
Exchange, from paragraph (b), which covers an SQT or RSQT's application 
for assignment in a particular option. Currently, the two concepts are 
intermingled in these paragraphs, which may be hard to follow.
    Third, the Exchange proposes to extend some of the requirements 
applicable to RSQT applicants to SQT applicants. These requirements 
include significant market-making and/or specialist experience in a 
broad array of securities; superior resources, including capital, 
technology and personnel;

[[Page 74978]]

demonstrated history of stability, superior electronic capacity, and 
superior operational capacity; proven ability to interact with order 
flow in all types of markets; and willingness and ability to make 
competitive markets on the Phlx and otherwise to promote the Phlx in a 
manner that is likely to enhance the ability of the Phlx to compete 
successfully for order flow in the options it trades. The purpose of 
this proposal is to enable the Exchange's Option Allocation, Evaluation 
and Securities Committee (``OAESC'') \9\ to make a more informed and 
efficient decision as to whether a particular SQT applicant should be 
assigned in an option.
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    \9\ See Phlx By-Law Article X, Section 10-7. The OAESC 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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    SQT applicants would not be required to be willing to accept 
assignments as an SQT in options overlying 400 or more securities, and 
would not be required to show the existence of order flow commitments 
in order to become an SQT. RSQT applicants would continue to have such 
a requirement.
    The Exchange believes that it is appropriate to apply these 
requirements to SQTs because SQT status, similar to RSQT status, 
entails a commitment to provide liquidity on the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ 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 removing outdated concepts from the Exchange's rules as 
well as by adopting requirements to promote the objective, efficient, 
and beneficial assignment of options to SQTs and RSQTs.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\ As required under Rule 19b-4(f)(6)(iii) under 
the Act,\14\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 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 
\15\ normally may not become operative prior to 30 days after the date 
of filing. However, Rule 19b-4(f)(6)(iii) under the Act permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest.\16\ 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 the proposed rule change clarifies the operation of 
Phlx Rule 507. Accordingly, the Commission designates the proposal to 
be effective and operative upon filing with the Commission.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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 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.\18\
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    \18\ 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-2006-80 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-2006-80. 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

[[Page 74979]]

should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-Phlx-2006-80 
and should be submitted on or before January 3, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-21159 Filed 12-12-06; 8:45 am]

BILLING CODE 8011-01-P