[Federal Register Volume 77, Number 76 (Thursday, April 19, 2012)]
[Notices]
[Pages 23531-23532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9407]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66806; File No. SR-Phlx-2012-49]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 1014

April 13, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that, on April 4, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section (b)(ii)(D)(3) of Rule 1014, 
Obligations and Restrictions Applicable to Specialists and Registered 
Options Traders, a rule pertaining to the minimum size requirement for 
quotations.
    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
    This proposed rule change is based on filings previously submitted 
by the Chicago Board Options Exchange (``CBOE'') \3\ and the 
International Securities Exchange (``ISE'') \4\ that were effective on 
filing.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 58828 (October 21, 
2008), 73 FR 63749 (October 27, 2008) (SR-CBOE-2008-107).
    \4\ See Securities Exchange Act Release No. 60854 (October 21, 
2009) 74 FR 55613 (October 28, 2009) (SR-ISE-2009-84).
---------------------------------------------------------------------------

    The purpose of the proposed rule change is to amend Section 
(b)(ii)(D)(3) of Rule 1014, Obligations and Restrictions Applicable to 
Specialists and Registered Options Traders, in order to change a 
minimum quoting size requirement. Rule 1014(b)(ii)(D) sets forth 
certain market making obligations that apply to Streaming Quote Traders 
(``SQTs''), \5\ Remote Streaming Quote Traders (``RSQTs'') \6\ and 
specialists. For example, Rule 1014(b)(ii)(D)(1) provides that, in 
addition to other obligations and with certain exceptions, an SQT and 
an RSQT shall be responsible to quote two-sided markets in not less 
than 60% of the series in which such SQT or RSQT is assigned. Likewise, 
Rule 1014(b)(ii)(D)(2) provides that a specialist must quote two-sided 
markets in the lesser of 99% of the series or 100% of the series minus 
one call-put pair in each option in which such specialist is assigned.
---------------------------------------------------------------------------

    \5\ A Streaming Quote Trader (``SQT'') is defined in Exchange 
Rule 1014(b)(ii)(A) as an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically in 
options to which such SQT is assigned.
    \6\ A Remote Streaming Quote Trader (``RSQT'') is defined 
Exchange Rule in 1014(b)(ii)(B) as 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 in options to which such RSQT has been 
assigned. An RSQT may only submit such quotations electronically 
from off the floor of the Exchange.
---------------------------------------------------------------------------

    Currently Rule 1014(b)(ii)(D)(3) provides that SQTs, RSQTs and the 
specialist assigned in an option shall submit electronic quotations for 
such option with a size of not less than 10 contracts. The Exchange 
proposes to eliminate the 10 contract minimum size and to provide 
instead that the minimum number of contracts shall be specified by the 
Exchange for each option. The proposed change would allow the Exchange 
to set a minimum quotation size requirement for quotes on a class by 
class basis, provided the minimum set by the Exchange is at least one 
contract. Phlx would not impose a minimum quotation size requirement 
greater than 10 contracts.
    The Exchange believes it should have the flexibility to change the 
minimum size requirement on a class by class basis depending on market 
conditions and the trading and liquidity in a particular option class 
and its underlying security. Phlx notes that the minimum quotation size 
requirement for market makers on ISE, CBOE, NYSE Arca, Inc. (``NYSE 
Arca'') and the Nasdaq Options Market (``NOM'') is only one 
contract.\7\ As a result, Phlx believes the proposed rule change is 
based on and similar to the rules of other options exchanges.
---------------------------------------------------------------------------

    \7\ See ISE Rule 804, CBOE Rules 6.2B, 8.7, 8.14, 8.15A, 
NYSEArca Rule 6.37B and NOM Rulebook Chapter VII, Section 6(a).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 23532]]

of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \9\ 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. 
The proposed rule change would permit the Exchange to set a minimum 
quotation size requirement on a class by class basis, provided the 
minimum size is at least one contract. Phlx believes that this 
flexibility will enable the Exchange to take into consideration market 
conditions and the trading and liquidity in a particular option class 
and its underlying security.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 proposed rule change 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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) \11\ 
thereunder.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give 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 Exchange has satisfied this requirement. 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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 email to [email protected]. Please include 
File Number SR-Phlx-2012-49 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-2012-49. 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 
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-2012-49 and should be 
submitted on or before May 10, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9407 Filed 4-18-12; 8:45 am]
BILLING CODE 8011-01-P