[Federal Register: October 14, 2005 (Volume 70, Number 198)]
[Notices]
[Page 60120-60125]
[DOCID:fr14oc05-80]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52568; File No. SR-Phlx-2005-58]

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
and Amendment No. 1 Thereto Relating to Its October 2005 Equity Options
Payment for Order Flow Program

October 6, 2005.
    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 September 29, 2005, 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, II,
and III below, which Items have been prepared by the Exchange. On
October 3, 2005, the Phlx submitted Amendment No. 1 to the proposed
rule change.\3\ The Phlx has designated this proposal as one changing a
fee imposed by the Phlx under Section 19(b)(3)(A)(ii) of the Act \4\
and Rule 19b-4(f)(2) thereunder,\5\ which renders the proposal, as
amended, effective upon filing with the Commission. 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 revised the proposed text
to correct typographical errors contained in the proposed Schedule
of Fees and to reflect that options on the Nasdaq-100 Index Tracking
StockSM are now traded under the symbol ``QQQQ.''
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
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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 its equity options payment for order
flow program in a number of ways, as described in detail below.

A. Equity Option Payment for Order Flow Program Prior to October 1,
2005

    Pursuant to the Exchange's payment for order flow program in effect
for transactions settling on or after July 1, 2005,\6\ only orders that
are delivered electronically, over AUTOM, are assessed a payment for
order flow fee to a Registered Options Trader (``ROT'') or

a Directed ROT,\7\ but not a specialist,\8\ if the specialist elects to
opt into the payment for order flow program for that option. For those
orders that are not delivered electronically, i.e. represented by a
floor broker, a payment for order flow fee is not assessed on those
equity option transactions.\9\
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    \6\ The program that took effect on July 1, 2005 is a pilot
program that is scheduled to expire on May 27, 2006, the same date
the one-year pilot program in connection with Directed Orders is due
to expire. See Securities Exchange Act Release Nos. 51759 (May 27,
2005), 70 FR 32860 (June 6, 2005) (SR-Phlx-2004-91) and 52114 (July
22, 2005), 70 FR 44138 (August 1, 2005) (SR-Phlx-2004-44).
    \7\ Directed ROTs are either Streaming Quote Traders (``SQTs'')
or Remote Streaming Quote Traders (``RSQTs'') that receive Directed
Orders. An SQT is an Exchange ROT who has received permission from
the Exchange to generate and submit option quotations electronically
through an electronic interface with AUTOM via an Exchange approved
proprietary electronic quoting device in eligible options to which
such SQT is assigned. AUTOM is the Exchange's electronic order
delivery, routing, execution and reporting system, which provides
for the automatic entry and routing of equity option and index
option orders to the Exchange trading floor. See Exchange Rules
1014(b)(ii) and 1080l. An RSQT is an Exchange ROT that is a member
or member organization of the Exchange 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. An RSQT may only trade in a market making capacity in
classes of options in which he is assigned. See Exchange Rule
1014(b)(ii)(B). See Securities Exchange Act Release Nos. 51126
(February 2, 2005), 70 FR 6915 (February 9, 2005) (SR-Phlx-2004-90)
and 51428 (March 24, 2005), 70 FR 16325 (March 30, 2005) (SR-Phlx-
2005-12). The term ``Directed Order'' means any customer order to
buy or sell, which has been directed to a particular specialist,
RSQT, or SQT by an Order Flow Provider (defined below). The
provisions of Exchange Rule 1080(l) are in effect for a one-year
pilot period to expire on May 27, 2006. See Securities Exchange Act
Release No. 51759 (May 27, 2005), 70 FR 32860 (June 6, 2005) (SR-
Phlx-2004-91).
    \8\ The Exchange uses the terms ``specialist'' and ``specialist
unit'' interchangeably herein.
    \9\ Electronically-delivered orders do not include orders
delivered through the Floor Broker Management System pursuant to
Exchange Rule 1063.
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    If the specialist unit opts into the program, the Exchange charges
a payment for order flow fee to ROTs of $0.60 on all equity options
traded against a customer order on the Exchange that are delivered
electronically over AUTOM, other than options on the Nasdaq-100 Index
Tracking StockSM traded under the symbol QQQQ (``QQQQ''),\10\ which are
assessed a payment for order flow fee of $0.75. FXI Options are not
assessed a payment for order flow fee.
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    \10\ The Nasdaq-100(r), Nasdaq-100 Index[supreg],
Nasdaq[supreg], The Nasdaq Stock Market[supreg], Nasdaq-100
SharesSM, Nasdaq-100 TrustSM, Nasdaq-100 Index
Tracking StockSM, and QQQSM are trademarks or
service marks of The Nasdaq Stock Market, Inc. (``Nasdaq'') and have
been licensed for use for certain purposes by the Philadelphia Stock
Exchange pursuant to a License Agreement with Nasdaq. The Nasdaq-100
Index[supreg] (the ``Index'') is determined, composed, and
calculated by Nasdaq without regard to the Licensee, the Nasdaq-100
TrustSM, or the beneficial owners of Nasdaq-100
SharesSM. Nasdaq has complete control and sole discretion
in determining, comprising, or calculating the Index or in modifying
in any way its method for determining, comprising, or calculating
the Index in the future.
    The Exchange proposes to modify the symbol ``QQQ'' in its Fee
Schedule to ``QQQQ'' to reflect that the options on the Nasdaq-100
Index Tracking Stock are currently traded under the symbol ``QQQQ.''
See Amendment No. 1.
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1. Directed ROTs and ROTs
    For Directed Orders received over AUTOM, Directed ROTs may elect to
be assessed or not to be assessed a payment for order flow fee for
orders directed to them when the specialist has elected to participate
in the payment for order flow program for that option. Directed ROTs
may not request reimbursement for payment for order flow paid to Order
Flow Providers.\11\
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    \11\ The term ``Order Flow Provider'' means any member or member
organization that submits, as agent, customer orders to the
Exchange. See Exchange Rule 1080(l).
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    Directed ROTs must notify the Exchange of the election to pay or
not to pay the payment for order flow fee for Directed Orders in
writing no later than five business days prior to the start of the
month for which the payment for order flow fee is to be assessed.\12\
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    \12\ Directed ROTs are required to notify the Exchange in
writing to either elect to pay the payment for order flow fee or not
to pay the fee when the specialist has elected to opt into the
payment for order flow program for that option. The Directed ROT
does not need to notify the Exchange in writing to either elect to
pay the payment for order flow fee or not to pay the fee if the
specialist for that option does not participate in the Exchange's
payment for order flow program. Once an election to pay the payment
for order flow fee or not to pay the payment for order flow fee in a
particular month has been made, no notice to the Exchange is
required in a subsequent month unless there is a change in
participation status.
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    However, the payment for order flow fee is assessed on any ROT (but
not the Directed ROT for that transaction when the Directed ROT has
opted out of the payment for order flow program) if the ROT
participates in the allocation of any remaining contracts after the
Directed ROT receives its trade allocation. The Exchange states that
the payment for order flow fee applies, in effect, to equity option
transactions between a ROT (and Directed ROT who has elected to be
assessed a payment for order flow fee) and a customer.\13\
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    \13\ Thus, the payment for order flow fee is not assessed on
transactions between: (1) a specialist and a ROT; (2) a ROT and a
ROT; (3) a ROT and a firm; and (4) a ROT and a broker-dealer. The
ROT payment for order flow fee does not apply to index options or
foreign currency options. For purposes of the payment for order flow
program, a firm is defined as a proprietary account of a member
firm, and not the account of an individual member and a broker-
dealer orders are orders entered from other than the floor of the
Exchange, for any account (i) in which the holder of beneficial
interest is a member or non-member broker-dealer or (ii) in which
the holder of beneficial interest is a person associated with or
employed by a member or non-member broker-dealer. This includes
orders for the account of an ROT entered from off-the-floor.
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2. Specialists
    Specialists are not assessed a payment for order fee.\14\
Consistent with current practice, the Exchange must be notified of the
election to participate or not to participate in the payment for order
flow program in writing no later than five business days prior to the
start of the month for which reimbursement for monies expended on
payment for order flow will be requested.\15\ The Exchange states that
the result of electing not to participate in the program is a waiver of
the right to any reimbursement of payment for order flow funds for such
month(s). If a specialist opts in its entirety into the program and
does not request any payment for order flow reimbursement more than two
times in a six-month period, it will be precluded from entering in its
entirety in the payment for order flow program for the next three
months.
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    \14\ For purposes of assessing payment for order flow fees, the
Exchange does not differentiate between specialists and specialists
who receive Directed Orders.
    \15\ Specialists must notify the Exchange in writing to either
elect to participate or not to participate in the program. Once an
election to participate or not to participate in the Exchange's
payment for order flow program in a particular month has been made,
no notice to the Exchange is required in a subsequent month, as
described above, unless there is a change in participation status.
For example, if a specialist elected to participate in the program
and provided the Exchange with the appropriate notice, that
specialist would not be required to notify the Exchange in the
subsequent month(s) if it intends to continue to participate in the
program. However, if it elects not to participate (a change from its
current status), it would need to notify the Exchange in accordance
with the requirements stated above.
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    Specialists may also elect to participate or not to participate in
the payment for order flow program on an option-by-option basis if they
notify the Exchange in writing no later than three business days prior
to entering into or opting out of the payment for order flow program.
Specialists may only opt into or out of the Exchange's payment for
order flow program one time in any given month.
    Thus, if at any time during a month, a specialist opts into the
payment for order flow program for a particular option, a payment for
order flow fee is assessed for that portion of the month. For example,
a payment for order flow fee is assessed, even beginning mid-month, if
an option is allocated, or reallocated from a non-participating
specialist unit, to a specialist unit that participates in the
Exchange's payment for order flow program.
    Payment for order flow charges apply to ROTs (or Directed ROTs that
have elected to be assessed the payment for

order flow fee) as long as the specialist unit for that option elects
to participate in the Exchange's payment for order flow program.
    The payment for order flow fee is billed and collected on a monthly
basis. Because the specialists are not charged the payment for order
flow fee, they may not request reimbursement for order flow funds in
connection with any transactions to which they were a party.
    The Exchange states that specialists may request payment for order
flow reimbursements on an option-by-option basis. The collected funds
are to be used by each specialist as a reimbursement for monies
expended to attract options orders to the Exchange by making payments
to Order Flow Providers who provide order flow to the Exchange.
Specialists receive their respective funds only after submitting an
Exchange certification form identifying the amount of the requested
funds.\16\
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    \16\ The Exchange states that Specialists are given instructions
as to when the certification forms are required to be submitted.
While all determinations concerning the amount that will be paid for
orders and which Order Flow Providers shall receive these payments
are made by the specialists, the specialists will provide to the
Exchange on an Exchange form certain information as required by the
Exchange, which may include what firms they paid for order flow, the
amount of the payment and the price paid per contract.
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    The Exchange states that the amount a specialist may receive in
reimbursement is limited. For a specialist who elects to participate in
the Exchange's payment for order flow program for electronically
delivered orders, the amount of reimbursement is limited to the
percentage of ROT and Directed ROT monthly volume to total
participating specialist, Directed ROT and ROT monthly volume in the
equity option payment for order flow program.
3. Specialist Calculation
    Funds collected from the payment for order flow program are
available to the specialist participating in the payment for order flow
program. The amount of funds that are available are determined by a
specific specialist calculation.\17\
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    \17\ For example, if a specialist unit in the payment for order
flow program has a payment for order flow arrangement with various
Order Flow Providers to pay the Order Flow Providers $0.50 per
contract for order flow routed to the Exchange, including for order
flow sent to Directed ROTs, and those Order Flow Providers send
90,000 customer contracts to the Exchange in one month for one
option, then the specialist would be required, pursuant to its
agreement with the Order Flow Providers, to pay the Order Flow
Providers $45,000 for that month. Assuming that the 90,000
represents 30,000 specialist contracts, 30,000 total ROT and
Directed ROT contracts (comprised of 10,000 ROT contracts, 10,000
Directed ROT ``A'' contracts, 7,000 Directed ROT ``B'' contracts and
3,000 Directed ROT ``C'' contracts), and 30,000 contracts from
firms, broker-dealers and other customers, the specialist may
request reimbursement of up to 50% (30,000 ROT and Directed ROT
contracts/60,000, which is comprised of 30,000 ROT and Directed ROT
contracts + 30,000 specialist contracts) of the amount paid ($45,000
x 50% = $22,500). Because the ROTs and Directed ROTs will have paid
a total of $18,000 (30,000 contracts x $.60 per contract) into the
payment for order flow fund for that month, the specialist may
collect up to $18,000 of its $22,500 reimbursement request.
    Assuming, however, that Directed ROT ``B'' elects not to be
assessed a payment for order flow fee and has notified the Exchange
pursuant to the requirements set forth above, then the specialist is
obligated to pay for 83,000 contracts (or $41,500 (83,000 x $.50 per
contract)). The ROTs and Directed ROTs ``A'' and ``C'' will have
paid $13,800 (23,000 contracts x $.60 per contract) into the payment
for order flow fund for that option for that month. Thus, the amount
the specialist may collect is up to $13,800 of its $20,750 ($41,500
x 50%) reimbursement request. (For purposes of this example, the
Directed ROTs have elected to be assessed the payment for order flow
fee by notifying the Exchange in writing, consistent with the
notification requirements previously discussed).
    If all Directed ROTs have notified the Exchange that they elect
not to be assessed a payment for order flow fee in the above-
referenced example, then the specialist is obligated to pay for
70,000 contracts (or $35,000 (70,000 x $.50 per contract)). The ROTs
will have paid $6,000 (10,000 contracts x $.60 per contract) into
the payment for order flow fund for that option for that month.
Thus, the amount the specialist may collect is up to $6,000 of its
$17,500 ($35,000 x 50%) reimbursement request.
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    The Exchange states that any excess funds (funds remaining after
reimbursement requests are processed) for a particular month that are
not requested by the participating specialist are returned, by option,
to the ROTs and Directed ROTs (who have opted to pay the payment for
order flow fee) who have been charged payment for order flow fees. The
excess funds are reflected as a credit on the monthly invoices and
rebated on a pro rata basis by option to the ROTs and Directed ROTs who
were billed payment for order flow charges for that same month.
    Participating specialists may not receive more than the payment for
order flow amount billed and collected in a given month.
    In addition, a 500-contract cap per individual cleared side of a
transaction is imposed. The Exchange also implements a quality of
execution program. Further, the Exchange may audit a specialist's
payments to Order Flow Providers to verify the use and accuracy of the
payment for order flow funds remitted to the specialists based on their
certification form.\18\
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    \18\ See Exchange Rule 760.
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B. This Proposal: Equity Options Payment for Order Flow Program To Be
in Effect for Transactions Settling on or After October 1, 2005

    The proposal, as discussed below, would be in effect for trades
settling on or after October 1, 2005 and would remain in effect as a
pilot program that is scheduled to expire on May 27, 2006, the same
date that the one-year pilot program relating to Directed Orders is due
to expire.\19\
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    \19\ See Securities Exchange Act Release No. 51759 (May 27,
2005), 70 FR 32860 (June 6, 2005) (SR-Phlx-2004-91).
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    The payment for order flow rate would remain unchanged under the
program to be in effect for transactions settling on or after October
1, 2005 (``October program''). Specifically, the following rates would
continue to apply: (1) Equity options other than QQQQ and FXI Options
will be assessed $0.60 per contract; (2) options on QQQQ will be
assessed $0.75 per contract; and (3) no payment for order flow fee will
be assessed on FXI Options. Consistent with the current program, trades
resulting from either Directed or non-Directed Orders that are
delivered electronically over AUTOM and executed on the Exchange would
be assessed a payment for order flow fee, while non-electronically-
delivered orders (i.e., represented by a floor broker) would not be
assessed a fee.\20\
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    \20\ For purposes of this proposal, electronically-delivered
orders do not include orders delivered through the Floor Broker
Management System pursuant to Exchange Rule 1063.
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    However, the following aspects of the October program would be new
or different: (1) Assessing the payment for order flow fee; (2)
allowing Directed ROTs to elect to participate or not to participate in
the payment for order flow program; (3) establishing separate pools of
funds for each Directed ROT and each specialist unit that participates
in the Exchange's payment for order flow program, with the funds no
longer being pooled on an option-by-option basis; (4) eliminating the
reimbursement process whereby specialists requested funds to reimburse
them for payments made to Order Flow Providers; (5) allowing the
Exchange to make payments directly to Order Flow Providers at the
direction of the Directed ROT or specialist unit; (6) carrying forward
each month excess funds (funds not requested by specialist units or
Directed ROTs to be paid to Order Flow Providers), up to a certain
amount or, at the direction of the specialist unit or Directed ROT
rebating the excess funds on a pro-rata basis; and (7) establishing a
payment for order flow advisory group, which would conduct periodic
reviews to assist in determining the effectiveness of the Exchange's
payment for order flow program.

Assessment of the Payment for Order Flow Fee and Participation in the
Payment for Order Flow Program
    Specialist and Directed ROTs who participate in the Exchange's
payment for order flow program would be assessed a payment for order
flow fee, in addition to ROTs. Therefore, the payment for order flow
fee would be assessed, in effect, on equity option transactions between
a customer and an ROT, a customer and a Directed ROT, or a customer and
a specialist. The payment for order flow fees would be assessed when
the specialist, or Directed ROT to whom the order is directed,
participates in the Exchange's payment for order flow program.
    Specialist units would continue to be permitted to opt into or out
of the Exchange's payment for order flow program. The Exchange also
proposes to allow Directed ROTs to be permitted to opt into or out of
the Exchange's payment for order flow program for orders directed to
them.
    For both specialist units and Directed ROTs, the Exchange must be
notified of the election to participate or not to participate in the
payment for order flow program in writing no later than five business
days prior to the date on which the payment for order flow fee will be
assessed.\21\ Specialist units and Directed ROTs may only opt into or
out of the Exchange's payment for order flow program one time in any
given month. The Exchange represents that the result of electing not to
participate in the program would be a waiver of the right to direct the
Exchange to make payments to Order Flow Providers. If a specialist unit
or Directed ROT opts into the program and does not direct the Exchange
to make any payment for order flow payments to Order Flow Providers
more than two times in a six-month period, it would be precluded from
entering into the payment for order flow program for the next three
months.
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    \21\ Specialist units and Directed ROTs would be required to
notify the Exchange in writing to either elect to participate or not
to participate in the program. Once an election to participate or
not to participate in the Exchange's payment for order flow program
in a particular month has been made, no notice to the Exchange would
be required in a subsequent month, as described above, unless there
is a change in participation status. For example, if a specialist
unit elected to participate in the program and provided the Exchange
with the appropriate notice, that specialist unit would not be
required to notify the Exchange in the subsequent month(s) if it
intends to continue to participate in the program. However, if it
elects not to participate (a change from its current status), it
would need to notify the Exchange in accordance with the
requirements stated above. Specialist units and Directed ROTs who
currently participate in the Exchange's payment for order flow
program in effect beginning July 1, 2005, would not need to notify
the Exchange again regarding their participation status, unless
there is a change from their current status.
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    If at any time during a month, a specialist unit or Directed ROT
opts into the payment for order flow program, a payment for order flow
fee would be assessed for that portion of the month. For example, a
payment for order flow fee would be assessed, even beginning mid-month,
if an option is allocated, or reallocated from a non-participating
specialist unit, to a specialist unit that participates in the
Exchange's payment for order flow program or if a ROT is designated as
a Directed ROT mid-month.
    The amount a specialist unit or Directed ROT may request that the
Exchange pay to Order Flow Providers would be limited to the amount
billed and collected for that month,\22\ plus any excess funds that
were carried over from previous months (funds collected but not
requested by a specialist unit or Directed ROT). However, specialist
units or Directed ROTs, would be able to request that any excess funds
be rebated on a pro-rata basis to the applicable members (i.e., the
applicable ROT, Directed ROT or specialist)\23\ who paid into that pool
of funds. If excess funds are rebated, they would be reflected as a
credit on the invoices.\24\
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    \22\ The Exchange intends to have the National Securities
Clearing Corporation collect the payment for order flow fees, along
with other Exchange fees, on behalf of the Exchange on a monthly
basis.
    \23\ See Amendment No. 1, note 3, supra.
    \24\ If a specialist unit or a Directed ROT leaves the Exchange
mid-month, any excess funds in that specialist unit or Directed ROT
pool would be rebated to the applicable Exchange members on a pro
rata basis. This process would occur automatically without any
request having to be made by any party. Per Telephone call between
Michou H.M. Nguyen, Commission and Cynthia K. Hoekstra, Exchange on
October 4, 2005.
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    The available payment for order flow funds would be disbursed by
the Exchange according to the instructions of the specialist units and
Directed ROTs.\25\ Specialist units and Directed ROTs would be given
instructions as to how to submit their payment directions. The Exchange
would not be involved in the determination of the terms governing the
orders that qualify for payment or the amount of any payment. The
Exchange would provide administrative support for the program in such
matters as maintaining the funds, keeping track of the number of
qualified orders each specialist unit and Directed ROT directs to the
Exchange, and making payments to the Order Flow Providers on behalf of,
and at the direction of, the specialist units or Directed ROT.
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    \25\ A specialist unit or a Directed ROT would certify to the
Exchange that payment for order flow funds directed by either of
them to be paid to Order Flow Providers reflect payment arrangements
entered into by the specialist unit or Directed ROT and the Order
Flow Provider.
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    Separate pools of funds would be available to each specialist unit
and Directed ROT solely for those trades where the payment for order
flow fee was assessed and would be aggregated for use by each
specialist unit and each Directed ROT to attract customer orders to the
Exchange from Order Flow Providers that accept payment as a factor in
making their order routing decisions. For Directed Orders, payment for
order flow fees would be assessed on a per contract basis (when the
specialist or Directed ROT opts into the program) and would be
aggregated into separate pools of funds for use by each specialist unit
or Directed ROT. For non-directed electronically-delivered orders,
payment for order flow fees would continue to be assessed on a per
contract basis and would be allocated for use by the participating
specialist.
    The Exchange is also proposing to establish a payment for order
flow advisory group, which would conduct periodic reviews to assist in
determining the effectiveness of the Exchange's payment for order flow
program.\26\
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    \26\ In connection with determining the effectiveness of the
Exchange's payment for order flow program, the advisory group would
review whether excess funds should continue to be carried over from
previous months (in instances where specialist units and Directed
ROTs do not request that excess funds be rebated to the applicable
members who paid into the payment for order flow pools).
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    The 500-contract cap per individual cleared side of a transaction
would continue to be imposed. The Exchange would also continue to
implement a quality of execution program.\27\
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    \27\ See Exchange Rule 760.
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    Below is the text of the proposed rule change, as amended. Proposed
new language is in italics; proposed deletions are in [brackets].
* * * * *

SUMMARY OF EQUITY OPTION CHARGES (p. 3/6)

    For any top 120 option listed after February 1, 2004 and for any
top 120 option acquired by a new specialist unit ** within the first 60
days of operations, the following thresholds will apply, with a cap of
$10,000 for the first 4 full months of trading per month per option
provided that the total monthly market share effected on the Phlx in
that top 120 Option is equal to or greater than 50% of the volume
threshold in effect:

First full month of trading: 0% national market share

Second full month of trading: 3% national market share
Third full month of trading: 6% national market share
Fourth full month of trading: 9% national market share
Fifth full month of trading (and thereafter): 12% national market share

    ** A new specialist unit is one that is approved to operate as a
specialist unit by the Options Allocation, Evaluation, and Securities
Committee on or after February 1, 2004 and is a specialist unit that is
not currently affiliated with an existing options specialist unit as
reported on the member organization's Form BD, which refers to direct
and indirect owners, or as reported in connection with any other
financial arrangement, such as is required by Exchange Rule 783.

REAL-TIME RISK MANAGEMENT FEE

    $.0025 per contract for firms/members receiving information on a
real-time basis.
EQUITY OPTION PAYMENT FOR ORDER FLOW FEES*[(1) (2)]
[Registered Option Trader**+]
    (1) For trades resulting from either Directed or non-Directed
Orders that are delivered electronically and executed on the Exchange:
Assessed on ROTs, specialists and Directed ROTs on those trades when
the specialist unit or Directed ROT elects to participate in the
payment for order flow program.***
    (2) No payment for order flow fees will be assessed on trades that
are not delivered electronically.

QQQQ (NASDAQ-100 Index Tracking Stock\SM\) $0.75 per contract
Remaining Equity Options, except FXI Options $0.60 per contract

    *Assessed on transactions resulting from customer orders, subject
to a 500-contract cap, per individual cleared side of transaction. This
proposal will be in effect for trades settling on or after October 1,
2005 and will remain in effect as a pilot program that is scheduled to
expire on May 27, 2006.
    ***Any excess payment for order flow funds billed but not utilized
by the specialist or Directed ROT [reimbursed to specialists] will be
carried forward unless the Directed ROT or specialist elects to have
those funds rebated to the applicable ROT, Directed ROT or specialist
on a pro rata basis, reflected as a credit on the monthly invoices.
[returned to the applicable ROTs and Directed ROTs who have elected to
be assessed a payment for order flow fee (reflected as a credit on the
monthly invoices) and distributed on a pro rata basis.]
    [+Only incurred when the specialist elects to participate in the
payment for order flow program.]
    [(1) For orders delivered electronically: Assessed on ROTs when the
specialist unit opts into the program. ROTs who receive Directed Orders
may elect to be assessed the payment for order flow fee on customer
orders directed to and executed by them.
    [(2) No payment for order flow fees will be assessed on orders that
are not delivered electronically]
    See Appendix A for additional fees.

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, as amended. 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 Exchange represents that the purpose of the proposal, as
amended, is to adopt a more competitive and administratively efficient
payment for order flow program. This proposal would give both
specialist units and Directed ROTs the ability to compete for order
flow by allowing them to elect to participate or not to participate in
the Exchange's payment for order flow program. The proposal would also
establish separate pools of payment for order flow funds for each
specialist and each Directed ROT. The proposal would permit the
specialist units and Directed ROTs to instruct the Exchange as to how
to distribute the available payment for order flow funds directly to
order flow providers.
    According to the Phlx, the Exchange's trading environment has
changed. Now, ROTs must submit their orders electronically through
streaming quote devices. Therefore, particular trading crowds are not
relevant in that ROTs may stream from anywhere on the trading floor or
off the trading floor.\28\ ROTs have unlimited access to stream any and
all equity option issues without limitations, with participation spread
among various issues and specialists.\29\
---------------------------------------------------------------------------

    \28\ A ROT is either a SQT or a RSQTs, as defined in footnote 7,
supra. A SQT may only stream from the floor. A RSQT may only stream
from off the floor. Per Telephone call among Michou H.M. Nguyen,
Commission, Cynthia K. Hoekstra, Exchange and William N. Briggs,
Exchange on October 4, 2005.
    \29\ Exchange Rule 507 places no limit on the number of
qualifying ROTs that may become SQTs or RSQTs; any applicant that is
qualified as an ROT in good standing and that satisfies the
technological readiness and testing requirements shall be approved
as an SQT. RSQTs must also demonstrate additional qualifications.
See Exchange Rule 507, Application for Assignment in Streaming Quote
Options.
---------------------------------------------------------------------------

    The Exchange believes that the ``pooling'' of payment for order
flow fees collected by the Exchange is similar to the practices
currently in effect at the Chicago Board Options Exchange, Inc.
(``CBOE''), the International Securities Exchange (``ISE''), Inc and
the Pacific Exchange, Inc (``PCX'').\30\ Payment for order flow funds
generated from this proposal originate from electronic orders--
generally the same type of orders for which Order Flow Providers expect
payment. Only specialists, Directed ROTs and ROTs that stream quotes
will be assessed the payment for order flow fee, as floor-brokered
orders are not part of the program.
---------------------------------------------------------------------------

    \30\ See Securities Exchange Act Release Nos. 52474 (September
20, 2005), 70 FR 56520 (September 27, 2005) (SR-CBOE-2005-72) (all
funds generated by CBOE's ``marketing fee'' are collected by CBOE
and recorded according to the Designated Primary Market-Maker
(``DPM'') station and class where the options subject to the fee are
traded); 48568 (September 30, 2003), 68 FR 57720 (October 6, 2003)
(SR-ISE-2003-23) (ISE has divided the options it trades into ten
groups, with one Primary Market Maker assigned to each group. The
ISE maintains a payment for order flow fund for each group,
consisting of the fees collected from market makers trading options
in that group); and 48175 (July 14, 2003), 68 FR 43245 (July 21,
2003) (SR-PCX-2003-30) (PCX collects and segregates the ``marketing
fee'' proceeds by trading post).
---------------------------------------------------------------------------

    According to the Exchange, it has further added supplementary
administrative practices that are necessary to remain competitive with
other options exchanges and should help to ease the accounting burden
on membership. This is achieved by eliminating the reimbursement
process and by having the Exchange act as the program administrator
remitting payments directly to Order Flow Providers per the
instructions of the specialist unit or Directed ROT in a manner, which
the Exchange believes is substantially similar to that of other options
exchanges.\31\
---------------------------------------------------------------------------

    \31\ See Securities Exchange Act Release Nos. 51650 (May 3,
2005), 70 FR 24663 (May 10, 2005) (SR-CBOE-2005-34) (the ``marketing
fee'' collected by CBOE is disbursed by CBOE according to the
instructions of the DPM); and 48175 (July 14, 2003), 68 FR 43245
(July 21, 2003) (SR-PCX-2003-30) (PCX collects and segregates the
fee proceeds by trading post and makes the funds available to Lead
Market Makers (``LMM''). The LMMs determine the specific terms
governing the orders that qualify for payment and the amounts to be
paid).

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

2. Statutory Basis
    The Exchange believes that its proposal, as amended, is consistent
with Section 6(b) of the Act \32\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act \33\ in
particular, in that it is an equitable allocation of reasonable dues,
fees, and other charges among the Phlx's members.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b).
    \33\ 15 U.S.C. 78f(b)(4)-(5).
---------------------------------------------------------------------------

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 inappropriate 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

    The foregoing proposed rule change, as amended, has been designated
as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act \34\ and
Rule 19b-4(f)(2) \35\ thereunder, because it establishes or changes a
due, fee, or other charge imposed by the Exchange. Accordingly, the
proposal will take effect upon filing with the Commission. At any time
within 60 days of the filing of such proposed rule change, as amended,
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.\36\
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \35\ 17 CFR 240.19b-4(f)(2).
    \36\ The effective date of the original proposed rule change is
September 29, 2005, the effective date of Amendment No. 1 is October
3, 2005. For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposal, the Commission
considers the period to commence on October 3, 2005, the date on
which the Exchange submitted Amendment No. 1.
---------------------------------------------------------------------------

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:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-Phlx-2005-58 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Phlx-2005-58. 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, as amended, 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-2005-58 and should be submitted on
or before November 4, 2005.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-5645 Filed 10-13-05; 8:45 am]

BILLING CODE 8010-01-P


region facility species. orig stage year impinged. est entrained. est notes qc dummy dummy dummy dummy  999  999  999 dummy dummy reservoir roxboro black. crappie age01 1980 94.4 . RM# 35966 pg 7 61 lefer reservoir roxboro bluegill age01 1980 3482 . RM# 35966 pg 7 61 lefer reservoir roxboro channel. catfish age01 1980 30.5 . RM# 35966 pg 7 61 lefer reservoir roxboro gizzard. shad age01 1980 71592.8 . RM# 35966 pg 7 61 lefer reservoir roxboro golden. shiner age01 1980 88.3 . RM# 35966 pg 7 61 lefer reservoir roxboro green. sunfish age01 1980 2399.4 . RM# 35966 pg 7 61 lefer reservoir roxboro satinfin. shiner age01 1980 200.5 . RM# 35966 pg 7 61 lefer reservoir roxboro white. catfish age01 1980 247.4 . RM# 35966 pg 7 61 lefer reservoir roxboro white. crappie age01 1980 18 . RM# 35966 pg 7 61 lefer reservoir roxboro yellow. perch age01 1980 258.6 . RM# 35966 pg 7 61 lefer month species unit. 1. no. per. 24. hrs. mo unit. 2. no. per. 24. hrs. mo no. per. 24. hrs. mo days/ mo extrap. imp May 79 gizzard. shad 0 0 0 31 0 Jun 79 gizzard. shad 0 0.5 0.5 30 15 Jul 79 gizzard. shad 1 0 1 31 31 Aug 79 gizzard. shad 1 0 1 31 31 Sep 79 gizzard. shad 71.6 158.7 230.3 30 6909 Oct 79 gizzard. shad 4.3 2.6 6.9 31 214 Nov 79 gizzard. shad 545.1 84 629.1 30 18873 Dec 79 gizzard. shad 17.8 12.2 30 31 930 May 79 golden. shiner 0 0 0 31 0 Jun 79 golden. shiner 0 0 0 30 0 Jul 79 golden. shiner 0 0.3 0.3 31 9 Aug 79 golden. shiner 0 0 0 31 0 Sep 79 golden. shiner 0 0 0 30 0 Oct 79 golden. shiner 0 0.3 0.3 31 9 Nov 79 golden. shiner 0.5 0 0.5 30 15 Dec 79 golden. shiner 0.5 0 0.5 31 16 May 79 white. catfish 0 0 0 31 0 Jun 79 white. catfish 0.5 0.5 1 30 30 Jul 79 white. catfish 0.7 0 0.7 31 22 Aug 79 white. catfish 0.5 0 0.5 31 16 Sep 79 white. catfish 0.5 0.5 1 30 30 Oct 79 white. catfish 0.7 1 1.7 31 53 Nov 79 white. catfish 0 1 1 30 30 Dec 79 white. catfish 0 0.8 0.8 31 25 May 79 channel. catfish 0 0 0 31 0 Jun 79 channel. catfish 0 0 0 30 0 Jul 79 channel. catfish 0.3 0 0.3 31 9 Aug 79 channel. catfish 0 0 0 31 0 Sep 79 channel. catfish 0 1.1 1.1 30 33 Oct 79 channel. catfish 0 0 0 31 0 Nov 79 channel. catfish 0 0 0 30 0 Dec 79 channel. catfish 0.5 0 0.5 31 16 May 79 striped. bass 0 0 0 31 0 Jun 79 striped. bass 0 0 0 30 0 Jul 79 striped. bass 0 0 0 31 0 Aug 79 striped. bass 0 0 0 31 0 Sep 79 striped. bass 0 0 0 30 0 Oct 79 striped. bass 0 0 0 31 0 Nov 79 striped. bass 0.5 0 0.5 30 15 Dec 79 striped. bass 0 0 0 31 0 May 79 green. sunfish 0 0 0 31 0 Jun 79 green. sunfish 0 0.5 0.5 30 15 Jul 79 green. sunfish 0 0.3 0.3 31 9 Aug 79 green. sunfish 0 0.5 0.5 31 16 Sep 79 green. sunfish 1.6 0.5 2.1 30 63 Oct 79 green. sunfish 0.6 1 1.6 31 50 Nov 79 green. sunfish 1.1 0 1.1 30 33 Dec 79 green. sunfish 1 0 1 31 31 May 79 bluegill 4.4 2.2 6.6 31 205 Jun 79 bluegill 1 1.6 2.6 30 78 Jul 79 bluegill 0 0.3 0.3 31 9 Aug 79 bluegill 0 0 0 31 0 Sep 79 bluegill 2.2 8.1 10.3 30 309 Oct 79 bluegill 5.9 8.5 14.4 31 446 Nov 79 bluegill 7.4 6 13.4 30 402 Dec 79 bluegill 0.5 1.8 2.3 31 71 May 79 black. crappie 0 0 0 31 0 Jun 79 black. crappie 0 0 0 30 0 Jul 79 black. crappie 0 0 0 31 0 Aug 79 black. crappie 0 0 0 31 0 Sep 79 black. crappie 0.5 0 0.5 30 15 Oct 79 black. crappie 0.6 0.3 0.9 31 28 Nov 79 black. crappie 1 0 1 30 30 Dec 79 black. crappie 0 0 0 31 0 May 79 yellow. perch 0 0 0 31 0 Jun 79 yellow. perch 0 0 0 30 0 Jul 79 yellow. perch 0 0 0 31 0 Aug 79 yellow. perch 0 0.5 0.5 31 16 Sep 79 yellow. perch 0.5 0 0.5 30 15 Oct 79 yellow. perch 0 0.7 0.7 31 22 Nov 79 yellow. perch 0 0 0 30 0 Dec 79 yellow. perch 0 0 0 31 0 month species unit. 1. no. per. 24. hrs. mo unit. 2. no. per. 24. hrs. mo no. per. 24. hrs. mo days/ mo extrap. imp Jan 80 gizzard. shad 187.9 25.8 213.7 31 6625 Feb 80 gizzard. shad 1105.3 383.4 1488.7 28 41684 Mar 80 gizzard. shad 500 5 505 31 15655 Apr 80 gizzard. shad 207.4 7 214.4 30 6432 May 80 gizzard. shad 0 0 0 31 0 Jun 80 gizzard. shad 3.8 0.5 4.3 30 129 Jul 80 gizzard. shad 0 0.3 0.3 31 9 Aug 80 gizzard. shad 0 0.5 0.5 31 16 Sep 80 gizzard. shad 3.5 0.5 4 30 120 Oct 80 gizzard. shad 9.7 0 9.7 31 301 Nov 80 gizzard. shad 9 3.5 12.5 30 375 Dec 80 gizzard. shad 5 3 8 31 248 Jan 80 golden. shiner 0 0 0 31 0 Feb 80 golden. shiner 0 0 0 28 0 Mar 80 golden. shiner 0 0 0 31 0 Apr 80 golden. shiner 1.1 0 1.1 30 33 May 80 golden. shiner 0 0 0 31 0 Jun 80 golden. shiner 0 0 0 30 0 Jul 80 golden. shiner 0 0 0 31 0 Aug 80 golden. shiner 0.5 0 0.5 31 16 Sep 80 golden. shiner 0 0 0 30 0 Oct 80 golden. shiner 0.8 0 0.8 31 25 Nov 80 golden. shiner 0 0.5 0.5 30 15 Dec 80 golden. shiner 0 0 0 31 0 Jan 80 satinfin. shiner 0 0 0 31 0 Feb 80 satinfin. shiner 0 0 0 28 0 Mar 80 satinfin. shiner 0.9 0 0.9 31 28 Apr 80 satinfin. shiner 0.6 0 0.6 30 18 May 80 satinfin. shiner 0.6 0 0.6 31 19 Jun 80 satinfin. shiner 0 0 0 30 0 Jul 80 satinfin. shiner 0 0 0 31 0 Aug 80 satinfin. shiner 0 0 0 31 0 Sep 80 satinfin. shiner 0 0 0 30 0 Oct 80 satinfin. shiner 0 0 0 31 0 Nov 80 satinfin. shiner 1.5 2 3.5 30 105 Dec 80 satinfin. shiner 1 0 1 31 31 Jan 80 white. catfish 0 0 0 31 0 Feb 80 white. catfish 1.1 0.5 1.6 28 45 Mar 80 white. catfish 0 1 1 31 31 Apr 80 white. catfish 0 0 0 30 0 May 80 white. catfish 0 0.6 0.6 31 19 Jun 80 white. catfish 0.5 0.5 1 30 30 Jul 80 white. catfish 0.7 0 0.7 31 22 Aug 80 white. catfish 0 0.5 0.5 31 16 Sep 80 white. catfish 0 0 0 30 0 Oct 80 white. catfish 1.8 0 1.8 31 56 Nov 80 white. catfish 0 1 1 30 30 Dec 80 white. catfish 0 0 0 31 0 Jan 80 channel. catfish 0 0 0 31 0 Feb 80 channel. catfish 0 0 0 28 0 Mar 80 channel. catfish 0 0 0 31 0 Apr 80 channel. catfish 0 0 0 30 0 May 80 channel. catfish 0 0 0 31 0 Jun 80 channel. catfish 0 0 0 30 0 Jul 80 channel. catfish 0 0 0 31 0 Aug 80 channel. catfish 0 0 0 31 0 Sep 80 channel. catfish 0.5 0 0.5 30 15 Oct 80 channel. catfish 0.5 0 0.5 31 16 Nov 80 channel. catfish 0 0 0 30 0 Dec 80 channel. catfish 0 0 0 31 0 Jan 80 green. sunfish 0.9 0 0.9 31 28 Feb 80 green. sunfish 3.2 2.1 5.3 28 148 Mar 80 green. sunfish 1.3 0 1.3 31 40 Apr 80 green. sunfish 5.1 1 6.1 30 183 May 80 green. sunfish 0.6 0 0.6 31 19 Jun 80 green. sunfish 0.5 0 0.5 30 15 Jul 80 green. sunfish 0.4 0.3 0.7 31 22 Aug 80 green. sunfish 1.1 1 2.1 31 65 Sep 80 green. sunfish 6.7 2.3 9 30 270 Oct 80 green. sunfish 23.9 1 24.9 31 772 Nov 80 green. sunfish 7.5 7.5 15 30 450 Dec 80 green. sunfish 8.5 4 12.5 31 388 Jan 80 bluegill 1.6 0.4 2 31 62 Feb 80 bluegill 3.2 0.5 3.7 28 104 Mar 80 bluegill 0.5 1 1.5 31 47 Apr 80 bluegill 70.8 1 71.8 30 2154 May 80 bluegill 2.9 0.6 3.5 31 109 Jun 80 bluegill 1.1 0 1.1 30 33 Jul 80 bluegill 1.4 0 1.4 31 43 Aug 80 bluegill 0.5 0 0.5 31 16 Sep 80 bluegill 2.8 0.6 3.4 30 102 Oct 80 bluegill 9 2 11 31 341 Nov 80 bluegill 4 4 8 30 240 Dec 80 bluegill 4.5 3 7.5 31 233 Jan 80 black. crappie 0.3 0 0.3 31 9 Feb 80 black. crappie 1.1 0.5 1.6 28 45 Mar 80 black. crappie 0 0 0 31 0 Apr 80 black. crappie 0 0 0 30 0 May 80 black. crappie 0 0 0 31 0 Jun 80 black. crappie 0 0 0 30 0 Jul 80 black. crappie 0.3 0 0.3 31 9 Aug 80 black. crappie 0.5 0 0.5 31 16 Sep 80 black. crappie 0 0 0 30 0 Oct 80 black. crappie 0.5 0 0.5 31 16 Nov 80 black. crappie 0 0 0 30 0 Dec 80 black. crappie 0 0 0 31 0 Jan 80 white. crappie 0 0 0 31 0 Feb 80 white. crappie 0 0 0 28 0 Mar 80 white. crappie 0 0 0 31 0 Apr 80 white. crappie 0.6 0 0.6 30 18 May 80 white. crappie 0 0 0 31 0 Jun 80 white. crappie 0 0 0 30 0 Jul 80 white. crappie 0 0 0 31 0 Aug 80 white. crappie 0 0 0 31 0 Sep 80 white. crappie 0 0 0 30 0 Oct 80 white. crappie 0 0 0 31 0 Nov 80 white. crappie 0 0 0 30 0 Dec 80 white. crappie 0 0 0 31 0 Jan 80 yellow. perch 0 0 0 31 0 Feb 80 yellow. perch 0 0 0 28 0 Mar 80 yellow. perch 0 0 0 31 0 Apr 80 yellow. perch 8 0 8 30 240 May 80 yellow. perch 0.6 0 0.6 31 19 Jun 80 yellow. perch 0 0 0 30 0 Jul 80 yellow. perch 0 0 0 31 0 Aug 80 yellow. perch 0 0 0 31 0 Sep 80 yellow. perch 0 0 0 30 0 Oct 80 yellow. perch 0 0 0 31 0 Nov 80 yellow. perch 0 0 0 30 0 Dec 80 yellow. perch 0 0 0 31 0 source qc RM# 35966 pg 7 61 lefer Sum of extrap. imp RM# 35966 pg 7 61 lefer species Total RM# 35966 pg 7 61 lefer black. crappie 94.4 RM# 35966 pg 7 61 lefer bluegill 3482 RM# 35966 pg 7 61 lefer channel. catfish 30.5 RM# 35966 pg 7 61 lefer gizzard. shad 71592.8 RM# 35966 pg 7 61 lefer golden. shiner 88.3 RM# 35966 pg 7 61 lefer green. sunfish 2399.4 RM# 35966 pg 7 61 lefer satinfin. shiner 200.5 RM# 35966 pg 7 61 lefer white. catfish 247.4 RM# 35966 pg 7 61 lefer white. crappie 18 RM# 35966 pg 7 61 lefer yellow. perch 258.6 RM# 35966 pg 7 61 lefer Grand Total 78411.9 RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer RM# 35966 pg 7 61 lefer source RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer RM# 35966 pg 7 62 lefer Losses data for the Roxboro Steam Electric Plant ( North Carolina). Cooling water source: Hyco Reservoir Intake 316( b) Phase III A. Gage, 12/ 2/ 2003 Notes: Impingement sampling was conducted at Units 1 & 2 biweekly from May 1979 Dec 1980 for a 24 hr time period. Units 3 & 4 have zero Entrainment sampling was conducted at Unit 3 only biweekly from March 1979 Dec 1980. Flow for Unit 3 in 1980 is not kno Only summed 1980 extrapolated impingement losses. Impingement extrapolated based on monthly sampling ( multiplied by # days per month).

QC Checked data entry in " entry" worksheet. Checked values in losses worksheet against pivot table. M. Lefer 12/ 8/ 03. ero impingement ( no screens on 3, 4 is closed cycle). nown.


From:
<EMAIL_ADDRESS><EMAIL_ADDRESS>Sent:
Tuesday, August 02, 2016 2:54 PM
To:
Jones, DonnaLee<EMAIL_ADDRESS>Cc:
<EMAIL_ADDRESS><EMAIL_ADDRESS><EMAIL_ADDRESS>Subject:
2015 Quarterly Title V and NESHAP Reports

Chris Potts
Senior Environmental Engineer
AK Steel Middletown Works
office:<PHONE_NUMBER>
cell:<PHONE_NUMBER>
fax:<PHONE_NUMBER>

<< 1Q 2015 Coke 5C COMS Report.pdf >>
<< 1Q 2015 Deviation Report.pdf >>
<< 2Q 2015 Coke 5C COMS Report.pdf >>
<< 2Q 2015 Deviation & VE Report.pdf >>
<< 3Q 2015 Coke 5C COMS Report.pdf >>
<< 3Q 2015 Deviation Report.pdf >>
<< 4Q 2015 Coke 5C COMS Report.pdf >>
<< 4Q 2015 Deviation & VE Report.pdf >>


[Federal Register Volume 82, Number 87 (Monday, May 8, 2017)]
[Notices]
[Pages 21446-21450]
[FR Doc No: 2017-09195]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80577; File No. SR-NYSEMKT-2017-04]

Self-Regulatory Organizations; NYSE MKT LLC; Order Granting
Accelerated Approval of Proposed Rule Change, as Modified by Amendment
No. 1, Relating to Market Makers Applicable When the Exchange
Transitions Trading to Pillar, the Exchange's New Trading Technology
Platform

May 2, 2017.

I. Introduction

    On January 25, 2017, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
adopt rules relating to market makers that would be applicable when the
Exchange transitions trading to Pillar, the Exchange's new trading
technology platform. The proposed rule change was published for comment
in the Federal Register on February 13, 2017.\3\ On March 29, 2017, the
Commission designated a longer period for action on the proposed rule
change.\4\ On March 30, 2017, the Exchange filed Amendment No. 1 to the
proposed rule change.\5\ The Commission received no comments on the
proposal, as modified by Amendment No. 1. The Commission is approving
the proposed rule change, as modified by Amendment No. 1, on an
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 79982 (Feb. 7,
2017), 82 FR 10508 (Feb. 13, 2017) (``Notice'').
    \4\ See Securities Exchange Act Release No. 80336 (Mar. 29,
2017), 82 FR 16447 (Apr. 4, 2017).
    \5\ In Amendment No. 1, the Exchange: (1) Specified that
proposed Exchange Rule 7.25E titled ``DMM Security Allocation and
Reallocation'' is also based on New York Stock Exchange LLC
(``NYSE'') Rule 103B; (2) modified proposed Exchange Rule
7.25E(b)(1), to read ``Issuer Section [sic] of DMM Unit by
Interview;'' (3) modified proposed Exchange Rule 7.25E(b)(1)(B)(ii)
by (a) adding the qualifier ``eligible'' to ``DMMs'' in the first
sentence, (b) adding the clause ``or a designee of such senior
official'' at the end of the second sentence, (c) modifying the
fourth sentence to ``Representatives of each DMM must participate in
the meeting,'' and (d) adding a final sentence stating that
``Meetings will normally be held at the Exchange, unless the
Exchange has agreed that they may be held elsewhere;'' (4) modified
proposed Exchange Rule 7.25(b)(2) by (a) changing the title to
``Exchange Selection of DMM by Delegation,'' (b) deleting from the
first sentence of paragraph (A) the phrase ``based on a review of
all information available to the issuer,'' and (c) modifying
paragraph (B) to state that ``The ESP will select the DMM and inform
the issuer of its selection''; (5) modified proposed Exchange Rule
7.25E(b)(11) to state that ``If the issuer of an initial Fund lists
additional funds within nine months from the date of its initial
listing, the issuer may choose to maintain the same DMM for those
subsequently listed funds or it may select a different DMM from the
group of eligible DMMs that the issuer interviewed or reviewed in
the allocation process for its initial fund''; (6) modified proposed
Exchange Rule 7.25E(d)(1) to state ``loses its registration as a DMM
in a security as a result of proceedings under the Rule 8000 or 9000
Series, as applicable; or''; and (7) changed proposed Exchange Rule
7.25E(e) to make listing-company DMM allocation decisions for
purposes of an initial public offering sunset after 18 months, made
a conforming change to the filing, and stated that this proposed
rule is based on current Exchange Rule 103B(VI)(H)--Equities and
NYSE Rule 103B(VI)(H). Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysemkt-2017-04/nysemkt201704-1680445-149392.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1

    The Exchange proposes to adopt new rules relating to market makers
that would be applicable when the Exchange transitions trading to
Pillar, a new trading technology platform. As part of this transition,
the Exchange would move from the current floor-based market with a
parity allocation model to a fully automated market with a price-time-
priority allocation model. The Exchange's floor-based traders, such as
designated market makers (``DMMs'') and floor brokers, would not be
retained in Pillar. Electronic DMMs would replace floor-based DMMs.
    The proposed rules would not assign securities to DMMs at the
natural-person level and would not require DMMs to facilitate the
opening, reopening, or closing of assigned Exchange-listed securities.
In addition, the proposed rules would not entitle DMMs to a parity
allocation of executions, and also would not subject DMMs to heightened
capital requirements. Finally, DMMs would continue to be subject to
rules governing allocation of securities and combination of DMM units.
The Exchange would also no longer provide for members to act as
Supplemental Liquidity Providers.
    The Exchange represents that the proposal is based on the rules of
NYSE Arca Equities, Inc. (``NYSE Arca Equities''), which has already
implemented Pillar, the same trading technology platform as the
Exchange proposes to adopt.\6\
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    \6\ NYSE Arca filed four proposals to implement its transition
to Pillar in stages: (1) Adopting rules for trading sessions, order
ranking and display, and order execution; (2) adopting rules for
orders and modifiers and the retail liquidity program; (3) adopting
rules for trading halts, short sales, limit up-limit down, and odd
lots and mixed lots; and (4) adopting rules for auctions. See
Securities Exchange Act Release Nos. 74951 (May 13, 2015), 80 FR
28721 (May 19, 2015) and 75494 (July 20, 2015), 80 FR 44170 (July
24, 2015) (SR-NYSEArca-2015-38) (first Pillar filing and approval);
75497 (July 21, 2015), 80 FR 45022 (July 28, 2015) and 76267 (Oct.
26, 2015), 80 FR 66951 (Oct. 30, 2015) (SR-NYSEArca-2015-56) (second
Pillar filing and approval); 75467 (July 16, 2015), 80 FR 43515
(July 22, 2015) and 76198 (Oct. 20, 2015), 80 FR 65274 (Oct. 26,
2015) (third Pillar filing and approval); and 76085 (Oct. 6, 2015),
80 FR 61513 (Oct. 13, 2015) and 76869 (Jan. 11, 2016), 81 FR 2276
(Jan. 15, 2016) (fourth Pillar filing and approval).
---------------------------------------------------------------------------

    The proposal would set forth new definitions for Market Makers,
Market Maker Authorized Traders, and Designated Market Makers. In
addition, the proposal would set forth the process for registration and
obligations of Market Makers, the obligations of Market Maker
Authorized Traders, the registration of non-DMM Market Makers, the
registration and obligations of DMMs, DMM security allocation and
reallocation, and DMM combination review policy.\7\
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    \7\ The Exchange previously adopted these rules, generally with
rule text reserved for future filings, in anticipation of the
current proposal. See Securities Exchange Act Release No. 79242
(Nov. 4, 2016), 81 FR 79081 (Nov. 10, 2016) (SR-NYSEMKT-2016-97).
The rule numbers correspond with the rule numbers of NYSE Arca
Equities rules.
---------------------------------------------------------------------------

    The Exchange represents that it will announce the transition to
Pillar, if approved by the Commission, by Trader Update. The Exchange
anticipates that the transition would occur in the second quarter of
2017. After the transition to Pillar, current Exchange equities rules
governing the floor-based platform would no longer be applicable. For
each current equities rule that would not be applicable when trading on
the Pillar platform begins, the Exchange proposes to add a preamble
stating that ``this rule is not applicable to trading on the Pillar
trading platform.'' The Exchange represents that, after it has
transitioned to the Pillar trading platform, it will file a separate
proposed rule change to delete the obsolete rules. Current Exchange
rules governing equities trading that do not have the preamble
described above will continue to govern

Exchange operations on its cash equities trading platform. A detailed
description of the proposal appears in the Notice.\8\ The proposal is
summarized and discussed below.
---------------------------------------------------------------------------

    \8\ See Notice, supra note 3.
---------------------------------------------------------------------------

A. Definitions

    The Exchange proposes three new definitions related to market
makers. First, the Exchange proposes to define the term ``Market
Maker'' as an ETP Holder that acts as a Market Maker pursuant to
Exchange Rule 7E.\9\ This proposed definition is based on the
definition of ``Market Maker'' in NYSE Arca Equities, without any
substantive differences.\10\ Second, the Exchange proposes to define
``Market Maker Authorized Trader,'' or ``MMAT,'' to mean an Authorized
Trader who performs market making activities pursuant to Exchange Rule
7E on behalf of a Market Maker.\11\ This proposed definition is based
on the definition of ``Market Maker Authorized Trader'' in NYSE Arca
Equities, without any substantive differences.\12\ Third, the Exchange
proposes to define ``Designated Market Maker,'' or ``DMM,'' as a
registered Market Maker that is subject to additional requirements set
forth in Section 2 of Exchange Rule 7E for Exchange-listed securities
assigned to such DMM.\13\ The Exchange represents that this proposed
definition would be new and that it is not based on the rules of the
NYSE Arca Equities exchange.\14\
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    \9\ See Proposed Exchange Rule 1.1E(v). In a related rule
filing, the Exchange has proposed to define the term ``ETP Holder''
as a member organization that has been issued an Equity Trading
Permit. See Securities Exchange Act Release No. 79993 (Feb. 9,
2017), 82 FR 10814 (Feb. 15, 2017) (SR-NYSEMKT-2017-01) (``Trading
Rules Filing''). The term ``member organization'' is defined in
Exchange Rule 2(b)--Equities.
    \10\ See NYSE Arca Equities Rule 1.1(v).
    \11\ See Proposed Exchange Rule 1.1E(w). The Exchange has
separately proposed to define the term ``Authorized Trader'' to mean
a person who may submit orders to the Exchange's cash equities
Trading Facilities on behalf of his or her ETP Holder. See supra
note 9.
    \12\ See NYSE Arca Equities Rule 1.1(w).
    \13\ See Proposed Exchange Rule 1.1E(ccc).
    \14\ See Exchange Rule 2(i)--Equities. Furthermore, because DMMs
would be Market Makers, and a Market Maker designation is at the
level of the ETP Holder, the Exchange represents that the proposed
definition would differ from the Exchange's current rules, which
define a DMM at the individual level.
---------------------------------------------------------------------------

B. Registration of Market Makers

    Proposed Exchange Rule 7.20E addresses registration requirements
for Market Makers, such as how an ETP Holder files an application to
register, the factors that the Exchange will consider in reviewing the
application, effectiveness and appeal provisions, the right of the
Exchange to suspend or terminate registration, and withdrawal
procedures. The Exchange represents that the proposed rule is based in
part on NYSE Arca Equities Rule 7.20, with the following substantive
differences. First, the Exchange proposes that member organizations
already registered as Market Makers by the Exchange would continue to
be registered as Market Makers under proposed Exchange Rule 7.20E
without being required to re-register as a Market Maker.\15\ Second,
the second sentence of proposed Exchange Rule 7.20E(b) would be changed
to provide that ``[a]pplications will be reviewed by the Exchange,
which will consider the ETP Holder's capital, operations, personnel,
technical resources, and disciplinary history.'' The Exchange also
proposes an additional clarifying sentence that would provide that,
after reviewing the application, the Exchange would either approve or
disapprove the ETP Holder's registration as a Market Maker. Third,
because proposed Exchange Rule 7.24E(a)(4) would cover DMM withdrawal
from registration in a security, the Exchange proposes that DMMs would
not be covered by the provisions of proposed Rule 7.20E(e), which
governs a Market Maker's withdrawal of registration as a Market Maker
in a security. The Exchange also proposes to provide that a Market
Maker that fails to notify the Exchange of its written notice of
withdrawal on the business day prior to its withdrawal may be subject
to formal disciplinary action.\16\ Finally, the Exchange proposes a
non-substantive difference to proposed Rule 7.20E(c) and (e), as
compared to NYSE Arca Equities Rule 7.20(c) and (d), to use Exchange
disciplinary rule references in lieu of NYSE Arca Equities disciplinary
rule references.
---------------------------------------------------------------------------

    \15\ Under current Rule 103--Equities, a member organization may
be approved to be registered as a DMM. In addition, under current
Rule 107B--Equities, a member organization approved as a
Supplemental Liquidity Provider may be registered as a market maker
on the Exchange as an ``SLMM''.
    \16\ The Exchange states it does not believe that a Market Maker
needs to provide ten business day notice of such withdrawal of
registration, as required by NYSE Arca Equities Rule 7.20(e),
because the Exchange can process such withdrawals within one
business day from date of notice.
---------------------------------------------------------------------------

C. Obligations of Market Maker Authorized Traders

    Proposed Exchange Rule 7.21E would set forth the obligations of
Market Maker Authorized Traders. As proposed, MMATs would be permitted
to enter orders only for the account of the Market Maker for which the
MMATs are registered. The proposed rule would also specify the
registration requirements for MMATs and the procedures for suspension
and withdrawal of registration. The Exchange represents that the
proposed rule is based on NYSE Arca Equities Rule 7.21.

D. Registration of Non-DMM Market Makers in a Security \17\
---------------------------------------------------------------------------

    \17\ Because proposed Exchange Rules 7.22E and 7.24E would
describe the obligations of DMMs on the Pillar trading platform, the
Exchange proposes that Exchange Rule 104--Equities would not be
applicable to trading on the Pillar trading platform.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.22E would set forth the process for Market
Makers, other than DMMs, to become registered in a security and would
set forth the factors the Exchange may consider in approving the
registration of a non-DMM Market Maker in a security. The proposed rule
would also govern both termination of a Market Maker's registration in
a security by the Exchange and voluntary termination by a Market Maker.
    The Exchange represents that proposed Exchange Rule 7.22E is based
on NYSE Arca Equities Rule 7.22 with certain differences. First,
proposed Exchange Rule 7.22E would govern registration in a security
only for non-DMM Market Makers, rather than for all Market Makers.
Second, in proposed Exchange Rule 7.22E(a), the Exchange proposes that
a Market Maker may become registered in a security by submitting a
request to the Exchange, rather than by filing a security registration
form.\18\ Third, the Exchange does not propose to include rule text
based on paragraphs (c) and (d) of NYSE Arca Equities Rule 7.22.\19\
Finally, the Exchange proposes additional, non-substantive differences
by replacing references to NYSE Arca Equities Rule 10 and 10.13 with
references to the Exchange Rule 9200 and Rule 9500 Series,
respectively.
---------------------------------------------------------------------------

    \18\ NYSE Arca Equities Rule 7.22 states that a prospective
Market Maker should file a security registration form.
    \19\ Since NYSE Arca Equities rules governing designated market
makers and lead market makers are not applicable on the Exchange,
the Exchange is not including in proposed Exchange Rule 7.22E the
text from paragraphs (c) and (d) of NYSE Arca Equities Rule 7.22.
The Exchange proposes that requirements relating to DMMs would be
set forth in proposed Exchange Rules 7.24E, 7.25E, and 7.26E,
described in greater detail below.
---------------------------------------------------------------------------

E. Obligations of Market Makers

    Proposed Exchange Rule 7.23E would set forth the affirmative
obligations of Market Makers, including DMMs, to engage in a course of
dealing for their own account to assist in the maintenance, insofar as
reasonably

practicable, of fair and orderly markets on the Exchange. Further, the
proposed rule would set forth specific responsibilities and duties of
Market Makers, including the obligation to maintain continuous, two-
sided trading in registered securities and to adhere to certain pricing
obligations. As proposed, Market Makers would have to remain in good
standing with the Exchange, inform the Exchange of any material change
in financial or operational condition or in personnel, and clear and
settle transactions through the facilities of a registered clearing
agency. The proposed rule provides for disciplinary action, suspension,
or revocation of registration by the Exchange upon certain failures of
Market Makers to abide by the requirements of the rule. Finally, the
proposed rule sets forth temporary withdrawal provisions for Market
Makers.
    The Exchange represents that proposed Exchange Rule 7.23E is based
on NYSE Arca Equities Rule 7.23 with certain differences. First,
proposed Exchange Rules 7.23E(a)(1)(B)(iii) and (iv) have different
definitions for the terms ``Designated Percentage'' and ``Defined
Limit.'' The Exchange states that it is using the definitions for these
terms used in Bats BZX, Inc. Rule 11.8(d)(2)(D) and (E). Second,
proposed Exchange Rule 7.23E(a)(2), rather than citing NYSE Arca
Equities Rule 4.1, would require that a Market Maker maintain adequate
minimum capital in accordance with the provisions of Rule 15c3-1 under
the Act (``Rule 15c3-1''). The Exchange represents that this does not
represent a substantive change in minimum capital requirements because
NYSE Arca Equities Rule 4.1 cross references Rule 15c3-1. Finally, the
Exchange proposes that the provisions of proposed Exchange Rule
7.23E(d), regarding temporary withdrawal of an ETP Holder from Market
Maker status in the securities in which it is registered, would not be
applicable to Market Makers acting as a DMM. As described in greater
detail below, proposed Exchange Rule 7.24E(a)(4) would address DMM
withdrawal from registration in a security.

F. Registration and Obligations of DMMs \20\
---------------------------------------------------------------------------

    \20\ Because proposed Exchange Rules 7.22E and 7.24E would
describe the obligations of DMMs on the Pillar trading platform, the
Exchange proposes that Exchange Rule 104--Equities would not be
applicable to trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.24E would set forth the registration and
obligations of DMMs. The Exchange represents that proposed Exchange
Rule 7.24E is new and is based in part on provisions of current
Exchange Rule 98A--Equities, Exchange Rule 103--Equities, Exchange Rule
104--Equities, and Exchange Rule 107B--Equities.
    Proposed Exchange Rule 7.24E(a) would provide that all Exchange-
listed securities would be assigned to a DMM and there would be no more
than one DMM per Exchange-listed security.\21\ The Exchange represents
that this new rule text is based on how the Exchange currently
operates, as set forth in Exchange Rules 103--Equities and 103B--
Equities, in that every Exchange-listed security is allocated to a DMM.
---------------------------------------------------------------------------

    \21\ See Proposed Exchange Rule 7.24E(a).
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.24E(b) would set forth the registration
procedures of DMMs.\22\ An ETP Holder must be registered as a Market
Maker and approved as a DMM, in order to be eligible to receive an
allocation as a DMM. The Exchange represents this proposed rule is
based in part on current Exchange Rule 103(a)(i)--Equities.\23\ To
provide for continuity for companies that list their securities on the
Exchange, the Exchange proposes in Rule 7.24E(b)(1) to allow a DMM unit
currently approved to operate one business day prior to the Pillar
transition to automatically be approved as a DMM. Conversely, Market
Makers not registered as a DMM one business day before the Pillar
transition date would need to file a written application to become a
DMM.
---------------------------------------------------------------------------

    \22\ See Proposed Exchange Rule 7.24E(b).
    \23\ The Exchange proposes that Exchange Rule 103--Equities
would not be applicable to trading on the Pillar trading platform.
Instead, proposed Exchange Rule 7.24(b), together with proposed
Exchange Rule 7.20E, described above, would establish the
registration requirements for DMMs.
---------------------------------------------------------------------------

    The Exchange proposes a substantive difference between proposed
Exchange Rule 7.24E(b)(2) and existing Exchange Rule 103(b)(i)--
Equities in that proposed Exchange Rule 7.24E(b)(2) would reference
proposed Exchange Rules 7.25E(f) and 7.26E, which establish additional
factors that the Exchange may consider in determining whether to
approve a Market Maker as a DMM. Proposed Exchange Rules 7.25E (``DMM
Security Allocation and Reallocation'') and 7.26E (``DMM Combination
Policy'') are described below.
    Proposed Exchange Rule 7.24E(b)(3) would provide that an ETP Holder
registered as a DMM in a security may also be registered as a Market
Maker in that security only if the ETP Holder maintains information
barriers between the trading unit operating as a DMM and the trading
unit operation as a non-DMM Market Maker in the same security.
Currently, under Exchange Rule 107B(h)(2)(A)--Equities, an Exchange
member may operate as a supplemental liquidity provider in a security
that is assigned to a DMM unit of the member, provided that the
supplemental liquidity provider is not part of the DMM unit.\24\ The
Exchange represents that Rule 7.24E(b)(3) would operate substantially
similarly to the current rule in that a member organization can
currently be both a DMM and a supplemental liquidity provider in a
security through the use of information barriers.
---------------------------------------------------------------------------

    \24\ See Exchange Rule 107B(h)(2)(A)--Equities.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.24E(b)(4) would govern the circumstances
under which a DMM may temporarily withdraw from its DMM status in its
assigned securities. The Exchange represents that this rule is based on
NYSE Arca Equities Rule 7.23(d). In addition, Proposed Rule 7.24E(b)(5)
would specify that a DMM may not be registered in a security of an
issuer, or a partner or subsidiary of the issuer, if the entity is an
approved person or affiliate of the DMM. The Exchange represents that
the proposed rule text is based on current Exchange Rule 98A--Equities,
with non-substantive differences to use Pillar terminology.
    Proposed Exchange Rule 7.24E(c) sets forth the obligations of DMMs.
The Exchange represents that the text of proposed Exchange Rule
7.24E(c) is based in part on current Exchange Rule 104(a)(1)(A)--
Equities. Currently, DMMs are required to maintain a quote at the
inside at least 10% of the trading day for securities with a
consolidated average daily volume of less than one million shares and
at least 5% of the trading day for securities with a consolidated
average daily volume equal to or greater than one million shares. The
Exchange represents that, similar to the current quoting requirements,
the proposed quoting requirement set forth in proposed Exchange Rule
7.24E(c) are portfolio-based quoting requirements. On the Pillar
trading platform, because DMMs would not have other obligations as set
forth in Exchange Rule 104(a)--Equities, such as the requirement to
facilitate openings, reopenings, and closings, the Exchange proposes a
heightened quoting obligation of 25% across all securities assigned to
a DMM, regardless of consolidated average daily trading volume for a
security. The Exchange otherwise proposes that the manner that a DMM's
quoting obligations would be calculated would be the same as under
current rules.

G. DMM Security Allocation and Reallocation

    Proposed Exchange Rule 7.25E would set forth the allocation and
reallocation of securities to DMMs. The proposed rule would set forth
when a security is eligible for allocation or reallocation, as well as
the eligibility of DMMs to participate in the allocation process. The
proposed rule further sets forth the allocation process--whether the
issuer selects the DMM directly or the issuer delegates the selection
to the Exchange. In the event that a company with listed securities
wishes to change its DMM, the proposed rule sets forth the reallocation
process. Should a DMM lose its registration or voluntarily withdraw its
registration, the DMM would be ineligible, under the Exchange's
``Allocation Freeze Policy,'' for future allocations for a six-month
period. For companies that list securities through an initial public
offering, the allocation decision would remain in effect for 12 months.
Finally, the proposed rule sets forth criteria the Exchange may
consider for applicants that are not currently DMMs. For applicants
that are not currently DMMs, the proposal would not require additional
capital requirements as currently required.
    The Exchange represents that proposed Exchange Rule 7.25E is based
on current Exchange Rule 103B--Equities and on NYSE Rule 103B, with
substantive differences to reflect that an allocation would be to a DMM
at the ETP Holder level rather than at the individual (natural person)
DMM level, as well as non-substantive differences to streamline the
rule text. In addition, the Exchange would use the term ``DMM,'' as
defined in proposed Exchange Rule 1.1E(ccc) to replace current
references to either DMM (as an individual) or DMM unit.\25\
---------------------------------------------------------------------------

    \25\ Because proposed Exchange Rule 7.25E would establish the
requirements for the allocation and reallocation of securities to
DMMs on Pillar, the Exchange proposes that Exchange Rule 103B--
Equities would not be applicable to trading on the Pillar trading
platform.
---------------------------------------------------------------------------

H. DMM Combination Policy

    For a DMM to merge with another DMM, or otherwise combine their
businesses, the transaction must be approved by the Exchange. Proposed
Exchange Rule 7.26E would set forth the required contents of a written
submission to the Exchange by proponents of the DMM combination
addressing certain enumerated factors for the Exchange to consider in
approving the transaction, as well as the procedures the Exchange would
follow in approving or disapproving a combination. The proposal also
sets forth the timeline for the Exchange to approve or disapprove a
combination, the ability of the Exchange to grant conditional
approvals, and the ability to have the Exchange's board of directors to
review a disapproval decision. The Exchange represents that the
proposed Exchange Rule is based on current Exchange Rule 123E--Equities
(``DMM Combination Review Policy'').\26\
---------------------------------------------------------------------------

    \26\ Because this rule would govern DMM combinations on the
Exchange, the Exchange proposes that Rule 123E--Equities would not
be applicable to trading on the Pillar trading platform.
---------------------------------------------------------------------------

I. Current Exchange Rules Not Applicable on Pillar

    As noted earlier, the Exchange would no longer operate a trading
floor once the Exchange transitions to Pillar. As a result, the
Exchange proposes that certain current rules that relate to floor-based
trading would not be applicable on Pillar.\27\
---------------------------------------------------------------------------

    \27\ The Exchange proposes to specify in its rule book that the
following Floor-specific rules would not be applicable to trading on
Pillar: Exchange Rule 98--Equities (Operation of a DMM Unit),
Exchange Rule 104A--Equities (DMMs--General), Exchange Rule 104B--
Equities (DMM Commissions),\27\ Exchange Rule 113--Equities (DMM
Unit's Public Customers), and Exchange Rule 460--Equities (DMMs
Participating in Contests). In addition, the Exchange proposes to
delete current Exchange Rules 99--Equities, Exchange Rule 100--
Equities, and Exchange Rule 101--Equities, all of which are
currently marked ``Reserved,'' as well as Exchange Rule 113 Former--
Equities (DMMs' Public Customers), which is obsolete. The Exchange
represents that DMMs would not be required to facilitate the
opening, reopening, or closing of assigned securities; would have
electronic access only; would not be entitled to parity allocation;
and would not be subject to heightened capital requirements. Current
Exchange Rule 460--Equities prohibits DMM firms and associated
persons from participating in a proxy contest or serving as a
director of an issuer, requires DMMs to report beneficial ownership
above a certain limit, and limits specified DMM business
transactions, if the DMM member is registered in the securities of
the issuer. The Exchange represents that DMMs would no longer have a
time and place advantage, that DMMs would be similar to market
makers on NYSE Arca, and that no other exchanges have restrictions
similar to Exchange Rule 460--Equities. See Email from Clare
Saperstein, Associate General Counsel, NYSE Group, Inc. to Michael
E. Coe, Assistant Director, and Steve Kuan, Division of Trading and
Markets, Commission (Apr. 27, 2017).
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review of the proposal, as modified by Amendment No.
1, the Commission finds that the proposal is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the Exchange.\28\ In particular, the Commission finds
that the proposed rule change is consistent with Section 6(b)(5) of the
Act,\29\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market systems and, in general, to protect investors and the
public interest, and that the rules are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \28\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
    \29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange is transitioning from its current floor-based trading,
with a parity allocation model, to a fully automated electronic trading
system, with a price-time allocation model. The Commission notes that
the proposed rules closely parallel, and are substantially similar to,
current rules of the Exchange, the NYSE Arca Equities, or the Bats BZX
exchange, which were filed and approved by the Commission (or which
became immediately effective) pursuant to Section 19(b) of the Act.
NYSE Arca Equities currently operates using the Pillar trading
platform, and NYSE Arca Equities market makers operate according to
rules that are similar to the rules that the Exchange proposes to
adopt. In addition, the Commission believes that the heightened DMM
quoting obligations proposed in Exchange Rule 7.24E(c), and the lack of
heightened capital requirements, are appropriate because DMMs on the
Exchange would not, on the Pillar trading platform, retain their
current obligations to facilitate openings, reopenings, and closings on
the Exchange. Accordingly, the Commission believes that the proposal is
reasonably designed to protect investors and the public interest, and
that it is consistent with the requirements of the Act.

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to 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<EMAIL_ADDRESS>Please include
File Number SR-NYSEMKT-2017-04 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2017-04. 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
10:00 a.m. and 3:00 p.m. Copies of the 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 Number SR-NYSEMKT-2017-04 and should
be submitted on or before May 30, 2017.

V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1

    As noted above, in Amendment No. 1, the Exchange: (1) Specified
that proposed Exchange Rule 7.25E, titled ``DMM Security Allocation and
Reallocation,'' is based on NYSE Rule 103B; (2) modified proposed
Exchange Rule 7.25E(b)(1), to read ``Issuer Section [sic] of DMM Unit
by Interview;'' (3) modified proposed Exchange Rule 7.25E(b)(1)(B)(ii)
by (a) adding the qualifier ``eligible'' to ``DMMs'' in the first
sentence, (b) adding the clause ``or a designee of such senior
official'' at the end of the second sentence, (c) modifying the fourth
sentence to ``Representatives of each DMM must participate in the
meeting,'' and (d) adding a final sentence stating that ``Meetings will
normally be held at the Exchange, unless the Exchange has agreed that
they may be held elsewhere;'' (4) modified proposed Exchange Rule
7.25(b)(2) by (a) changing the title to ``Exchange Selection of DMM by
Delegation,'' (b) deleting from the first sentence of paragraph (A) the
phrase ``based on a review of all information available to the
issuer,'' and (c) modifying paragraph (B) to state that ``The ESP will
select the DMM and inform the issuer of its selection;'' (5) modified
proposed Exchange Rule 7.25E(b)(11) to state that ``If the issuer of an
initial Fund lists additional funds within nine months from the date of
its initial listing, the issuer may choose to maintain the same DMM for
those subsequently listed funds or it may select a different DMM from
the group of eligible DMMs that the issuer interviewed or reviewed in
the allocation process for its initial fund;'' (6) modified proposed
Exchange Rule 7.25E(d)(1) to state ``loses its registration as a DMM in
a security as a result of proceedings under the Exchange Rule 8000 or
9000 Series, as applicable; or''; and (7) changed proposed Exchange
Rule 7.25E(e) to make listing company DMM allocation decisions for
purposes of an initial public offering sunset after 18 months, made a
conforming change to the filing, and stated that this proposed rule is
based on current Exchange Rule 103B(VI)(H)--Equities and NYSE Rule
103B(VI)(H).
    The Commission believes that Amendment No. 1 is consistent with the
Act and notes that the amendment updates proposed Exchange Rule 7.25E
to conform to an amended version of NYSE Rule 103B that became
effective in February 2017.\30\ Accordingly, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\31\ to approve the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.
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    \30\ See Securities Exchange Act Release No. 80122 (Feb. 28,
2017), 82 FR 12642 (Mar. 6, 2017) (SR-NYSE-2017-06).
    \31\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, that pursuant to Section 19(b)(2) of the
Act, that the proposed rule change (SR-NYSEMKT-2017-04), as modified by
Amendment No. 1, be, and it hereby is, approved on an accelerated
basis.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09195 Filed 5-5-17; 8:45 am]
 BILLING CODE 8011-01-P