81_FR_84142 81 FR 83917 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Limit Order Protection

81 FR 83917 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Limit Order Protection

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 225 (November 22, 2016)

Page Range83917-83920
FR Document2016-28033

Federal Register, Volume 81 Issue 225 (Tuesday, November 22, 2016)
[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Notices]
[Pages 83917-83920]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-28033]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79326; File No. SR-Phlx-2016-113]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the Limit 
Order Protection

November 16, 2016.
    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 November 15, 2016, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Limit Order Protection or 
``LOP'' for members accessing PSX and adding rule text related to a 
collar applicable to Primary Pegging and Market Pegging Orders.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqphlx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange recently adopted a new mechanism to protect against 
erroneous Limit Orders which are entered into PSX at Rule 3307(f).\3\ 
This mechanism addresses risks to market participants of human error in 
entering Limit Orders at unintended prices. Specifically, LOP prevents 
certain Limit Orders from executing or being placed on the Order Book 
at prices outside pre-set standard limits. The System rejects those 
Limit Orders, rather than executing them automatically. LOP rejects 
Limit Orders back to the member when the order exceeds certain defined 
logic. Specifically, LOP prevents certain Limit Orders at prices 
outside of pre-set standard limits (``LOP Limit'') from being accepted 
by the System.
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    \3\ See Securities Exchange Act Release No. 78246 [sic] (August 
24, 2016), 81 FR 59672 (August 30, 2016) (SR-Phlx-2016-58).
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Modifications of Orders
    In its adoptive filing, the Exchange noted that LOP shall apply to 
all Quotes and Orders, including any modified Orders.\4\ At this time, 
the Exchange proposes to remove ``including any modified Orders'' from 
the rule text at rule 3307(f)(i). The Exchange proposes to amend this 
language because it is misleading and may cause confusion. The Exchange 
proposes to state that LOP shall apply to all Quotes and Orders, 
including Quotes and Orders that have been modified, where the 
modification results in a new timestamp and priority.\5\ Any Order that 
is modified within the System, but does not lose priority, for example 
an Order that was decremented, will not be subject to LOP after it was 
modified because the system does not cancel decremented orders from the 
Order Book. If an Order is cancelled either by the member or by the 
system and a new Order entered into the System, the new Order would be 
subject to LOP. For example, if the price of an Order is modified, the 
system will cancel the Order and the modified Order would receive a new 
timestamp and priority and this Order would be subject to LOP.
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    \4\ If an Order is modified, LOP will review the order anew and, 
if LOP is triggered, such modification will not take effect and the 
original order will be rejected.
    \5\ See Rule 4756 (Entry and Display of Quotes and Orders) at 
(a)(3).
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Exceptions to LOP
    The Exchange also noted in its adoptive filing that LOP would not 
apply to Market Orders, Market Maker Peg Orders \6\ or Intermarket 
Sweep Orders (ISO).\7\ The Exchange proposes to modify this language to 
specifically state that LOP would not apply to Orders with Market and 
Primary Pegging.\8\
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    \6\ A ``Market Maker Peg Order'' is an Order Type designed to 
allow a Market Maker to maintain a continuous two-sided quotation at 
a displayed price that is compliant with the quotation requirements 
for Market Makers set forth in Rule 3213(a)(2). The displayed price 
of the Market Maker Peg Order is set with reference to a ``Reference 
Price'' in order to keep the displayed price of the Market Maker Peg 
Order within a bounded price range. A Market Maker Peg Order may be 
entered through RASH or FIX only. A Market Maker Peg Order must be 
entered with a limit price beyond which the Order may not be priced. 
The Reference Price for a Market Maker Peg Order to buy (sell) is 
the then-current National Best Bid (National Best Offer) (including 
PSX), or if no such National Best Bid or National Best Offer, the 
most recent reported last-sale eligible trade from the responsible 
single plan processor for that day, or if none, the previous closing 
price of the security as adjusted to reflect any corporate actions 
(e.g., dividends or stock splits) in the security. See PSX Rule 
3301A(b)(5)(A).
    \7\ An Intermarket Sweep or ISO Order, which is an Order that is 
immediately executable within PSX against Orders against which they 
are marketable, is not subject to LOP. See PSX Rule 3401(g).
    \8\ Orders with Market and Primary Pegging available through 
RASH and FIX only.
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    There are three types of Pegging Orders: Primary Pegging, Market 
Pegging and Midpoint Pegging. Pegging is an Order Attribute that allows 
an Order to have its price automatically set with reference to the 
NBBO; provided, however, that if PSX is the sole market center at the 
Best Bid or Best Offer (as applicable), then the price of any Displayed 
Order with Primary Pegging (as defined below) will be set with 
reference to the highest bid or lowest offer disseminated by a market 
center other than PSX. An Order with a Pegging Order Attribute may be 
referred to as a ``Pegged Order.''\9\ For purposes of this Rule 3301B, 
the price to which an Order is pegged will be referred to as the Inside 
Quotation, the Inside Bid, or the Inside Offer, as appropriate. There 
are three varieties of Pegging:
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    \9\ PSX Rule 3301B(d).

     Primary Pegging means Pegging with reference to the 
Inside Quotation on the same side of the market. For example, if the 
Inside Bid was $11, an Order to buy with Primary Pegging would be 
priced at $11.
     Market Pegging means Pegging with reference to the 
Inside Quotation on the opposite side of the market. For example, if 
the Inside Offer was $11.06, an Order to buy with Market Pegging 
would be priced at $11.06.
     Midpoint Pegging means Pegging with reference to the 
midpoint between the Inside Bid and the Inside Offer (the 
``Midpoint''). Thus, if the Inside Bid was $11 and the Inside Offer 
was $11.06, an Order with Midpoint Pegging would be priced at 
$11.03.

[[Page 83918]]

An Order with Midpoint Pegging is not displayed. An Order with 
Midpoint Pegging may be executed in sub-pennies if necessary to 
obtain a midpoint price.

    Midpoint Pegging will be the only Pegging Order subject to LOP, 
provided it has a limit price. An Order with Pegging may specify a 
limit price beyond which the Order may not be executed; provided, 
however, that if an Order has been assigned a Pegging Order Attribute 
and a Discretion Order \10\ Attribute, the Order may execute at any 
price within the discretionary price range, even if beyond the limit 
price specified with respect to the Pegging Order Attribute. A Midpoint 
Pegging Order may have a discretion attribute. A Midpoint Pegging Order 
with a discretion price would not be subject to LOP. The Exchange notes 
that a Midpoint Pegging Order, similar to a Primary or Market Pegging 
Order, as explained below, may result is [sic] an aggressive or passive 
price. As a result, the LOP may remove orders that were intended to be 
more aggressive or passive due to the discretionary attribute. For this 
reason, the Exchange will not subject a Midpoint Pegging Order with a 
discretion price to LOP.
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    \10\ Discretion is an Order Attribute under which an Order has a 
non-displayed discretionary price range within which the entering 
Participant is willing to trade; such an Order may be referred to as 
a ``Discretionary Order.'' See PSX Rule 3301B(g).
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    In addition, an Order with Primary Pegging or Market Pegging may 
specify an Offset Amount,\11\ such that the price of the Order will 
vary from the Inside Quotation by the selected Offset Amount. The 
Offset Amount may be either aggressive or passive. Thus, for example, 
if a Participant entered an Order to buy with Primary Pegging and a 
passive Offset Amount of $0.05 and the Inside Bid was $11, the Order 
would be priced at $10.95. If the Participant selected an aggressive 
Offset Amount of $0.02, however, the Order would be priced at $11.02. 
An Order with Primary Pegging and an Offset Amount will not be 
Displayed, unless the Order is Attributable. The Exchange notes that 
both Market and Primary Pegging may impact the market by effecting the 
bid or offer.
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    \11\ An offset is not supported for a Midpoint Pegging Order.
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    The Exchange is not applying LOP to orders with Market or Primary 
Pegging because it may result in removing orders that were intended to 
be more aggressive or to set the bid or offer on the market due to the 
order attributes noted above. These Pegging Orders are also subject to 
a collar, which is explained in this rule change.
    In contrast, an Order with Midpoint Pegging will only be at the 
midpoint and not have the same impact as the other two types of orders 
and therefore subjecting such an order to LOP does not impact the 
potential of the order since by definition it is set to the midpoint. 
An Order with Midpoint Pegging will not be displayed and is not subject 
to a collar.
    An Order with Market Pegging and no Offset behaves as a ``market 
order'' with respect to any liquidity on the PSX Book at the Inside 
Quotation on the opposite side of the market because it is immediately 
executable at that price. If, at the time of entry, there is no price 
to which a Pegged Order can be pegged, the Order will be rejected; 
provided, however, that a Displayed Order that has Market Pegging, or 
an Order with a Non-Display Attribute that has Primary Pegging or 
Market Pegging, will be accepted at its limit price. In the case of an 
Order with Midpoint Pegging, if the Inside Bid and Inside Offer are 
locked, the Order will be priced at the locking price, if the Inside 
Bid and Inside Offer are crossed, the Order will nevertheless be priced 
at the midpoint between the Inside Bid and Inside Offer, and if there 
is no Inside Bid and/or Inside Offer, the Order will be rejected. 
However, even if the Inside Bid and Inside Offer are locked or crossed, 
an Order with Midpoint Pegging that locked or crossed an Order on the 
PSX Book would execute (provided, however, that a Midpoint Peg Post-
Only Order would execute or post as described in Rule 3301B(d). It is 
important to note that only to the extent that a Midpoint Pegging Order 
has a limit price that the Order would be subject to LOP, unless the 
Midpoint Pegging Order also has a discretion attribute. If no limit 
price is specified, the Midpoint Pegging Order would not be subject to 
LOP.
    LOP will be operational each trading day, except during trading 
halts and pauses. Members will continue to be subject to certain 
parameters when submitting Limit Orders into the Order Book. LOP will 
not apply in the event that there is no established LOP Reference 
Price.\12\ The LOP Reference Price shall be the current National Best 
Bid or Best Offer (NBBO), the bid for sell orders and the offer for buy 
orders.\13\ LOP is will be applicable on all protocols.\14\ The LOP 
feature will be mandatory for all PSX members.
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    \12\ For example, if there is a one-sided quote or if the NBB, 
when used as the LOP Reference Price, is equal to or less than 
$0.50.
    \13\ The Exchange will not accept incoming Limit Orders that 
exceed the LOP Reference Threshold. Limit Orders will not be 
accepted if the price of the Limit Order is greater than the LOP 
Reference Threshold for a buy Limit Order. Limit Orders will not be 
accepted if the price of the Limit Order is less than the LOP 
Reference Threshold for a sell Limit Order. The LOP Reference 
Threshold for buy orders will be the LOP Reference Price (offer) 
plus the applicable percentage specified in the LOP Limit. The LOP 
Reference Threshold for sell orders will be the LOP Reference Price 
(bid) minus the applicable percentage specified in the LOP Limit. 
The LOP Limit will be the greater of 10% of the LOP Reference Price 
or $0.50 for all securities across all trading sessions. The LOP 
Reference Price will be the current National Best Bid or Best Offer 
(NBBO), the bid for sell orders and the offer for buy orders.
    \14\ PSX maintains several communications protocols for members 
to use in entering Orders and sending other messages to PSX, such 
as: OUCH, RASH, FLITE, and FIX.
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Implementation of LOP
    The Exchange indicated in its adoptive rule change that it would 
implement this rule within ninety (90) days of the approval of the 
proposed rule change.\15\ At this time, the Exchange proposes to delay 
this implementation an additional sixty (60) days from the original 
timeframe in order to implement the LOP with the changes proposed 
herein. The Exchange will issue an Equities Trader Alert in advance to 
inform market participants of such implementation date.
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    \15\ See note 3 above.
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Pegging Order Collar
    In 2009, the Exchange adopted a collar for certain Unpriced 
Orders.\16\ At that time, the Exchange defined an Unpriced Order as any 
order type permitted by the System to buy or sell shares of a security 
at the national best bid (best offer) (``NBBO'') at the time when the 
order reaches the System. Any portion of an Unpriced Order that would 
execute on PSX at a price more than $0.25 or 5 percent worse than the 
NBBO at the time when the order reaches the System, whichever is 
greater, will be cancelled.
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    \16\ See Securities Exchange Act Release No. 63051 (October 6, 
2010), 75 FR 63240 (October 14, 2010) (SR-Phlx-2010-135). An 
``Unpriced Order'' was defined in this rule change as any order type 
permitted by the System to buy or sell shares of a security at the 
national best bid (best offer) (``NBBO'') at the time when the order 
reaches the System.
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    This rule related to the collar was inadvertently removed from the 
Exchange's rules.\17\ At this time, the Exchange proposes to amend the 
PSX rules to add the collar into the rules once again.
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    \17\ See Securities Exchange Act Commission [sic] Release No. 
75293 (June 24, 2015), 80 FR 37327 (June 30, 2015) (SR-Phlx-2015-
29).
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    The purpose of the collar is to protect market participants by 
reducing the risk that Primary and Market Pegging Orders will execute 
at prices that are significantly worse than the national

[[Page 83919]]

best bid and offer (``NBBO'') at the time the Exchange receives the 
order. The Exchange believes that most market participants expect that 
their order will be executed at its full size at a price reasonably 
related to the prevailing market. However, market participants may not 
be aware that there is insufficient liquidity at or near the NBBO to 
fill the entire order, particularly for more thinly-traded securities.
    The Exchange proposes to memorialize this collar, which currently 
exists in its trading and routing systems functionality, and define it 
specifically as applicable to Primary and Market Pegging Orders. The 
Exchange seeks to memorialize the rule within Rule 3301B, entitled 
``Order Attributes.'' The new rule text would state, ``Primary Pegging 
Orders and Market Pegging Orders are subject to a collar. Any portion 
of a Primary Pegging Order or Market Pegging Order that would execute, 
either on the Exchange or when routed to another market center, at a 
price of more than $0.25 or 5 percent worse than the NBBO at the time 
when the order reaches the System, whichever is greater, will be 
cancelled.''
    The following example illustrates how the collar works. A market 
participant submits a routable order to buy 500 shares. The NBBO is 
$6.00 bid by $6.05 offer, with 100 shares available on each side. Both 
sides of the NBBO are set by another market center (``Away Market''), 
but PSX has 100 shares available at the $6.05 to sell at the offer 
price and also has reserve orders to sell 100 shares at $6.32 and 400 
shares at $6.40. No other market center is publishing offers to sell 
the security in between $6.05 and $6.40.
    In this example, the order would be executed in the following 
manner:
     100 shares would be executed by PSX at the $6.05;
     400 shares would be routed to the Away Market as an 
immediate or cancel order with a price of $6.05;
     100 shares executed by the Away Market;\18\
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    \18\ This assumes that the Away Market's offer was still 
available and that the Away Market had no additional non-displayed 
orders at this price.
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     300 shares returned to PSX;
     100 shares executed by PSX at $6.32 (more than $0.25 but 
less than 5 percent worse than the NBBO); and 200 shares, representing 
the remainder of the order, would be cancelled because the remaining 
liquidity available at $6.40 is more than 5 percent worse than the 
NBBO.
Implementation of Pegging Order Collar
    The Exchange intends to implement the Pegging Order Collar as soon 
as practicable pursuant to this proposal. The Exchange requests a 
waiver of the operative delay to implement the Pegging Order Collar.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\19\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\20\ 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 mitigating risks to market participants of human error in 
entering Limit Orders at clearly unintended prices. The proposal will 
allow for protections for Limit Orders which should encourage price 
continuity and, in turn, protect investors and the public interest by 
reducing executions occurring at dislocated prices.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Exchange's proposal to amend the language concerning the 
modification of Orders is consistent with the Act because only new 
Orders would be subject to LOP. The proposed new language specifies 
that Orders that are modified for size and remain in the Order Book 
with the same priority, because only size was modified to reduce the 
size, will not be subject to LOP. Other modifications to Orders that 
amend the timestamp or priority will subject the modified orders to LOP 
because these Orders will be submitted into the System as new Orders. 
The LOP functionality protects market participants by reducing the risk 
that Midpoint Pegging Orders will execute at prices that are 
significantly worse than the national best bid and offer (``NBBO'') at 
the time the Exchange receives the order.
    The LOP feature assists with the maintenance of fair and orderly 
markets by mitigating the risks associated with errors resulting in 
executions at prices that are away from the Best Bid or Offer and 
potentially erroneous. Further it protects investors from potentially 
receiving executions away from the prevailing prices at any given time. 
The Exchange adopted LOP to avoid a series of improperly priced 
aggressive orders transacting in the Order Book.
    The Exchange believes that excluding Primary Pegging and Market 
Pegging Orders is consistent with the Act because including such orders 
may result in removing orders that were intended to be more aggressive 
or to set the bid or offer on the market due to the order attributes 
noted in the Purpose section of this rule change. Market and Primary 
Pegging Orders are also currently subject to a collar. Market and 
Primary Pegging Orders that would execute, either on the Exchange or 
when routed to another market center, at a price of more than $0.25 or 
5 percent worse than the NBBO at the time when the order reaches the 
System, whichever is greater, will be cancelled.\21\ Further, the 
Market Pegging Order has its own process for rejecting those orders 
where no price exists to which a Pegged Order can be pegged.
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    \21\ The Exchange inadvertently removed the rule from the Phlx 
Rulebook. The Exchange proposes to adopt the rule herein.
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    This feature should create a level of protection that prevents the 
Limit Orders from entering the Order Book outside of an acceptable 
range for the Limit Order to execute. The LOP should reduce the 
negative impacts of sudden, unanticipated volatility, and serve to 
preserve an orderly market in a transparent and uniform manner, 
increase overall market confidence, and promote fair and orderly 
markets and the protection of investors.
Pegging Order Collar
    The Exchange believes that the collar proposal is consistent with 
the Act because 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 avoiding execution of 
Primary and Market Pegging Orders (either on PSX or on other market 
centers as a result of orders routed by PSX) at prices that are 
significantly worse than the NBBO at the time the order is initially 
received. The NBBO provides reasonable guidance of the current value of 
a given security and therefore market participants should have 
confidence that their Market and Primary Pegging Orders will not be 
executed at a significantly worse price than the NBBO.

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 LOP feature should provide 
market participants with additional price

[[Page 83920]]

protection from anomalous executions. This feature is not optional and 
is applicable to all members submitting Limit Orders. Thus, the 
Exchange does not believe the proposal creates any significant impact 
on competition. In addition, the proposed collar in Rule 3301B would be 
applicable to all Market and Primary Pegging Orders entered into the 
PSX System. Similarly, all Midpoint Pegging Order will be subject to 
LOP, unless they have a discretion attribute.

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) of the Act and Rule 19b-
4(f)(6) thereunder.\22\
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    \22\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \23\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \24\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. When the 
Exchange first proposed the LOP, the Exchange represented that it would 
implement the LOP within 90 days of obtaining Commission approval 
(i.e., by November 22, 2016).\25\ The Exchange now proposes to extend 
the LOP implementation date by 60 days in order to include the 
modifications in this proposed rule change with the implementation of 
the LOP. Waiver of the 30-day operative delay would allow the Exchange 
to immediately extend the LOP implementation date. The waiver would 
also permit the Exchange to immediately clarify the application of the 
LOP to modified orders. Moreover, the waiver would allow the Exchange 
to immediately exclude from the LOP Market Pegging Orders, Primary 
Pegging Orders, and Midpoint Pegging Orders that have a discretion 
price. As noted above, the Exchange proposes to exclude these Orders 
because these Orders may be intended to be aggressive or to set the bid 
or offer on the market. Moreover, as noted above, Market and Primary 
Pegging Orders are currently subject to collars. Lastly, the waiver 
would allow the Exchange's rules to immediately and accurately reflect 
the current collars for Market and Primary Pegging Orders, which were 
removed inadvertently. Accordingly, the Commission finds that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest and designates the proposal operative 
upon filing.\26\
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    \23\ 17 CFR 240.19b-4(f)(6).
    \24\ 17 CFR 240.19b-4(f)(6)(iii).
    \25\ See Securities Exchange Act Release Nos. 78245 (July 7, 
2016), 81 FR 45337 (July 13, 2016) (noticing SR-Phlx-2016-58) and 
78667 (August 24, 2016), 81 FR 59672 (August 30, 2016) (approving 
SR-Phlx-2016-58).
    \26\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
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 change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2016-113 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2016-113. 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-2016-113 and should be 
submitted on or before December 13, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
Brent J. Fields,
Secretary.
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    \27\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-28033 Filed 11-21-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                                              Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices                                                      83917

                                                  Dated: November 16, 2016.                                A. Self-Regulatory Organization’s                     apply to Market Orders, Market Maker
                                                Brent J. Fields,                                           Statement of the Purpose of, and                      Peg Orders 6 or Intermarket Sweep
                                                Secretary.                                                 Statutory Basis for, the Proposed Rule                Orders (ISO).7 The Exchange proposes
                                                [FR Doc. 2016–28027 Filed 11–21–16; 8:45 am]               Change                                                to modify this language to specifically
                                                BILLING CODE 8011–01–P                                     1. Purpose                                            state that LOP would not apply to
                                                                                                                                                                 Orders with Market and Primary
                                                                                                              The Exchange recently adopted a new                Pegging.8
                                                SECURITIES AND EXCHANGE                                    mechanism to protect against erroneous                   There are three types of Pegging
                                                COMMISSION                                                 Limit Orders which are entered into                   Orders: Primary Pegging, Market
                                                                                                           PSX at Rule 3307(f).3 This mechanism                  Pegging and Midpoint Pegging. Pegging
                                                [Release No. 34–79326; File No. SR–Phlx–                   addresses risks to market participants of             is an Order Attribute that allows an
                                                2016–113]                                                  human error in entering Limit Orders at               Order to have its price automatically set
                                                                                                           unintended prices. Specifically, LOP                  with reference to the NBBO; provided,
                                                Self-Regulatory Organizations;
                                                                                                           prevents certain Limit Orders from                    however, that if PSX is the sole market
                                                NASDAQ PHLX LLC; Notice of Filing
                                                                                                           executing or being placed on the Order                center at the Best Bid or Best Offer (as
                                                and Immediate Effectiveness of
                                                                                                           Book at prices outside pre-set standard               applicable), then the price of any
                                                Proposed Rule Change To Amend the
                                                                                                           limits. The System rejects those Limit                Displayed Order with Primary Pegging
                                                Limit Order Protection
                                                                                                           Orders, rather than executing them                    (as defined below) will be set with
                                                November 16, 2016.                                         automatically. LOP rejects Limit Orders               reference to the highest bid or lowest
                                                   Pursuant to Section 19(b)(1) of the                     back to the member when the order                     offer disseminated by a market center
                                                Securities Exchange Act of 1934                            exceeds certain defined logic.                        other than PSX. An Order with a
                                                (‘‘Act’’),1 and Rule 19b–4 thereunder,2                    Specifically, LOP prevents certain Limit              Pegging Order Attribute may be referred
                                                notice is hereby given that on November                    Orders at prices outside of pre-set                   to as a ‘‘Pegged Order.’’9 For purposes
                                                15, 2016, NASDAQ PHLX LLC (‘‘Phlx’’                        standard limits (‘‘LOP Limit’’) from                  of this Rule 3301B, the price to which
                                                or ‘‘Exchange’’) filed with the Securities                 being accepted by the System.                         an Order is pegged will be referred to as
                                                and Exchange Commission (‘‘SEC’’ or                        Modifications of Orders                               the Inside Quotation, the Inside Bid, or
                                                ‘‘Commission’’) the proposed rule                                                                                the Inside Offer, as appropriate. There
                                                change as described in Items I and II                        In its adoptive filing, the Exchange
                                                                                                                                                                 are three varieties of Pegging:
                                                below, which Items have been prepared                      noted that LOP shall apply to all Quotes
                                                                                                           and Orders, including any modified                      • Primary Pegging means Pegging with
                                                by the Exchange. The Commission is                                                                               reference to the Inside Quotation on the same
                                                publishing this notice to solicit                          Orders.4 At this time, the Exchange
                                                                                                           proposes to remove ‘‘including any                    side of the market. For example, if the Inside
                                                comments on the proposed rule change                                                                             Bid was $11, an Order to buy with Primary
                                                                                                           modified Orders’’ from the rule text at
                                                from interested persons.                                                                                         Pegging would be priced at $11.
                                                                                                           rule 3307(f)(i). The Exchange proposes                  • Market Pegging means Pegging with
                                                I. Self-Regulatory Organization’s                          to amend this language because it is                  reference to the Inside Quotation on the
                                                Statement of the Terms of Substance of                     misleading and may cause confusion.                   opposite side of the market. For example, if
                                                the Proposed Rule Change                                   The Exchange proposes to state that                   the Inside Offer was $11.06, an Order to buy
                                                   The Exchange proposes to amend the                      LOP shall apply to all Quotes and                     with Market Pegging would be priced at
                                                                                                           Orders, including Quotes and Orders                   $11.06.
                                                Limit Order Protection or ‘‘LOP’’ for                                                                              • Midpoint Pegging means Pegging with
                                                members accessing PSX and adding rule                      that have been modified, where the
                                                                                                           modification results in a new timestamp               reference to the midpoint between the Inside
                                                text related to a collar applicable to                                                                           Bid and the Inside Offer (the ‘‘Midpoint’’).
                                                Primary Pegging and Market Pegging                         and priority.5 Any Order that is
                                                                                                                                                                 Thus, if the Inside Bid was $11 and the
                                                Orders.                                                    modified within the System, but does                  Inside Offer was $11.06, an Order with
                                                   The text of the proposed rule change                    not lose priority, for example an Order               Midpoint Pegging would be priced at $11.03.
                                                is available on the Exchange’s Web site                    that was decremented, will not be
                                                at http://nasdaqphlx.cchwallstreet.com/                    subject to LOP after it was modified                     6 A ‘‘Market Maker Peg Order’’ is an Order Type

                                                , at the principal office of the Exchange,                 because the system does not cancel                    designed to allow a Market Maker to maintain a
                                                and at the Commission’s Public                             decremented orders from the Order                     continuous two-sided quotation at a displayed price
                                                                                                           Book. If an Order is cancelled either by              that is compliant with the quotation requirements
                                                Reference Room.                                                                                                  for Market Makers set forth in Rule 3213(a)(2). The
                                                                                                           the member or by the system and a new                 displayed price of the Market Maker Peg Order is
                                                II. Self-Regulatory Organization’s                         Order entered into the System, the new                set with reference to a ‘‘Reference Price’’ in order
                                                Statement of the Purpose of, and                           Order would be subject to LOP. For                    to keep the displayed price of the Market Maker Peg
                                                Statutory Basis for, the Proposed Rule                     example, if the price of an Order is                  Order within a bounded price range. A Market
                                                Change                                                                                                           Maker Peg Order may be entered through RASH or
                                                                                                           modified, the system will cancel the                  FIX only. A Market Maker Peg Order must be
                                                   In its filing with the Commission, the                  Order and the modified Order would                    entered with a limit price beyond which the Order
                                                Exchange included statements                               receive a new timestamp and priority                  may not be priced. The Reference Price for a Market
                                                                                                           and this Order would be subject to LOP.               Maker Peg Order to buy (sell) is the then-current
                                                concerning the purpose of and basis for                                                                          National Best Bid (National Best Offer) (including
                                                the proposed rule change and discussed                     Exceptions to LOP                                     PSX), or if no such National Best Bid or National
                                                any comments it received on the                                                                                  Best Offer, the most recent reported last-sale eligible
                                                proposed rule change. The text of these                      The Exchange also noted in its                      trade from the responsible single plan processor for
                                                                                                           adoptive filing that LOP would not                    that day, or if none, the previous closing price of
                                                statements may be examined at the                                                                                the security as adjusted to reflect any corporate
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                                                places specified in Item IV below. The                        3 See Securities Exchange Act Release No. 78246    actions (e.g., dividends or stock splits) in the
                                                Exchange has prepared summaries, set                       [sic] (August 24, 2016), 81 FR 59672 (August 30,      security. See PSX Rule 3301A(b)(5)(A).
                                                                                                                                                                    7 An Intermarket Sweep or ISO Order, which is
                                                forth in sections A, B, and C below, of                    2016) (SR–Phlx–2016–58).
                                                                                                              4 If an Order is modified, LOP will review the     an Order that is immediately executable within PSX
                                                the most significant aspects of such                                                                             against Orders against which they are marketable,
                                                                                                           order anew and, if LOP is triggered, such
                                                statements.                                                modification will not take effect and the original    is not subject to LOP. See PSX Rule 3401(g).
                                                                                                           order will be rejected.                                  8 Orders with Market and Primary Pegging
                                                  1 15   U.S.C. 78s(b)(1).                                    5 See Rule 4756 (Entry and Display of Quotes and   available through RASH and FIX only.
                                                  2 17   CFR 240.19b–4.                                    Orders) at (a)(3).                                       9 PSX Rule 3301B(d).




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                                                83918                      Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices

                                                An Order with Midpoint Pegging is not                      In contrast, an Order with Midpoint                   all protocols.14 The LOP feature will be
                                                displayed. An Order with Midpoint Pegging               Pegging will only be at the midpoint                     mandatory for all PSX members.
                                                may be executed in sub-pennies if necessary             and not have the same impact as the
                                                to obtain a midpoint price.                                                                                      Implementation of LOP
                                                                                                        other two types of orders and therefore
                                                   Midpoint Pegging will be the only                    subjecting such an order to LOP does                       The Exchange indicated in its
                                                Pegging Order subject to LOP, provided                  not impact the potential of the order                    adoptive rule change that it would
                                                it has a limit price. An Order with                     since by definition it is set to the                     implement this rule within ninety (90)
                                                Pegging may specify a limit price                       midpoint. An Order with Midpoint                         days of the approval of the proposed
                                                beyond which the Order may not be                       Pegging will not be displayed and is not                 rule change.15 At this time, the
                                                executed; provided, however, that if an                 subject to a collar.                                     Exchange proposes to delay this
                                                Order has been assigned a Pegging                          An Order with Market Pegging and no                   implementation an additional sixty (60)
                                                Order Attribute and a Discretion                        Offset behaves as a ‘‘market order’’ with                days from the original timeframe in
                                                Order 10 Attribute, the Order may                       respect to any liquidity on the PSX Book                 order to implement the LOP with the
                                                execute at any price within the                         at the Inside Quotation on the opposite                  changes proposed herein. The Exchange
                                                discretionary price range, even if                      side of the market because it is                         will issue an Equities Trader Alert in
                                                beyond the limit price specified with                   immediately executable at that price. If,                advance to inform market participants
                                                respect to the Pegging Order Attribute.                 at the time of entry, there is no price to               of such implementation date.
                                                A Midpoint Pegging Order may have a                     which a Pegged Order can be pegged,                      Pegging Order Collar
                                                discretion attribute. A Midpoint Pegging                the Order will be rejected; provided,
                                                                                                        however, that a Displayed Order that                       In 2009, the Exchange adopted a
                                                Order with a discretion price would not
                                                                                                        has Market Pegging, or an Order with a                   collar for certain Unpriced Orders.16 At
                                                be subject to LOP. The Exchange notes
                                                                                                        Non-Display Attribute that has Primary                   that time, the Exchange defined an
                                                that a Midpoint Pegging Order, similar
                                                                                                        Pegging or Market Pegging, will be                       Unpriced Order as any order type
                                                to a Primary or Market Pegging Order,
                                                                                                        accepted at its limit price. In the case of              permitted by the System to buy or sell
                                                as explained below, may result is [sic]
                                                                                                        an Order with Midpoint Pegging, if the                   shares of a security at the national best
                                                an aggressive or passive price. As a
                                                                                                        Inside Bid and Inside Offer are locked,                  bid (best offer) (‘‘NBBO’’) at the time
                                                result, the LOP may remove orders that
                                                                                                        the Order will be priced at the locking                  when the order reaches the System. Any
                                                were intended to be more aggressive or
                                                                                                        price, if the Inside Bid and Inside Offer                portion of an Unpriced Order that
                                                passive due to the discretionary
                                                                                                        are crossed, the Order will nevertheless                 would execute on PSX at a price more
                                                attribute. For this reason, the Exchange
                                                                                                        be priced at the midpoint between the                    than $0.25 or 5 percent worse than the
                                                will not subject a Midpoint Pegging
                                                                                                        Inside Bid and Inside Offer, and if there                NBBO at the time when the order
                                                Order with a discretion price to LOP.
                                                                                                        is no Inside Bid and/or Inside Offer, the                reaches the System, whichever is
                                                   In addition, an Order with Primary
                                                                                                        Order will be rejected. However, even if                 greater, will be cancelled.
                                                Pegging or Market Pegging may specify                                                                              This rule related to the collar was
                                                an Offset Amount,11 such that the price                 the Inside Bid and Inside Offer are
                                                                                                        locked or crossed, an Order with                         inadvertently removed from the
                                                of the Order will vary from the Inside                                                                           Exchange’s rules.17 At this time, the
                                                Quotation by the selected Offset                        Midpoint Pegging that locked or crossed
                                                                                                        an Order on the PSX Book would                           Exchange proposes to amend the PSX
                                                Amount. The Offset Amount may be                                                                                 rules to add the collar into the rules
                                                either aggressive or passive. Thus, for                 execute (provided, however, that a
                                                                                                        Midpoint Peg Post-Only Order would                       once again.
                                                example, if a Participant entered an                                                                               The purpose of the collar is to protect
                                                Order to buy with Primary Pegging and                   execute or post as described in Rule
                                                                                                        3301B(d). It is important to note that                   market participants by reducing the risk
                                                a passive Offset Amount of $0.05 and                                                                             that Primary and Market Pegging Orders
                                                the Inside Bid was $11, the Order would                 only to the extent that a Midpoint
                                                                                                        Pegging Order has a limit price that the                 will execute at prices that are
                                                be priced at $10.95. If the Participant                                                                          significantly worse than the national
                                                selected an aggressive Offset Amount of                 Order would be subject to LOP, unless
                                                $0.02, however, the Order would be                      the Midpoint Pegging Order also has a
                                                                                                                                                                 less than the LOP Reference Threshold for a sell
                                                priced at $11.02. An Order with Primary                 discretion attribute. If no limit price is               Limit Order. The LOP Reference Threshold for buy
                                                Pegging and an Offset Amount will not                   specified, the Midpoint Pegging Order                    orders will be the LOP Reference Price (offer) plus
                                                be Displayed, unless the Order is                       would not be subject to LOP.                             the applicable percentage specified in the LOP
                                                                                                           LOP will be operational each trading                  Limit. The LOP Reference Threshold for sell orders
                                                Attributable. The Exchange notes that                                                                            will be the LOP Reference Price (bid) minus the
                                                both Market and Primary Pegging may                     day, except during trading halts and                     applicable percentage specified in the LOP Limit.
                                                impact the market by effecting the bid                  pauses. Members will continue to be                      The LOP Limit will be the greater of 10% of the
                                                or offer.                                               subject to certain parameters when                       LOP Reference Price or $0.50 for all securities
                                                                                                        submitting Limit Orders into the Order                   across all trading sessions. The LOP Reference Price
                                                   The Exchange is not applying LOP to                                                                           will be the current National Best Bid or Best Offer
                                                orders with Market or Primary Pegging                   Book. LOP will not apply in the event                    (NBBO), the bid for sell orders and the offer for buy
                                                because it may result in removing orders                that there is no established LOP                         orders.
                                                that were intended to be more                           Reference Price.12 The LOP Reference                        14 PSX maintains several communications


                                                aggressive or to set the bid or offer on                Price shall be the current National Best                 protocols for members to use in entering Orders and
                                                                                                        Bid or Best Offer (NBBO), the bid for                    sending other messages to PSX, such as: OUCH,
                                                the market due to the order attributes                                                                           RASH, FLITE, and FIX.
                                                noted above. These Pegging Orders are                   sell orders and the offer for buy                           15 See note 3 above.

                                                also subject to a collar, which is                      orders.13 LOP is will be applicable on                      16 See Securities Exchange Act Release No. 63051

                                                explained in this rule change.                                                                                   (October 6, 2010), 75 FR 63240 (October 14, 2010)
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                                                                                                           12 For example, if there is a one-sided quote or if   (SR–Phlx–2010–135). An ‘‘Unpriced Order’’ was
                                                                                                        the NBB, when used as the LOP Reference Price,           defined in this rule change as any order type
                                                  10 Discretion is an Order Attribute under which       is equal to or less than $0.50.                          permitted by the System to buy or sell shares of a
                                                an Order has a non-displayed discretionary price           13 The Exchange will not accept incoming Limit        security at the national best bid (best offer)
                                                range within which the entering Participant is          Orders that exceed the LOP Reference Threshold.          (‘‘NBBO’’) at the time when the order reaches the
                                                willing to trade; such an Order may be referred to      Limit Orders will not be accepted if the price of the    System.
                                                as a ‘‘Discretionary Order.’’ See PSX Rule 3301B(g).    Limit Order is greater than the LOP Reference               17 See Securities Exchange Act Commission [sic]
                                                  11 An offset is not supported for a Midpoint          Threshold for a buy Limit Order. Limit Orders will       Release No. 75293 (June 24, 2015), 80 FR 37327
                                                Pegging Order.                                          not be accepted if the price of the Limit Order is       (June 30, 2015) (SR–Phlx–2015–29).



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                                                                           Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices                                                  83919

                                                best bid and offer (‘‘NBBO’’) at the time               Implementation of Pegging Order Collar                because including such orders may
                                                the Exchange receives the order. The                      The Exchange intends to implement                   result in removing orders that were
                                                Exchange believes that most market                      the Pegging Order Collar as soon as                   intended to be more aggressive or to set
                                                participants expect that their order will               practicable pursuant to this proposal.                the bid or offer on the market due to the
                                                be executed at its full size at a price                 The Exchange requests a waiver of the                 order attributes noted in the Purpose
                                                reasonably related to the prevailing                    operative delay to implement the                      section of this rule change. Market and
                                                market. However, market participants                    Pegging Order Collar.                                 Primary Pegging Orders are also
                                                may not be aware that there is                                                                                currently subject to a collar. Market and
                                                insufficient liquidity at or near the                   2. Statutory Basis                                    Primary Pegging Orders that would
                                                NBBO to fill the entire order,                             The Exchange believes that its                     execute, either on the Exchange or when
                                                particularly for more thinly-traded                     proposal is consistent with Section 6(b)              routed to another market center, at a
                                                securities.                                             of the Act,19 in general, and furthers the            price of more than $0.25 or 5 percent
                                                   The Exchange proposes to                             objectives of Section 6(b)(5) of the Act,20           worse than the NBBO at the time when
                                                memorialize this collar, which currently                in particular, in that it is designed to              the order reaches the System, whichever
                                                exists in its trading and routing systems               promote just and equitable principles of              is greater, will be cancelled.21 Further,
                                                functionality, and define it specifically               trade, to remove impediments to and                   the Market Pegging Order has its own
                                                as applicable to Primary and Market                     perfect the mechanism of a free and                   process for rejecting those orders where
                                                Pegging Orders. The Exchange seeks to                   open market and a national market                     no price exists to which a Pegged Order
                                                memorialize the rule within Rule                        system, and, in general to protect                    can be pegged.
                                                3301B, entitled ‘‘Order Attributes.’’ The               investors and the public interest, by                    This feature should create a level of
                                                new rule text would state, ‘‘Primary                    mitigating risks to market participants of            protection that prevents the Limit
                                                Pegging Orders and Market Pegging                       human error in entering Limit Orders at               Orders from entering the Order Book
                                                Orders are subject to a collar. Any                     clearly unintended prices. The proposal               outside of an acceptable range for the
                                                portion of a Primary Pegging Order or                   will allow for protections for Limit                  Limit Order to execute. The LOP should
                                                Market Pegging Order that would                         Orders which should encourage price                   reduce the negative impacts of sudden,
                                                execute, either on the Exchange or when                 continuity and, in turn, protect                      unanticipated volatility, and serve to
                                                routed to another market center, at a                   investors and the public interest by                  preserve an orderly market in a
                                                price of more than $0.25 or 5 percent                   reducing executions occurring at                      transparent and uniform manner,
                                                worse than the NBBO at the time when                    dislocated prices.                                    increase overall market confidence, and
                                                the order reaches the System, whichever                    The Exchange’s proposal to amend                   promote fair and orderly markets and
                                                is greater, will be cancelled.’’                        the language concerning the                           the protection of investors.
                                                                                                        modification of Orders is consistent
                                                   The following example illustrates                    with the Act because only new Orders                  Pegging Order Collar
                                                how the collar works. A market                          would be subject to LOP. The proposed                    The Exchange believes that the collar
                                                participant submits a routable order to                 new language specifies that Orders that               proposal is consistent with the Act
                                                buy 500 shares. The NBBO is $6.00 bid                   are modified for size and remain in the               because it is designed to promote just
                                                by $6.05 offer, with 100 shares available               Order Book with the same priority,                    and equitable principles of trade, to
                                                on each side. Both sides of the NBBO                    because only size was modified to                     remove impediments to and perfect the
                                                are set by another market center (‘‘Away                reduce the size, will not be subject to               mechanism of a free and open market
                                                Market’’), but PSX has 100 shares                       LOP. Other modifications to Orders that               and a national market system, and, in
                                                available at the $6.05 to sell at the offer             amend the timestamp or priority will                  general to protect investors and the
                                                price and also has reserve orders to sell               subject the modified orders to LOP                    public interest, by avoiding execution of
                                                100 shares at $6.32 and 400 shares at                   because these Orders will be submitted                Primary and Market Pegging Orders
                                                $6.40. No other market center is                        into the System as new Orders. The LOP                (either on PSX or on other market
                                                publishing offers to sell the security in               functionality protects market                         centers as a result of orders routed by
                                                between $6.05 and $6.40.                                participants by reducing the risk that                PSX) at prices that are significantly
                                                   In this example, the order would be                  Midpoint Pegging Orders will execute at               worse than the NBBO at the time the
                                                executed in the following manner:                       prices that are significantly worse than              order is initially received. The NBBO
                                                   • 100 shares would be executed by                    the national best bid and offer                       provides reasonable guidance of the
                                                PSX at the $6.05;                                       (‘‘NBBO’’) at the time the Exchange                   current value of a given security and
                                                   • 400 shares would be routed to the                  receives the order.                                   therefore market participants should
                                                Away Market as an immediate or cancel                      The LOP feature assists with the                   have confidence that their Market and
                                                order with a price of $6.05;                            maintenance of fair and orderly markets               Primary Pegging Orders will not be
                                                                                                        by mitigating the risks associated with               executed at a significantly worse price
                                                   • 100 shares executed by the Away                    errors resulting in executions at prices
                                                Market;18                                                                                                     than the NBBO.
                                                                                                        that are away from the Best Bid or Offer
                                                   • 300 shares returned to PSX;                        and potentially erroneous. Further it                 B. Self-Regulatory Organization’s
                                                   • 100 shares executed by PSX at                      protects investors from potentially                   Statement on Burden on Competition
                                                $6.32 (more than $0.25 but less than 5                  receiving executions away from the                      The Exchange does not believe that
                                                percent worse than the NBBO); and 200                   prevailing prices at any given time. The              the proposed rule change will impose
                                                shares, representing the remainder of                   Exchange adopted LOP to avoid a series                any burden on competition not
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                                                the order, would be cancelled because                   of improperly priced aggressive orders                necessary or appropriate in furtherance
                                                the remaining liquidity available at                    transacting in the Order Book.                        of the purposes of the Act. The LOP
                                                $6.40 is more than 5 percent worse than                    The Exchange believes that excluding               feature should provide market
                                                the NBBO.                                               Primary Pegging and Market Pegging                    participants with additional price
                                                                                                        Orders is consistent with the Act
                                                   18 This assumes that the Away Market’s offer was                                                              21 The Exchange inadvertently removed the rule
                                                                                                          19 15 U.S.C. 78f(b).
                                                still available and that the Away Market had no                                                               from the Phlx Rulebook. The Exchange proposes to
                                                additional non-displayed orders at this price.            20 15 U.S.C. 78f(b)(5).                             adopt the rule herein.



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                                                83920                      Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices

                                                protection from anomalous executions.                   to include the modifications in this                  Paper Comments
                                                This feature is not optional and is                     proposed rule change with the                            • Send paper comments in triplicate
                                                applicable to all members submitting                    implementation of the LOP. Waiver of                  to Brent J. Fields, Secretary, Securities
                                                Limit Orders. Thus, the Exchange does                   the 30-day operative delay would allow                and Exchange Commission, 100 F Street
                                                not believe the proposal creates any                    the Exchange to immediately extend the                NE., Washington, DC 20549–1090.
                                                significant impact on competition. In                   LOP implementation date. The waiver
                                                addition, the proposed collar in Rule                                                                         All submissions should refer to File
                                                                                                        would also permit the Exchange to
                                                3301B would be applicable to all Market                                                                       Number SR–Phlx–2016–113. This file
                                                                                                        immediately clarify the application of
                                                and Primary Pegging Orders entered                                                                            number should be included on the
                                                                                                        the LOP to modified orders. Moreover,
                                                into the PSX System. Similarly, all                                                                           subject line if email is used. To help the
                                                                                                        the waiver would allow the Exchange to
                                                Midpoint Pegging Order will be subject                                                                        Commission process and review your
                                                                                                        immediately exclude from the LOP
                                                to LOP, unless they have a discretion                                                                         comments more efficiently, please use
                                                                                                        Market Pegging Orders, Primary Pegging
                                                attribute.                                                                                                    only one method. The Commission will
                                                                                                        Orders, and Midpoint Pegging Orders
                                                                                                                                                              post all comments on the Commission’s
                                                C. Self-Regulatory Organization’s                       that have a discretion price. As noted
                                                                                                                                                              Internet Web site (http://www.sec.gov/
                                                Statement on Comments on the                            above, the Exchange proposes to
                                                                                                                                                              rules/sro.shtml). Copies of the
                                                Proposed Rule Change Received From                      exclude these Orders because these                    submission, all subsequent
                                                Members, Participants, or Others                        Orders may be intended to be aggressive               amendments, all written statements
                                                                                                        or to set the bid or offer on the market.             with respect to the proposed rule
                                                  No written comments were either                       Moreover, as noted above, Market and
                                                solicited or received.                                                                                        change that are filed with the
                                                                                                        Primary Pegging Orders are currently                  Commission, and all written
                                                III. Date of Effectiveness of the                       subject to collars. Lastly, the waiver                communications relating to the
                                                Proposed Rule Change and Timing for                     would allow the Exchange’s rules to                   proposed rule change between the
                                                Commission Action                                       immediately and accurately reflect the                Commission and any person, other than
                                                                                                        current collars for Market and Primary                those that may be withheld from the
                                                   Because the foregoing proposed rule                  Pegging Orders, which were removed
                                                change does not: (i) Significantly affect                                                                     public in accordance with the
                                                                                                        inadvertently. Accordingly, the                       provisions of 5 U.S.C. 552, will be
                                                the protection of investors or the public
                                                                                                        Commission finds that waiving the 30-                 available for Web site viewing and
                                                interest; (ii) impose any significant
                                                                                                        day operative delay is consistent with                printing in the Commission’s Public
                                                burden on competition; and (iii) become
                                                                                                        the protection of investors and the                   Reference Room, 100 F Street NE.,
                                                operative for 30 days from the date on
                                                                                                        public interest and designates the                    Washington, DC 20549, on official
                                                which it was filed, or such shorter time
                                                                                                        proposal operative upon filing.26                     business days between the hours of
                                                as the Commission may designate, it has
                                                become effective pursuant to Section                       At any time within 60 days of the                  10:00 a.m. and 3:00 p.m. Copies of the
                                                19(b)(3)(A) of the Act and Rule 19b–                    filing of such proposed rule change, the              filing also will be available for
                                                4(f)(6) thereunder.22                                   Commission summarily may                              inspection and copying at the principal
                                                   A proposed rule change filed                         temporarily suspend such rule change if               office of the Exchange. All comments
                                                pursuant to Rule 19b–4(f)(6) under the                  it appears to the Commission that such                received will be posted without change;
                                                Act 23 normally does not become                         action is necessary or appropriate in the             the Commission does not edit personal
                                                operative for 30 days after the date of its             public interest, for the protection of                identifying information from
                                                filing. However, Rule 19b–4(f)(6)(iii) 24               investors, or otherwise in furtherance of             submissions. You should submit only
                                                permits the Commission to designate a                   the purposes of the Act. If the                       information that you wish to make
                                                shorter time if such action is consistent               Commission takes such action, the                     available publicly. All submissions
                                                with the protection of investors and the                Commission shall institute proceedings                should refer to File Number SR–Phlx–
                                                public interest. The Exchange has asked                 to determine whether the proposed rule                2016–113 and should be submitted on
                                                the Commission to waive the 30-day                      change should be approved or                          or before December 13, 2016.
                                                operative delay so that the proposal may                disapproved.                                            For the Commission, by the Division of
                                                become operative immediately upon                                                                             Trading and Markets, pursuant to delegated
                                                                                                        IV. Solicitation of Comments                          authority.27
                                                filing. When the Exchange first
                                                proposed the LOP, the Exchange                            Interested persons are invited to                   Brent J. Fields,
                                                represented that it would implement the                 submit written data, views, and                       Secretary.
                                                LOP within 90 days of obtaining                         arguments concerning the foregoing,                   [FR Doc. 2016–28033 Filed 11–21–16; 8:45 am]
                                                Commission approval (i.e., by                           including whether the proposed rule                   BILLING CODE 8011–01–P
                                                November 22, 2016).25 The Exchange                      change is consistent with the Act.
                                                now proposes to extend the LOP                          Comments may be submitted by any of
                                                implementation date by 60 days in order                 the following methods:                                SMALL BUSINESS ADMINISTRATION
                                                  22 17  CFR 240.19b–4(f)(6). As required under Rule    Electronic Comments                                   [Disaster Declaration #14921 and #14922]
                                                19b–4(f)(6)(iii), the Exchange provided the
                                                Commission with written notice of its intent to file      • Use the Commission’s Internet                     South Carolina Disaster Number SC–
                                                the proposed rule change, along with a brief            comment form (http://www.sec.gov/
                                                description and the text of the proposed rule                                                                 00040
                                                change, at least five business days prior to the date   rules/sro.shtml); or
sradovich on DSK3GMQ082PROD with NOTICES




                                                of filing of the proposed rule change, or such            • Send an email to rule-comments@                   AGENCY: U.S. Small Business
                                                shorter time as designated by the Commission.
                                                                                                        sec.gov. Please include File Number SR–               Administration.
                                                  23 17 CFR 240.19b–4(f)(6).
                                                  24 17 CFR 240.19b–4(f)(6)(iii).                       Phlx–2016–113 on the subject line.                    ACTION: Amendment 4.
                                                  25 See Securities Exchange Act Release Nos.
                                                                                                                                                              SUMMARY:  This is an amendment of the
                                                78245 (July 7, 2016), 81 FR 45337 (July 13, 2016)         26 For purposes only of waiving the 30-day

                                                (noticing SR–Phlx–2016–58) and 78667 (August 24,        operative delay, the Commission has considered the    Presidential declaration of a major
                                                2016), 81 FR 59672 (August 30, 2016) (approving         proposed rule’s impact on efficiency, competition,
                                                SR–Phlx–2016–58).                                       and capital formation. 15 U.S.C. 78c(f).                27 17   CFR 200.30–3(a)(12).



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Document Created: 2018-02-14 08:29:39
Document Modified: 2018-02-14 08:29:39
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 83917 

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