[Federal Register: July 19, 2006 (Volume 71, Number 138)]
[Notices]
[Page 41064-41066]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19jy06-146]
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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 rule-comments@sec.gov. 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