81 FR 549 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1060
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 3 (January 6, 2016)
Federal Register Volume 81, Issue 3 (January 6, 2016)
| Page Range | 549-550 | |
| FR Document | 2015-33220 |
[Federal Register Volume 81, Number 3 (Wednesday, January 6, 2016)] [Notices] [Pages 549-550] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-33220] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76800; File No. SR-Phlx-2015-114] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1060 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 21, 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 the Substance of the Proposed Rule Change The Exchange proposes to update Phlx Rule 1060, as described further below. The text of the proposed rule change is below; proposed deletions are in brackets. * * * * * Rule 1060. Floor Broker Defined An Options Floor Broker is an individual who is registered with the Exchange for the purpose, while on the Options Floor, of accepting and handling options orders [received from members and member organizations. An Options Floor Broker shall not accept an order from any other source unless he is the nominee of a member organization qualified to transact business with the public in which event he may accept orders from public customers of the organization]. * * * * * 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 proposal is to update Phlx Rule 1060, Floor Broker Defined, which is incorrect in a number of ways. Other than the implementation of the Exchange's Options Floor Broker Management System,\3\ the rule has not been updated since its adoption in 1984. --------------------------------------------------------------------------- \3\ Securities Exchange Act Release No. 69471 (April 29, 2013), 78 FR 26096 (May 3, 2013) (SR-Phlx-2013-09). --------------------------------------------------------------------------- Currently, the rule provides that Floor Brokers are registered as such for the purpose of accepting and handling options orders received from members and member organizations.\4\ In actuality, Floor Brokers have long been accepting orders from non-members/member organizations. Specifically, Floor Brokers accept orders from broker-dealers who are not Phlx members or member organizations; they have long done so.\5\ No additional rules apply as a result of accepting orders from non-member broker-dealers. --------------------------------------------------------------------------- \4\ See Rules 1(n) and (o). \5\ CBOE Floor Brokers are similarly permitted to accept orders from non-member broker-dealers. See CBOE Rule 6.70. --------------------------------------------------------------------------- In addition, Floor Brokers accept orders from non-broker-dealer customers (meaning, the public). In order to do so, Floor Brokers must be properly qualified to do business with the public.\6\ These qualification requirements apply to all members and member organizations that do business with the public, including Floor Brokers, and will continue to do so under the amended rule. In addition, in order to do business with the public, Floor Brokers must abide by the Phlx rules pertaining to handling of customer orders, including fidelity bond coverage,\7\ annual audits,\8\ approval of the opening of accounts,\9\ supervision of accounts \10\ and communications to customers.\11\ --------------------------------------------------------------------------- \6\ See e.g., Rules 613, 620 and 1024(a). \7\ See Rule 705. \8\ See Rule 712. \9\ See Rule 1024(b). \10\ See Rule 1025. \11\ See Rule 1049. --------------------------------------------------------------------------- The Exchange does not believe it is necessary to list in Rule 1060 from what type of market participant a Floor Broker may receive orders, because a Floor Broker can accept orders from any type of market participant. It would be superfluous to add such a list. The rules applicable to doing business with the public apply to Floor Brokers and their member organization regardless of whether such rules are specifically listed in Rule 1060. Rule 1060 also provides that an Options Floor Broker shall not accept an order from any other source unless the Floor Broker is the nominee of a member organization qualified to transact business with the public in which event the Floor Broker may accept orders from public customers of the organization. The Exchange believes that this provision is incorrect in a number of respects. The term ``nominee'' is no longer used, except with reference to inactive nominees, which is a separate status, unrelated to defining a Floor Broker.\12\ Prior to 2004, the Exchange had a different ownership and membership structure, such that the term ``nominee'' was sometimes used. Specifically, a nominee of a member organization was, in essence, a member. --------------------------------------------------------------------------- \12\ See Rules 1(l) and 925. --------------------------------------------------------------------------- Furthermore, the Floor Broker, not just his member organization, must be qualified to accept orders from the public.\13\ In addition, a Floor Broker's ability to accept orders from the public is not limited to accepting orders from public customers of the Floor Broker's member organization. As explained above, a Floor Broker may accept orders from the public provided the Floor Broker is properly qualified to do so and abides by the rules pertaining to handling of such orders.\14\ --------------------------------------------------------------------------- \13\ See Rule 613. \14\ See supra notes 5-10. --------------------------------------------------------------------------- Accordingly, the Exchange is deleting the last sentence of Rule 1060. In sum, the updated rule will continue to state that an Options Floor [[Page 550]] Broker is an individual who is registered with the Exchange for the purpose, while on the Options Floor, of accepting and handling options orders. Overall, the Exchange notes that the current language in Rule 1060 was adopted at a time when the options market structure and trading floor community were very different than today. Long ago, there were only a handful of options exchanges, all of which operated trading floors. With the advent of additional exchanges and electronic trading, membership in every options exchange was no longer critical or practical. Many large firms maintained a floor presence in the form of their own ``house'' Floor Brokers. This has changed dramatically, in that most Floor Brokers now work for member organizations that are solely in the floor brokerage business and not affiliated with large firms that operate trading desks or receive order flow. Because the dynamics have changed so much and the floor brokerage business has evolved accordingly, the Exchange believes that the limitations contained in Rule 1060 no longer make sense. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act \15\ in general, and furthers the objectives of section 6(b)(5) of the Act \16\ in particular, in that it is designed to promote just and equitable principles of trade and to protect investors and the public interest, by correctly identifying what functions a Floor Broker can perform in terms of order acceptance. In its current form, Rule 1060 can be read too narrowly, which would result in a Floor Broker not being permitted to accept orders other than from members and member organizations. Other Phlx members and member organizations are not limited with respect to the participants from whom orders can be accepted, and, thus, the proposal levels the playing field for options Floor Brokers. Persons submitting orders for execution by a Floor Broker on the Exchange would not expect that Exchange membership would be required to do so. Thus, the Exchange believes that updating the rule will help prevent confusion and help ensure that floor brokerage services are widely available to various types of market participants, which should, in turn, promote just and equitable principles of trade. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78f(b). \16\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 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. With respect to inter-market competition, the Exchange does not believe that the proposed revisions will impose any burden on competition, because at least one other Exchange has a similar rule governing the types of orders a floor broker can submit.\17\ With respect to intra-market competition, the proposal applies to all Phlx Floor Brokers. --------------------------------------------------------------------------- \17\ CBOE Rule 6.70. --------------------------------------------------------------------------- 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 subparagraph (f)(6) of Rule 19b-4 thereunder.\19\ --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(3)(a)(iii). \19\ 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. --------------------------------------------------------------------------- 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-2015-114 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-2015-114. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2015-114, 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. 2015-33220 Filed 1-5-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices 549
Office of Information and Regulatory Options Floor Broker shall not accept an with the public, including Floor
Affairs, Office of Management and order from any other source unless he Brokers, and will continue to do so
Budget, Room 10102, New Executive is the nominee of a member under the amended rule. In addition, in
Office Building, Washington, DC 20503, organization qualified to transact order to do business with the public,
or by sending an email to: Shagufta_ business with the public in which event Floor Brokers must abide by the Phlx
Ahmed@omb.eop.gov; and (ii) Pamela he may accept orders from public rules pertaining to handling of customer
Dyson, Director/Chief Information customers of the organization]. orders, including fidelity bond
Officer, Securities and Exchange * * * * * coverage,7 annual audits,8 approval of
Commission, c/o Remi Pavlik-Simon, the opening of accounts,9 supervision of
100 F Street NE., Washington, DC II. Self-Regulatory Organization’s accounts 10 and communications to
20549, or by sending an email to: PRA_ Statement of the Purpose of, and customers.11
Mailbox@sec.gov. Comments must be Statutory Basis for, the Proposed Rule The Exchange does not believe it is
submitted to OMB within 30 days of Change necessary to list in Rule 1060 from what
this notice. In its filing with the Commission, the type of market participant a Floor
Dated: December 30, 2015. Exchange included statements Broker may receive orders, because a
Jill M. Peterson, concerning the purpose of and basis for Floor Broker can accept orders from any
the proposed rule change and discussed type of market participant. It would be
Assistant Secretary.
any comments it received on the superfluous to add such a list. The rules
[FR Doc. 2015–33213 Filed 1–5–16; 8:45 am]
proposed rule change. The text of these applicable to doing business with the
BILLING CODE 8011–01–P public apply to Floor Brokers and their
statements may be examined at the
places specified in Item IV below. The member organization regardless of
Exchange has prepared summaries, set whether such rules are specifically
SECURITIES AND EXCHANGE
forth in sections A, B, and C below, of listed in Rule 1060.
COMMISSION
the most significant aspects of such Rule 1060 also provides that an
[Release No. 34–76800; File No. SR–Phlx– statements. Options Floor Broker shall not accept an
2015–114] order from any other source unless the
A. Self-Regulatory Organization’s Floor Broker is the nominee of a
Self-Regulatory Organizations; Statement of the Purpose of, and member organization qualified to
NASDAQ OMX PHLX LLC; Notice of Statutory Basis for, the Proposed Rule transact business with the public in
Filing and Immediate Effectiveness of Change which event the Floor Broker may
Proposed Rule Change To Amend Rule 1. Purpose accept orders from public customers of
1060 the organization. The Exchange believes
The purpose of the proposal is to
December 30, 2015. update Phlx Rule 1060, Floor Broker that this provision is incorrect in a
Pursuant to section 19(b)(1) of the Defined, which is incorrect in a number number of respects. The term
Securities Exchange Act of 1934 of ways. Other than the implementation ‘‘nominee’’ is no longer used, except
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 of the Exchange’s Options Floor Broker with reference to inactive nominees,
notice is hereby given that on December Management System,3 the rule has not which is a separate status, unrelated to
21, 2015, NASDAQ OMX PHLX LLC been updated since its adoption in 1984. defining a Floor Broker.12 Prior to 2004,
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the Currently, the rule provides that Floor the Exchange had a different ownership
Securities and Exchange Commission Brokers are registered as such for the and membership structure, such that the
(‘‘SEC’’ or ‘‘Commission’’) the proposed purpose of accepting and handling term ‘‘nominee’’ was sometimes used.
rule change as described in Items I, II, options orders received from members Specifically, a nominee of a member
and III, below, which Items have been and member organizations.4 In actuality, organization was, in essence, a member.
prepared by the Exchange. The Floor Brokers have long been accepting Furthermore, the Floor Broker, not
Commission is publishing this notice to orders from non-members/member just his member organization, must be
solicit comments on the proposed rule organizations. Specifically, Floor qualified to accept orders from the
change from interested persons. Brokers accept orders from broker- public.13 In addition, a Floor Broker’s
dealers who are not Phlx members or ability to accept orders from the public
I. Self-Regulatory Organization’s is not limited to accepting orders from
member organizations; they have long
Statement of the Terms of the Substance public customers of the Floor Broker’s
done so.5 No additional rules apply as
of the Proposed Rule Change member organization. As explained
a result of accepting orders from non-
The Exchange proposes to update member broker-dealers. above, a Floor Broker may accept orders
Phlx Rule 1060, as described further In addition, Floor Brokers accept from the public provided the Floor
below. The text of the proposed rule orders from non-broker-dealer Broker is properly qualified to do so and
change is below; proposed deletions are customers (meaning, the public). In abides by the rules pertaining to
in brackets. order to do so, Floor Brokers must be handling of such orders.14
* * * * * properly qualified to do business with Accordingly, the Exchange is deleting
the public.6 These qualification the last sentence of Rule 1060.
Rule 1060. Floor Broker Defined requirements apply to all members and In sum, the updated rule will
An Options Floor Broker is an member organizations that do business continue to state that an Options Floor
mstockstill on DSK4VPTVN1PROD with NOTICES
individual who is registered with the 7 See Rule 705.
Exchange for the purpose, while on the 3 Securities Exchange Act Release No. 69471
8 See Rule 712.
Options Floor, of accepting and (April 29, 2013), 78 FR 26096 (May 3, 2013) (SR–
9 See Rule 1024(b).
Phlx–2013–09).
handling options orders [received from 4 See Rules 1(n) and (o). 10 See Rule 1025.
members and member organizations. An 5 CBOE Floor Brokers are similarly permitted to 11 See Rule 1049.
12 See Rules 1(l) and 925.
accept orders from non-member broker-dealers. See
1 15 U.S.C. 78s(b)(1). CBOE Rule 6.70. 13 See Rule 613.
2 17 CFR 240.19b–4. 6 See e.g., Rules 613, 620 and 1024(a). 14 See supra notes 5–10.
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![550 Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices
Broker is an individual who is B. Self-Regulatory Organization’s Comments may be submitted by any of
registered with the Exchange for the Statement on Burden on Competition the following methods:
purpose, while on the Options Floor, of The Exchange does not believe that Electronic Comments
accepting and handling options orders. the proposed rule change will impose
Overall, the Exchange notes that the any burden on competition not • Use the Commission’s Internet
current language in Rule 1060 was necessary or appropriate in furtherance comment form (http://www.sec.gov/
adopted at a time when the options of the purposes of the Act. With respect rules/sro.shtml); or
market structure and trading floor to inter-market competition, the • Send an email to rule-comments@
community were very different than Exchange does not believe that the sec.gov. Please include File Number SR–
today. Long ago, there were only a proposed revisions will impose any
Phlx–2015–114 on the subject line.
handful of options exchanges, all of burden on competition, because at least
which operated trading floors. With the one other Exchange has a similar rule Paper Comments
advent of additional exchanges and governing the types of orders a floor
electronic trading, membership in every broker can submit.17 With respect to • Send paper comments in triplicate
options exchange was no longer critical intra-market competition, the proposal to Secretary, Securities and Exchange
or practical. Many large firms applies to all Phlx Floor Brokers. Commission, 100 F Street NE.,
maintained a floor presence in the form Washington, DC 20549–1090.
C. Self-Regulatory Organization’s
of their own ‘‘house’’ Floor Brokers. Statement on Comments on the All submissions should refer to File
This has changed dramatically, in that Proposed Rule Change Received From Number SR–Phlx–2015–114. This file
most Floor Brokers now work for Members, Participants, or Others number should be included on the
member organizations that are solely in subject line if email is used. To help the
No written comments were either
the floor brokerage business and not solicited or received. Commission process and review your
affiliated with large firms that operate comments more efficiently, please use
trading desks or receive order flow. III. Date of Effectiveness of the only one method. The Commission will
Because the dynamics have changed so Proposed Rule Change and Timing for post all comments on the Commission’s
much and the floor brokerage business Commission Action Internet Web site (http://www.sec.gov/
has evolved accordingly, the Exchange Because the foregoing proposed rule rules/sro.shtml). Copies of the
believes that the limitations contained change does not: (i) Significantly affect submission, all subsequent
in Rule 1060 no longer make sense. the protection of investors or the public amendments, all written statements
interest; (ii) impose any significant with respect to the proposed rule
2. Statutory Basis
burden on competition; and (iii) become change that are filed with the
The Exchange believes that its operative for 30 days from the date on Commission, and all written
proposal is consistent with section 6(b) which it was filed, or such shorter time communications relating to the
of the Act 15 in general, and furthers the as the Commission may designate, it has proposed rule change between the
objectives of section 6(b)(5) of the Act 16 become effective pursuant to section Commission and any person, other than
in particular, in that it is designed to 19(b)(3)(A)(iii) of the Act 18 and those that may be withheld from the
promote just and equitable principles of subparagraph (f)(6) of Rule 19b–4
public in accordance with the
trade and to protect investors and the thereunder.19
At any time within 60 days of the provisions of 5 U.S.C. 552, will be
public interest, by correctly identifying available for Web site viewing and
filing of the proposed rule change, the
what functions a Floor Broker can printing in the Commission’s Public
Commission summarily may
perform in terms of order acceptance. In Reference Room, 100 F Street NE.,
temporarily suspend such rule change if
its current form, Rule 1060 can be read it appears to the Commission that such Washington, DC 20549 on official
too narrowly, which would result in a action is: (i) Necessary or appropriate in business days between the hours of
Floor Broker not being permitted to the public interest; (ii) for the protection 10:00 a.m. and 3:00 p.m. Copies of such
accept orders other than from members of investors; or (iii) otherwise in filing also will be available for
and member organizations. Other Phlx furtherance of the purposes of the Act. inspection and copying at the principal
members and member organizations are If the Commission takes such action, the office of the Exchange. All comments
not limited with respect to the Commission shall institute proceedings received will be posted without change;
participants from whom orders can be to determine whether the proposed rule the Commission does not edit personal
accepted, and, thus, the proposal levels should be approved or disapproved. identifying information from
the playing field for options Floor submissions. You should submit only
Brokers. Persons submitting orders for IV. Solicitation of Comments
information that you wish to make
execution by a Floor Broker on the Interested persons are invited to available publicly. All submissions
Exchange would not expect that submit written data, views, and should refer to File Number SR–Phlx–
Exchange membership would be arguments concerning the foregoing, 2015–114, and should be submitted on
required to do so. Thus, the Exchange including whether the proposed rule or before January 27, 2016.
believes that updating the rule will help change is consistent with the Act.
For the Commission, by the Division of
prevent confusion and help ensure that Trading and Markets, pursuant to delegated
17 CBOE Rule 6.70.
floor brokerage services are widely
mstockstill on DSK4VPTVN1PROD with NOTICES
18 15 U.S.C. 78s(b)(3)(a)(iii). authority.20
available to various types of market 19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
Jill M. Peterson,
participants, which should, in turn, 4(f)(6) requires a self-regulatory organization to give
promote just and equitable principles of the Commission written notice of its intent to file
Assistant Secretary.
trade. the proposed rule change at least five business days [FR Doc. 2015–33220 Filed 1–5–16; 8:45 am]
prior to the date of filing of the proposed rule BILLING CODE 8011–01–P
change, or such shorter time as designated by the
15 15 U.S.C. 78f(b). Commission. The Exchange has satisfied this
16 15 U.S.C. 78f(b)(5). requirement. 20 17 CFR 200.30–3(a)(12).
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Document Created: 2016-01-06 04:01:49
Document Modified: 2016-01-06 04:01:49
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