[Federal Register Volume 71, Number 138 (Wednesday, July 19, 2006)]
[Notices]
[Pages 41064-41066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11390]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54138; File No. SR-Phlx-2006-35]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to a System Change to the Options Floor Broker Management 
System

July 12, 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 May 18, 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, II, 
and III below, which Items have been prepared by the Phlx. On July 12, 
the Exchange filed Amendment No. 1 to the proposed rule change.\3\ The

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Exchange filed the proposal pursuant to section 19(b)(3)(A) of the Act 
\4\ and Rule 19b-4(f)(5) thereunder,\5\ which renders the proposal 
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\ See Form 19b-4 dated July 12, 2006 (``Amendment No. 1''). 
Amendment No. 1 replaced the original filing in its entirety. 
Telephone conversation between Anthony Voci, Director and Counsel, 
Phlx, and Natasha Cowen, Commission, Division of Market Regulation 
(``Division''), on July 12, 2006 (``Telephone Conversation'').
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(5).
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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 Exchange Rule 1063(e) to include a cross 
\6\ as one of the transaction categories to be recorded onto the 
Options Floor Broker Management System (``FBMS'').\7\ The text of the 
proposed rule change, as amended, is available on the Phlx's Web site 
(http://www.phlx.com), at the Phlx's Office of the Secretary, and at 
the Commission's Public Reference Room.
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    \6\ A cross can occur when a Floor Broker holds orders to buy 
and sell the same options series. See Exchange Rule 1064(a).
    \7\ The FBMS is a component of AUTOM, the Exchange's electronic 
order delivery, routing, execution and reporting system. See 
Exchange Rule 1080. The FBMS is designed to enable Floor Brokers 
and/or their employees to enter, route and report transactions 
stemming from options orders received on the Exchange. The Options 
Floor Broker Management System also is designed to establish an 
electronic audit trail for options orders represented and executed 
by Floor Brokers on the Exchange, such that the audit trial provides 
an accurate, time-sequenced record of electronic and other orders, 
quotations and transactions on the Exchange, beginning with the 
receipt of an order by the Exchange, and further documenting the 
life of the order through the process of execution, partial 
execution, or cancellation of that order.
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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 Exchange 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
    In July, 2003, the Exchange implemented a consolidated options 
audit trail system (``COATS'') to create an electronic audit trail for 
non-electronic orders and to improve, among other things, order 
handling by Floor Brokers, by deploying the FBMS.\8\ The purpose of the 
instant proposed rule change is to improve the existing electronic 
audit trail and provide a more efficient options marketplace by 
augmenting the FBMS, as described below.
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    \8\ See Securities Exchange Act Release No. 48266 (July 31, 
2003), 68 FR 47131 (August 7, 2003) (SR-Phlx-2003-56).
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    Currently, the FBMS only provides one mechanism for cross 
transactions that are executed by Floor Brokers, i.e., the entry of two 
separate, contra-side orders for the same series. The Exchange is 
implementing a new, additional screen on the FBMS to reflect certain 
crosses as a single transaction, rather than requiring separate buy and 
sell transactions to be recorded.
    Specifically, in cross transactions where both sides of the 
transaction contain completely identical terms,\9\ Floor Brokers will 
select the new cross screen which will automatically duplicate all of 
the terms of the initiating order to record the contra side, prior to 
representation in the crowd. The Exchange believes that this should 
better capture the actual time of receipt of a crossing order by 
streamlining the data entry process required of Floor Brokers pursuant 
to Exchange Rule 1063(e).
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    \9\ The following terms must be identical in order for the new 
cross screen to be utilized: order type, option symbol, price, 
number of contracts, any contingency indicators, and the clearing 
number of the broker-dealer that submitted the order. Telephone 
Conversation.
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    Finally, the proposed systems change will not replace the current 
rules setting forth the in-crowd requirements for Floor Brokers for 
handling crosses,\10\ but will improve the FBMS.
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    \10\ See Exchange Rule 1064.
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2. Statutory Basis
    The Exchange believes that its proposal, as amended, is consistent 
with section 6(b) of the Act \11\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \12\ 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 maintaining an accurate, time-
sequenced audit trail of options transactions.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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, as 
amended, 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.

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

    The foregoing rule change, as amended, has become effective 
pursuant to section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(5) 
thereunder.\14\ 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.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(5).
    \15\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the proposed rule change to have been filed 
on July 12, 2006, when Amendment No. 1 was filed.
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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, 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 protected]. Please include 
File Number SR-Phlx-2006-35 on the subject line.

Paper Comments

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


[[Page 41066]]


All submissions should refer to File Number SR-Phlx-2006-35. 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 such 
filing also will be available for inspection and copying at the 
principal offices of Phlx. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-Phlx-2006-35 and should be submitted on or before August 9, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\

    \16\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-11390 Filed 7-18-06; 8:45 am]
BILLING CODE 8010-01-P