81 FR 18665 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Professional Customer Definition
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 62 (March 31, 2016)
Federal Register Volume 81, Issue 62 (March 31, 2016)
| Page Range | 18665-18667 | |
| FR Document | 2016-07203 |
[Federal Register Volume 81, Number 62 (Thursday, March 31, 2016)] [Notices] [Pages 18665-18667] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-07203] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77449; File No. SR-Phlx-2016-10] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Professional Customer Definition March 25, 2016. I. Introduction On January 21, 2016, NASDAQ PHLX LLC (the ``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the methodology for counting average daily order submissions in listed options to determine whether a person or entity meets the definition of a Professional \3\ (``Professional order counting''). The Commission published the proposed rule change for comment in the Federal Register on February 10, 2016.\4\ The Exchange filed Amendment No. 1 to the proposed rule change on March 21, 2016.\5\ The Commission received no comments on this proposal. This order provides notice of filing of Amendment No. 1 and approves the proposal, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ The term ``Professional'' means any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). See Phlx Rule 1000(b)(14); see also Securities Exchange Release 59287 (January 23, 2009), 74 FR 5694 (January 30, 2009) (ISE-2006-26) (``ISE Approval Order''). \4\ See Securities Exchange Act Release No. 77054 (February 4, 2016), 81 FR 7166 (``Notice''). \5\ In Amendment No. 1, the Exchange changed how complex orders will be counted with respect to Professional order counting. Amendment No. 1 modified the proposal to provide that a complex order compromised of nine legs or more will count as multiple orders with each option leg counting as its own separate order while complex orders with eight legs or less will count as a single order. The Exchange previously proposed that complex orders compromised of five legs or more count as multiple orders while complex orders with four legs or less count as a single order. In addition, any complex order with nine or more legs that is canceled and replaced would count as multiple new orders. The Exchange previously proposed that complex orders with five legs or more that were canceled and replaced would count as multiple new orders. Finally, Amendment No.1 also added clarifying rule text to make clear that single-strike algorithms are treated the same as cancel and replace orders and therefore each cancel and replace order will count as a new order when tracking the NBBO. Finally, the Exchange clarified that an order that cancels and replaces a subordinate order on the same side and series as the parent order will count as one order. To promote transparency of its proposed amendment, when Phlx filed Amendment No. 1 with the Commission, it also submitted Amendment No. 1 as a comment letter to the file, which the Commission posted on its Web site and placed in the public comment file for SR-Phlx-2016-10 (available at http://www.sec.gov/comments/sr-phlx-2016-10/phlx201610-1.pdf). The Exchange also posted a copy of its Amendment No. 1 on its Web site when it filed the amendment with the Commission. --------------------------------------------------------------------------- II. Description of the Proposal The Exchange proposes to amend the definition of Professional in Rule 1000(b)(14) to clarify the calculation of certain types of orders for purposes of Professional order counting.\6\ --------------------------------------------------------------------------- \6\ See Notice, supra note 4, at 7166. --------------------------------------------------------------------------- Background On Phlx, public customers are granted certain marketplace advantages over other market participant orders, including non-customer orders and quotes from specialists and Registered Options Traders (``ROTs'').\7\ These advantages include priority over other market participant orders at the same [[Page 18666]] price as well as no transaction fees for order execution.\8\ When representing orders on the Exchange, members must specify whether an order for the account of a non-broker-dealer is for the beneficial account of a Professional.\9\ --------------------------------------------------------------------------- \7\ See id. at 7169. \8\ See id. \9\ See id. at 7166. Phlx rules require members to review their customers' account activity on a quarterly basis to determine whether certain customers should be represented as Professionals. See id. at 7167. The Exchange also may conduct its own analysis and identify persons or entities that should be represented as Professionals. See id. at 7167, n.5. --------------------------------------------------------------------------- Proposal The Exchange's proposal is intended to provide additional guidance regarding the counting methodology when calculating average daily orders for Professional order counting purposes. As a general rule, for Professional order counting, the Exchange required the counting of orders regardless of which exchange they are routed to with the exception of FLEX orders.\10\ --------------------------------------------------------------------------- \10\ See id. at 7167. The term ``FLEX option'' means a FLEX option contract that is traded subject to Exchange Rule 1079. --------------------------------------------------------------------------- FLEX Orders Under new paragraph (a) of proposed Rule 1000(b)(14)(i), FLEX orders are not included in the Professional order counting methodology as they are non-electronic orders and not typically traded by retail customers.\11\ Therefore, according to the Exchange, these orders are not relevant to the distinction that it seeks to make between public customers and professional traders.\12\ --------------------------------------------------------------------------- \11\ See id. \12\ See id. --------------------------------------------------------------------------- Cancel and Replace/Complex Orders Under new Paragraph (b) of proposed Rule 1000(b)(14)(i), the Exchange will count as a new order any order that cancels and replaces a prior order.\13\ Additionally, single strike algorithms, which are a series of cancel and replace orders in an individual strike that tracks the NBBO, will also count as a new order for each cancel and replace order.\14\ --------------------------------------------------------------------------- \13\ See id. A cancel and replace order is one that removes a preexisting order and replaces it with a new order. See id. The Exchange notes that a cancel message alone is not an order. See id. at 7167, n.11. Similarly, the rule would count as multiple new orders any cancel/replace of a complex order of nine options legs or more. See Amendment No. 1, supra note 5. \14\ See Notice, supra note 4, at 7167. In Amendment No. 1, the Exchange clarified that ``single strike algorithms'' are included in this provision. See supra note 5. --------------------------------------------------------------------------- Under new Paragraph (c) of proposed Rule 1000(b)(14)(i), a complex order of 9 legs \15\ or more will count as a new order per leg whereas a complex order of 8 legs or less will count as a single order for all its legs combined.\16\ --------------------------------------------------------------------------- \15\ See Amendment No. 1, supra note 5 (in which the Exchange increased the number of option legs from five to nine). \16\ For complex orders, stock orders do not count towards the number of legs. For example, a nine leg complex order with eight option legs and one stock leg will count as an eight leg complex order for the purposes of Professional order counting. See Notice, supra note 4, at 7167, n.10, as amended by Amendment No. 1, supra note 5. --------------------------------------------------------------------------- Parent/Child Orders Under new Paragraph (d) of proposed Rule 1000(b)(14)(i), an order that converts into multiple subordinate orders in order to achieve an execution strategy \17\ will be counted as one order per side and per series.\18\ Additionally, if one of those subordinate ``child'' orders is subsequently canceled and replaced by multiple orders on multiple sides/series, then each new replacement order is counted as a separate new order per each side and series.\19\ However, if a subordinate ``child'' order is canceled and replaced by a new order(s) on the same side and series, then that new replacement order will not count as a separate new order.\20\ --------------------------------------------------------------------------- \17\ See id. at 7167 (noting that all strategies must comply with Rule 1080, Commentary .07(a)(ii)); see also id. at 7168 (for examples of cancel and replace, ``parent/child'' Professional order counting, and a chart detailing the rule). \18\ See id. For example, orders that are for a single side/ series but are broken up by the broker will count as one order, even if part of the order is routed away. See Proposed Rule 1000(b)(14)(i)(d). If a member sends in multiple orders to the Exchange as separate orders then each will count as a separate order. See Notice, supra note 4, at 7167. \19\ See Notice, supra note 4, at 7167. \20\ See Amendment No. 1, supra note 5 (adding a sentence to paragraph (d)). --------------------------------------------------------------------------- As the Exchange explained in its Notice, an order that is filled in parts by the Exchange's matching engine, without any intervention by the customer, will not count as separate order for each fill because the customer did not intervene to generate new orders.\21\ Along similar lines, if an order is repriced to avoid locking or crossing the market, that action will not cause a ``new'' order for Professional order counting purposes because the customer did not intervene in that process.\22\ The Exchange noted that the manner in which an order is ultimately executed, as one order or multiple orders, does not by itself determine whether the activity is that of a Professional.\23\ Rather, the distinction is whether the member exercised control and discretion over the order to an extent that could be characterized as non-retail customer trading activity.\24\ --------------------------------------------------------------------------- \21\ See Notice, supra note 4, at 7167. \22\ See id. \23\ See id. \24\ See id. --------------------------------------------------------------------------- Implementation The Exchange proposes to implement this rule on April 1, 2016, and will issue an Options Trader Alert in advance to inform market participants of such date.\25\ --------------------------------------------------------------------------- \25\ See id. at 7168. --------------------------------------------------------------------------- III. Discussion and Commission Findings After careful review of the proposed rule change, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\26\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\27\ which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, 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; and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. In addition, the Commission finds that the proposed rule change is consistent with Section 6(b)(8) of the Act, which requires the rules of the exchange not to impose any burden on competition not necessary or appropriate in furtherance of the Act.\28\ --------------------------------------------------------------------------- \26\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \27\ 15 U.S.C. 78f(b)(5). \28\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- The Commission previously has articulated its position regarding the application of Section 6 of the Act in evaluating distinctions among market participants proposed by exchanges and the discretion available to an exchange to set an appropriate level of advantages and responsibilities of persons trading on its market.\29\ In particular, the Commission previously indicated that it does not believe that priority for public customer orders is a statutorily-required attribute of an exchange and therefore the grant of such priority is within an exchange's prerogative and business judgement, as long as such provision is [[Page 18667]] otherwise consistent with the requirements of the Act.\30\ --------------------------------------------------------------------------- \29\ See ISE Approval Order, supra note 3, at 5699, n.59. \30\ See id. at 5700. --------------------------------------------------------------------------- The Commission notes that the Exchange is not amending the threshold of 390 orders in listed options per day but is revising the method for counting Professional orders in the context of multi-part orders and cancel/replace activity. The Commission believes that the proposal is designed to set forth a reasonable and objective approach to determine Professional customer status. Specifically, the proposal addresses how to account for complex orders, parent/child orders, and cancel/replace orders. The Commission believes that distinguishing between complex orders with 9 or more options legs and those orders with 8 or fewer options legs is a reasonable and objective approach. In addition, the Commission believes that PHLX's proposal appropriately distinguishes between parent/child orders that are generated by a broker's efforts to obtain an execution on a larger size order while minimizing market impact and multi-part orders that are used by more sophisticated market participants. Similarly, the Commission believes that the proposed rule change under which cancel/ replace orders will count as separate orders with limited exceptions is a reasonable and objective approach to distinguish the orders of retail customers that are ``worked'' by a broker from orders generated by algorithms used by more sophisticated market participants. Similar to what it has noted in past Professional customer filings, the Commission believes that the line that Phlx now seeks to draw between ``priority'' customers and Professional customers reflects Phlx's belief that the orders of a person who submits, on average, more than one order every minute of the trading day need not (or should not) be granted the same benefit or incentive that is granted to customers who do not trade on such a scale.\31\ The Commission believes that the grant of priority to certain participants over others, in a manner that is consistent with the Act is most reasonably viewed as within the discretion of the Exchange.\32\ Thus, the Commission believes that PHLX's proposal, which establishes an objective methodology for counting average daily order submissions for Professional order counting purposes, is consistent with the Act. --------------------------------------------------------------------------- \31\ See id. at 5701. \32\ See id. at 5700. --------------------------------------------------------------------------- V. Solicitation of Comments on Amendment No. 1 to the Proposed Rule Change Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 1 to the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File No. SR-Phlx-2016-10 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 No. SR-Phlx-2016-10. 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 will also 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 No. SR-Phlx-2016-10 and should be submitted on or before April 21, 2016. VI. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of notice of the amended proposal in the Federal Register. The revisions made to the proposal in Amendment No. 1 provided clarifying language for how cancel and replace orders will be counted in addition to changing how complex orders will be counted with respect to Professional order counting. In particular, Amendment No. 1 modified the proposal to provide that a complex order compromised of 9 legs or more will count as multiple orders with each option leg counting as its own separate order instead of 5 legs or more as previously proposed by the Exchange.\33\ Amendment No. 1 effectively allows retail customers to use more advanced trading strategies (i.e., complex orders with up to 8 legs) without having that activity counted as multiple orders for purposes of Professional order counting. Thus, the Commission believes that the changes in Amendment No. 1 adopt a more permissive threshold for complex orders, and ultimately could decrease the number of persons or entities that will meet the definition of Professional under the new rule. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,\34\ to approve the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \33\ See Amendment No. 1, supra note 5. \34\ 15 U.S.C. 78s(b)(2) --------------------------------------------------------------------------- IV. Conclusion IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Act,\35\ that the proposed rule change (SR-Phlx-2016-10), as modified by Amendment No. 1, be, and hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \35\ See id. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\36\ --------------------------------------------------------------------------- \36\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-07203 Filed 3-30-16; 8:45 am] BILLING CODE 8011-01-P
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time if such action is consistent with the Copies of the submission, all subsequent a Professional 3 (‘‘Professional order
protection of investors and the public amendments, all written statements counting’’). The Commission published
interest. The Exchange has asked the with respect to the proposed rule the proposed rule change for comment
Commission to waive the 30-day change that are filed with the in the Federal Register on February 10,
operative delay so that the proposal may Commission, and all written 2016.4 The Exchange filed Amendment
become operative immediately upon communications relating to the No. 1 to the proposed rule change on
filing. The Commission believes that proposed rule change between the March 21, 2016.5 The Commission
waiving the 30-day operative delay is Commission and any person, other than received no comments on this proposal.
consistent with the protection of those that may be withheld from the This order provides notice of filing of
investors and the public interest as it public in accordance with the Amendment No. 1 and approves the
will allow the Exchange to delete provisions of 5 U.S.C. 552, will be proposal, as modified by Amendment
unnecessary and outdated rule text and available for Web site viewing and No. 1, on an accelerated basis.
therefore reduce confusion in the printing in the Commission’s Public
II. Description of the Proposal
application of the Exchange’s rules. Reference Room, 100 F Street NE.,
Therefore, the Commission hereby Washington, DC 20549, on official The Exchange proposes to amend the
waives the operative delay and business days between the hours of definition of Professional in Rule
designates the proposed rule change 10:00 a.m. and 3:00 p.m. Copies of the 1000(b)(14) to clarify the calculation of
operative upon filing.7 filing also will be available for certain types of orders for purposes of
At any time within 60 days of the inspection and copying at the principal Professional order counting.6
filing of the proposed rule change, the office of the Exchange. All comments Background
Commission summarily may received will be posted without change;
the Commission does not edit personal On Phlx, public customers are granted
temporarily suspend such rule change if certain marketplace advantages over
it appears to the Commission that such identifying information from
submissions. You should submit only other market participant orders,
action is necessary or appropriate in the including non-customer orders and
public interest, for the protection of information that you wish to make
available publicly. All submissions quotes from specialists and Registered
investors, or otherwise in furtherance of Options Traders (‘‘ROTs’’).7 These
the purposes of the Act. If the should refer to File Number SR–Phlx–
2016–37 and should be submitted on or advantages include priority over other
Commission takes such action, the market participant orders at the same
Commission shall institute proceedings before April 21, 2016.
to determine whether the proposed rule For the Commission, by the Division of 3 The term ‘‘Professional’’ means any person or
should be approved or disapproved. Trading and Markets, pursuant to delegated entity that (i) is not a broker or dealer in securities,
authority.8 and (ii) places more than 390 orders in listed
IV. Solicitation of Comments Brent J. Fields, options per day on average during a calendar month
for its own beneficial account(s). See Phlx Rule
Interested persons are invited to Secretary. 1000(b)(14); see also Securities Exchange Release
submit written data, views, and [FR Doc. 2016–07198 Filed 3–30–16; 8:45 am] 59287 (January 23, 2009), 74 FR 5694 (January 30,
arguments concerning the foregoing, BILLING CODE 8011–01–P
2009) (ISE–2006–26) (‘‘ISE Approval Order’’).
4 See Securities Exchange Act Release No. 77054
including whether the proposed rule
(February 4, 2016), 81 FR 7166 (‘‘Notice’’).
change is consistent with the Act. 5 In Amendment No. 1, the Exchange changed
Comments may be submitted by any of SECURITIES AND EXCHANGE how complex orders will be counted with respect
the following methods: COMMISSION to Professional order counting. Amendment No. 1
modified the proposal to provide that a complex
Electronic Comments [Release No. 34–77449; File No. SR–Phlx– order compromised of nine legs or more will count
2016–10] as multiple orders with each option leg counting as
• Use the Commission’s Internet its own separate order while complex orders with
comment form (http://www.sec.gov/ Self-Regulatory Organizations; eight legs or less will count as a single order. The
rules/sro.shtml); or NASDAQ PHLX LLC; Notice of Filing of Exchange previously proposed that complex orders
• Send an email to rule-comments@ Amendment No. 1 and Order Granting
compromised of five legs or more count as multiple
orders while complex orders with four legs or less
sec.gov. Please include File Number SR– Accelerated Approval of a Proposed count as a single order. In addition, any complex
Phlx–2016–37 on the subject line. Rule Change, as Modified by order with nine or more legs that is canceled and
Amendment No. 1, Relating to the replaced would count as multiple new orders. The
Paper Comments Exchange previously proposed that complex orders
Professional Customer Definition
• Send paper comments in triplicate with five legs or more that were canceled and
replaced would count as multiple new orders.
to Secretary, Securities and Exchange March 25, 2016. Finally, Amendment No.1 also added clarifying rule
Commission, 100 F Street NE., I. Introduction text to make clear that single-strike algorithms are
Washington, DC 20549–1090. treated the same as cancel and replace orders and
All submissions should refer to File On January 21, 2016, NASDAQ PHLX therefore each cancel and replace order will count
LLC (the ‘‘Exchange’’) filed with the as a new order when tracking the NBBO. Finally,
Number SR–Phlx–2016–37. This file the Exchange clarified that an order that cancels
number should be included on the Securities and Exchange Commission and replaces a subordinate order on the same side
subject line if email is used. To help the (‘‘Commission’’), pursuant to Section and series as the parent order will count as one
Commission process and review your 19(b)(1) of the Securities Exchange Act order. To promote transparency of its proposed
of 1934 (‘‘Act’’) 1 and Rule 19b–4 amendment, when Phlx filed Amendment No. 1
comments more efficiently, please use with the Commission, it also submitted
only one method. The Commission will thereunder,2 a proposed rule change to Amendment No. 1 as a comment letter to the file,
mstockstill on DSK4VPTVN1PROD with NOTICES
post all comments on the Commission’s amend the methodology for counting which the Commission posted on its Web site and
Internet Web site average daily order submissions in placed in the public comment file for SR–Phlx–
listed options to determine whether a 2016–10 (available at http://www.sec.gov/
(http://www.sec.gov/rules/sro.shtml). comments/sr-phlx-2016-10/phlx201610-1.pdf). The
person or entity meets the definition of Exchange also posted a copy of its Amendment No.
7 For purposes only of waiving the 30-day 1 on its Web site when it filed the amendment with
8 17 CFR 200.30–3(a)(12). the Commission.
operative delay, the Commission has considered the
1 15 U.S.C. 78s(b)(1). 6 See Notice, supra note 4, at 7166.
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4. 7 See id. at 7169.
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otherwise consistent with the V. Solicitation of Comments on VI. Accelerated Approval of Proposed
requirements of the Act.30 Amendment No. 1 to the Proposed Rule Rule Change, as Modified by
The Commission notes that the Change Amendment No. 1
Exchange is not amending the threshold Interested persons are invited to The Commission finds good cause to
of 390 orders in listed options per day submit written data, views, and approve the proposed rule change, as
but is revising the method for counting arguments concerning the foregoing, modified by Amendment No. 1, prior to
Professional orders in the context of including whether Amendment No. 1 to the thirtieth day after the date of
multi-part orders and cancel/replace the proposed rule change is consistent publication of notice of the amended
activity. The Commission believes that with the Act. Comments may be proposal in the Federal Register. The
the proposal is designed to set forth a submitted by any of the following revisions made to the proposal in
reasonable and objective approach to methods: Amendment No. 1 provided clarifying
determine Professional customer status. language for how cancel and replace
Specifically, the proposal addresses Electronic Comments
orders will be counted in addition to
how to account for complex orders,
• Use the Commission’s Internet changing how complex orders will be
parent/child orders, and cancel/replace counted with respect to Professional
comment form (http://www.sec.gov/
orders. The Commission believes that order counting. In particular,
rules/sro.shtml); or
distinguishing between complex orders Amendment No. 1 modified the
with 9 or more options legs and those • Send an email to rule-comments@
proposal to provide that a complex
orders with 8 or fewer options legs is a sec.gov. Please include File No. SR–
order compromised of 9 legs or more
reasonable and objective approach. Phlx–2016–10 on the subject line.
will count as multiple orders with each
In addition, the Commission believes Paper Comments option leg counting as its own separate
that PHLX’s proposal appropriately order instead of 5 legs or more as
distinguishes between parent/child • Send paper comments in triplicate previously proposed by the Exchange.33
orders that are generated by a broker’s to Secretary, Securities and Exchange Amendment No. 1 effectively allows
efforts to obtain an execution on a larger Commission, 100 F Street NE., retail customers to use more advanced
size order while minimizing market Washington, DC 20549–1090. trading strategies (i.e., complex orders
impact and multi-part orders that are All submissions should refer to File No. with up to 8 legs) without having that
used by more sophisticated market SR–Phlx–2016–10. This file number activity counted as multiple orders for
participants. Similarly, the Commission should be included on the subject line purposes of Professional order counting.
believes that the proposed rule change if email is used. To help the Thus, the Commission believes that the
under which cancel/replace orders will Commission process and review your changes in Amendment No. 1 adopt a
count as separate orders with limited comments more efficiently, please use more permissive threshold for complex
exceptions is a reasonable and objective only one method. The Commission will orders, and ultimately could decrease
approach to distinguish the orders of post all comments on the Commission’s the number of persons or entities that
retail customers that are ‘‘worked’’ by a Internet Web site (http://www.sec.gov/ will meet the definition of Professional
broker from orders generated by rules/sro.shtml). Copies of the under the new rule. Accordingly, the
algorithms used by more sophisticated submission, all subsequent Commission finds good cause, pursuant
market participants. Similar to what it amendments, all written statements to Section 19(b)(2) of the Act,34 to
has noted in past Professional customer with respect to the proposed rule approve the proposed rule change, as
filings, the Commission believes that the change that are filed with the modified by Amendment No. 1, on an
line that Phlx now seeks to draw Commission, and all written accelerated basis.
between ‘‘priority’’ customers and communications relating to the
Professional customers reflects Phlx’s IV. Conclusion
proposed rule change between the
belief that the orders of a person who Commission and any person, other than IT IS THEREFORE ORDERED,
submits, on average, more than one those that may be withheld from the pursuant to Section 19(b)(2) of the
order every minute of the trading day public in accordance with the Act,35 that the proposed rule change
need not (or should not) be granted the provisions of 5 U.S.C. 552, will be (SR–Phlx–2016–10), as modified by
same benefit or incentive that is granted available for Web site viewing and Amendment No. 1, be, and hereby is,
to customers who do not trade on such printing in the Commission’s Public approved on an accelerated basis.
a scale.31 The Commission believes that Reference Room, 100 F Street NE., For the Commission, by the Division of
the grant of priority to certain Washington, DC 20549, on official Trading and Markets, pursuant to delegated
participants over others, in a manner business days between the hours of authority.36
that is consistent with the Act is most 10:00 a.m. and 3:00 p.m. Copies of such
reasonably viewed as within the Robert W. Errett,
filing will also be available for
discretion of the Exchange.32 Thus, the Deputy Secretary.
inspection and copying at the principal
Commission believes that PHLX’s [FR Doc. 2016–07203 Filed 3–30–16; 8:45 am]
office of the Exchange. All comments
proposal, which establishes an objective received will be posted without change; BILLING CODE 8011–01–P
methodology for counting average daily the Commission does not edit personal
mstockstill on DSK4VPTVN1PROD with NOTICES
order submissions for Professional order identifying information from
counting purposes, is consistent with submissions. You should submit only
the Act. information that you wish to make
available publicly. All submissions 33 See Amendment No. 1, supra note 5.
30 See id. at 5700. should refer to File No. SR–Phlx–2016– 34 15 U.S.C. 78s(b)(2)
31 See id. at 5701. 10 and should be submitted on or before 35 See id.
32 See id. at 5700. April 21, 2016. 36 17 CFR 200.30–3(a)(12).
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Document Created: 2016-03-31 00:55:40
Document Modified: 2016-03-31 00:55:40
| Category | Regulatory Information | |
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| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| FR Citation | 81 FR 18665 |
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