[Federal Register Volume 75, Number 121 (Thursday, June 24, 2010)]
[Notices]
[Pages 36132-36134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-15267]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62320; File No. SR-Phlx-2010-83]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
Its Rules Relating to Directed Orders and Eligible Orders
June 17, 2010.
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 June 14, 2010, NASDAQ OMX PHLX, 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 Exchange. The Exchange filed the proposed
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ 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)(iii).
\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 Exchange proposes to clarify the definition of ``Directed
Order'' in Rule 1080(l)(i)(A) by removing the limiting word
``customer'' before the word ``order.'' A conforming change to the
definition of ``Order Flow Provider'' is proposed to be made in Rule
1080(l)(i)(B). Second, amendments to Rule 1080(b)(i)(C) are proposed
which specify that orders for the account of an off-floor broker dealer
may be entered into the Exchange's enhanced electronic trading platform
for options, Phlx XL,\5\ by an agent of the off-floor broker dealer.
Third, the Exchange is adding opening-only-market orders and limit on
opening orders to the list of eligible orders in Rule 1080(b)(i), as
order types eligible for entry into the trading system. The Exchange
proposes to add a definition of limit on opening order to Rule 1066.
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\5\ See Securities Exchange Act Release No. 59995 (May 28,
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
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The text of the proposed rule change is available on the Exchange's
Internet Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, on the Commission's Internet Web site at
http://www.sec.gov, at the principal office of the Exchange, 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 self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In May 2005 the Exchange adopted rules for Phlx XL that permit
Exchange specialists, Streaming Quote Traders (``SQTs''),\6\ and Remote
Streaming Quote Traders (``RSQTs'') \7\ to receive Directed Orders, and
to provide a participation guarantee to specialists, SQTs and
[[Page 36133]]
RSQTs that receive Directed Orders.\8\ The proposed amendment to Rule
1080(l)(i)(A) is intended to clarify that Rule 1080(1)(i)(A) does not
limit Directed Orders to public customer orders. The Exchange notes
that other exchanges' Directed Orders rules do not limit Directed
Orders to public customer orders.\9\
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\6\ An SQT is an Exchange Registered Options Trader (``ROT'')
who has received permission from the Exchange to generate and submit
option quotations electronically through Phlx XL 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 an 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 Phlx XL 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\ See Securities Exchange Act Release No. 51759 (May 27,
2005), 70 FR 32860 (June 6, 2005). See also Phlx Rule 1014(g)(viii)
(setting forth the automatic trade allocation algorithm for Directed
Orders).
\9\ See, e.g., NYSE Amex Rule 900.3NY(s), NYSE Arca Rule 6.62(z)
and ISE Rule 811(a)(1).
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Currently, the term ``Directed Order'' is defined in Rule
1080(l)(i)(A) as ``any customer order (other than a stop or stop-limit
order as defined in Rule 1066) to buy or sell which has been directed
to a particular specialist, RSQT, or SQT by an Order Flow Provider * *
*'' The Exchange proposes to remove the word ``customer'' from this
definition to avoid any suggestion that Directed Orders are limited to
orders of ``public'' customers. Directed Orders can be broker-dealer
orders as well as public customer orders.
Rule 1080(b)(i)(A) provides in relevant part that ``[f]or purposes
of Exchange options trading, an agency order is any order entered on
behalf of a public customer, and does not include any order entered for
the account of a broker-dealer, or any account in which a broker-dealer
or an associated person of a broker-dealer has any direct or indirect
interest.'' In adopting the Directed Order program, the Exchange did
not limit Directed Orders to agency orders as defined in Rule
1080(b)(i)(A). The Exchange believes, however, that use of the word
``customer'' in the definition of Directed Order is potentially
confusing and unnecessary and is therefore deleting it. For the same
reason, the modifier ``customer'' is deleted before the word ``order''
in the definition of Order Flow Provider in Rule 1080(l)(i)(B).
Accordingly, this change clarifies that Directed Orders can be sent not
only on behalf of public customers but also on behalf of broker
dealers. Directed Orders are limited to orders sent on an agency basis
by Order Flow Providers and not on behalf of the sender's proprietary
account.
Currently, Rule 1080(b)(i)(C) provides that certain ``off-floor
broker-dealer'' limit orders may be entered into Phlx XL. The rule
currently defines ``off-floor broker-dealer'' as a broker-dealer that
delivers orders from off the floor of the Exchange for the proprietary
account(s) of such broker-dealer. Rule 1080(b)(i)(C) is being revised
to specify that orders for an off-floor broker-dealer's proprietary
account may be entered into Phlx XL by an agent, on behalf of the off-
floor broker-dealer as well as by the off-floor broker-dealer itself.
This situation occurs, for example, where the off-floor broker-dealer
is not itself a Phlx member and uses a Phlx member for execution of its
proprietary orders on Phlx.
Rule 1080(b)(i) lists the types of orders that are eligible for
entry into the Phlx XL trading system by various categories of market
participants. The Exchange is proposing to add opening-only-market
orders to the list of agency orders eligible for entry into the system
in Rule 1080(b)(i)(A).\10\ It also proposes to add limit-on-opening
orders to each of the lists of eligible orders that market participants
are permitted to enter in Rules 1080(b)(i)(A), (B) and(C). ``Limit-on-
Opening Order'' would be defined in new Section 9 of Rule 1066(c) as
meaning a limit order which is to be executed in whole or in part
during the opening rotation of an options series or not at all. Phlx
notes that at least one other options exchange already accepts opening
only limit and market orders.\11\
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\10\ Rule 1066(c)(5) provides that ``[a]n opening-only-market
order is a market order which is to be executed in whole or in part
during the opening rotation of an options series or not at all.''
\11\ See NYSE Arca Rule 6.62(r) which defines an ``Opening Only
Order'' as ``a market order or limit order which is to be executed
in whole or in part during the opening auction of an options series
or not at all. Any portion not so executed is to be treated as
cancelled.''
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \12\ in general, and furthers the objectives of Section
6(b)(5) of the Act \13\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest, by permitting the Exchange to modify its rules relating to
Directed Orders and eligible orders for the benefit of investors.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6)
thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires a
self-regulatory organization to give the Commission written notice
of its intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-Phlx-2010-83 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2010-83. This file
number should be included on the
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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 Web site viewing and printing in the Commission's Public
Reference Room, on official business days between the hours of 10 a.m.
and 3 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-Phlx-2010-83 and should be
submitted on or before July 15, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15267 Filed 6-23-10; 8:45 am]
BILLING CODE 8010-01-P