80 FR 17534 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Harmonization of Phlx Rules

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 62 (April 1, 2015)

Page Range		17534-17537
FR Document		2015-07366

Federal Register, Volume 80 Issue 62 (Wednesday, April 1, 2015)

[Federal Register Volume 80, Number 62 (Wednesday, April 1, 2015)]
[Notices]
[Pages 17534-17537]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-07366]

[[Page 17534]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74592; File No. SR-Phlx-2015-28]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Harmonization of Phlx Rules

March 26, 2015.
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 March 25, 2015, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 Rules 771 entitled ``Excessive
Trading of Members;'' 832, entitled ``Price Adjustment of Open Orders
on Ex-Date;'' and 1006 entitled ``Other Restrictions on Exchange
Options Transactions and Exercises.'' The Exchange proposes to make
minor amendments for rule conformity to Rules 1001, entitled ``Position
Limits;'' 1002 entitled ``Exercise Limits;'' 1003 entitled ``Reporting
of Options Positions;'' 1040 entitled ``Failure to Pay Premium;'' 1041
entitled ``Options Contracts Of Suspended Members;'' 1042 ``Exercise of
Equity Option Contracts;'' 1044 ``Delivery and Payment;'' 1048 ``Stock
Transfer Tax;'' and 1090 entitled ``Clerks.'' The Exchange proposes to
delete Rules 1021 entitled ``Excessive Dealing in Options;'' 1038
entitled ``Open Orders on Ex-Date; '' and 1045 ``Officers and Employees
Restricted.''
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxphlx.cchwallstreet.com/, 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 this proposed rule change is to update certain of
the 1000 series options rules to harmonize the Rulebook and modernize
Exchange rules. The Exchange is also proposing to amend other non-
options rules as well. The Exchange proposes to amend rule text, make
minor technical amendments to certain rules, such as numbering, and to
delete other rules. Each proposed rule change will be discussed in
greater detail below.

Amendment to Certain Exchange Rules

The Exchange proposes to amend Rule 771, entitled ``Excessive
Trading of Members,'' to combine rule text from Rule 1021 entitled
``Excessive Dealing in Options. Both of these rules cover the same
basic topic, excessive trading of members. Rule 1021 is specific to
options, while Rule 771 is broader in nature. The Exchange proposes to
add a new paragraph to Rule 771 which contains similar rule text to
Commentary .01 of Rule 1021.\3\ The Exchange does not believe it is
necessary to have two rules in the Rulebook which discuss the same
restriction, therefore, the Exchange will delete Rule 1021. This rule
change is proposed to harmonize the Rulebook.
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\3\ The proposed text omits a reference to ``options'' that are
[sic] currently in Rule 1021.
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The Exchange proposes to amend Rule 832, entitled ``Price
Adjustment of Open Orders on Ex-Date,'' to combine rule text from Rule
1038 entitled ``Open Orders on Ex-Date.'' Both of these rules cover the
same basic topic, price adjustment of open orders on ``Ex-Date.'' Rule
1038 is specific to options, while Rule 832 is broader in nature. The
Exchange proposes to add a new paragraph to Rule 832 which contains
similar rule text to Rule 1038.\4\ The Exchange does not believe it is
necessary to have two rules in the Rulebook which discuss the same
restriction; therefore the Exchange will delete Rule 1038. This rule
change is proposed to harmonize the Rulebook.
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\4\ The proposed text adds a new reference to ``options'' in
Rule 832.
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The Exchange proposes to amend Rule 1006 entitled ``Other
Restrictions on Exchange Options Transactions and Exercises,'' to
harmonize this rule with NASDAQ Stock Market LLC (``NOM'') and NASDAQ
OMX BX, Inc. (``BX'') rules at Chapter III, Section 12.\5\ The Exchange
believes the NOM and BX rules are more specific with respect to
restrictions as compared to the Phlx rule. The proposed rule likewise
imposes restrictions on transactions or exercises in one or more series
of options, similar to the Phlx rule.\6\ A similar restriction exists
in the current Phlx rule with respect to the ten business days prior to
the expiration date of a given series of options, other than index
options, which shall include such expiration date for an option
contract that expires on a business day.\7\ Specifically the proposed
rule would note, ``[n]otwithstanding the foregoing, during the ten (10)
business days prior to the expiration date of a given series of
options, other than index options, which shall include such expiration
date for an option contract that expires on a business day, no
restriction on exercise under this Section may be in effect with
respect to that series of options. With respect to index options,
restrictions on exercise may be in effect until the opening of business
on the business day of their expiration or, in the case of an option
contract expiring on a day that is not a business day, on the last
business day before the expiration date.'' \8\
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\5\ See NOM and BX Rules at Chapter III, Section 12 entitled
``Other Restrictions on Options Transactions and Exercises.''
\6\ See proposed Rule 1006(a) and (a)(i).
\7\ See proposed Rule 1006(a)(ii). The proposed new rule text
will not distinguish between European and American settlement with
regard to the ten (10) business day restriction. The current Phlx
rule does make such a distinction.
\8\ Id.
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The Exchange proposes to add specific language concerning exercise
of American-style cash-settled index options, which shall be prohibited
during any time when trading in such options is delayed, halted, or
suspended.\9\ The Exchange proposes to provide the following exceptions
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\9\ See proposed Rule 1006(a)(iii).
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(1) The exercise of an American-style, cash-settled index option
may be processed and given effect in

[[Page 17535]]

accordance with and subject to the Rules of The Options Clearing
Corporation while trading in the option is delayed, halted, or
suspended if it can be documented, in a form prescribed by Phlx
Regulation, that the decision to exercise the option was made during
allowable time frames prior to the delay, halt, or suspension;
(2) Exercises of expiring American-style, cash-settled index
options shall not be prohibited on the business day of expiration, or
in the case of an option contract expiring on a day that is not a
business day, the last business day prior to their expiration;
(3) Exercises of American-style, cash-settled index options shall
not be prohibited during a trading halt that occurs at or after 4 p.m.
Eastern time. In the event of such a trading halt, exercises may occur
through 4:20 p.m. Eastern time. .[sic] In addition, if trading resumes
following such a trading halt pursuant to the procedures described in
Rules 1047 and 1047A, exercises may occur during the resumption of
trading and for five (5) minutes after the close of the resumption of
trading. The provisions of this subparagraph (a)(iii)(3) are subject to
the authority of the Board to impose restrictions on transactions and
exercises pursuant to paragraph (a) of this Rule; and
(4) Phlx may determine to permit the exercise of American-style,
cash-settled index options while trading in such options is delayed,
halted, or suspended.\10\
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\10\ See proposed Rule 1006(a)(iii).

Further, whenever the issuer of a security underlying a call option
traded on Phlx is engaged or proposes to engage in a public
underwritten distribution (``public distribution'') of such underlying
security or securities exchangeable for or convertible into such
underlying security, the underwriters may request that Phlx impose
restrictions upon all opening writing transactions in such options at a
``discount'' where the resulting short position will be uncovered
(``uncovered opening writing transactions''). The rule notes conditions
which are necessary for the imposition of restrictions, such as:
(1) Less than a majority of the securities to be publicly
distributed in such distribution are being sold by existing security
holders;
(2) the underwriters agree to notify Phlx Regulation upon the
termination of their stabilization activities; and
(3) the underwriters initiate stabilization activities in such
underlying security on a national securities exchange when the price of
such security is either at a ``minus'' or ``zero minus'' tick.\11\
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\11\ See proposed Rule 1006(b)(i).

Upon receipt of such a request and determination that the conditions
listed above are met, Phlx Regulation shall impose the requested
restrictions as promptly as possible but no earlier than fifteen (15)
minutes after members or member organizations shall have been notified
and shall terminate such restrictions upon request of the underwriters
or when Phlx Regulation otherwise discovers that stabilizing
transactions by the underwriters has been terminated.\12\ An uncovered
opening writing transaction in a call option will be deemed to be
effected at a ``discount'' when the premium in such transaction is
either: in the case of a distribution of the underlying security not
involving the issuance of rights and in the case of a distribution of
securities exchangeable for or convertible into the underlying
security, less than the amount by which the underwriters' stabilization
bid for the underlying security exceeds the exercise price of such
option; or in the case of a distribution being offered pursuant to
rights, less than the amount by which the underwriters' stabilization
bid in the underlying security at the subscription price exceeds the
exercise price of such option.\13\
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\12\ See proposed Rule 1006(b)(ii).
\13\ See proposed Rule 1006(b)(iii).
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The Exchange believes that adopting the NOM and BX rules provides
greater specificity with respect to restrictions on options
transactions and exercises.
Minor Technical Amendments to Options Rules
The Exchange proposes to amend Rule 1001, entitled ``Position
Limits,'' to remove the header ``Commentary'' from the rule and replace
it with consecutive numbering. The remainder of the changes correct
cross-references to the newly renumbered sections, remove extraneous
dashes and add a period and outside parentheses to the numbering in the
rule text to conform the text to the portion that is not in the
Commentary today.
The Exchange proposes to amend Rule 1002 entitled ``Exercise
Limits,'' to similarly remove the header ``Commentary'' from the rule
and replace it with consecutive lettering.
The Exchange proposes to amend Rule 1003 entitled ``Reporting of
Options Positions,'' to remove the footnote in the rule and instead
place the language in the footnote within the body of the rule. A minor
grammatical correction was made to remove a dash in this section in the
word ``market maker.''
The Exchange proposes to amend Rule 1040 entitled ``Failure to Pay
Premium,'' to capitalize the certain terms and also utilize a newly
defined term ``OCC'' throughout the rule.
The Exchange proposes to amend Rule 1041 entitled ``Options
Contracts Of Suspended Members,'' to utilize a newly defined term
``OCC'' throughout the rule.
The Exchange proposes to amend Rule 1042 ``Exercise of Equity
Option Contracts,'' to define the term ``CEA'' within the Rule and to
remove the header ``Commentary'' and renumber the remainder of the
rule. The Exchange is also proposing to remove a specific reference to
The Options Clearing Corporation's Articles and instead refer to the
by-laws more generally and utilize a newly defined term ``OCC''
throughout the rule.
The Exchange proposes to amend Rule 1044 ``Delivery and Payment,''
to utilize a newly defined term ``OCC'' throughout the rule.
The Exchange proposes to amend Rule 1048 ``Stock Transfer Tax,
utilize a newly defined term ``OCC'' throughout the rule.
The Exchange proposes to amend Rule 1090 entitled ``Clerks,''
update a reference to an outdated ``DOT machine'' and replace that
reference with the updated term ``order handling entry device.'' The
Exchange also proposes to remove the header ``Commentary'' and renumber
the remainder of the rule.
Deleted Rules
The Exchange proposes to delete Rules 1021 entitled ``Excessive
Dealing in Options;'' and 1038 entitled ``Open Orders on Ex-Date;''
because these Rules are being combined with Rules 771 and 832,
respectively, as described above. The Exchange is also proposing to
delete Rule 1045 ``Officers and Employees Restricted,'' which is
covered in detail by the Exchange's Code of Ethics.\14\ Rule 1045 does
not

[[Page 17536]]

apply to members, but rather applies to employees of the Exchange. The
Exchange has policies and procedures which are applicable to employees
which are not contained in the Rulebook. The Exchange believes that
this rule, which does not apply to members, is not necessary to retain
in the Rulebook.
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\14\ Phlx Rule 1045(a) requires every salaried officer or
employee of the Exchange and every salaried officer or employee of
any corporation in which the Exchange owns the majority of the stock
to promptly report to the Exchange every purchase or sale for his
own account or the account of others of any security which is the
underlying security of any option contract admitted to dealings on
the Exchange. Today, Phlx employees are subject to the NASDAQ Code
of Ethics, which refers to the Global Trading Policy which requires
an annual and other periodic reporting of securities holdings to the
Exchange. Phlx Rule 1045(b) provides that no salaried officer or
employee of the Exchange or salaried officer or employee of any
corporation in which the Exchange owns the majority of the corporate
stock may purchase or sell for his own account or for the account of
others any option contract which entitles the purchaser to purchase
or sell any security described in paragraph (a) of Rule 1045 or any
foreign currency option contract admitted to dealings on the
Exchange. The NASDAQ Code of Ethics refers to the Global Trading
Policy which prohibits employees from holding or trading certain
securities noted on the prohibited list. The prohibited list
prohibits employees from holding or trading certain securities
because those companies have dealings on the Exchange. The Code of
Ethics is more expansive in scope as compared to Phlx Rule 1045.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \15\ in general, and furthers the objectives of Section
6(b)(5) of the Act \16\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, 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 Exchange believes that
these proposed rule changes will harmonize and modernize the Phlx
Rulebook.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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The proposed rule changes to amend various options rules should
harmonize the Exchange's Rulebook by removing duplicate rules by
combining general Phlx rules with options rules, conforming the
language in certain rules by defining terms within the rules and
removing Commentary sections and instead renumbering the rule; and
deleting unnecessary rules. It is in the interests of the protection of
investors to eliminate any confusion among market participants with
respect to the Rulebook. The rule changes are intended to provide a
clearer Rulebook in order that market participants are aware of their
obligations. The Exchange believes that these amendments will make
clear the manner in which the Exchange operates and thereby remove
impediments to and provide free and open markets.
The Exchange's proposed deletion of Rule 1045 would not impact
members because this rule applies solely to employees of the Exchange.
The Exchange has policies and procedures which are applicable to
employees which are not contained in the Rulebook. The Exchange
believes that this rule, which does not apply to members, is not
necessary to retain in the Rulebook. The proposed amendment to Rule
1006 to adopt similar NOM and BX Rules \17\ will provide members with
additional specificity with respect to restrictions on options
transactions and exercises, similar to the current practice at NOM and
BX.
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\17\ See note 5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. The Exchange's proposed amendments seek to harmonize the
Rulebook by combining duplicative rules, conforming the text of the
rules and also deleting unnecessary rules. Certain of these amendments
apply to all members, equity and options, and other rules related to
options, apply specifically to options members. The rules uniformly
apply to members transacting a specific product. The proposed
amendments do not unduly burden competition on the Exchange.
The proposed amendment to Rule 1006 will provide members with a
rule substantially similar to rules on NOM and BX.\18\ The Exchange
believes that adopting the NOM and BX rules \19\ will assist the
Exchange in competing more effectively with respect to options.
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\18\ See note 25.
\19\ Id.
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The proposed deletion of Rule 1045 applies specifically to
employees of the Exchange. This rule does not impact the competition
among members transacting business on the Exchange but rather concerns
the operation of the Exchange and conduct of its employees.

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 from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \20\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(a)(ii).
\21\ 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.
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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 rule-comments@sec.gov. Please include
File Number SR-Phlx-2015-28 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2015-28. 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

[[Page 17537]]

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 such filing also will be available for
inspection and copying at the principal offices 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-2015-28, and should be
submitted on or before April 22, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-07366 Filed 3-31-15; 8:45 am]
BILLING CODE 8011-01-P

17534 Federal Register / Vol. 80, No. 62 / Wednesday, April 1, 2015 / Notices

SECURITIES AND EXCHANGE II. Self-Regulatory Organization’s similar rule text to Rule 1038.4 The
COMMISSION Statement of the Purpose of, and Exchange does not believe it is
Statutory Basis for, the Proposed Rule necessary to have two rules in the
[Release No. 34–74592; File No. SR-Phlx- Change Rulebook which discuss the same
2015–28] In its filing with the Commission, the restriction; therefore the Exchange will
Exchange included statements delete Rule 1038. This rule change is
Self-Regulatory Organizations; concerning the purpose of and basis for proposed to harmonize the Rulebook.
NASDAQ OMX PHLX LLC; Notice of The Exchange proposes to amend
the proposed rule change and discussed
Rule 1006 entitled ‘‘Other Restrictions
Filing and Immediate Effectiveness of any comments it received on the
on Exchange Options Transactions and
Proposed Rule Change Relating to proposed rule change. The text of these
Exercises,’’ to harmonize this rule with
Harmonization of Phlx Rules statements may be examined at the
NASDAQ Stock Market LLC (‘‘NOM’’)
places specified in Item IV below. The
March 26, 2015. and NASDAQ OMX BX, Inc. (‘‘BX’’)
Exchange has prepared summaries, set
rules at Chapter III, Section 12.5 The
Pursuant to Section 19(b)(1) of the forth in sections A, B, and C below, of Exchange believes the NOM and BX
Securities Exchange Act of 1934 the most significant aspects of such rules are more specific with respect to
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 statements. restrictions as compared to the Phlx
notice is hereby given that on March 25, A. Self-Regulatory Organization’s rule. The proposed rule likewise
2015, NASDAQ OMX PHLX LLC Statement of the Purpose of, and imposes restrictions on transactions or
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the Statutory Basis for, the Proposed Rule exercises in one or more series of
Securities and Exchange Commission Change options, similar to the Phlx rule.6 A
(‘‘SEC’’ or ‘‘Commission’’) the proposed similar restriction exists in the current
1. Purpose Phlx rule with respect to the ten
rule change as described in Items I, II,
and III below, which Items have been The purpose of this proposed rule business days prior to the expiration
prepared by the Exchange. The change is to update certain of the 1000 date of a given series of options, other
Commission is publishing this notice to series options rules to harmonize the than index options, which shall include
solicit comments on the proposed rule Rulebook and modernize Exchange such expiration date for an option
change from interested persons. rules. The Exchange is also proposing to contract that expires on a business day.7
amend other non-options rules as well. Specifically the proposed rule would
I. Self-Regulatory Organization’s The Exchange proposes to amend rule note, ‘‘[n]otwithstanding the foregoing,
Statement of the Terms of Substance of text, make minor technical amendments during the ten (10) business days prior
the Proposed Rule Change to certain rules, such as numbering, and to the expiration date of a given series
to delete other rules. Each proposed rule of options, other than index options,
The Exchange proposes to amend change will be discussed in greater which shall include such expiration
Rules 771 entitled ‘‘Excessive Trading of detail below. date for an option contract that expires
Members;’’ 832, entitled ‘‘Price on a business day, no restriction on
Adjustment of Open Orders on Ex- Amendment to Certain Exchange Rules exercise under this Section may be in
Date;’’ and 1006 entitled ‘‘Other The Exchange proposes to amend effect with respect to that series of
Restrictions on Exchange Options Rule 771, entitled ‘‘Excessive Trading of options. With respect to index options,
Transactions and Exercises.’’ The Members,’’ to combine rule text from restrictions on exercise may be in effect
Exchange proposes to make minor Rule 1021 entitled ‘‘Excessive Dealing until the opening of business on the
amendments for rule conformity to in Options. Both of these rules cover the business day of their expiration or, in
Rules 1001, entitled ‘‘Position Limits;’’ same basic topic, excessive trading of the case of an option contract expiring
1002 entitled ‘‘Exercise Limits;’’ 1003 members. Rule 1021 is specific to on a day that is not a business day, on
entitled ‘‘Reporting of Options options, while Rule 771 is broader in the last business day before the
Positions;’’ 1040 entitled ‘‘Failure to Pay nature. The Exchange proposes to add a expiration date.’’ 8
new paragraph to Rule 771 which The Exchange proposes to add
Premium;’’ 1041 entitled ‘‘Options
contains similar rule text to specific language concerning exercise of
Contracts Of Suspended Members;’’ American-style cash-settled index
Commentary .01 of Rule 1021.3 The
1042 ‘‘Exercise of Equity Option options, which shall be prohibited
Exchange does not believe it is
Contracts;’’ 1044 ‘‘Delivery and during any time when trading in such
necessary to have two rules in the
Payment;’’ 1048 ‘‘Stock Transfer Tax;’’ Rulebook which discuss the same options is delayed, halted, or
and 1090 entitled ‘‘Clerks.’’ The restriction, therefore, the Exchange will suspended.9 The Exchange proposes to
Exchange proposes to delete Rules 1021 delete Rule 1021. This rule change is provide the following exceptions
entitled ‘‘Excessive Dealing in Options;’’ proposed to harmonize the Rulebook. (1) The exercise of an American-style,
1038 entitled ‘‘Open Orders on Ex-Date; The Exchange proposes to amend cash-settled index option may be
’’ and 1045 ‘‘Officers and Employees Rule 832, entitled ‘‘Price Adjustment of processed and given effect in
Restricted.’’ Open Orders on Ex-Date,’’ to combine
4 The proposed text adds a new reference to
The text of the proposed rule change rule text from Rule 1038 entitled ‘‘Open
‘‘options’’ in Rule 832.
is available on the Exchange’s Web site Orders on Ex-Date.’’ Both of these rules 5 See NOM and BX Rules at Chapter III, Section

at http:// cover the same basic topic, price 12 entitled ‘‘Other Restrictions on Options
mstockstill on DSK4VPTVN1PROD with NOTICES

nasdaqomxphlx.cchwallstreet.com/, at adjustment of open orders on ‘‘Ex-Date.’’ Transactions and Exercises.’’
the principal office of the Exchange, and Rule 1038 is specific to options, while 6 See proposed Rule 1006(a) and (a)(i).
7 See proposed Rule 1006(a)(ii). The proposed
at the Commission’s Public Reference Rule 832 is broader in nature. The
new rule text will not distinguish between
Room. Exchange proposes to add a new European and American settlement with regard to
paragraph to Rule 832 which contains the ten (10) business day restriction. The current
Phlx rule does make such a distinction.
1 15 U.S.C. 78s(b)(1). 3 The proposed text omits a reference to 8 Id.
2 17 CFR 240.19b–4. ‘‘options’’ that are [sic] currently in Rule 1021. 9 See proposed Rule 1006(a)(iii).

VerDate Sep<11>2014 18:37 Mar 31, 2015 Jkt 235001 PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 E:\FR\FM\01APN1.SGM 01APN1

17536 Federal Register / Vol. 80, No. 62 / Wednesday, April 1, 2015 / Notices

apply to members, but rather applies to employees of the Exchange. The which it was filed, or such shorter time
employees of the Exchange. The Exchange has policies and procedures as the Commission may designate, it has
Exchange has policies and procedures which are applicable to employees become effective pursuant to Section
which are applicable to employees which are not contained in the 19(b)(3)(A)(ii) of the Act 20 and
which are not contained in the Rulebook. The Exchange believes that subparagraph (f)(6) of Rule 19b–4
Rulebook. The Exchange believes that this rule, which does not apply to thereunder.21
this rule, which does not apply to members, is not necessary to retain in At any time within 60 days of the
members, is not necessary to retain in the Rulebook. The proposed amendment filing of the proposed rule change, the
the Rulebook. to Rule 1006 to adopt similar NOM and Commission summarily may
2. Statutory Basis BX Rules 17 will provide members with temporarily suspend such rule change if
additional specificity with respect to it appears to the Commission that such
The Exchange believes that its restrictions on options transactions and action is: (i) Necessary or appropriate in
proposal is consistent with Section 6(b) exercises, similar to the current practice the public interest; (ii) for the protection
of the Act 15 in general, and furthers the at NOM and BX. of investors; or (iii) otherwise in
objectives of Section 6(b)(5) of the Act 16 furtherance of the purposes of the Act.
in particular, in that it is designed to B. Self-Regulatory Organization’s
If the Commission takes such action, the
prevent fraudulent and manipulative Statement on Burden on Competition
Commission shall institute proceedings
acts and practices, to promote just and The proposed rule change does not to determine whether the proposed rule
equitable principles of trade, to foster impose any burden on competition that should be approved or disapproved.
cooperation and coordination with is not necessary or appropriate in
persons engaged in facilitating furtherance of the purposes of the Act. IV. Solicitation of Comments
transactions in securities, to remove The Exchange’s proposed amendments Interested persons are invited to
impediments to and perfect the seek to harmonize the Rulebook by submit written data, views, and
mechanism of a free and open market combining duplicative rules, arguments concerning the foregoing,
and a national market system and, in conforming the text of the rules and also including whether the proposed rule
general, to protect investors and the deleting unnecessary rules. Certain of change is consistent with the Act.
public interest. The Exchange believes these amendments apply to all Comments may be submitted by any of
that these proposed rule changes will members, equity and options, and other the following methods:
harmonize and modernize the Phlx rules related to options, apply
Rulebook. Electronic Comments
specifically to options members. The
The proposed rule changes to amend rules uniformly apply to members • Use the Commission’s Internet
various options rules should harmonize transacting a specific product. The comment form (http://www.sec.gov/
the Exchange’s Rulebook by removing proposed amendments do not unduly rules/sro.shtml); or
duplicate rules by combining general burden competition on the Exchange. • Send an email to rule-comments@
Phlx rules with options rules, The proposed amendment to Rule sec.gov. Please include File Number SR–
conforming the language in certain rules 1006 will provide members with a rule Phlx–2015–28 on the subject line.
by defining terms within the rules and substantially similar to rules on NOM
removing Commentary sections and Paper Comments
and BX.18 The Exchange believes that
instead renumbering the rule; and adopting the NOM and BX rules 19 will • Send paper comments in triplicate
deleting unnecessary rules. It is in the assist the Exchange in competing more to Secretary, Securities and Exchange
interests of the protection of investors to effectively with respect to options. Commission, 100 F Street NE.,
eliminate any confusion among market The proposed deletion of Rule 1045 Washington, DC 20549–1090.
participants with respect to the applies specifically to employees of the All submissions should refer to File
Rulebook. The rule changes are Exchange. This rule does not impact the Number SR–Phlx–2015–28. This file
intended to provide a clearer Rulebook competition among members transacting number should be included on the
in order that market participants are business on the Exchange but rather subject line if email is used. To help the
aware of their obligations. The Exchange concerns the operation of the Exchange Commission process and review your
believes that these amendments will
and conduct of its employees. comments more efficiently, please use
make clear the manner in which the
only one method. The Commission will
Exchange operates and thereby remove C. Self-Regulatory Organization’s
post all comments on the Commission’s
impediments to and provide free and Statement on Comments on the
Internet Web site (http://www.sec.gov/
open markets. Proposed Rule Change Received From
The Exchange’s proposed deletion of rules/sro.shtml). Copies of the
Members, Participants, or Others
Rule 1045 would not impact members submission, all subsequent
No written comments were either amendments, all written statements
because this rule applies solely to solicited or received. with respect to the proposed rule
corporate stock may purchase or sell for his own III. Date of Effectiveness of the change that are filed with the
account or for the account of others any option Proposed Rule Change and Timing for Commission, and all written
contract which entitles the purchaser to purchase
Commission Action communications relating to the
or sell any security described in paragraph (a) of proposed rule change between the
Rule 1045 or any foreign currency option contract Because the foregoing proposed rule
admitted to dealings on the Exchange. The Commission and any person, other than
NASDAQ Code of Ethics refers to the Global
change does not: (i) Significantly affect
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Trading Policy which prohibits employees from the protection of investors or the public 20 15 U.S.C. 78s(b)(3)(a)(ii).
holding or trading certain securities noted on the interest; (ii) impose any significant 21 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
prohibited list. The prohibited list prohibits burden on competition; and (iii) become 4(f)(6) requires a self-regulatory organization to give
employees from holding or trading certain the Commission written notice of its intent to file
securities because those companies have dealings operative for 30 days from the date on
the proposed rule change at least five business days
on the Exchange. The Code of Ethics is more prior to the date of filing of the proposed rule
expansive in scope as compared to Phlx Rule 1045. 17 See note 5. change, or such shorter time as designated by the
15 15 U.S.C. 78f(b). 18 See note 25. Commission. The Exchange has satisfied this
16 15 U.S.C. 78f(b)(5). 19 Id. requirement.

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Federal Register / Vol. 80, No. 62 / Wednesday, April 1, 2015 / Notices 17537

those that may be withheld from the II. Description of the Proposed Rule organization if it finds that such
public in accordance with the Change proposed rule change is consistent with
provisions of 5 U.S.C. 552, will be The purpose of the proposed rule the requirements of the Act and the
available for Web site viewing and change is to provide for the clearing of rules and regulations thereunder
printing in the Commission’s Public Western European sovereign CDS applicable to such organization. Section
Reference Room, 100 F Street NE., contracts referencing four additional 17A(b)(3)(F) of the Act 7 requires, among
Washington, DC 20549 on official reference entities: The Kingdom of the other things, that the rules of a clearing
business days between the hours of 10 Netherlands, the Republic of Finland, agency are designed to promote the
a.m. and 3 p.m. Copies of such filing the Kingdom of Sweden and the prompt and accurate clearance and
also will be available for inspection and Kingdom of Denmark (the ‘‘Additional settlement of securities transactions
copying at the principal offices of the WE Sovereign Contracts’’). ICE Clear and, to the extent applicable, derivative
Exchange. All comments received will Europe currently clears CDS contracts agreements, contracts, and transactions,
be posted without change; the referencing six other Western European to assure the safeguarding of securities
Commission does not edit personal sovereigns: Ireland, the Republic of and funds which are in the custody or
identifying information from Italy, the Portuguese Republic, the control of the clearing agency or for
submissions. You should submit only Kingdom of Spain, the Kingdom of which it is responsible, and, in general,
information that you wish to make Belgium and the Republic of Austria.4 to protect investors and the public
available publicly. All submissions ICE Clear Europe believes clearance of interest.
should refer to File Number SR–Phlx– the Additional WE Sovereign Contracts
2015–28, and should be submitted on or will benefit the markets for credit After careful review, the Commission
before April 22, 2015. default swaps on Western European finds that the proposed rule change is
sovereigns by offering to market consistent with Section 17A of the Act 8
For the Commission, by the Division of
Trading and Markets, pursuant to delegated participants the benefits of clearing, and the rules thereunder applicable to
authority.22 including reduction in counterparty risk ICE Clear Europe. The proposed rule
and safeguarding of margin assets change will provide for clearing of the
Brent J. Fields,
pursuant to clearing house rules. Additional WE Sovereign Contracts,
Secretary. ICE Clear Europe has stated that the which are similar to the other Western
[FR Doc. 2015–07366 Filed 3–31–15; 8:45 am] Additional WE Sovereign Contracts will European sovereign CDS contracts
BILLING CODE 8011–01–P constitute ‘‘Non-STEC Single Name currently cleared by ICE Clear Europe,
Contracts’’ for purposes of the CDS in accordance with the existing rules
Procedures and, accordingly, will be and procedures applicable to Western
SECURITIES AND EXCHANGE governed by Paragraph 10 of the CDS European sovereign CDS contracts.
COMMISSION Procedures consistent with the Specifically, the Commission believes
treatment of the other Western European that ICE Clear Europe’s proposal to clear
[Release No. 34–74588; File No. SR–ICEEU– sovereign CDS contracts currently the Additional WE Sovereign Contracts
2015–004] cleared by ICE Clear Europe. ICE Clear pursuant to its current risk management
Europe has represented that clearing of framework (including margin and
Self-Regulatory Organizations; ICE the Additional WE Sovereign Contracts
guaranty fund methodology),
Clear Europe Limited; Order Approving will not require any changes to ICE
operational procedures, settlement
Proposed Rule Change Relating to Clear Europe’s existing Clearing Rules
Additional European Sovereign CDS and Procedures, risk management procedures and default management
Contracts framework (including relevant policies), policies is designed to promote the
or margin model.5 prompt and accurate clearance and
March 26, 2015. settlement of securities transactions, to
III. Discussion and Commission assure the safeguarding of securities and
I. Introduction Findings funds which are in the custody or
On January 27, 2015, ICE Clear Section 19(b)(2)(C) of the Act 6 directs control of ICE Clear Europe or for which
Europe Limited (‘‘ICE Clear Europe’’) the Commission to approve a proposed it is responsible, and in general, to
filed with the Securities and Exchange rule change of a self-regulatory protect investors and the public interest,
Commission (‘‘Commission’’), pursuant consistent with Section 17A(b)(3)(F) of
4 See Securities Exchange Act Release No. 34–
to Section 19(b)(1) of the Securities the Act.9
71920 (April 9, 2014), 79 FR 21331 (April 15, 2015)
Exchange Act of 1934 (‘‘Act’’) 1 and Rule (SR–ICEEU–2014–04) (order approving proposed IV. Conclusion
19b–4 thereunder,2 a proposed rule rule change to clear Western European sovereign
change to provide for the clearance of CDS contracts referencing Ireland, the Republic of On the basis of the foregoing, the
additional European sovereign credit Italy, the Portuguese Republic and the Kingdom of
Spain) and Securities Exchange Act Release No. 34– Commission finds that the proposal is
default swap (‘‘CDS’’) contracts. The 73737 (December 4, 2014), 79 FR 73372 (December consistent with the requirements of the
proposed rule change was published for 10, 2014) (SR–ICEEU–2014–18) (order approving Act and in particular with the
comment in the Federal Register on proposed rule change to clear additional Western
requirements of Section 17A of the
February 11, 2015.3 The Commission European sovereign CDS contracts referencing
Kingdom of Belgium and the Republic of Austria) Act 10 and the rules and regulations
did not receive comments on the (collectively, the ‘‘Prior WE Sovereigns Orders’’). thereunder.
proposed rule change. This order 5 For a description of previously approved
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approves the proposed rule change. changes to ICE Clear Europe’s risk management It is therefore ordered, pursuant to
framework to accommodate clearing of Western Section 19(b)(2) of the Act,11 that the
European sovereign CDS contracts, see the Prior WE
22 17 CFR 200.30–3(a)(12). Sovereigns Orders. Id. ICE Clear Europe represents 7 15
1 15 U.S.C. 78s(b)(1). that it has performed a variety of empirical analyses U.S.C. 78q–1(b)(3)(F).
2 17 CFR 240.19b–4. 8 15 U.S.C. 78q–1.
related to clearing of the Additional WE Sovereign
9 15 U.S.C. 78q–1(b)(3)(F).
3 Securities Exchange Act Release No. 34–74213 Contracts under its margin methodology, including
back tests and stress tests. 10 15 U.S.C. 78q–1.
(February 5, 2015), 80 FR 7661 (February 11, 2015)
(SR–ICEEU–2015–004). 6 15 U.S.C. 78s(b)(2)(C). 11 15 U.S.C. 78s(b)(2).

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Document Created: 2015-12-18 11:03:39
Document Modified: 2015-12-18 11:03:39

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 17534