81 FR 541 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Order Exposure
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 3 (January 6, 2016)
Federal Register Volume 81, Issue 3 (January 6, 2016)
| Page Range | 541-544 | |
| FR Document | 2015-33219 |
[Federal Register Volume 81, Number 3 (Wednesday, January 6, 2016)] [Notices] [Pages 541-544] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-33219] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76801; File No. SR-Phlx-2015-99] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Order Exposure December 30, 2015. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on December 15, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Phlx Rule 1080, entitled ``Phlx XL and Phlx XL II,'' to account for potential internal conflicts with other Exchange Rules, which are exceptions to the order exposure rule regarding principle orders the Order Entry Firm represents as agent from being exposed. 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. [[Page 542]] A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Phlx Rule 1080(c)(ii)(C) to provide that other Exchange Rules are exceptions to rules requiring Order Entry Firms to expose orders and to name those rules. Today, Phlx Rule 1080(c)(ii)(C)(1) provides that, Principal Transactions: Order Entry Firms may not execute as principal against orders on the limit order book they represent as agent unless: (a) Agency orders are first exposed on the limit order book for at least one (1) second, (b) the Order Entry Firm has been bidding or offering on the Exchange for at least one (1) second prior to receiving an agency order that is executable against such order, or (c) the Order Entry Firm proceeds in accordance with the crossing rules contained in Rule 1064. Further, Phlx Rule 1080(c)(ii)(C)(2) and (3) provide, Solicitation Orders. Order Entry Firms must expose orders they represent as agent for at least one (1) second before such orders may be automatically executed, in whole or in part, against orders solicited from members and non-member broker-dealers to transact with such orders. It shall be a violation of Rule 1080(c)(ii)(C) for any Exchange member or member organization to be a party to any arrangement designed to circumvent Rule 1080(c)(ii)(C) by providing an opportunity for a customer, member, member organization, or non- member broker-dealer to execute immediately against agency orders delivered to the Exchange, whether such orders are delivered via AUTOM or represented in the trading crowd by a member or a member organization. The Exchange notes that there are other exceptions to the general rule regarding the exposure of principal orders represented as agent by the Order Entry Firm. Also, other options exchanges have similar order exposure exceptions.\3\ --------------------------------------------------------------------------- \3\ See International Securities Exchange LLC (``ISE'') Rule 717(d) and BOX Options Exchange LLC (``BOX'') Rule 7140. --------------------------------------------------------------------------- The first proposed additional exception to the order exposure rule is Price Improvement XL or ``PIXL.'' \4\ PIXL is a component of the Exchange's fully automated options trading system, PHLX XL that allows a member or member organization to electronically submit for execution an order it represents as agent on behalf of a public customer, broker- dealer, or any other entity (``PIXL Order'') against principal interest or against any other order it represents as agent (an ``Initiating Order'') provided it submits the PIXL Order for electronic execution into the PIXL Auction (``Auction''). This mechanism is an exception to the general rule in [sic], which requires Phlx members and member organizations to expose principal orders they represent as agent for at least one (1) second prior to receiving an agency order that is executable against such bid or offer. With PIXL, paired orders are submitted simultaneously and would not violate Phlx Rule 1080(c)(ii)(C). --------------------------------------------------------------------------- \4\ See Phlx Rule 1080(n). Complex Orders may also be placed into PIXL. --------------------------------------------------------------------------- The second proposed additional exception to the order exposure rule is the Complex Order Live Auction or ``COLA.'' \5\ COLA is the automated Complex Order Live Auction process. A COLA may take place upon identification of the existence of a COLA-eligible order either: (1) Following a COOP, or (2) during normal trading if the Phlx XL system receives a Complex Order that improves the cPBBO. Phlx XL participants may bid and/or offer on either or both side(s) of the market during the COLA Timer by submitting one or more bids or offers that improve the cPBBO, known as a ``COLA Sweep.'' \6\ COLA does not abide by the one second order exposure requirement. --------------------------------------------------------------------------- \5\ See Phlx Rule 1080, Commentary .02(c)(ii)(e) [sic]. \6\ A single Phlx XL participant may submit multiple COLA Sweeps at different prices (but not multiple COLA Sweeps at the same price, except as provided in sub-paragraph (B) below) in increments of $0.01 in response to a COLA broadcast, regardless of the minimum trading increment applicable to the specific series. Phlx XL participants may change the size of a previously submitted COLA Sweep at the previously submitted COLA price during the COLA Timer. The system will use the Phlx XL participant's most recently submitted COLA Sweep at each price level as that participant's response at that price level, unless the COLA Sweep has a size of zero. A COLA Sweep with a size of zero will remove a Phlx XL participant's COLA Sweep from the COLA at that price level. COLA Sweeps will not be visible to any participant and will not be disseminated by the Exchange. See Phlx Rule 1080, Commentary .02(c)(ii)(e)(iv)(A)-(C) [sic]. --------------------------------------------------------------------------- The third proposed additional exception to the order exposure rule is the Qualified Contingent Cross or ``QCC'' mechanism.\7\ A QCC Order is comprised of an originating order to buy or sell at least 1,000 contracts, or 10,000 contracts in the case of Mini Options, which is identified as being part of a qualified contingent trade that is coupled with a contra-side order or orders totaling an equal number of contracts.\8\ With QCC, coupled orders are submitted simultaneously and would not violate Phlx Rule 1080(c)(ii)(C).\9\ A QCC transaction consists of two or more component orders, executed as agent or principal, where: (a) At least one component is an NMS Stock, as defined in Rule 600 of Regulation NMS under the Exchange Act; (b) all components are effected with a product or price contingency that either has been agreed to by all the respective counterparties or arranged for by a broker-dealer as principal or agent; (c) the execution of one component is contingent upon the execution of all other components at or near the same time; (d) the specific relationship between the component orders (e.g., the spread between the prices of the component orders) is determined by the time the contingent order is placed; (e) the component orders bear a derivative relationship to one another, represent different classes of shares of the same issuer, or involve the securities of participants in mergers or with intentions to merge that have been announced or cancelled; and (f) the transaction is fully hedged (without regard to any prior existing position) as a result of other components of the contingent trade.\10\ --------------------------------------------------------------------------- \7\ See Phlx Rules 1080(o). \8\ See Phlx Rule 1080(o). \9\ Complex Orders may also be placed into PIXL. See Phlx Rule 1080(n). \10\ See Phlx Rule 1080(o)(3). --------------------------------------------------------------------------- The Exchange believes that amending Phlx Rule 1080(c)(ii)(C) to add rule text to include these additional exceptions to this general rule regarding order exposure will conform the rule text. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act \11\ in general, and furthers the objectives of section 6(b)(5) of the Act \12\ in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest, by explicitly delineating all exceptions to the general rule regarding the requirements to expose certain principal orders which the Order Entry firm represents as agent. Specifically, the Exchange's proposal amends the order exposure rule to list PIXL, COLA and QCC as exceptions to the wait time to expose such principal orders the Order Entry Firm represents as agent for at least one (1) second prior to receiving an agency order that is executable against such bid or offer. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78f(b). \12\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange's proposal will make clear that PIXL is an exception to the [[Page 543]] general rule, which requires Phlx members and member organizations to expose principal orders they represent as agent for at least one (1) second prior to receiving an agency order that is executable against such bid or offer. PIXL permits Participants to enter paired orders without first exposing those orders for one second. The Exchange believes that providing an exception to the order exposure rule for orders entered into PIXL is consistent with the Act, because while PIXL's auction will last for one second, the orders may be entered as paired orders.\13\ A Phlx member or member organization, known as the Initiating Participant, must enter an order into the PIXL Mechanism as specified by Phlx Rule 1080(n).\14\ Complex Orders may also be entered into PIXL and such prices must be at the cPBBO or better.\15\ Initiating Participants entering orders into PIXL are required to guarantee an execution at the NBBO (cPBBO for Complex Orders) or at a better price, and are subject to market risk while their PIXL Order is exposed to other market participants in this competitive auction. --------------------------------------------------------------------------- \13\ See Phlx Rule 1080(o). \14\ To initiate the Auction (except if it is a Complex Order), the Initiating Member must mark the PIXL Order for Auction processing, and specify either: (a) A single price at which it seeks to execute the PIXL Order (a ``stop price''); (b) that it is willing to automatically match as principal or as agent on behalf of an Initiating Order the price and size of all PAN responses, and trading interest (``auto-match'') in which case the PIXL Order will be stopped at the NBBO on the Initiating Order side; or (c) that it is willing to either: (i) Stop the entire order at a single stop price and auto-match PAN responses and trading interest at a price or prices that improve the stop price to a specified price (a ``Not Worse Than'' or ``NWT'' price); (ii) stop the entire order at a single stop price and auto-match all PAN responses and trading interest at or better than the stop price; or (iii) stop the entire order at the NBBO on the Initiating Order side, and auto-match PAN responses and trading interest at a price or prices that improve the stop price up to the NWT price. In all cases, if the PBBO on the same side of the market as the PIXL Order represents a limit order on the book, the stop price must be at least one minimum price improvement increment better than the booked limit order's limit price. Once the Initiating Member has submitted a PIXL Order for processing pursuant to this subparagraph, such PIXL Order may not be modified or cancelled. The stop price or NWT price may be improved to the benefit of the PIXL Order during the Auction, but may not be cancelled. See Phlx Rule 1080(n)(ii)(A)(1). \15\ To initiate the PIXL Complex Order Auction, the Initiating Member must mark the PIXL Order for Auction processing, and specify either: (a) A single price at which it seeks to execute the PIXL Order (a ``stop price''); or (b) that it is willing to either: (i) Stop the entire order at a single stop price and auto-match PAN responses and trading interest at a price or prices that improve the stop price to a specified price (a ``Not Worse Than'' or ``NWT'' price); or (ii) stop the entire order at a single stop price and auto-match all PAN responses and trading interest at or better than the stop price. Once the Initiating Member has submitted a PIXL Complex Order for processing pursuant to this subparagraph, such PIXL Order may not be modified or cancelled. Under any of the circumstances described in sub-paragraphs (a)-(b) in note 14, the stop price or NWT price may be improved to the benefit of the PIXL Order during the Auction, but may not be cancelled. See Phlx Rule 1080(n)(ii)(A)(2). --------------------------------------------------------------------------- The Exchange's proposal will make clear that COLA is an exception to the general order exposure rule. A ``COLA-eligible order'' means a Complex Order (a) identified by way of a COOP, or (b) that, upon receipt, improves the cPBBO respecting the specific Complex Order Strategy that is the subject of the Complex Order and is not for a market maker, as specified in Phlx Rule 1080.07 (b)(ii).\16\ COLA- eligible orders are executed without consideration of any prices that might be available on other exchanges trading the same options contracts. The COLA will begin with a timing mechanism (a ``COLA Timer''), which is a counting period not to exceed five (5) seconds during which Phlx XL participants may submit bids or offers that improve the cPBBO. Phlx XL participants may bid and/or offer on either or both side(s) of the market during the COLA Timer by submitting one or more bids or offers that improve the cPBBO, known as a ``COLA Sweep.'' COLA Sweeps will not be visible to any participant and will not be disseminated by the Exchange. Upon the expiration of the COLA Timer, COLA Sweeps and/or any Complex Orders received during the COLA Timer that improve the cPBBO may be executed against the COLA-eligible order.\17\ The Exchange believes that providing an exception to the order exposure rule for orders entered into COLA is consistent with the Act, because while COLA auction may exceed one second, the COLA- eligible order will receive the best price or prices available for the Complex Order Strategy represented by the COLA-eligible order, and are subject to market risk while their Complex Order is exposed to other market participants in this competitive auction. --------------------------------------------------------------------------- \16\ If the Phlx XL system identifies the existence of a COLA- eligible order following a COOP or by way of receipt during normal trading of a Complex Order that improves the cPBBO, such COLA- eligible order will initiate a COLA, during which Phlx XL participants may bid and offer against the COLA-eligible order pursuant to this rule. \17\ See Phlx Rule 1080, Commentary .02(c)(ii)(e) [sic]. --------------------------------------------------------------------------- The Exchange's proposal will make clear that QCC is an exception to the general order exposure rule. QCC Orders are immediately executed upon entry into the System by an Order Entry Firm provided that (i) no Customer Orders are at the same price on the Exchange's limit order book and (ii) the price is at or between the NBBO. The Exchange believes that providing an exception to the order exposure rule for orders entered into QCC is consistent with the Act, because when entered into the System QCC Orders are coupled with a contra-side order or orders totaling an equal number of contracts. These orders must be executed at a price that is at or between the NBBO, and are subject to market risk while the QCC Order is exposed to other market participants in this competitive auction. The proposed amendments provide additional exceptions to the current order exposure rule and will serve to protect investors and the public interest by providing additional information in the Rules concerning exceptions. 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. The proposed changes do not impose any burden on competition, rather, the amendment provides an exception to the order exposure rule for orders entered into PIXL, COLA and QCC for all Phlx members and member organizations. The Exchange believes that this exception will further inform Phlx members and member organizations of their obligations with respect to order exposure. Phlx members and member organizations entering orders into PILX [sic], COLA or QCC are subject to market risk while their order is exposed to other market participants and member organizations in these competitive auctions. 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)(iii) of the Act \18\ and [[Page 544]] subparagraph (f)(6) of Rule 19b-4 thereunder.\19\ --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(3)(a)(iii). \19\ 7 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. --------------------------------------------------------------------------- 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 CommentsUse 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-2015-99 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-2015-99. 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 the 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-2015-99 and should be submitted on or before January 27, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Jill M. Peterson, Assistant Secretary. [FR Doc. 2015-33219 Filed 1-5-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices 541
Securities and Exchange Commission, may also assist Commission staff in SECURITIES AND EXCHANGE
Office of Information and Regulatory assessing investment advisers’ COMMISSION
Affairs, Office of Management and compliance programs.
Budget, Room 10102, New Executive This collection of information is [Release No. 34–76801; File No. SR–Phlx–
Office Building, Washington, DC 20503,
mandatory. The information collected 2015–99]
or by sending an email to: Shagufta_
pursuant to the rule 206(4)–7 is
Ahmed@omb.eop.gov; and (ii) Pamela Self-Regulatory Organizations;
Dyson, Director/Chief Information reviewed by the Commission’s
examination staff; it will be accorded NASDAQ OMX PHLX LLC; Notice of
Officer, Securities and Exchange Filing and Immediate Effectiveness of
Commission, c/o Remi Pavlik-Simon, the same level of confidentiality
accorded to other responses provided to Proposed Rule Change Regarding
100 F Street NE., Washington, DC 20549 Order Exposure
or send an email to: PRA_Mailbox@ the Commission in the context of its
sec.gov. Comments must be submitted to examination and oversight program. December 30, 2015.
OMB within 30 days of this notice. The respondents to this information Pursuant to section 19(b)(1) of the
Dated: December 30, 2015. collection are investment advisers Securities Exchange Act of 1934
Jill M. Peterson, registered with the Commission. Our (‘‘Act’’),1 and Rule 19b–4 thereunder,2
Assistant Secretary. latest data indicate that there were notice is hereby given that on December
[FR Doc. 2015–33211 Filed 1–5–16; 8:45 am] 12,026 advisers registered with the 15, 2015, NASDAQ OMX PHLX LLC
BILLING CODE 8011–01–P Commission as of November 1, 2015. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the
The Commission has estimated that Securities and Exchange Commission
compliance with rule 206(4)–7 imposes (‘‘SEC’’ or ‘‘Commission’’) the proposed
SECURITIES AND EXCHANGE an annual burden of approximately 87 rule change as described in Items I, II,
COMMISSION hours per respondent. Based on this and III, below, which Items have been
[OMB Control No. 3235–0585, SEC File No. figure, the Commission estimates a total prepared by the Exchange. The
270–523] annual burden of 1,046,262 hours for Commission is publishing this notice to
this collection of information. solicit comments on the proposed rule
Proposed Collection; Comment Written comments are invited on: (a) change from interested persons.
Request
Whether the collection of information is I. Self-Regulatory Organization’s
Upon Written Request, Copies Available necessary for the proper performance of Statement of the Terms of Substance of
From: Securities and Exchange the functions of the agency, including the Proposed Rule Change
Commission, Office of FOIA Services, whether the information will have
100 F Street NE., Washington, DC practical utility; (b) the accuracy of the The Exchange proposes to amend
20549–2736. agency’s estimate of the burden of the Phlx Rule 1080, entitled ‘‘Phlx XL and
Extension: Rule 206(4)–7. collection of information; (c) ways to Phlx XL II,’’ to account for potential
Notice is hereby given that, pursuant enhance the quality, utility, and clarity internal conflicts with other Exchange
to the Paperwork Reduction Act of 1995 of the information collected; and (d) Rules, which are exceptions to the order
(44 U.S.C. 3501 et seq.), the Securities ways to minimize the burden of the exposure rule regarding principle orders
and Exchange Commission collection of information on the Order Entry Firm represents as agent
(‘‘Commission’’) is soliciting comments respondents, including through the use from being exposed.
on the collection of information of automated collection techniques or The text of the proposed rule change
summarized below. The Commission other forms of information technology. is available on the Exchange’s Web site
plans to submit this existing collection Consideration will be given to at http://
of information to the Office of comments and suggestions submitted in nasdaqomxphlx.cchwallstreet.com, at
Management and Budget for extension writing within 60 days of this the principal office of the Exchange, and
and approval. publication. An agency may not conduct at the Commission’s Public Reference
The title for the collection of or sponsor a collection of information Room.
information is ‘‘Investment Advisers Act unless it displays a currently valid OMB
rule 206(4)–7 (17 CFR 275.206(4)–7), II. Self-Regulatory Organization’s
control number. No person shall be
Compliance procedures and practices.’’ Statement of the Purpose of, and
subject to any penalty for failing to
Rule 206(4)–7 requires each investment Statutory Basis for, the Proposed Rule
comply with a collection of information
adviser registered with the Commission Change
to (i) adopt and implement internal subject to the PRA that does not display
compliance policies and procedures, (ii) a valid OMB control number. In its filing with the Commission, the
review those policies and procedures Please direct your written comments Exchange included statements
annually, (iii) designate a chief to Pamela Dyson, Director/Chief concerning the purpose of and basis for
compliance officer, and (iv) maintain Information Officer, Securities and the proposed rule change and discussed
certain compliance records. The rule is Exchange Commission, C/O Remi any comments it received on the
designed to protect investors by Pavlik-Simon, 100 F Street NE., proposed rule change. The text of these
fostering better compliance with the Washington, DC 20549; or send an email statements may be examined at the
places specified in Item IV below. The
mstockstill on DSK4VPTVN1PROD with NOTICES
securities laws. The collection of to: PRA_Mailbox@sec.gov.
information under rule 206(4)–7 is Exchange has prepared summaries, set
Dated: December 30, 2015. forth in sections A, B, and C below, of
necessary to assure that investment
advisers maintain comprehensive Jill M. Peterson, the most significant aspects of such
internal programs that promote the Assistant Secretary. statements.
advisers’ compliance with the [FR Doc. 2015–33210 Filed 1–5–16; 8:45 am]
Investment Advisers Act of 1940. The BILLING CODE 8011–01–P
1 15 U.S.C. 78s(b)(1).
information collected under this rule 2 17 CFR 240.19b–4.
VerDate Sep<11>2014 17:32 Jan 05, 2016 Jkt 238001 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 E:\FR\FM\06JAN1.SGM 06JAN1](https://thefederalregister.org/doc/81_FR_544/page/1.svg)
![542 Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices
A. Self-Regulatory Organization’s represents as agent (an ‘‘Initiating 1080(c)(ii)(C).9 A QCC transaction
Statement of the Purpose of, and Order’’) provided it submits the PIXL consists of two or more component
Statutory Basis for, the Proposed Rule Order for electronic execution into the orders, executed as agent or principal,
Change PIXL Auction (‘‘Auction’’). This where: (a) At least one component is an
mechanism is an exception to the NMS Stock, as defined in Rule 600 of
1. Purpose
general rule in [sic], which requires Regulation NMS under the Exchange
The Exchange proposes to amend Phlx members and member Act; (b) all components are effected with
Phlx Rule 1080(c)(ii)(C) to provide that organizations to expose principal orders a product or price contingency that
other Exchange Rules are exceptions to they represent as agent for at least one either has been agreed to by all the
rules requiring Order Entry Firms to (1) second prior to receiving an agency respective counterparties or arranged for
expose orders and to name those rules. order that is executable against such bid by a broker-dealer as principal or agent;
Today, Phlx Rule 1080(c)(ii)(C)(1) or offer. With PIXL, paired orders are (c) the execution of one component is
provides that, submitted simultaneously and would contingent upon the execution of all
Principal Transactions: Order Entry Firms not violate Phlx Rule 1080(c)(ii)(C). other components at or near the same
may not execute as principal against orders The second proposed additional time; (d) the specific relationship
on the limit order book they represent as exception to the order exposure rule is between the component orders (e.g., the
agent unless: (a) Agency orders are first spread between the prices of the
the Complex Order Live Auction or
exposed on the limit order book for at least component orders) is determined by the
one (1) second, (b) the Order Entry Firm has ‘‘COLA.’’ 5 COLA is the automated
been bidding or offering on the Exchange for Complex Order Live Auction process. A time the contingent order is placed; (e)
at least one (1) second prior to receiving an COLA may take place upon the component orders bear a derivative
agency order that is executable against such identification of the existence of a relationship to one another, represent
order, or (c) the Order Entry Firm proceeds COLA-eligible order either: (1) different classes of shares of the same
in accordance with the crossing rules Following a COOP, or (2) during normal issuer, or involve the securities of
contained in Rule 1064. trading if the Phlx XL system receives participants in mergers or with
Further, Phlx Rule 1080(c)(ii)(C)(2) and a Complex Order that improves the intentions to merge that have been
(3) provide, cPBBO. Phlx XL participants may bid announced or cancelled; and (f) the
and/or offer on either or both side(s) of transaction is fully hedged (without
Solicitation Orders. Order Entry Firms
must expose orders they represent as agent the market during the COLA Timer by regard to any prior existing position) as
for at least one (1) second before such orders submitting one or more bids or offers a result of other components of the
may be automatically executed, in whole or that improve the cPBBO, known as a contingent trade.10
in part, against orders solicited from ‘‘COLA Sweep.’’ 6 COLA does not abide The Exchange believes that amending
members and non-member broker-dealers to by the one second order exposure Phlx Rule 1080(c)(ii)(C) to add rule text
transact with such orders. requirement. to include these additional exceptions
It shall be a violation of Rule 1080(c)(ii)(C) to this general rule regarding order
for any Exchange member or member The third proposed additional
exception to the order exposure rule is exposure will conform the rule text.
organization to be a party to any arrangement
designed to circumvent Rule 1080(c)(ii)(C) by the Qualified Contingent Cross or 2. Statutory Basis
providing an opportunity for a customer, ‘‘QCC’’ mechanism.7 A QCC Order is The Exchange believes that its
member, member organization, or non- comprised of an originating order to buy
member broker-dealer to execute
proposal is consistent with section 6(b)
or sell at least 1,000 contracts, or 10,000 of the Act 11 in general, and furthers the
immediately against agency orders delivered contracts in the case of Mini Options,
to the Exchange, whether such orders are objectives of section 6(b)(5) of the Act 12
which is identified as being part of a in particular, in that it is designed to
delivered via AUTOM or represented in the
trading crowd by a member or a member
qualified contingent trade that is promote just and equitable principles of
organization. coupled with a contra-side order or trade, to remove impediments to and
orders totaling an equal number of perfect the mechanism of a free and
The Exchange notes that there are other contracts.8 With QCC, coupled orders
exceptions to the general rule regarding open market and a national market
are submitted simultaneously and system, and, in general to protect
the exposure of principal orders would not violate Phlx Rule
represented as agent by the Order Entry investors and the public interest, by
Firm. Also, other options exchanges explicitly delineating all exceptions to
5 See Phlx Rule 1080, Commentary .02(c)(ii)(e)
have similar order exposure the general rule regarding the
[sic].
exceptions.3 6 A single Phlx XL participant may submit requirements to expose certain principal
The first proposed additional multiple COLA Sweeps at different prices (but not orders which the Order Entry firm
exception to the order exposure rule is multiple COLA Sweeps at the same price, except as represents as agent. Specifically, the
provided in sub-paragraph (B) below) in increments Exchange’s proposal amends the order
Price Improvement XL or ‘‘PIXL.’’ 4 of $0.01 in response to a COLA broadcast,
PIXL is a component of the Exchange’s regardless of the minimum trading increment
exposure rule to list PIXL, COLA and
fully automated options trading system, applicable to the specific series. Phlx XL QCC as exceptions to the wait time to
PHLX XL that allows a member or participants may change the size of a previously expose such principal orders the Order
submitted COLA Sweep at the previously submitted Entry Firm represents as agent for at
member organization to electronically COLA price during the COLA Timer. The system
submit for execution an order it will use the Phlx XL participant’s most recently
least one (1) second prior to receiving an
represents as agent on behalf of a public submitted COLA Sweep at each price level as that agency order that is executable against
customer, broker-dealer, or any other participant’s response at that price level, unless the such bid or offer.
mstockstill on DSK4VPTVN1PROD with NOTICES
COLA Sweep has a size of zero. A COLA Sweep The Exchange’s proposal will make
entity (‘‘PIXL Order’’) against principal with a size of zero will remove a Phlx XL
interest or against any other order it participant’s COLA Sweep from the COLA at that
clear that PIXL is an exception to the
price level. COLA Sweeps will not be visible to any
9 Complex Orders may also be placed into PIXL.
3 See International Securities Exchange LLC participant and will not be disseminated by the
(‘‘ISE’’) Rule 717(d) and BOX Options Exchange Exchange. See Phlx Rule 1080, Commentary See Phlx Rule 1080(n).
.02(c)(ii)(e)(iv)(A)–(C) [sic]. 10 See Phlx Rule 1080(o)(3).
LLC (‘‘BOX’’) Rule 7140.
4 See Phlx Rule 1080(n). Complex Orders may 7 See Phlx Rules 1080(o). 11 15 U.S.C. 78f(b).
also be placed into PIXL. 8 See Phlx Rule 1080(o). 12 15 U.S.C. 78f(b)(5).
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![Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices 543
general rule, which requires Phlx execution at the NBBO (cPBBO for believes that providing an exception to
members and member organizations to Complex Orders) or at a better price, the order exposure rule for orders
expose principal orders they represent and are subject to market risk while entered into QCC is consistent with the
as agent for at least one (1) second prior their PIXL Order is exposed to other Act, because when entered into the
to receiving an agency order that is market participants in this competitive System QCC Orders are coupled with a
executable against such bid or offer. auction. contra-side order or orders totaling an
PIXL permits Participants to enter The Exchange’s proposal will make equal number of contracts. These orders
paired orders without first exposing clear that COLA is an exception to the must be executed at a price that is at or
those orders for one second. The general order exposure rule. A ‘‘COLA- between the NBBO, and are subject to
Exchange believes that providing an eligible order’’ means a Complex Order market risk while the QCC Order is
exception to the order exposure rule for (a) identified by way of a COOP, or (b) exposed to other market participants in
orders entered into PIXL is consistent that, upon receipt, improves the cPBBO this competitive auction.
with the Act, because while PIXL’s respecting the specific Complex Order
auction will last for one second, the Strategy that is the subject of the The proposed amendments provide
orders may be entered as paired Complex Order and is not for a market additional exceptions to the current
orders.13 A Phlx member or member maker, as specified in Phlx Rule 1080.07 order exposure rule and will serve to
organization, known as the Initiating (b)(ii).16 COLA-eligible orders are protect investors and the public interest
Participant, must enter an order into the executed without consideration of any by providing additional information in
PIXL Mechanism as specified by Phlx prices that might be available on other the Rules concerning exceptions.
Rule 1080(n).14 Complex Orders may exchanges trading the same options B. Self-Regulatory Organization’s
also be entered into PIXL and such contracts. The COLA will begin with a Statement on Burden on Competition
prices must be at the cPBBO or better.15 timing mechanism (a ‘‘COLA Timer’’),
Initiating Participants entering orders which is a counting period not to The Exchange does not believe that
into PIXL are required to guarantee an exceed five (5) seconds during which the proposed rule change will impose
Phlx XL participants may submit bids or any burden on competition not
13 See Phlx Rule 1080(o). offers that improve the cPBBO. Phlx XL necessary or appropriate in furtherance
14 To initiate the Auction (except if it is a participants may bid and/or offer on of the purposes of the Act. The
Complex Order), the Initiating Member must mark
the PIXL Order for Auction processing, and specify
either or both side(s) of the market proposed changes do not impose any
either: (a) A single price at which it seeks to execute during the COLA Timer by submitting burden on competition, rather, the
the PIXL Order (a ‘‘stop price’’); (b) that it is willing one or more bids or offers that improve amendment provides an exception to
to automatically match as principal or as agent on the cPBBO, known as a ‘‘COLA Sweep.’’
behalf of an Initiating Order the price and size of the order exposure rule for orders
all PAN responses, and trading interest (‘‘auto- COLA Sweeps will not be visible to any entered into PIXL, COLA and QCC for
match’’) in which case the PIXL Order will be participant and will not be disseminated all Phlx members and member
stopped at the NBBO on the Initiating Order side; by the Exchange. Upon the expiration of organizations. The Exchange believes
or (c) that it is willing to either: (i) Stop the entire the COLA Timer, COLA Sweeps and/or
order at a single stop price and auto-match PAN that this exception will further inform
responses and trading interest at a price or prices any Complex Orders received during the Phlx members and member
that improve the stop price to a specified price (a COLA Timer that improve the cPBBO organizations of their obligations with
‘‘Not Worse Than’’ or ‘‘NWT’’ price); (ii) stop the may be executed against the COLA- respect to order exposure. Phlx
entire order at a single stop price and auto-match eligible order.17 The Exchange believes
all PAN responses and trading interest at or better members and member organizations
than the stop price; or (iii) stop the entire order at that providing an exception to the order
entering orders into PILX [sic], COLA or
the NBBO on the Initiating Order side, and auto- exposure rule for orders entered into
QCC are subject to market risk while
match PAN responses and trading interest at a price COLA is consistent with the Act,
or prices that improve the stop price up to the NWT their order is exposed to other market
because while COLA auction may
price. In all cases, if the PBBO on the same side of participants and member organizations
the market as the PIXL Order represents a limit exceed one second, the COLA-eligible
in these competitive auctions.
order on the book, the stop price must be at least order will receive the best price or
one minimum price improvement increment better prices available for the Complex Order C. Self-Regulatory Organization’s
than the booked limit order’s limit price. Once the Strategy represented by the COLA-
Initiating Member has submitted a PIXL Order for
Statement on Comments on the
processing pursuant to this subparagraph, such eligible order, and are subject to market Proposed Rule Change Received From
PIXL Order may not be modified or cancelled. The risk while their Complex Order is Members, Participants, or Others
stop price or NWT price may be improved to the exposed to other market participants in
benefit of the PIXL Order during the Auction, but this competitive auction. No written comments were either
may not be cancelled. See Phlx Rule
1080(n)(ii)(A)(1). The Exchange’s proposal will make solicited or received.
15 To initiate the PIXL Complex Order Auction, clear that QCC is an exception to the
III. Date of Effectiveness of the
the Initiating Member must mark the PIXL Order for general order exposure rule. QCC Orders
Auction processing, and specify either: (a) A single Proposed Rule Change and Timing for
are immediately executed upon entry
price at which it seeks to execute the PIXL Order Commission Action
(a ‘‘stop price’’); or (b) that it is willing to either:
into the System by an Order Entry Firm
(i) Stop the entire order at a single stop price and provided that (i) no Customer Orders are Because the foregoing proposed rule
auto-match PAN responses and trading interest at at the same price on the Exchange’s change does not: (i) Significantly affect
a price or prices that improve the stop price to a limit order book and (ii) the price is at
specified price (a ‘‘Not Worse Than’’ or ‘‘NWT’’
the protection of investors or the public
price); or (ii) stop the entire order at a single stop
or between the NBBO. The Exchange interest; (ii) impose any significant
price and auto-match all PAN responses and trading burden on competition; and (iii) become
mstockstill on DSK4VPTVN1PROD with NOTICES
16 If the Phlx XL system identifies the existence
interest at or better than the stop price. Once the operative for 30 days from the date on
Initiating Member has submitted a PIXL Complex of a COLA-eligible order following a COOP or by
Order for processing pursuant to this subparagraph, way of receipt during normal trading of a Complex which it was filed, or such shorter time
such PIXL Order may not be modified or cancelled. Order that improves the cPBBO, such COLA- as the Commission may designate, it has
Under any of the circumstances described in sub- eligible order will initiate a COLA, during which become effective pursuant to section
paragraphs (a)–(b) in note 14, the stop price or NWT Phlx XL participants may bid and offer against the
COLA-eligible order pursuant to this rule.
19(b)(3)(A)(iii) of the Act 18 and
price may be improved to the benefit of the PIXL
Order during the Auction, but may not be 17 See Phlx Rule 1080, Commentary .02(c)(ii)(e)
cancelled. See Phlx Rule 1080(n)(ii)(A)(2). [sic]. 18 15 U.S.C. 78s(b)(3)(a)(iii).
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![544 Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices
subparagraph (f)(6) of Rule 19b–4 with respect to the proposed rule (‘‘Act’’),1 and Rule 19b–4 thereunder,2
thereunder.19 change that are filed with the notice is hereby given that on December
At any time within 60 days of the Commission, and all written 18, 2015, The NASDAQ Stock Market
filing of the proposed rule change, the communications relating to the LLC (‘‘NASDAQ’’) filed with the
Commission summarily may proposed rule change between the Securities and Exchange Commission
temporarily suspend such rule change if Commission and any person, other than (‘‘Commission’’) the proposed rule
it appears to the Commission that such those that may be withheld from the change as described in Items I, II, and
action is: (i) Necessary or appropriate in public in accordance with the III below, which Items have been
the public interest; (ii) for the protection provisions of 5 U.S.C. 552, will be prepared by NASDAQ. The Commission
of investors; or (iii) otherwise in available for Web site viewing and
is publishing this notice to solicit
furtherance of the purposes of the Act. printing in the Commission’s Public
comments on the proposed rule change
If the Commission takes such action, the Reference Room, 100 F Street NE.,
Washington, DC 20549, on official from interested persons.
Commission shall institute proceedings
to determine whether the proposed rule business days between the hours of I. Self-Regulatory Organization’s
should be approved or disapproved. 10:00 a.m. and 3:00 p.m. Copies of the Statement of the Terms of the Substance
filing also will be available for of the Proposed Rule Change
IV. Solicitation of Comments inspection and copying at the principal
Interested persons are invited to office of the Exchange. All comments NASDAQ proposes to modify the
submit written data, views, and received will be posted without change; charges to be paid for Managed Data
arguments concerning the foregoing, the Commission does not edit personal Solutions (‘‘MDS’’). While the changes
including whether the proposed rule identifying information from proposed herein are effective upon
change is consistent with the Act. submissions. You should submit only filing, the Exchange has designated that
Comments may be submitted by any of information that you wish to make the amendments be operative on
the following methods: available publicly. All submissions January 1, 2016.
should refer to File Number SR–Phlx–
Electronic Comments 2015–99 and should be submitted on or The text of the proposed rule change
• Use the Commission’s Internet before January 27, 2016. is below. Proposed new language is
comment form (http://www.sec.gov/ italicized; proposed deletions are
For the Commission, by the Division of
rules/sro.shtml); or Trading and Markets, pursuant to delegated bracketed.
• Send an email to rule-comments@ authority.20 NASDAQ Stock Market Rules
sec.gov. Please include File Number SR– Jill M. Peterson,
Phlx–2015–99 on the subject line. Assistant Secretary. Equity Rules
Paper Comments [FR Doc. 2015–33219 Filed 1–5–16; 8:45 am] * * * * *
• Send paper comments in triplicate BILLING CODE 8011–01–P
7026. Distribution Models
to Secretary, Securities and Exchange
Commission, 100 F Street NE., (a) No change.
SECURITIES AND EXCHANGE
Washington, DC 20549–1090. (b) Managed Data Solutions
COMMISSION
All submissions should refer to File The charges to be paid by Distributors
Number SR–Phlx–2015–99. This file [Release No. 34–76797; File No. SR–
NASDAQ–2015–158] and Subscribers of Managed Data
number should be included on the
Solutions products containing Nasdaq
subject line if email is used. To help the Self-Regulatory Organizations; The Depth data (non-display use only) shall
Commission process and review your NASDAQ Stock Market LLC; Notice of be:
comments more efficiently, please use Filing and Immediate Effectiveness of
only one method. The Commission will Proposed Rule Change To Modify the
post all comments on the Commission’s Fees for Managed Data Solutions
Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the December 30, 2015.
submission, all subsequent Pursuant to Section 19(b)(1) of the
amendments, all written statements Securities Exchange Act of 1934
Fee schedule for managed data solutions Price
Managed Data Solution Administration Fee (for the right to offer Managed Data Solutions to client organi- $[1]2,500/mo Per Distributor.
zations).
Nasdaq Depth Data Professional Subscriber Fee (Internal Use Only and includes TotalView, Level 2, 3[00]75/mo Per Subscriber.
OpenView).
Nasdaq Depth Data Non-Professional Subscriber (Internal Use Only and includes TotalView, Level 2, 60/mo Per Subscriber.
OpenView).
(c) Hardware-Based Delivery of (1) The charges to be paid by hardware-based market data format
mstockstill on DSK4VPTVN1PROD with NOTICES
Nasdaq Depth data Distributors for processing Nasdaq shall be:
Depth data sourced from a Nasdaq
19 7 CFR 240.19b–4(f)(6). In addition, Rule 19b– prior to the date of filing of the proposed rule 20 17 CFR 200.30–3(a)(12).
4(f)(6) requires a self-regulatory organization to give change, or such shorter time as designated by the 1 15 U.S.C. 78s(b)(1).
the Commission written notice of its intent to file Commission. The Exchange has satisfied this 2 17 CFR 240.19b–4.
the proposed rule change at least five business days requirement.
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Document Created: 2016-01-06 04:02:06
Document Modified: 2016-01-06 04:02:06
| 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 | |
| Action | Order Entry Firms may not execute as principal against orders on the limit order book they represent as agent unless: (a) Agency orders are first exposed on the limit order book for at least one (1) second, (b) the Order Entry Firm has been bidding or offering on the Exchange for at least one (1) second prior to receiving an agency order that is executable against such order, or (c) the Order Entry Firm proceeds in accordance with the crossing rules contained in Rule 1064. | |
| FR Citation | 81 FR 541 |
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