81 FR 83886 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Order Granting Approval of Proposed Rule Change To Delete Outdated or Unnecessary Rule Language in Phlx Rule 1020
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 225 (November 22, 2016)
Federal Register Volume 81, Issue 225 (November 22, 2016)
| Page Range | 83886-83888 | |
| FR Document | 2016-28030 |
[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)] [Notices] [Pages 83886-83888] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-28030] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79322; File No. SR-Phlx-2016-97) Self-Regulatory Organizations; NASDAQ PHLX LLC; Order Granting Approval of Proposed Rule Change To Delete Outdated or Unnecessary Rule Language in Phlx Rule 1020 November 16, 2016. I. Introduction On September 27, 2016, NASDAQ PHLX LLC (``Exchange'' or ``Phlx'') filed with the Securities and Exchange Commission (``SEC'' or ``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 delete or amend its rules relating to specialists. The proposed rule change was published for comment in the Federal Register on October 14, 2016.\3\ The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 79073 (October 11, 2016), 81 FR 71153 (October 14, 2016) (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposal Phlx Rule 1020 contains provisions relating to the registration and functions of options specialists.\4\ Section (b) provides that a member registered as a specialist in one or more options has an obligation to assist in the maintenance of a fair and orderly market, ``in addition to the execution of orders entrusted to him in such options.'' The Exchange proposes to delete the language in section (b) regarding execution of entrusted orders. The Exchange represents that today, specialists on the Exchange trade only for their own account and ``no longer handle any agency orders whatsoever in their role as specialists.'' \5\ --------------------------------------------------------------------------- \4\ A ``specialist'' is an Exchange member who is registered as an options specialist pursuant to Phlx Rule 1020(a). Specialists are subject to quoting and registration obligations set forth in Phlx Rules 1014(b), 1020 and 1080.02. \5\ See Notice, supra note 3, at 71154. --------------------------------------------------------------------------- [[Page 83887]] Commentary .01 of Phlx Rule 1020 provides that in ``effecting transactions'' for a specialist's own account for the purpose of establishing or increasing a position, a specialist is to effect such transactions in a reasonable and orderly manner in relation to the condition of the general market, the market in the particular option, and the adequacy of his position to the immediate and reasonably anticipated needs of the options market. Commentary .01 sections (a) through (d) provide that certain types of transactions to establish or increase a position are not to be effected except when they are reasonably necessary to render the specialist's position adequate to such needs.\6\ The Exchange proposes to delete the last sentence of Commentary .01 and sections (a) through (d). The Exchange represents that today, specialists do not ``effect transactions'' in the sense of matching bids and offers to cause a transaction execution, except in rare cases.\7\ Instead, specialists submit bids and offers to be matched by the PHLX XL trading system.\8\ Therefore, the Exchange believes that the specialist may be unable to determine the price of the last sale, which would be required for a specialist to comply with the language Phlx proposes to be deleted. --------------------------------------------------------------------------- \6\ Specifically, Commentary .01 sections (a) through (d) provide that the following types of transactions to establish or increase a position are not to be effected except when they are reasonably necessary to render the specialist's position adequate to such needs: (a) A purchase at a price above the last sale in the same trading session; (b) the purchase of all or substantially all the options offered on the book at a price equal to the last sale, when the option so offered represents all or substantially all the options offered in the market; and when a substantial amount of an option is offered at a price equal to the last sale price, the purchase of more than 50% of all the options offered at the last sale price; (c) the supplying of all or substantially all the options bid for on the book at a price equal to the last sale, when the option so bid for represents all or substantially all the options bid for in the market; and when a substantial amount of the options bid for at a price equal to the last sale price, the supplying of more than 50% of all the options bid for at the last sale price; (d) failing to re-offer or re-bid where necessary after effecting transactions described in (a), (b), or (c). The rule permits transactions of these types to be effected, however, with the approval of an Options Exchange Official or in relatively inactive markets where they are an essential part of a proper course of dealings and where the amount of an option involved and the price change, if any, are normal in relation to the market. \7\ See Notice, supra note 3, at 71154. The Exchange represents that although a specialist may ``effect transactions'' with a market maker on the Exchange's trading floor, the vast majority of transactions are executed electronically by the trading system. \8\ See id. --------------------------------------------------------------------------- Commentary .02 of Phlx Rule 1020 provides that, for transactions of a specialist for his own account that liquidate or decrease his position in an option in which he is registered, such transactions are to be ``effected'' in a reasonable and orderly manner in relation to the condition of the general market, the market in the particular option, and the adequacy of the specialist's positions to the immediate and reasonably anticipated needs of the options market. Commentary .02 sections (a) through (c) describe certain restrictions on specialists when liquidating or decreasing such positions.\9\ The Exchange proposes to delete part of the last sentence of Commentary .02 and sections (a) through (c). The Exchange represents that, as discussed above, a specialist may be unable to determine the ``last different price'' as required to comply with sections (a) and (c).\10\ The Exchange believes also that section (b) is redundant to Rule 1020(b), which already contains the ``fair and orderly'' requirement.\11\ --------------------------------------------------------------------------- \9\ Commentary .02 sections (a) through (c) also provide that, unless he has the prior approval of an Options Exchange Official, he should avoid: (a) Liquidation of all or substantially all of a position by selling options at prices below the last different price or by purchasing options at prices above the last different price unless such transactions are reasonably necessary in relation to the specialist's overall position in the options in which he is registered; (b) failing to maintain a fair and orderly market during liquidations; or (c) failing to re-enter the market where necessary, after effecting transactions described in (a) above. \10\ See Notice, supra note 3, at 71155. \11\ See id. --------------------------------------------------------------------------- Commentary .03 of Phlx Rule 1020 provides that a specialist's quotation, made for his own account, should be such that a transaction effected at his quoted price or within the quoted spread, whether having the effect of reducing or increasing the specialist's position, would bear a proper relation to preceding transactions and anticipated succeeding transactions. The Exchange proposes to delete Commentary .03. The Exchange represents that, due to the speed of trading that occurs today on the Phlx XL trading system, specialists may not have knowledge of preceding transactions and would not be able to adjust quotes as needed to comply with Commentary .03 before the quotes are accessed.\12\ --------------------------------------------------------------------------- \12\ See id. --------------------------------------------------------------------------- Commentary .04 of Phlx Rule 1020 provides that a specialist should avoid participating as a dealer in opening or reopening an option in such a manner as to reverse the balance of public supply and demand as reflected by market and limited price orders at or near the price of the previous close or halt, unless the condition of the general market or the specialist's position in light of the reasonably anticipated needs of the market make it advisable to do so, or unless the specialist has obtained the prior approval of an Options Exchange Official to do so. The commentary provides that he may, however, buy or sell an option as a dealer to minimize the disparity between supply and demand at an opening or reopening. The Exchange proposes to delete Commentary .04. The Exchange represents that a specialist no longer manually opens options classes; the PHLX XL trading system handles the opening and reopening of options.\13\ --------------------------------------------------------------------------- \13\ See id. --------------------------------------------------------------------------- Commentary .05 of Phlx Rule 1020 prohibits a member acting as a specialist from effecting transactions for the purpose of adjusting a LIFO inventory in an option in which he is acting except as is reasonably necessary to assist in the maintenance of a fair and orderly market. The Exchange believes that Commentary .05 is no longer necessary and proposes to delete it.\14\ --------------------------------------------------------------------------- \14\ See id. --------------------------------------------------------------------------- Commentary .06 of Phlx Rule 1020 restricts a specialist from assigning options in which he is registered to an investment account. The Commentary states that a specialist may not add to a position in an investment account unless reasonably necessary to permit the specialist to assist in the maintenance of a fair and orderly market. Furthermore, a specialist may not effect a transfer of options in which he is registered from his dealer account to an investment account if the transfer would result in a short position in the dealer account. The Commentary also provides that in the maintenance of price continuity with reasonable depth, it is commonly desirable for a specialist to supply options to the market, even though he may have to sell short to do so, to the extent reasonably necessary to meet the needs of the market. The Exchange proposes to delete Commentary .06 because investment accounts are no longer used by specialists.\15\ --------------------------------------------------------------------------- \15\ See id. --------------------------------------------------------------------------- III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to a national securities exchange.\16\ In particular, the Commission finds that the proposed rule change is consistent with Section [[Page 83888]] 6(b)(5) of the Act,\17\ which requires, among other things, that the rules of a national securities exchange be 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; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission believes that the deletion of Phlx Rules 1020(b), Commentary .01, Commentary .02 (a) and (c), Commentary .03, Commentary .04, and Commentary .06 should protect investors by helping to ensure that the Phlx rules accurately describe the current operations of the Exchange and obligations of its members. In addition, the Commission notes that the deletion of Commentary .02 (b) to remove redundant rule language should add clarity to Phlx's rules and that the deletion of Commentary .05 and Commentary .06 should provide more clarity regarding the obligations of specialists on the Exchange. --------------------------------------------------------------------------- \16\ In approving the proposed rule changes, the Commission has considered their impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \17\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Accordingly, for the reasons discussed above, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act. V. Conclusion It is therefore ordered pursuant to Section 19(b)(2) of the Act \18\ that the proposed rule change (SR-PHLX-2016-97) be and hereby is approved. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-28030 Filed 11-21-16; 8:45 am] BILLING CODE 8011-01-P
![83886 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices
the protection of investors or the public IV. Solicitation of Comments For the Commission, by the Division of
interest; (ii) impose any significant Trading and Markets, pursuant to delegated
burden on competition; and (iii) become Interested persons are invited to authority.22
operative for 30 days from the date on submit written data, views, and Brent J. Fields,
which it was filed, or such shorter time arguments concerning the foregoing, Secretary.
as the Commission may designate, it has including whether the proposed rule [FR Doc. 2016–28031 Filed 11–21–16; 8:45 am]
become effective pursuant to Section change is consistent with the Act. BILLING CODE 8011–01–P
19(b)(3)(A)(iii) of the Act 18 and Comments may be submitted by any of
subparagraph (f)(6) of Rule 19b–4 the following methods:
SECURITIES AND EXCHANGE
thereunder.19 Electronic Comments COMMISSION
A proposed rule change filed under
• Use the Commission’s Internet [Release No. 34–79322; File No. SR–Phlx–
Rule 19b–4(f)(6) normally does not 2016–97)
comment form (http://www.sec.gov/
become operative prior to 30 days after
rules/sro.shtml); or
the date of filing. However, Rule 19b– Self-Regulatory Organizations;
4(f)(6)(iii) 20 permits the Commission to • Send an email to rule-comments@ NASDAQ PHLX LLC; Order Granting
designate a shorter time if such action sec.gov. Please include File Number SR– Approval of Proposed Rule Change To
is consistent with the protection of ISEMercury–2016–20 on the subject Delete Outdated or Unnecessary Rule
investors and the public interest. In its line. Language in Phlx Rule 1020
filing with the Commission, the Paper Comments November 16, 2016.
Exchange requests that the Commission
waive the 30-day operative delay. The • Send paper comments in triplicate I. Introduction
Exchange asserts that waiver of the to Secretary, Securities and Exchange On September 27, 2016, NASDAQ
operative delay is consistent with the Commission, 100 F Street NE., PHLX LLC (‘‘Exchange’’ or ‘‘Phlx’’) filed
protection of investors and the public Washington, DC 20549–1090. with the Securities and Exchange
interest because the proposed rule Commission (‘‘SEC’’ or ‘‘Commission’’),
All submissions should refer to File
change makes non-substantive, pursuant to Section 19(b)(1) of the
Number SR–ISEMercury-2016–20. This Securities Exchange Act of 1934
technical changes to the Exchange’s
file number should be included on the (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
rules. The Exchange also believes that
subject line if email is used. To help the proposed rule change to delete or
the proposed rule change increases the
Commission process and review your amend its rules relating to specialists.
clarity of ISE Mercury rules to the
comments more efficiently, please use The proposed rule change was
benefit of members and investors that
only one method. The Commission will published for comment in the Federal
trade on the Exchange. For these
post all comments on the Commission’s Register on October 14, 2016.3 The
reasons, the Commission believes that
Internet Web site (http://www.sec.gov/ Commission received no comment
waiver of the 30-day operative delay is
rules/sro.shtml). Copies of the letters on the proposed rule change.
consistent with the protection of
submission, all subsequent This order approves the proposed rule
investors and the public interest.
amendments, all written statements change.
Therefore, the Commission designates
with respect to the proposed rule II. Description of the Proposal
the proposed rule change to be operative
change that are filed with the
upon filing. 21 Phlx Rule 1020 contains provisions
Commission, and all written
At any time within 60 days of the communications relating to the relating to the registration and functions
filing of the proposed rule change, the proposed rule change between the of options specialists.4 Section (b)
Commission summarily may provides that a member registered as a
Commission and any person, other than
temporarily suspend such rule change if specialist in one or more options has an
those that may be withheld from the
it appears to the Commission that such obligation to assist in the maintenance
public in accordance with the
action is: (i) Necessary or appropriate in of a fair and orderly market, ‘‘in
provisions of 5 U.S.C. 552, will be addition to the execution of orders
the public interest; (ii) for the protection available for Web site viewing and entrusted to him in such options.’’ The
of investors; or (iii) otherwise in printing in the Commission’s Public Exchange proposes to delete the
furtherance of the purposes of the Act. Reference Room, 100 F Street NE., language in section (b) regarding
If the Commission takes such action, the Washington, DC 20549, on official execution of entrusted orders. The
Commission shall institute proceedings business days between the hours of Exchange represents that today,
to determine whether the proposed rule 10:00 a.m. and 3:00 p.m. Copies of the specialists on the Exchange trade only
should be approved or disapproved. filing also will be available for for their own account and ‘‘no longer
inspection and copying at the principal handle any agency orders whatsoever in
18 15 U.S.C. 78s(b)(3)(A)(iii). office of the Exchange. All comments their role as specialists.’’ 5
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
received will be posted without change;
the Commission written notice of its intent to file the Commission does not edit personal 22 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
the proposed rule change at least five business days identifying information from
2 17 CFR 240.19b–4.
prior to the date of filing of the proposed rule submissions. You should submit only
sradovich on DSK3GMQ082PROD with NOTICES
change, or such shorter time as designated by the 3 See Securities Exchange Act Release No. 79073
Commission. The Exchange has satisfied this information that you wish to make (October 11, 2016), 81 FR 71153 (October 14, 2016)
requirement. available publicly. All submissions (‘‘Notice’’).
20 17 CFR 240.19b–4(f)(6)(iii).
should refer to File Number SR– 4 A ‘‘specialist’’ is an Exchange member who is
21 For purposes only of waiving the 30-day
ISEMercury–2016–20 and should be registered as an options specialist pursuant to Phlx
operative delay, the Commission also has Rule 1020(a). Specialists are subject to quoting and
considered the proposed rule’s impact on submitted on or before December 13, registration obligations set forth in Phlx Rules
efficiency, competition, and capital formation. See 2016. 1014(b), 1020 and 1080.02.
15 U.S.C. 78c(f). 5 See Notice, supra note 3, at 71154.
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![83888 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices
6(b)(5) of the Act,17 which requires, Section 911 of the Dodd-Frank Wall The agenda for the meeting includes:
among other things, that the rules of a Street Reform and Consumer Protection remarks from Commissioners; a
national securities exchange be Act of 2010, is providing notice that it discussion regarding investor protection
designed to promote just and equitable will hold a public meeting. The public priorities for the New Year; the
principles of trade, to remove is invited to submit written statements announcement of election results for
impediments to and perfect the to the Committee. open officer positions; an update on the
mechanism of a free and open market DATES: The meeting will be held on Commission’s response to the
and a national market system, and, in Thursday, December 8, 2016 from 9:30 rulemaking mandate of the Fixing
general, to protect investors and the a.m. until 3:00 p.m. (ET). Written America’s Surface Transportation Act
public interest; and are not designed to statements should be received on or concerning public company disclosure
permit unfair discrimination between before December 8, 2016. requirements; and a nonpublic
customers, issuers, brokers, or dealers. administrative work session during
ADDRESSES: The meeting will be held in
The Commission believes that the lunch.
Multi-Purpose Room LL–006 at the
deletion of Phlx Rules 1020(b), Dated: November 17, 2016.
Commission’s headquarters, 100 F
Commentary .01, Commentary .02 (a) Brent J. Fields,
Street NE., Washington, DC 20549. The
and (c), Commentary .03, Commentary Secretary.
meeting will be webcast on the
.04, and Commentary .06 should protect
Commission’s Web site at www.sec.gov. [FR Doc. 2016–28077 Filed 11–21–16; 8:45 am]
investors by helping to ensure that the
Written statements may be submitted by BILLING CODE 8011–01–P
Phlx rules accurately describe the
any of the following methods:
current operations of the Exchange and
obligations of its members. In addition, Electronic Statements SECURITIES AND EXCHANGE
the Commission notes that the deletion
D Use the Commission’s Internet COMMISSION
of Commentary .02 (b) to remove
submission form (http://www.sec.gov/ [Release No. 34–79328; File No. SR–
redundant rule language should add
rules/other.shtml); or NYSEMKT–2016–102]
clarity to Phlx’s rules and that the
D Send an email message to rules-
deletion of Commentary .05 and Self-Regulatory Organizations; NYSE
comments@sec.gov. Please include File
Commentary .06 should provide more MKT LLC; Notice of Filing of Proposed
No. 265–28 on the subject line; or
clarity regarding the obligations of Rule Change, as Modified by
specialists on the Exchange. Paper Statements Amendment No. 1 Thereto, Introducing
Accordingly, for the reasons
D Send paper statements to Brent J. NYSE OptX
discussed above, the Commission finds
Fields, Secretary, Securities and
that the proposed rule change is November 16, 2016.
Exchange Commission, 100 F Street NE.,
consistent with Section 6(b)(5) of the Pursuant to Section 19(b)(1) 1 of the
Washington, DC 20549–1090.
Act. Securities Exchange Act of 1934 (the
All submissions should refer to File No. ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
V. Conclusion 265–28. This file number should be notice is hereby given that on November
It is therefore ordered pursuant to included on the subject line if email is 3, 2016, NYSE MKT LLC, on behalf of
Section 19(b)(2) of the Act 18 that the used. To help us process and review NYSE Amex Options (‘‘NYSE Amex
proposed rule change (SR–PHLX–2016– your statement more efficiently, please Options’’ or the ‘‘Exchange’’) filed with
97) be and hereby is approved. use only one method. the Securities and Exchange
For the Commission, by the Division of Statements also will be available for Commission (the ‘‘Commission’’) the
Trading and Markets, pursuant to delegated Web site viewing and printing in the proposed rule change as described in
authority.19 Commission’s Public Reference Room, Items I, II, and III below, which Items
Brent J. Fields, 100 F Street NE., Room 1580, have been prepared by the self-
Secretary. Washington, DC 20549, on official regulatory organization. On November
[FR Doc. 2016–28030 Filed 11–21–16; 8:45 am]
business days between the hours of 15, 2016, the Exchange filed
10:00 a.m. and 3:00 p.m. All statements Amendment No. 1 to the proposal.4 The
BILLING CODE 8011–01–P
received will be posted without change; Commission is publishing this notice to
we do not edit personal identifying solicit comments on the proposed rule
SECURITIES AND EXCHANGE information from submissions. You change, as modified by Amendment No.
COMMISSION should submit only information that 1, from interested persons.
you wish to make available publicly.
[Release Nos. 33–10257; 34–79336; File No. I. Self-Regulatory Organization’s
FOR FURTHER INFORMATION CONTACT: Statement of the Terms of Substance of
265–28]
Marc Oorloff Sharma, Senior Special the Proposed Rule Change
Investor Advisory Committee Meeting Counsel, Office of the Investor
Advocate, at (202) 551–3302, Securities The Exchange proposes to introduce
AGENCY: Securities and Exchange and Exchange Commission, 100 F Street NYSE OptX, an order entry platform
Commission. NE., Washington, DC 20549. that would allow for the submission of
ACTION: Notice of meeting of Securities Qualified Contingent Cross (‘‘QCC’’)
SUPPLEMENTARY INFORMATION: The Orders and orders executed in the
and Exchange Commission Dodd-Frank meeting will be open to the public,
Investor Advisory Committee. except during that portion of the
sradovich on DSK3GMQ082PROD with NOTICES
1 15 U.S.C. 78s(b)(1).
SUMMARY:The Securities and Exchange meeting reserved for an administrative 2 15 U.S.C. 78a.
Commission Investor Advisory work session during lunch. Persons 3 17 CFR 240.19b–4.
Committee, established pursuant to needing special accommodations to take 4 In Amendment No. 1, the Exchange proposed to
part because of a disability should amend note 10, infra, to clarify that QCC Orders
sent through NYSE OptX to the Exchange for
17 15 U.S.C. 78f(b)(5). notify the contact person listed in the execution would comply with the order format and
18 15 U.S.C. 78s(b)(2). section above entitled FOR FURTHER EOC entry requirements established by the
19 17 CFR 200.30–3(a)(12). INFORMATION CONTACT. Exchange, which are set forth in Rule 955NY.
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Document Created: 2018-02-14 08:29:05
Document Modified: 2018-02-14 08:29:05
| 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 83886 |
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