80 FR 9291 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Remote Streaming Quote Traders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 34 (February 20, 2015)

Page Range		9291-9294
FR Document		2015-03517
Federal Register, Volume 80 Issue 34 (Friday, February 20, 2015)
[Federal Register Volume 80, Number 34 (Friday, February 20, 2015)]
[Notices]
[Pages 9291-9294]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-03517]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74272; File No. SR-Phlx-2015-15]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Remote Streaming Quote Traders

February 13, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 9292]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 9, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Phlx Rule 507, entitled 
``Application for Approval as an SQT or RSQT or RSQTO and Assignment in 
Options'' to increase the number of Remote Streaming Quote Traders 
(``RSQTs'') that may be affiliated with a Remote Streaming Quote Trader 
Organization (``RSQTOs'').
    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 Phlx Rule 507, 
entitled ``Application for Approval as an SQT or RSQT or RSQTO and 
Assignment in Options,'' to increase the number of RSQTs that may be 
affiliated with RSQTOs. RSQTs are one of several types of Registered 
Options Traders (``ROTs'') on the Exchange. ROTs are market makers that 
include Streaming Quote Traders (``SQTs''),\3\ RSQTs,\4\ Directed 
Streaming Quote Traders (``DSQTs''), and Directed Remote Streaming 
Quote Traders (``DRSQTs'').\5\
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    \3\ An SQT is an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically in 
eligible options to which such SQT is assigned. An SQT may only 
submit such quotations while such SQT is physically present on the 
floor of the Exchange. See Rule 1014(b)(ii)(A).
    \4\ An RSQT is an ROT that is a member or member organization 
with no physical trading floor presence who has received permission 
from the Exchange to generate and submit option quotations 
electronically in eligible options to which such RSQT has been 
assigned. An RSQT may only submit such quotations electronically 
from off the floor of the Exchange. See Rule 1014(b)(ii)(B).
    \5\ A DSQT is an SQT and a DRSQT is an RSQT that receives a 
Directed Order. Exchange Rule 1080(l)(i)(A) defines Directed Order 
as any customer order (other than a stop or stop-limit order as 
defined in Rule 1066) to buy or sell which has been directed to a 
particular specialist, RSQT, or SQT by an Order Flow Provider and 
delivered to the Exchange via its electronic quoting, execution and 
trading system.
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    Rule 507 is one of the numerous rules administered by the Exchange 
that deal with allocation and assignment of securities. These Rules 
generally describe the process for: Applying for an appointment as a 
specialist; allocating classes of options to specialist units and 
individual specialists; applying for an appointment as an SQT or RQT; 
as well as continuing performance obligations. The Rules also indicate, 
among other things, under what circumstances new allocations are made 
to specialists and assignments are determined for SQTs.\6\ The process 
for applying to be an RSQTO and applying for an assignment in options 
as an RQST or SQT is set forth in Rule 507. All new applicants for 
trading privileges will continue to be subject to the process for 
assignment described in Rule 507. The Exchange considers all applicants 
for assignment in options using the objective criteria set forth in 
Exchange Rule 507(b). The objective criteria are used by the Exchange 
in determining the most beneficial assignment of options for the 
Exchange and the public. Approved RSQTs have certain electronic quoting 
obligations via the Exchange's electronic quoting and trading system, 
as well as restrictions, pertaining to the current market makers on the 
Exchange.\7\ SQTs and RSQTs are subject to performance evaluations to 
determine whether they have fulfilled performance standards relating 
to, among other things, quality of markets, efficient quote submission 
to the Exchange (including quotes submitted through a third party 
vendor), competition among market makers, observance of ethical 
standards, and administrative factors.\8\
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    \6\ See, e.g., Supplementary Material .01 to Rule 506 
(specialist may not apply for a new allocation for a period of six 
months after an option allocation was taken away from the specialist 
in a disciplinary proceeding or an involuntary reallocation 
proceeding). Specifically, Rule 507 discusses the process of 
applying for approval as an RSQT or SQT on the Exchange and 
assignment of options to them. Under Rule 507, RSQTOs are Exchange 
member organizations while SQTs and RSQTs are Exchange members. Any 
member organization of the Exchange in good standing that satisfies 
the RSQTO readiness requirements will be approved as an RSQTO. 
RSQTOs may also be referred to as Remote Market Maker Organizations 
(``RMOs'') and RSQTs may also be referred to as Remote Market 
Markers (``RMMs''). Rule 507(a). No limit is placed on the number of 
member organizations that may become RSQTOs. Moreover, as many as 
three RSQT applicants affiliated with an RSQTO may be approved as an 
RSQT, to the extent that each such RSQT applicant is qualified as an 
ROT in good standing, and satisfies the five readiness requirements 
that are set out in Rule 507. There is no limit on the number of 
qualifying ROTs that may be approved as RSQTs, as long as the 
applicants are qualified as ROTs in good standing and satisfy the 
readiness requirements. No limit is placed on the number of member 
organizations that may become RSQTOs. Moreover, as many as three 
RSQT applicants affiliated with an RSQTO may be approved as an RSQT, 
to the extent that each such RSQT applicant is qualified as an ROT 
in good standing, and satisfies the five readiness requirements that 
are set out in Rule 507. There is no limit on the number of 
qualifying ROTs that may be approved as RSQTs, as long as the 
applicants are qualified as ROTs in good standing and satisfy the 
readiness requirements.
    \7\ More than one RSQT may submit a quote in an assigned option, 
to the extent that each RSQT applies for and is approved as an RSQT 
affiliated with an RSQTO pursuant to Rule 507. See Rule 1014 
(b)(ii)(B).
    \8\ See Rule 510.
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    The Exchange is not proposing to amend the process or procedure for 
applying to act as a market maker on the Exchange nor the obligations 
or performance evaluations that are conducted once appointed. The 
Exchange proposes to amend Rule 507(a) to increase the number of RSQTs 
that may be affiliated with an RSQTO from three to five RSTQs. The 
Exchange initially selected three RSQTs when the concept of an RSQTO 
was adopted because the Exchange believed that up to three RSQTs for 
each RSQTO organization would strike a proper balance with respect to 
the anticipated increase to support quoting and trading options in 
light of competition. The RSQTO concept was initially adopted in 
2013.\9\ At this time, the Exchange believes the number of RSQTs 
affiliated with an RSQTO can be increased to allow up to five RSQTs to 
be affiliated with an RSQTO, without a significant impact on message 
traffic, while allowing increased competition. The Exchange has allowed 
up to three RSQTs in the interim two years and at this time believes it 
has the adequate

[[Page 9293]]

capacity to propose the increased number of RSQTs to quote. The 
Exchange will continue to monitor the number of permitted RSQTs in 
relation to its capacity. The Exchange notes that the Maximum Number of 
Quoters (``MNQs'') refers to the maximum number of participants that 
may be assigned in a particular equity option at any one time. The MNQ 
level for options trading on the Exchange is 30 for all equity options 
listed for trading on the Exchange.\10\ This rule change will not 
impact the MNQ. Other options exchanges similarly impose higher limits 
on the number of total members that may quote electronically.\11\ The 
Exchange represents that it has the system capacity to continue to 
support quoting and trading options subsequent to the effectiveness of 
this proposal. The Exchange represents that it has an adequate 
surveillance program in place for options that are quoted and traded on 
the Exchange and intends to continue application of those program 
procedures as necessary. Additionally, the Exchange is a member of the 
Intermarket Surveillance Group (``ISG'') under the Intermarket 
Surveillance Group Agreement, dated June 20, 1994. ISG members 
coordinate surveillance and investigative information sharing for 
equity and options markets. Moreover, futures exchanges are affiliated 
members of the ISG, which allows for the sharing of surveillance 
information for potential intermarket trading abuses.
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    \9\ See Securities and Exchange [sic] Release No. 68689 (January 
25 [sic], 2013), 78 FR 5518 (January 18 [sic], 2013) (SR-Phlx-2013-
03).
    \10\ See Commentaries .01 to .05 to Rule 507.
    \11\ The Chicago Board Options Exchange Incorporated (``CBOE'') 
imposes an upper limit on the aggregate number of Trading Permit 
Holders that may quote electronically in each product during each 
trading session (``Class Quoting Limit'' or ``CQL''). The DPM or 
LMM(s) assigned to the product and Market-Makers who hold an 
appointment in the product are entitled to quote electronically in 
those products for as long as they maintain an appointment in those 
products. All other Market-Makers that request the ability to submit 
quotes electronically in the subject product will be entitled to 
quote electronically in that product in the order in which they so 
request provided the number of Trading Permit Holders quoting 
electronically in the product does not exceed the CQL. When the 
number of Trading Permit Holders in the product quoting 
electronically equals the CQL, all other Trading Permit Holders 
requesting the ability to quote electronically in that product will 
be wait-listed in the order in which they submitted the request. The 
CQL for products trading on the Hybrid Trading System is fifty (50). 
See CBOE Rule 8.3A.
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    The Exchange believes that the proposed rule change increasing the 
number of RSQTs that may be affiliated with RSQTOs will encourage 
competition, create additional trading opportunities and outlets and 
increase the depth of markets.
    The Exchange is also proposing to delete rule text in Rule 507 
related to RSQTO conversions. The rule text was originally adopted to 
provide guidance as to the initial manner and timeframe within which 
members were required to notify the Exchange of the names of the 
affiliated RSQTs. This language is no longer necessary and the Exchange 
proposes to delete the rule text.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \12\ in general, and furthers the objectives of section 
6(b)(5) of the Act \13\ 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 enabling a greater number of RSQTs to be affiliated with 
an RSQTO.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that this proposal does not engender unfair 
discrimination among specialists, specialist units, SQTs and RSQTs. 
This proposal to amend Rule 507 will be equally applicable to all 
members and member organizations at the Exchange. Increasing the number 
of RSQTs associated with an RSQTO is pro-competitive, because it adds 
depth and liquidity to the Exchange's markets by permitting additional 
participants to compete on the Exchange.
    The Exchange believes that deleting the language concerning the 
RSQTO conversion period, which was initially implemented to provide a 
timeframe to permit member organizations to provide notification to the 
Exchange of up to three affiliated RSQTs, will clarify the Rule text by 
removing this language which is no longer necessary and is outdated.

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. To the contrary, the proposal 
further promotes intra-market competition on the Exchange which should 
lead to tighter, more efficient markets to the benefit of market 
participants including public investors that engage in trading and 
hedging on the Exchange, and thereby make the Exchange a desirable 
market as compared to other options exchanges and therefore promoted 
inter-market competition.

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) [sic] of the Act \14\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \15\ 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 [email protected]. Please include 
File Number SR-Phlx-2015-15 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-2015-15. This file

[[Page 9294]]

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-2015-15, and should be 
submitted on or before March 13, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-03517 Filed 2-19-15; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 34 / Friday, February 20, 2015 / Notices 9291

governing body of the Exchange and 4. Changes to the Exchange have or is not appropriately allocating
possess all of the powers necessary for Organizational Documents such financial, technological, technical
the management of its business and In connection with the completion of and personnel resources as may be
affairs and the execution of its the Transaction, the Exchange proposes necessary or appropriate for the
responsibilities as an SRO. In particular, certain amendments in the Exchange Exchange to meet its obligations under
the Exchange A&R By-laws will A&R Certificate and the Exchange A&R the Act.81 According to the Exchange,
continue to provide that the Exchange By-laws. In particular, the Exchange upon the completion of the Transaction,
Board shall consist of no fewer than proposes to delete the language in such requirements will no longer apply
seven or more than 25 directors.69 In Paragraph Fourth of the Exchange A&R because CBSX will have no ownership
addition, the Exchange Board’s Certificate that provides that the interest in the Exchange.82
composition at all times shall include Exchange shall at all times be wholly Finally, the Exchange is proposing
the Chief Executive Officer of the owned by CBSX and replace that certain clarifying amendments, and
Exchange, at least 50% Non-Industry provision with one requiring that the other non-substantive conforming
Directors 70 (at least one of whom shall Exchange at all times be wholly owned amendments to the Exchange A&R By-
be an Independent Director 71) and such by NSX Holdings.76 laws that are consistent with the
number of ETP Holder Directors 72 as is In addition, with respect to the changes described above.83
necessary to comprise at least 20% of Exchange A&R By-laws, the Exchange The Commission believes that the
the Exchange Board.73 proposes to replace all references to proposed changes to the organizational
In connection with the Closing, the ‘‘CBSX’’ with references to ‘‘NSX documents of the Exchange are
steps to transition the membership on Holdings.’’ 77 Specifically, Article III, consistent with the Act, and that they
the Exchange Board from the current section 3.2(c) of the Exchange A&R By- are intended to align the Exchange’s
directors to the post-Closing directors laws will be amended to eliminate any governance and organizational structure
will conform to the requirements set requirements relating to CBSX and will with the proposed ownership by NSX
forth in Article III, section 3.7 of the provide that no two or more directors of Holdings.
Exchange A&R By-laws. Furthermore, the Exchange may be partners, officers
the Exchange A&R By-laws provides or directors of the same person or be III. Conclusion
that any vacancy occurring in a affiliated with the same person (or For the foregoing reasons, the
committee shall be filled by the affiliated with the same person), unless Commission finds that the proposed
Chairman of the Board for the remainder such affiliation is with a national rule change is consistent with the Act
of the term, with the approval of the securities exchange or NSX Holdings.78 and the rules and regulations
Exchange Board.74 Each committee shall In addition, the Exchange proposes to thereunder applicable to a national
be comprised of at least three people replace references to CBSX with securities exchange.
and may include persons who are not references to NSX Holdings in section It is therefore ordered, pursuant to
members of the Board; provided, 10.2 of the Exchange A&R By-laws. The section 19(b)(2) of the Act 84 that the
however, that such committee members provision would provide that no proposed rule change (SR–NSX–2014–
who are not also members of the Board members of the Holdings Board who are 017), be, and hereby is, approved.
shall only participate in committee not also members of the Exchange
For the Commission, by the Division of
actions to the extent permitted by law.75 Board, or any officers, staff, counsel or Trading and Markets, pursuant to delegated
The Commission finds that these advisors of NSX Holdings who are not authority.85
provisions are consistent with the Act, also officers, staff, counsel or advisors of Jill M. Peterson,
and that they are intended to assist the the Exchange (or any committees of the
Assistant Secretary.
Exchange in fulfilling its self-regulatory Exchange), shall be allowed to
[FR Doc. 2015–03515 Filed 2–19–15; 8:45 am]
obligations and in administering and participate in any meetings of the
complying with the requirements of the Exchange Board or any Exchange BILLING CODE 8011–01–P

Act. committee pertaining to the self-
regulatory function of the Exchange,
69 See Exchange A&R By-laws, Article III, section including disciplinary matters.79 The SECURITIES AND EXCHANGE
3.2(a). Exchange states that these amendments COMMISSION
70 The term ‘‘Non-Industry Director’’ is defined in
are intended to prevent any undue
Article I, section 1.1, para. N of the Exchange A&R
influence or any perception of undue [Release No. 34–74272; File No. SR–Phlx–
By-laws as ‘‘a member of the [NSX] Board who is
(i) an Independent Director; or (ii) any other influence over the Exchange’s self- 2015–15]
individual who would not be an Industry Director.’’ regulatory functions by NSX Holdings.80
71 The term ‘‘Independent Director’’ is defined in
In addition, the Exchange proposes to Self-Regulatory Organizations;
Article I, section 1.1, para. I of the Exchange A&R delete section 10.1(b) in the Exchange NASDAQ OMX PHLX LLC; Notice of
By-laws as ‘‘a member of the [NSX] Board that the Filing and Immediate Effectiveness of
[NSX] Board has determined to have no material A&R By-laws, which requires that for so
relationship with the Exchange or any affiliate of long as CBSX controls the Exchange, the Proposed Rule Change Relating to
the Exchange, or any ETP Holder or any affiliate of Exchange shall promptly inform the Remote Streaming Quote Traders
any such ETP Holder, other than as a member of CBSX board of directors, in writing, in
the Board.’’ February 13, 2015.
the event that the Exchange has, or
72 The term ‘‘ETP Holder Director’’ is defined in Pursuant to section 19(b)(1) of the
Article I, section 1.1, para. E(2) of the Exchange experiences, a deficiency related to its
Securities Exchange Act of 1934 (the
A&R By-laws as ‘‘a director who is an ETP Holder ability to carry out its obligations as a
TKELLEY on DSK3SPTVN1PROD with NOTICES

or a director, officer, managing member or partner national securities exchange under the 81 See Notice, supra note 4, at 89.
of an entity that is, or is an affiliate of, an ETP
Holder.’’
Act, including if the Exchange does not 82 See Notice, supra note 4, at 89–90.
73 See Exchange A&R By-laws, Article III, section 83 For a more detailed description of the non-
76 See Notice, supra note 4, at 89.
3.2(b). substantive conforming amendments, see Notice,
77 See Notice, supra note 4, at 89.
74 See Exchange A&R By-laws, Article V, section supra note 4, at 90 and Exhibit 5D to SR–NSX–
78 See Notice, supra note 4, at 89. 2014–017.
5.2.
75 See Exchange A&R By-laws, Article V, section 79 See Notice, supra note 4, at 90. 84 15 U.S.C. 78s(b)(2).

5.2. 80 See Notice, supra note 4, at 90. 85 17 CFR 200.30–3(a)(12).

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9292 Federal Register / Vol. 80, No. 34 / Friday, February 20, 2015 / Notices

‘‘Act’’),1 and Rule 19b–4 thereunder,2 Quote Traders (‘‘SQTs’’),3 RSQTs,4 The process for applying to be an
notice is hereby given that on February Directed Streaming Quote Traders RSQTO and applying for an assignment
9, 2015, NASDAQ OMX PHLX LLC (‘‘DSQTs’’), and Directed Remote in options as an RQST or SQT is set
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the Streaming Quote Traders (‘‘DRSQTs’’).5 forth in Rule 507. All new applicants for
Securities and Exchange Commission Rule 507 is one of the numerous rules trading privileges will continue to be
(‘‘SEC’’ or ‘‘Commission’’) the proposed administered by the Exchange that deal subject to the process for assignment
rule change as described in Items I, II, with allocation and assignment of described in Rule 507. The Exchange
and III below, which Items have been securities. These Rules generally considers all applicants for assignment
prepared by the Exchange. The describe the process for: Applying for an in options using the objective criteria set
Commission is publishing this notice to appointment as a specialist; allocating forth in Exchange Rule 507(b). The
solicit comments on the proposed rule classes of options to specialist units and objective criteria are used by the
change from interested persons. individual specialists; applying for an Exchange in determining the most
appointment as an SQT or RQT; as well beneficial assignment of options for the
I. Self-Regulatory Organization’s
as continuing performance obligations. Exchange and the public. Approved
Statement of the Terms of the Substance
The Rules also indicate, among other RSQTs have certain electronic quoting
of the Proposed Rule Change
things, under what circumstances new obligations via the Exchange’s electronic
The Exchange proposes to amend allocations are made to specialists and quoting and trading system, as well as
Phlx Rule 507, entitled ‘‘Application for assignments are determined for SQTs.6 restrictions, pertaining to the current
Approval as an SQT or RSQT or RSQTO market makers on the Exchange.7 SQTs
and Assignment in Options’’ to increase 3 An SQT is an ROT who has received permission
and RSQTs are subject to performance
from the Exchange to generate and submit option evaluations to determine whether they
the number of Remote Streaming Quote quotations electronically in eligible options to
Traders (‘‘RSQTs’’) that may be which such SQT is assigned. An SQT may only have fulfilled performance standards
affiliated with a Remote Streaming submit such quotations while such SQT is relating to, among other things, quality
Quote Trader Organization (‘‘RSQTOs’’). physically present on the floor of the Exchange. See of markets, efficient quote submission to
Rule 1014(b)(ii)(A). the Exchange (including quotes
The text of the proposed rule 4 An RSQT is an ROT that is a member or member

change is available on the Exchange’s organization with no physical trading floor
submitted through a third party vendor),
Web site at http:// presence who has received permission from the competition among market makers,
nasdaqomxphlx.cchwallstreet.com/, at Exchange to generate and submit option quotations observance of ethical standards, and
electronically in eligible options to which such administrative factors.8
the principal office of the Exchange, and RSQT has been assigned. An RSQT may only
at the Commission’s Public Reference submit such quotations electronically from off the
The Exchange is not proposing to
Room. floor of the Exchange. See Rule 1014(b)(ii)(B). amend the process or procedure for
5 A DSQT is an SQT and a DRSQT is an RSQT applying to act as a market maker on the
II. Self-Regulatory Organization’s that receives a Directed Order. Exchange Rule Exchange nor the obligations or
Statement of the Purpose of, and 1080(l)(i)(A) defines Directed Order as any performance evaluations that are
customer order (other than a stop or stop-limit order
Statutory Basis for, the Proposed Rule as defined in Rule 1066) to buy or sell which has conducted once appointed. The
Change been directed to a particular specialist, RSQT, or Exchange proposes to amend Rule
SQT by an Order Flow Provider and delivered to 507(a) to increase the number of RSQTs
In its filing with the Commission, the the Exchange via its electronic quoting, execution that may be affiliated with an RSQTO
Exchange included statements and trading system.
6 See, e.g., Supplementary Material .01 to Rule from three to five RSTQs. The Exchange
concerning the purpose of and basis for
506 (specialist may not apply for a new allocation initially selected three RSQTs when the
the proposed rule change and discussed for a period of six months after an option allocation concept of an RSQTO was adopted
any comments it received on the was taken away from the specialist in a disciplinary because the Exchange believed that up
proposed rule change. The text of these proceeding or an involuntary reallocation
proceeding). Specifically, Rule 507 discusses the
to three RSQTs for each RSQTO
statements may be examined at the
process of applying for approval as an RSQT or SQT organization would strike a proper
places specified in Item IV below. The on the Exchange and assignment of options to them. balance with respect to the anticipated
Exchange has prepared summaries, set Under Rule 507, RSQTOs are Exchange member increase to support quoting and trading
forth in sections A, B, and C below, of organizations while SQTs and RSQTs are Exchange
members. Any member organization of the
options in light of competition. The
the most significant aspects of such
Exchange in good standing that satisfies the RSQTO RSQTO concept was initially adopted in
statements. readiness requirements will be approved as an 2013.9 At this time, the Exchange
A. Self-Regulatory Organization’s RSQTO. RSQTOs may also be referred to as Remote believes the number of RSQTs affiliated
Market Maker Organizations (‘‘RMOs’’) and RSQTs
Statement of the Purpose of, and may also be referred to as Remote Market Markers
with an RSQTO can be increased to
Statutory Basis for, the Proposed Rule (‘‘RMMs’’). Rule 507(a). No limit is placed on the allow up to five RSQTs to be affiliated
Change number of member organizations that may become with an RSQTO, without a significant
RSQTOs. Moreover, as many as three RSQT impact on message traffic, while
1. Purpose applicants affiliated with an RSQTO may be
approved as an RSQT, to the extent that each such
allowing increased competition. The
The purpose of the proposed rule RSQT applicant is qualified as an ROT in good Exchange has allowed up to three
change is to amend Phlx Rule 507, standing, and satisfies the five readiness RSQTs in the interim two years and at
requirements that are set out in Rule 507. There is this time believes it has the adequate
entitled ‘‘Application for Approval as an no limit on the number of qualifying ROTs that may
SQT or RSQT or RSQTO and be approved as RSQTs, as long as the applicants are
Assignment in Options,’’ to increase the qualified as ROTs in good standing and satisfy the qualified as ROTs in good standing and satisfy the
readiness requirements. No limit is placed on the readiness requirements.
number of RSQTs that may be affiliated
TKELLEY on DSK3SPTVN1PROD with NOTICES

7 More than one RSQT may submit a quote in an
number of member organizations that may become
with RSQTOs. RSQTs are one of several RSQTOs. Moreover, as many as three RSQT assigned option, to the extent that each RSQT
types of Registered Options Traders applicants affiliated with an RSQTO may be applies for and is approved as an RSQT affiliated
(‘‘ROTs’’) on the Exchange. ROTs are approved as an RSQT, to the extent that each such with an RSQTO pursuant to Rule 507. See Rule
RSQT applicant is qualified as an ROT in good 1014 (b)(ii)(B).
market makers that include Streaming 8 See Rule 510.
standing, and satisfies the five readiness
requirements that are set out in Rule 507. There is 9 See Securities and Exchange [sic] Release No.
1 15 U.S.C. 78s(b)(1). no limit on the number of qualifying ROTs that may 68689 (January 25 [sic], 2013), 78 FR 5518 (January
2 17 CFR 240.19b–4. be approved as RSQTs, as long as the applicants are 18 [sic], 2013) (SR–Phlx–2013–03).

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Federal Register / Vol. 80, No. 34 / Friday, February 20, 2015 / Notices 9293

capacity to propose the increased RSQTO conversions. The rule text was C. Self-Regulatory Organization’s
number of RSQTs to quote. The originally adopted to provide guidance Statement on Comments on the
Exchange will continue to monitor the as to the initial manner and timeframe Proposed Rule Change Received From
number of permitted RSQTs in relation within which members were required to Members, Participants, or Others
to its capacity. The Exchange notes that notify the Exchange of the names of the No written comments were either
the Maximum Number of Quoters affiliated RSQTs. This language is no solicited or received.
(‘‘MNQs’’) refers to the maximum longer necessary and the Exchange
number of participants that may be proposes to delete the rule text. III. Date of Effectiveness of the
assigned in a particular equity option at Proposed Rule Change and Timing for
any one time. The MNQ level for 2. Statutory Basis Commission Action
options trading on the Exchange is 30 The Exchange believes that its Because the foregoing proposed rule
for all equity options listed for trading proposal is consistent with section 6(b) change does not: (i) Significantly affect
on the Exchange.10 This rule change of the Act 12 in general, and furthers the the protection of investors or the public
will not impact the MNQ. Other options objectives of section 6(b)(5) of the Act 13 interest; (ii) impose any significant
exchanges similarly impose higher in particular, in that it is designed to burden on competition; and (iii) become
limits on the number of total members promote just and equitable principles of operative for 30 days from the date on
that may quote electronically.11 The trade, to remove impediments to and which it was filed, or such shorter time
Exchange represents that it has the perfect the mechanism of a free and as the Commission may designate, it has
system capacity to continue to support open market and a national market become effective pursuant to section
quoting and trading options subsequent system, and, in general to protect 19(b)(3)(A)(ii) [sic] of the Act 14 and
to the effectiveness of this proposal. The investors and the public interest, by subparagraph (f)(6) of Rule 19b–4
Exchange represents that it has an enabling a greater number of RSQTs to thereunder.15
adequate surveillance program in place be affiliated with an RSQTO. At any time within 60 days of the
for options that are quoted and traded The Exchange believes that this filing of the proposed rule change, the
on the Exchange and intends to proposal does not engender unfair Commission summarily may
continue application of those program discrimination among specialists, temporarily suspend such rule change if
procedures as necessary. Additionally, specialist units, SQTs and RSQTs. This it appears to the Commission that such
the Exchange is a member of the proposal to amend Rule 507 will be action is: (i) Necessary or appropriate in
Intermarket Surveillance Group (‘‘ISG’’) equally applicable to all members and the public interest; (ii) for the protection
under the Intermarket Surveillance member organizations at the Exchange. of investors; or (iii) otherwise in
Group Agreement, dated June 20, 1994. Increasing the number of RSQTs furtherance of the purposes of the Act.
ISG members coordinate surveillance associated with an RSQTO is pro- If the Commission takes such action, the
and investigative information sharing competitive, because it adds depth and Commission shall institute proceedings
for equity and options markets. liquidity to the Exchange’s markets by to determine whether the proposed rule
Moreover, futures exchanges are permitting additional participants to should be approved or disapproved.
affiliated members of the ISG, which compete on the Exchange.
allows for the sharing of surveillance IV. Solicitation of Comments
information for potential intermarket The Exchange believes that deleting
the language concerning the RSQTO Interested persons are invited to
trading abuses. submit written data, views, and
The Exchange believes that the conversion period, which was initially
implemented to provide a timeframe to arguments concerning the foregoing,
proposed rule change increasing the including whether the proposed rule
number of RSQTs that may be affiliated permit member organizations to provide
notification to the Exchange of up to change is consistent with the Act.
with RSQTOs will encourage Comments may be submitted by any of
competition, create additional trading three affiliated RSQTs, will clarify the
Rule text by removing this language the following methods:
opportunities and outlets and increase
the depth of markets. which is no longer necessary and is Electronic Comments
The Exchange is also proposing to outdated.
• Use the Commission’s Internet
delete rule text in Rule 507 related to B. Self-Regulatory Organization’s comment form (http://www.sec.gov/
Statement on Burden on Competition rules/sro.shtml); or
10 See Commentaries .01 to .05 to Rule 507.
11 The The Exchange does not believe that • Send an email to rule-comments@
Chicago Board Options Exchange
Incorporated (‘‘CBOE’’) imposes an upper limit on the proposed rule change will impose sec.gov. Please include File Number SR–
the aggregate number of Trading Permit Holders
any burden on competition not Phlx–2015–15 on the subject line.
that may quote electronically in each product
during each trading session (‘‘Class Quoting Limit’’ necessary or appropriate in furtherance Paper Comments
or ‘‘CQL’’). The DPM or LMM(s) assigned to the of the purposes of the Act. To the • Send paper comments in triplicate
product and Market-Makers who hold an contrary, the proposal further promotes
appointment in the product are entitled to quote to Secretary, Securities and Exchange
electronically in those products for as long as they intra-market competition on the Commission, 100 F Street NE.,
maintain an appointment in those products. All Exchange which should lead to tighter, Washington, DC 20549–1090.
other Market-Makers that request the ability to more efficient markets to the benefit of
submit quotes electronically in the subject product
market participants including public All submissions should refer to File
will be entitled to quote electronically in that Number SR–Phlx–2015–15. This file
product in the order in which they so request investors that engage in trading and
hedging on the Exchange, and thereby
TKELLEY on DSK3SPTVN1PROD with NOTICES

provided the number of Trading Permit Holders
14 15 U.S.C. 78s(b)(3)(a)(ii).
quoting electronically in the product does not make the Exchange a desirable market 15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
exceed the CQL. When the number of Trading
Permit Holders in the product quoting as compared to other options exchanges 4(f)(6) requires a self-regulatory organization to give
electronically equals the CQL, all other Trading and therefore promoted inter-market the Commission written notice of its intent to file
Permit Holders requesting the ability to quote competition. the proposed rule change at least five business days
electronically in that product will be wait-listed in prior to the date of filing of the proposed rule
the order in which they submitted the request. The change, or such shorter time as designated by the
12 15 U.S.C. 78f(b).
CQL for products trading on the Hybrid Trading Commission. The Exchange has satisfied this
System is fifty (50). See CBOE Rule 8.3A. 13 15 U.S.C. 78f(b)(5). requirement.

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Document Created: 2015-12-18 13:01:52
Document Modified: 2015-12-18 13:01:52
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 9291