80_FR_36996 80 FR 36873 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Order Price Protection

80 FR 36873 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Order Price Protection

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 123 (June 26, 2015)

Page Range36873-36875
FR Document2015-15689

Federal Register, Volume 80 Issue 123 (Friday, June 26, 2015)
[Federal Register Volume 80, Number 123 (Friday, June 26, 2015)]
[Notices]
[Pages 36873-36875]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-15689]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75256; File No. SR-Phlx-2015-51]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Order Price Protection

June 22, 2015.
    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 June 12, 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 and II 
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 section (p)(3), Order Price 
Protection, of Exchange Rule 1080, Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.
    The text of the proposed rule change is below; proposed new 
language is italicized; proposed deletions are in brackets.
* * * * *
    Rule 1080 Obligations and Restrictions Applicable to Specialists 
and Registered Options Traders
    (a)-(o) No change.
    (p)
    (1)-(2) No change.
    (3) Order Price Protection (``OPP''). OPP is a feature of Phlx XL 
that prevents certain day limit, good til cancelled, immediate or 
cancel, and all-or-none orders at prices outside of pre-set standard 
limits from being accepted by the system. OPP applies to all options 
but does not apply to market orders, stop limit orders, Intermarket 
Sweep Orders or complex orders.
    (A) OPP is operational each trading day after the opening until the 
close of trading, except during trading halts. [The Exchange may also 
temporarily deactivate OPP from time to time on an intraday basis at 
its discretion if it determines that volatility warrants deactivation. 
Members will be notified of intraday OPP deactivation due to volatility 
and any subsequent intraday reactivation by the Exchange through the 
issuance of system status messages.]
    (B) OPP will reject incoming orders that exceed certain parameters 
according to the following algorithm.
    (i) If the better of the NBBO or the internal market BBO (the 
``Reference BBO'') on the contra-side of an incoming order is greater 
than $1.00, orders with a limit more than 50% through such contraside 
[NBBO] Reference BBO will be rejected by Phlx XL upon receipt. For 
example, if the [NBBO] Reference BBO on the offer side is $1.10, an 
order to buy options for more than $1.65 would be rejected. Similarly, 
if the [NBBO] Reference BBO on the bid side is $1.10, an order to sell 
options for less than $0.55 will be rejected.
    (ii) If the [NBBO] Reference BBO on the contra-side of an incoming 
order is less than or equal to $1.00, orders with a limit more than 
100% through such contra-side [NBBO] Reference BBO will be rejected by 
Phlx XL upon receipt. For example, if the [NBBO] Reference BBO on the 
offer side is $1.00, an order to buy options for more than $2.00 would

[[Page 36874]]

be rejected. However, if the [NBBO] Reference BBO of the bid side of an 
incoming order to sell is less than or equal to $1.00, the OPP limits 
set forth above will result in all incoming sell orders being accepted 
regardless of their limit. To illustrate, if the [NBBO] Reference BBO 
on the bid side is equal to $1.00, the OPP limits provide protection 
such that all orders to sell with a limit less than $0.00 would be 
rejected.
    (iii) No change.
    * * * Commentary
    No change.
* * * * *
    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 the proposed rule change is to amend and correct 
Exchange Rule 1080(p)(3) which describes Order Price Protection 
(``OPP''), a feature of the Phlx XL trading system that prevents 
certain day limit, good till cancelled, immediate or cancel and all-or-
none orders at prices outside of pre-set standard limits from being 
accepted by the system. The amendments also remove language providing 
for the temporary deactivation of OPP from time to time on an intraday 
basis at the Exchange's discretion if the Exchange determines that 
volatility warrants deactivation.
    OPP applies to all options but does not apply to market orders, 
stop limit orders, Intermarket Sweep Orders or complex orders. OPP is 
operational each trading day after the opening until the close of 
trading, except during trading halts. Rule 1080(p)(3)(A) also currently 
provides that the Exchange may also temporarily deactivate OPP from 
time to time on an intraday basis at its discretion if it determines 
that volatility warrants deactivation. Participants are notified of 
intraday OPP deactivation due to volatility and any subsequent intraday 
reactivation by the Exchange through the issuance of system status 
messages.\3\
---------------------------------------------------------------------------

    \3\ See Rule 1080(p)(3)(A).
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    OPP rejects incoming orders that exceed certain parameters. 
Currently, Rule 1080(p)(3)(B) establishes those parameters with 
reference to the NBBO. It states that if the NBBO on the contra-side of 
an incoming order is greater than $1.00, orders with a limit more than 
50% through such contraside NBBO will be rejected by Phlx XL upon 
receipt. For example, the rule provides that if the NBBO on the offer 
side is $1.10, an order to buy options for more than $1.65 would be 
rejected. Similarly, the rule states that if the NBBO on the bid side 
is $1.10, an order to sell options for less than $0.55 will be 
rejected. The rule provides that if the NBBO on the contra-side of an 
incoming order is less than or equal to $1.00, orders with a limit more 
than 100% through such contra-side NBBO will be rejected by Phlx XL 
upon receipt. For example, under the rule if the NBBO on the offer side 
is $1.00, an order to buy options for more than $2.00 would be 
rejected. However, the rule provides that if the NBBO of the bid side 
of an incoming order to sell is less than or equal to $1.00, the OPP 
limits set forth above will result in all incoming sell orders being 
accepted regardless of their limit.
    The Exchange has determined that a discrepancy exists between this 
rule description of how the OPP process works and how the system 
actually functions in cases where certain legging orders have been 
generated by the system pursuant to Rule 1080.07(f)(iii)(C).\4\ The 
trading system may generate Legging Orders in $0.01 increments on the 
Exchange regardless of the minimum price variation (``MPV'') of the 
option. These legging orders are considered part of the Exchange's 
internal market BBO at their non-MPV limit and are displayed at the 
allowable MPV price as part of the NBBO. While Rule 1080(p)(3)(B) 
states that the NBBO is used for OPP determinations as described above, 
the system is actually basing OPP determinations on the better of (a) 
the NBBO, or (b) the Exchange's internal market BBO, which may differ 
from the NBBO due to the presence of legging orders. The Exchange is 
proposing to correct this discrepancy by deleting the term ``NBBO'' in 
each instance where it appears in Rule 1080(p)(3)(B) and replacing it 
with the term ``Reference BBO'' which will be defined in Rule 
1080(p)(3)(B)(i) as the better of the NBBO or the internal market BBO.
---------------------------------------------------------------------------

    \4\ Generally, a legging order is a limit order on the regular 
order book in an individual series that represents one leg of a two-
legged complex order to buy or sell an equal quantity of two option 
series resting on the Exchange's Complex Order Book. Legging orders 
are firm orders that are included in the Exchange's displayed best 
bid or offer. Legging orders are designed to increase the 
opportunity for complex orders to execute by ``legging'' into the 
market, whereby all of the legs of the complex order execute against 
the best bids or offers on the Exchange for the individual options 
series. See Exchange Rule 1080.07(f)(iii)(C).
---------------------------------------------------------------------------

    Finally, the Exchange is removing from Rule 1080(p)(3)(A) the 
statements that the Exchange may temporarily deactivate OPP from time 
to time on an intraday basis at its discretion if it determines that 
volatility warrants deactivation, and that members will be notified of 
intraday OPP deactivation due to volatility and any subsequent intraday 
reactivation by the Exchange through the issuance of system status 
messages. The Exchange currently lacks the technology to implement 
intraday OPP deactivation and is deleting the language which suggests 
that it has such capability.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \5\ in general, and furthers the objectives of section 
6(b)(5) of the Act \6\ 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 amending and correcting the rule text to that it accurately reflects 
the functioning of the trading system. The amendments concerning the 
Reference BBO and the elimination of references to intraday 
deactivation of the OPP are both intended to improve the accuracy of 
the rule. The Exchange believes that the amendments should promote just 
and equitable principles of trade as well as protect investors and the 
public interest by making clear how OPP determinations are actually 
made on the Exchange, and by eliminating the potential for confusion 
inherent in the statement that the Exchange may temporarily deactivate 
OPP on an intraday basis when in fact it lacks the technical capacity 
to do so. Calculating

[[Page 36875]]

OPP on the basis of the better of the NBBO or the internal market BBO 
rather than solely on the basis of the NBBO protects investors and the 
public interest by extending the benefits of OPP to orders received in 
instances where the internal market BBO is better than the NBBO.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 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, as the amendments to Rule 
1080(p)(3)(B) will apply uniformly to all market participants availing 
themselves of the OPP feature. Nor will the proposal impose a burden on 
competition among the options exchanges, because of the vigorous 
competition for order flow among the options exchanges. To the extent 
that market participants disagree with the particular approach taken by 
the Exchange herein, market participants can easily and readily direct 
order flow to competing venues.

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) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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 Commission has determined to waive the five-day pre-filing 
period in this case.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \9\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)\10\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because it would allow 
the Exchange to immediately correct the inaccuracy with respect to the 
NBBO described above, as well as eliminate language suggesting the 
Exchange possesses the capability to temporarily deactivate OPP on an 
intraday basis when in fact this is not the case. The Exchange believes 
that the public interest would not be served by preserving these 
inaccuracies in its rules during a notice and comment period for this 
proposed rule change. The Commission believes that waiving the 30-day 
operative delay \11\ is consistent with the protection of investors and 
the public interest and designates the proposal operative on filing.
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 will institute proceedings to 
determine whether the proposed rule change 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-2015-51 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-2015-51. 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 
10:00 a.m. and 3:00 p.m. Copies of such 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-2015-51 and should be 
submitted on or before July 17, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15689 Filed 6-25-15; 8:45 am]
 BILLING CODE 8011-01-P



                                                                              Federal Register / Vol. 80, No. 123 / Friday, June 26, 2015 / Notices                                             36873

                                              SECURITIES AND EXCHANGE                                 Counsel, Office of the Investor                         I. Self-Regulatory Organization’s
                                              COMMISSION                                              Advocate, at (202) 551–3302, Securities                 Statement of the Terms of Substance of
                                                                                                      and Exchange Commission, 100 F Street                   the Proposed Rule Change
                                              [Release Nos. 33–9851; 34–75253; File No.
                                              265–28]                                                 NE., Washington, DC 20549.                                 The Exchange proposes to amend
                                                                                                      SUPPLEMENTARY INFORMATION:     The                      section (p)(3), Order Price Protection, of
                                              Investor Advisory Committee Meeting                     meeting will be open to the public,                     Exchange Rule 1080, Obligations and
                                              AGENCY:  Securities and Exchange                        except during that portion of the                       Restrictions Applicable to Specialists
                                              Commission.                                             meeting reserved for an administrative                  and Registered Options Traders.
                                              ACTION: Notice of meeting of Securities                 work session during lunch. Persons                         The text of the proposed rule change
                                              and Exchange Commission Dodd-Frank                      needing special accommodations to take                  is below; proposed new language is
                                              Investor Advisory Committee.                            part because of a disability should                     italicized; proposed deletions are in
                                                                                                      notify the contact person listed in FOR                 brackets.
                                              SUMMARY:   The Securities and Exchange                  FURTHER INFORMATION CONTACT.                            *       *     *     *     *
                                              Commission Investor Advisory                                                                                       Rule 1080 Obligations and
                                              Committee, established pursuant to                        The agenda for the meeting includes:
                                                                                                      Remarks from Commissioners; a                           Restrictions Applicable to Specialists
                                              Section 911 of the Dodd-Frank Wall                                                                              and Registered Options Traders
                                              Street Reform and Consumer Protection                   discussion of background checks as a
                                                                                                      means to address elder financial abuse                     (a)–(o) No change.
                                              Act of 2010, is providing notice that it
                                                                                                      (which may include a recommendation);                      (p)
                                              will hold a public meeting. The public
                                              is invited to submit written statements                 a discussion of the Department of                          (1)–(2) No change.
                                              to the Committee.                                       Labor’s fiduciary rule proposal; a                         (3) Order Price Protection (‘‘OPP’’).
                                                                                                      shareholder rights update panel; a                      OPP is a feature of Phlx XL that
                                              DATES: The meeting will be held on
                                                                                                      report of the Committee chair regarding                 prevents certain day limit, good til
                                              Thursday, July 16, 2015 from 9:30 a.m.
                                                                                                      Committee matters; an investment                        cancelled, immediate or cancel, and all-
                                              until 3:30 p.m. (ET). Written statements
                                              should be received on or before July 16,                                                                        or-none orders at prices outside of pre-
                                                                                                      management panel discussion on the
                                              2015.                                                                                                           set standard limits from being accepted
                                                                                                      disclosure of fees and risks in fund
                                                                                                                                                              by the system. OPP applies to all
                                              ADDRESSES: The meeting will be held in                  products; and a nonpublic
                                                                                                                                                              options but does not apply to market
                                              Multi-Purpose Room LL–006 at the                        administrative work session during                      orders, stop limit orders, Intermarket
                                              Commission’s headquarters, 100 F                        lunch.                                                  Sweep Orders or complex orders.
                                              Street NE., Washington, DC 20549. The                     Dated: June 22, 2015.                                    (A) OPP is operational each trading
                                              meeting will be webcast on the
                                                                                                      Brent J. Fields,                                        day after the opening until the close of
                                              Commission’s Web site at www.sec.gov.
                                                                                                      Secretary.                                              trading, except during trading halts.
                                              Written statements may be submitted by
                                                                                                                                                              [The Exchange may also temporarily
                                              any of the following methods:                           [FR Doc. 2015–15645 Filed 6–25–15; 8:45 am]
                                                                                                                                                              deactivate OPP from time to time on an
                                                                                                      BILLING CODE 8011–01–P
                                              Electronic Statements                                                                                           intraday basis at its discretion if it
                                                D Use the Commission’s Internet                                                                               determines that volatility warrants
                                              submission form (http://www.sec.gov/                                                                            deactivation. Members will be notified
                                                                                                      SECURITIES AND EXCHANGE
                                              rules/other.shtml); or                                                                                          of intraday OPP deactivation due to
                                                                                                      COMMISSION
                                                D Send an email message to rules-                                                                             volatility and any subsequent intraday
                                              comments@sec.gov. Please include File                                                                           reactivation by the Exchange through
                                                                                                      [Release No. 34–75256; File No. SR–Phlx–                the issuance of system status messages.]
                                              No. 265–28 on the subject line; or
                                                                                                      2015–51]                                                   (B) OPP will reject incoming orders
                                              Paper Statements                                                                                                that exceed certain parameters
                                                D Send paper statements to Brent J.                   Self-Regulatory Organizations;                          according to the following algorithm.
                                              Fields, Secretary, Securities and                       NASDAQ OMX PHLX LLC; Notice of
                                                                                                                                                                 (i) If the better of the NBBO or the
                                              Exchange Commission, 100 F Street NE.,                  Filing and Immediate Effectiveness of                   internal market BBO (the ‘‘Reference
                                              Washington, DC 20549–1090.                              Proposed Rule Change Relating to                        BBO’’) on the contra-side of an incoming
                                              All submissions should refer to File No.                Order Price Protection                                  order is greater than $1.00, orders with
                                              265–28. This file number should be                      June 22, 2015.                                          a limit more than 50% through such
                                              included on the subject line if email is                                                                        contraside [NBBO] Reference BBO will
                                              used. To help us process and review                        Pursuant to section 19(b)(1) of the                  be rejected by Phlx XL upon receipt. For
                                              your statement more efficiently, please                 Securities Exchange Act of 1934                         example, if the [NBBO] Reference BBO
                                              use only one method.                                    (‘‘Act’’),1 and Rule 19b–4 2 thereunder,                on the offer side is $1.10, an order to
                                                Statements also will be available for                 notice is hereby given that, on June 12,                buy options for more than $1.65 would
                                              Web site viewing and printing in the                    2015, NASDAQ OMX PHLX LLC                               be rejected. Similarly, if the [NBBO]
                                              Commission’s Public Reference Room,                     (‘‘Phlx’’ or ‘‘Exchange’’) filed with the               Reference BBO on the bid side is $1.10,
                                              100 F Street NE., Room 1580,                            Securities and Exchange Commission                      an order to sell options for less than
                                              Washington, DC 20549, on official                       (‘‘SEC’’ or ‘‘Commission’’) the proposed                $0.55 will be rejected.
                                              business days between the hours of                      rule change as described in Items I and                    (ii) If the [NBBO] Reference BBO on
                                              10:00 a.m. and 3:00 p.m. All statements                 II below, which Items have been                         the contra-side of an incoming order is
tkelley on DSK3SPTVN1PROD with NOTICES




                                              received will be posted without change;                 prepared by the Exchange. The                           less than or equal to $1.00, orders with
                                              we do not edit personal identifying                     Commission is publishing this notice to                 a limit more than 100% through such
                                              information from submissions. You                       solicit comments on the proposed rule                   contra-side [NBBO] Reference BBO will
                                              should submit only information that                     change from interested persons.                         be rejected by Phlx XL upon receipt. For
                                              you wish to make available publicly.                                                                            example, if the [NBBO] Reference BBO
                                              FOR FURTHER INFORMATION CONTACT:                          1 15   U.S.C. 78s(b)(1).                              on the offer side is $1.00, an order to
                                              Marc Oorloff Sharma, Senior Special                       2 17   CFR 240.19b–4.                                 buy options for more than $2.00 would


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                                              36874                           Federal Register / Vol. 80, No. 123 / Friday, June 26, 2015 / Notices

                                              be rejected. However, if the [NBBO]                     halts. Rule 1080(p)(3)(A) also currently                 non-MPV limit and are displayed at the
                                              Reference BBO of the bid side of an                     provides that the Exchange may also                      allowable MPV price as part of the
                                              incoming order to sell is less than or                  temporarily deactivate OPP from time to                  NBBO. While Rule 1080(p)(3)(B) states
                                              equal to $1.00, the OPP limits set forth                time on an intraday basis at its                         that the NBBO is used for OPP
                                              above will result in all incoming sell                  discretion if it determines that volatility              determinations as described above, the
                                              orders being accepted regardless of their               warrants deactivation. Participants are                  system is actually basing OPP
                                              limit. To illustrate, if the [NBBO]                     notified of intraday OPP deactivation                    determinations on the better of (a) the
                                              Reference BBO on the bid side is equal                  due to volatility and any subsequent                     NBBO, or (b) the Exchange’s internal
                                              to $1.00, the OPP limits provide                        intraday reactivation by the Exchange                    market BBO, which may differ from the
                                              protection such that all orders to sell                 through the issuance of system status                    NBBO due to the presence of legging
                                              with a limit less than $0.00 would be                   messages.3                                               orders. The Exchange is proposing to
                                              rejected.                                                  OPP rejects incoming orders that                      correct this discrepancy by deleting the
                                                 (iii) No change.                                     exceed certain parameters. Currently,                    term ‘‘NBBO’’ in each instance where it
                                                 * * * Commentary                                     Rule 1080(p)(3)(B) establishes those                     appears in Rule 1080(p)(3)(B) and
                                                 No change.                                           parameters with reference to the NBBO.                   replacing it with the term ‘‘Reference
                                              *       *    *    *       *                             It states that if the NBBO on the contra-                BBO’’ which will be defined in Rule
                                                 The text of the proposed rule change                 side of an incoming order is greater than                1080(p)(3)(B)(i) as the better of the
                                              is available on the Exchange’s Web site                 $1.00, orders with a limit more than                     NBBO or the internal market BBO.
                                              at http://                                              50% through such contraside NBBO                            Finally, the Exchange is removing
                                              nasdaqomxphlx.cchwallstreet.com/, at                    will be rejected by Phlx XL upon                         from Rule 1080(p)(3)(A) the statements
                                              the principal office of the Exchange, and               receipt. For example, the rule provides                  that the Exchange may temporarily
                                              at the Commission’s Public Reference                    that if the NBBO on the offer side is                    deactivate OPP from time to time on an
                                              Room                                                    $1.10, an order to buy options for more                  intraday basis at its discretion if it
                                                                                                      than $1.65 would be rejected. Similarly,                 determines that volatility warrants
                                              II. Self-Regulatory Organization’s                      the rule states that if the NBBO on the                  deactivation, and that members will be
                                              Statement of the Purpose of, and                        bid side is $1.10, an order to sell options              notified of intraday OPP deactivation
                                              Statutory Basis for, the Proposed Rule                  for less than $0.55 will be rejected. The                due to volatility and any subsequent
                                              Change                                                  rule provides that if the NBBO on the                    intraday reactivation by the Exchange
                                                In its filing with the Commission, the                contra-side of an incoming order is less                 through the issuance of system status
                                              Exchange included statements                            than or equal to $1.00, orders with a                    messages. The Exchange currently lacks
                                              concerning the purpose of and basis for                 limit more than 100% through such                        the technology to implement intraday
                                              the proposed rule change and discussed                  contra-side NBBO will be rejected by                     OPP deactivation and is deleting the
                                              any comments it received on the                         Phlx XL upon receipt. For example,                       language which suggests that it has such
                                              proposed rule change. The text of these                 under the rule if the NBBO on the offer                  capability.
                                              statements may be examined at the                       side is $1.00, an order to buy options for               2. Statutory Basis
                                              places specified in Item IV below. The                  more than $2.00 would be rejected.
                                                                                                      However, the rule provides that if the                      The Exchange believes that its
                                              Exchange has prepared summaries, set
                                                                                                      NBBO of the bid side of an incoming                      proposal is consistent with section 6(b)
                                              forth in sections A, B, and C below, of
                                                                                                      order to sell is less than or equal to                   of the Act 5 in general, and furthers the
                                              the most significant aspects of such
                                                                                                                                                               objectives of section 6(b)(5) of the Act 6
                                              statements.                                             $1.00, the OPP limits set forth above
                                                                                                                                                               in particular, in that it is designed to
                                                                                                      will result in all incoming sell orders
                                              A. Self-Regulatory Organization’s                                                                                promote just and equitable principles of
                                                                                                      being accepted regardless of their limit.
                                              Statement of the Purpose of, and                           The Exchange has determined that a                    trade, to remove impediments to and
                                              Statutory Basis for, the Proposed Rule                  discrepancy exists between this rule                     perfect the mechanism of a free and
                                              Change                                                  description of how the OPP process                       open market and a national market
                                                                                                      works and how the system actually                        system, and, in general to protect
                                              1. Purpose
                                                                                                      functions in cases where certain legging                 investors and the public interest, by
                                                 The purpose of the proposed rule                                                                              amending and correcting the rule text to
                                                                                                      orders have been generated by the
                                              change is to amend and correct                                                                                   that it accurately reflects the functioning
                                                                                                      system pursuant to Rule
                                              Exchange Rule 1080(p)(3) which                                                                                   of the trading system. The amendments
                                                                                                      1080.07(f)(iii)(C).4 The trading system
                                              describes Order Price Protection                                                                                 concerning the Reference BBO and the
                                                                                                      may generate Legging Orders in $0.01
                                              (‘‘OPP’’), a feature of the Phlx XL                                                                              elimination of references to intraday
                                                                                                      increments on the Exchange regardless
                                              trading system that prevents certain day                                                                         deactivation of the OPP are both
                                                                                                      of the minimum price variation
                                              limit, good till cancelled, immediate or                                                                         intended to improve the accuracy of the
                                                                                                      (‘‘MPV’’) of the option. These legging
                                              cancel and all-or-none orders at prices                                                                          rule. The Exchange believes that the
                                                                                                      orders are considered part of the
                                              outside of pre-set standard limits from                                                                          amendments should promote just and
                                                                                                      Exchange’s internal market BBO at their
                                              being accepted by the system. The                                                                                equitable principles of trade as well as
                                              amendments also remove language                           3 See                                                  protect investors and the public interest
                                                                                                              Rule 1080(p)(3)(A).
                                              providing for the temporary                               4 Generally, a legging order is a limit order on the   by making clear how OPP
                                              deactivation of OPP from time to time                   regular order book in an individual series that          determinations are actually made on the
                                              on an intraday basis at the Exchange’s                  represents one leg of a two-legged complex order to      Exchange, and by eliminating the
                                              discretion if the Exchange determines                   buy or sell an equal quantity of two option series
                                                                                                      resting on the Exchange’s Complex Order Book.
                                                                                                                                                               potential for confusion inherent in the
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                                              that volatility warrants deactivation.                  Legging orders are firm orders that are included in      statement that the Exchange may
                                                 OPP applies to all options but does                  the Exchange’s displayed best bid or offer. Legging      temporarily deactivate OPP on an
                                              not apply to market orders, stop limit                  orders are designed to increase the opportunity for      intraday basis when in fact it lacks the
                                              orders, Intermarket Sweep Orders or                     complex orders to execute by ‘‘legging’’ into the
                                                                                                      market, whereby all of the legs of the complex order
                                                                                                                                                               technical capacity to do so. Calculating
                                              complex orders. OPP is operational each                 execute against the best bids or offers on the
                                              trading day after the opening until the                 Exchange for the individual options series. See           5 15   U.S.C. 78f(b).
                                              close of trading, except during trading                 Exchange Rule 1080.07(f)(iii)(C).                         6 15   U.S.C. 78f(b)(5).



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                                                                                Federal Register / Vol. 80, No. 123 / Friday, June 26, 2015 / Notices                                                 36875

                                              OPP on the basis of the better of the                     public interest. The Exchange believes                only one method. The Commission will
                                              NBBO or the internal market BBO rather                    that waiving the 30-day operative delay               post all comments on the Commission’s
                                              than solely on the basis of the NBBO                      is consistent with the protection of                  Internet Web site (http://www.sec.gov/
                                              protects investors and the public                         investors and the public interest                     rules/sro.shtml). Copies of the
                                              interest by extending the benefits of                     because it would allow the Exchange to                submission, all subsequent
                                              OPP to orders received in instances                       immediately correct the inaccuracy with               amendments, all written statements
                                              where the internal market BBO is better                   respect to the NBBO described above, as               with respect to the proposed rule
                                              than the NBBO.                                            well as eliminate language suggesting                 change that are filed with the
                                                                                                        the Exchange possesses the capability to              Commission, and all written
                                              B. Self-Regulatory Organization’s
                                                                                                        temporarily deactivate OPP on an                      communications relating to the
                                              Statement on Burden on Competition
                                                                                                        intraday basis when in fact this is not               proposed rule change between the
                                                The Exchange does not believe that                      the case. The Exchange believes that the              Commission and any person, other than
                                              the proposed rule change will impose                      public interest would not be served by                those that may be withheld from the
                                              any burden on competition not                             preserving these inaccuracies in its rules            public in accordance with the
                                              necessary or appropriate in furtherance                   during a notice and comment period for                provisions of 5 U.S.C. 552, will be
                                              of the purposes of the Act, as the                        this proposed rule change. The                        available for Web site viewing and
                                              amendments to Rule 1080(p)(3)(B) will                     Commission believes that waiving the                  printing in the Commission’s Public
                                              apply uniformly to all market                             30-day operative delay 11 is consistent               Reference Room, 100 F Street NE.,
                                              participants availing themselves of the                   with the protection of investors and the              Washington, DC 20549, on official
                                              OPP feature. Nor will the proposal                        public interest and designates the                    business days between the hours of
                                              impose a burden on competition among                      proposal operative on filing.                         10:00 a.m. and 3:00 p.m. Copies of such
                                              the options exchanges, because of the                        At any time within 60 days of the                  filing also will be available for
                                              vigorous competition for order flow                       filing of the proposed rule change, the               inspection and copying at the principal
                                              among the options exchanges. To the                       Commission summarily may                              office of the Exchange. All comments
                                              extent that market participants disagree                  temporarily suspend such rule change if               received will be posted without change;
                                              with the particular approach taken by                     it appears to the Commission that such                the Commission does not edit personal
                                              the Exchange herein, market                               action is necessary or appropriate in the             identifying information from
                                              participants can easily and readily                       public interest, for the protection of                submissions. You should submit only
                                              direct order flow to competing venues.                    investors, or otherwise in furtherance of             information that you wish to make
                                              C. Self-Regulatory Organization’s                         the purposes of the Act. If the                       available publicly. All submissions
                                              Statement on Comments on the                              Commission takes such action, the                     should refer to File Number SR–Phlx–
                                              Proposed Rule Change Received From                        Commission will institute proceedings                 2015–51 and should be submitted on or
                                              Members, Participants, or Others                          to determine whether the proposed rule                before July 17, 2015.
                                                No written comments were either                         change should be approved or                            For the Commission, by the Division of
                                                                                                        disapproved.                                          Trading and Markets, pursuant to delegated
                                              solicited or received.                                                                                          authority.12
                                              III. Date of Effectiveness of the                         IV. Solicitation of Comments                          Robert W. Errett,
                                              Proposed Rule Change and Timing for                         Interested persons are invited to                   Deputy Secretary.
                                              Commission Action                                         submit written data, views, and                       [FR Doc. 2015–15689 Filed 6–25–15; 8:45 am]
                                                 Because the foregoing proposed rule                    arguments concerning the foregoing,                   BILLING CODE 8011–01–P
                                              change does not: (i) Significantly affect                 including whether the proposed rule
                                              the protection of investors or the public                 change is consistent with the Act.
                                              interest; (ii) impose any significant                     Comments may be submitted by any of                   SECURITIES AND EXCHANGE
                                              burden on competition; and (iii) become                   the following methods:                                COMMISSION
                                              operative for 30 days from the date on                    Electronic Comments                                   [Release No. 34–75254; File No. SR–CHX–
                                              which it was filed, or such shorter time                                                                        2015–04]
                                              as the Commission may designate, it has                     • Use the Commission’s Internet
                                              become effective pursuant to section                      comment form (http://www.sec.gov/                     Self-Regulatory Organizations;
                                              19(b)(3)(A) of the Act 7 and Rule 19b–                    rules/sro.shtml); or                                  Chicago Stock Exchange, Inc.; Notice
                                              4(f)(6) thereunder.8                                        • Send an email to rule-comments@                   of Filing and Immediate Effectiveness
                                                 A proposed rule change filed                           sec.gov. Please include File Number SR–               of a Proposed Rule Change To
                                              pursuant to Rule 19b–4(f)(6) under the                    Phlx–2015–51 on the subject line.                     Eliminate the Change in Business
                                              Act 9 normally does not become                            Paper Comments                                        Form Fee
                                              operative for 30 days after the date of its
                                              filing. However, Rule 19b–4(f)(6)10                         • Send paper comments in triplicate                 June 22, 2015.
                                              permits the Commission to designate a                     to Secretary, Securities and Exchange                    Pursuant to section 19(b)(1) of the
                                              shorter time if such action is consistent                 Commission, 100 F Street NE.,                         Securities Exchange Act of 1934
                                                                                                        Washington, DC 20549–1090.                            (‘‘Act’’),1 and Rule 19b–4 2 thereunder,
                                              with the protection of investors and the
                                                                                                        All submissions should refer to File                  notice is hereby given that on June 15,
                                                7 15  U.S.C. 78s(b)(3)(A).                              Number SR–Phlx–2015–51. This file                     2015, the Chicago Stock Exchange, Inc.
                                                8 17  CFR 240.19b–4(f)(6). In addition, Rule 19b–       number should be included on the                      (‘‘CHX’’ or the ‘‘Exchange’’) filed with
                                              4(f)(6) requires a self-regulatory organization to give   subject line if email is used. To help the            the Securities and Exchange
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                                              the Commission written notice of its intent to file
                                                                                                        Commission process and review your                    Commission (‘‘SEC’’ or ‘‘Commission’’)
                                              the proposed rule change at least five business days                                                            the proposed rule change as described
                                              prior to the date of filing of the proposed rule          comments more efficiently, please use
                                              change, or such shorter time as designated by the                                                               in Items I, II, and III, below, which Items
                                              Commission. The Commission has determined to                11 For purposes only of waiving the 30-day
                                              waive the five-day pre-filing period in this case.        operative delay, the Commission has considered the
                                                                                                                                                                12 17 CFR 200.30–3(a)(12).
                                                9 17 CFR 240.19b–4(f)(6).                                                                                       1 15 U.S.C. 78s(b)(1).
                                                                                                        proposed rule’s impact on efficiency, competition,
                                                10 17 CFR 240.19b–4(f)(6).                              and capital formation. See 15 U.S.C. 78c(f).            2 17 CFR 240.19b–4.




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Document Created: 2015-12-15 14:15:50
Document Modified: 2015-12-15 14:15:50
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 36873 

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