[Federal Register Volume 75, Number 27 (Wednesday, February 10, 2010)]
[Notices]
[Pages 6770-6772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2866]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61492; File No. SR-Phlx-2010-10]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to the Exchange's Quote Lock Counting Period

February 4, 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 January 29, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or the 
``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. Phlx has 
designated the proposed rule change as constituting a rule change under 
Rule 19b-4(f)(6) under the Act,\3\ which renders 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\ 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 amend Commentaries .02 and .03 to Exchange 
Rule 1082, Firm Quotations, to modify the duration of the ``counting 
period'' that is initiated when electronically submitted quotations of 
specialists, Streaming Quote Traders (``SQTs''),\4\ and Remote 
Streaming Quote Traders (``RSQTs'') \5\ interact with one another and 
result in a locked market (e.g., $1.00 bid--1.00 offer) or crossed 
market (e.g., $1.10 bid--1.00 offer). The Exchange also proposes 
technical amendments as described below.
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    \4\ An SQT is an Exchange Registered Options Trader (``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. See 
Exchange Rule 1014(b)(ii)(A).
    \5\ 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 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 Exchange Rule 
1014(b)(ii)(B).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 
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 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 Exchange 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 give the Exchange the 
ability to improve the speed with which the Exchange's systems can 
automatically execute locked or crossed quotations against one another.

[[Page 6771]]

    When the Exchange deployed its initial electronic options trading 
platform, Phlx XL,\6\ the Commission approved an Exchange proposal to 
establish a one-second ``counting period,'' to begin when electronic 
quotations submitted by specialists and/or SQTs became locked, during 
which the SQT(s) and/or specialist whose quotations are locked could 
eliminate the locked market. If their markets became crossed, the 
Exchange would disseminate a locked market at the price of the 
quotation that was crossed and would initiate the one-second counting 
period. Subsequently, the Exchange reduced the one-second counting 
period to \1/4\ of one second.\7\ Any unresolved locked or crossed 
markets remaining after the counting period are automatically executed.
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    \6\ See Securities Exchange Act Release No. 50100 (July 27, 
2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59).
    \7\ See Securities Exchange Act Release No. 55375 (February 28, 
2007), 72 FR 10288 (March 7, 2007) (SR-Phlx-2006-31).
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    The Exchange proposes to modify the duration of the counting period 
in order to provide more flexibility in increasing the speed with which 
locked and crossed markets may be resolved on the Exchange. 
Specifically, proposed Commentary .02 to Rule 1082 would state that the 
duration of the counting period will be established by the Exchange, 
will be the same for all options traded on the Exchange, and will not 
exceed .25 of one second. The duration of the counting period and any 
changes thereto will be published in an Options Trader Alert, which 
will be available on the Exchange's Web site.
    The effect of the proposed rule change would be to give the 
Exchange the ability to reduce the counting period from the current \1/
4\ of one second \8\ to a lesser time period, during which market 
participants may resolve locked and crossed markets, and after which, 
if the locked/crossed condition is not resolved, the Exchange's system 
will eliminate the condition by executing the transaction. The Exchange 
believes that any reduced counting period should improve market 
efficiency by eliminating locked and crossed markets in a more timely 
fashion, and should, in turn, facilitate compliance with firm quote 
obligations.
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    \8\ The counting period would not exceed the current [frac14] of 
one second.
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Technical Amendments
    At the time the rule was originally adopted, the Exchange 
distinguished between ``Streaming Quote Options'' which are traded on 
the Exchange's automated options trading platform, Phlx XL (since 
modified and re-named Phlx XL II \9\), and ``Non-Streaming Quote 
Options.'' All options traded on the Exchange are currently traded on 
Phlx XL II. Thus, the distinction is no longer necessary, and 
accordingly the Exchange proposes to delete references to ``Streaming 
Quote Options'' from the rule.
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    \9\ 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 Exchange proposes to modernize the rule by eliminating 
anachronistic references to the `` \1/4\ of one second'' counting 
period, and instead acknowledge the world of decimalization by 
referring to a counting period ``not to exceed .25 of one second.''
    The Exchange further proposes to delete quotations surrounding the 
term ``counting period'' in all references thereto following its 
initial definition in the rule. The rule will simply refer to the 
counting period.
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. Specifically, the Exchange believes that the proposal 
benefits customers by improving market efficiency by enabling the 
Exchange's system to eliminate locked and crossed markets in a more 
timely fashion.
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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 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 proposed rule change is designated by the Exchange as a ``non-
controversial'' rule pursuant to Section 19(b)(3)(A) \12\ of the Act 
and subparagraph (f)(6) of Rule 19b-4 thereunder,\13\ because the 
proposed rule change: (1) Does not significantly affect the protection 
of investors or the public interest; (2) does not impose any 
significant burden on competition; and (3) 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 filing of the proposed 
rule change.\14\ Specifically, the Exchange notes that a similar 
counting period has been established under the rules of another 
exchange.\15\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ As required under Rule 19b-4(f)(6)(iii), the Exchange has 
provided the Commission with written notice of its intent to file 
the proposed rule change at least five business days prior to the 
filing date of this proposal.
    \15\ See Chicago Board Options Exchange Inc. (``CBOE'') Rule 
6.45A(d)(i)(B).
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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.
    Consequently, the rule is being filed for immediate effectiveness.

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-2010-10 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-2010-10. This file 
number should be included on the

[[Page 6772]]

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-2010-10 and should be 
submitted on or before March 3, 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. 2010-2866 Filed 2-9-10; 8:45 am]
BILLING CODE 8011-01-P