[Federal Register: December 13, 2006 (Volume 71, Number 239)]
[Notices]
[Page 74977-74979]
[DOCID:fr13de06-85]

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SECURITIES AND EXCHANGE COMMISSION

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

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

December 6, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder, \2\ notice is hereby given
that on December 5, 2006, the Philadelphia Stock Exchange, Inc.
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II, below, which Items have been prepared by the Phlx. The
Exchange filed the proposal as a ``non-controversial'' rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ which rendered the proposal effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Phlx proposes to amend Phlx Rule 507,\5\ which governs the
assignment of options to Streaming Quote Traders (``SQTs'') \6\ and
Remote Streaming Quote Traders (``RSQTs''),\7\ by: (i) Clarifying that
all options traded on the Exchange are Streaming Quote Options; \8\
(ii) deleting outdated requirements contained in paragraph (f) under
Phlx Rule 507 regarding the assignment of options during the first six
months of the roll-out of streaming quote technology; (iii) moving the
existing text of Phlx Rule 507(a) to the first paragraph of (b) and
naming paragraph (b) ``Assignment in Options;'' (iv) moving the
language in 507(b)(iii) to paragraph (a) and renaming it ``Approval as
an SQT and RSQT;'' and (v) applying some of the current criteria for
RSQT applicants (formerly in Phlx Rule 507(b)(iii)) to SQT applicants
as well.
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    \5\ Phlx Rule 507 sets forth the process by which the Committee
assigns or reassigns equity options to eligible Streaming Quote
Traders and Remote Streaming Quote Traders. See Phlx Rule 507.
    \6\ An SQT is an Exchange Registered Options Trader (``ROT'')
who has received permission from the Exchange to generate and submit
options quotations electronically through AUTOM in eligible options
to which such SQT is assigned. An SQT may only submit such
quotations while such SQT is physically present on the floor of the
Exchange. See Phlx Rule 1014(b)(ii)(A).
    \7\ An RSQT is a ROT that is a member or member organization
with no physical trading floor presence who has received permission
from the Exchange to generate and submit option quotations
electronically through AUTOM in eligible options to which such RSQT
has been assigned. An RSQT may only submit such quotations
electronically from off the floor of the Exchange. See Phlx Rule
1014(b)(ii)(B).
    \8\ A Streaming Quote Option is an option for which the Options
Committee determines the SQTs may generate and submit options
quotations from the Exchange floor and that RSQTs may generate and
submit options quotations from off of the Exchange floor,
electronically. See Phlx Rule 1080(k).
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    The text of the proposed rule change is available on the Phlx's Web
site, http://www.phlx.com, at the Phlx's principal office, and at the

Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Phlx included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Phlx has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to update Phlx Rule 507
to reflect the current status of options trading on the Exchange.
    First, the proposed amendments modify outdated concepts and
requirements contained in Phlx Rule 507 by: (i) Clarifying that all
options traded on the Exchange are ``Streaming Quote Options,'' and
(ii) deleting obsolete requirements for the assignment of options
contained in paragraph (f) of Phlx Rule 507. The Exchange's
introduction of the Phlx XL technology allowed, among other things,
SQTs and RSQTs to generate and submit electronic quotations. Initially,
RSQTs and SQTs could only stream electronic quotations in designated
options until such technology was fully rolled-out to all options,
which occurred in February 2005. The Exchange is proposing to amend
Phlx Rule 507 to clarify the fact that all options listed for trading
on the Exchange are now ``Streaming Quote Options.''
    For the same reason, the Exchange is also proposing to delete the
requirements contained in paragraph (f) under Phlx Rule 507 that were
applicable to member firms seeking option assignments as an RSQT or SQT
during the first six months of the streaming quote roll-out. This
amendment will update the Exchange's rules and remove rule text that
may cause confusion.
    Second, the Exchange is proposing to reorganize Phlx Rule 507(a)
and (b) so that paragraph (a) covers the approval of SQTs and RSQTs as
such, and paragraph (b) covers the assignment of options to SQTs and
RSQTs. In order to clarify that paragraph (b) covers the assignment of
specific options to SQTs and RSQTs, paragraph (b)(i) would be titled
``Assignment in Options,'' and the introductory phrase, ``When an
option is to be assigned or reassigned by the Committee, the Committee
will solicit applications from all eligible SQTs and RSQTs, as defined
in Phlx Rule 1014(b)(ii)'' is proposed to be deleted from current
paragraph (a) and inserted into paragraph (b). The Exchange believes
that this should distinguish paragraph (a), which covers applications
for approval of an applicant's status as an SQT or RSQT on the
Exchange, from paragraph (b), which covers an SQT or RSQT's application
for assignment in a particular option. Currently, the two concepts are
intermingled in these paragraphs, which may be hard to follow.
    Third, the Exchange proposes to extend some of the requirements
applicable to RSQT applicants to SQT applicants. These requirements
include significant market-making and/or specialist experience in a
broad array of securities; superior resources, including capital,
technology and personnel;

demonstrated history of stability, superior electronic capacity, and
superior operational capacity; proven ability to interact with order
flow in all types of markets; and willingness and ability to make
competitive markets on the Phlx and otherwise to promote the Phlx in a
manner that is likely to enhance the ability of the Phlx to compete
successfully for order flow in the options it trades. The purpose of
this proposal is to enable the Exchange's Option Allocation, Evaluation
and Securities Committee (``OAESC'') \9\ to make a more informed and
efficient decision as to whether a particular SQT applicant should be
assigned in an option.
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    \9\ See Phlx By-Law Article X, Section 10-7. The OAESC has
jurisdiction over, among other things: The appointment of
specialists on the options and foreign currency options trading
floors; allocation, retention and transfer of privileges to deal in
options on the trading floors; and administration of the 500 series
of Phlx rules.
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    SQT applicants would not be required to be willing to accept
assignments as an SQT in options overlying 400 or more securities, and
would not be required to show the existence of order flow commitments
in order to become an SQT. RSQT applicants would continue to have such
a requirement.
    The Exchange believes that it is appropriate to apply these
requirements to SQTs because SQT status, similar to RSQT status,
entails a commitment to provide liquidity on the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \10\ in general, and furthers the objectives of Section
6(b)(5) of the Act \11\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest by removing outdated concepts from the Exchange's rules as
well as by adopting requirements to promote the objective, efficient,
and beneficial assignment of options to SQTs and RSQTs.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received by the
Exchange.

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

    Because the foregoing rule (i) does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, provided that the
Exchange has given the Commission written notice of its intent to file
the proposed rule change at least five business days prior to the date
of filing of the proposed rule change or such shorter time as
designated by the Commission, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\ As required under Rule 19b-4(f)(6)(iii) under
the Act,\14\ Phlx provided the Commission with written notice of its
intent to file the proposed rule change, along with a brief description
and text of the proposed rule change, prior to the date of the filing
of the proposed rule change.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) under the Act
\15\ normally may not become operative prior to 30 days after the date
of filing. However, Rule 19b-4(f)(6)(iii) under the Act permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest.\16\ The
Exchange has requested that the Commission waive the 30-day operative
delay, which would make the rule change effective and operative upon
filing. The Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest because the proposed rule change clarifies the operation of
Phlx Rule 507. Accordingly, the Commission designates the proposal to
be effective and operative upon filing with the Commission.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For the purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.\18\
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    \18\ See 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

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

File Number SR-Phlx-2006-80 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2006-80. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all

written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. Copies of the filing
also will be available for inspection and copying at the principal
office of the Phlx. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You

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

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

BILLING CODE 8011-01-P