82 FR 11967 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rules 501, 507, 508, 510, and 511 of the Exchange

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 37 (February 27, 2017)

Page Range		11967-11971
FR Document		2017-03729
Federal Register, Volume 82 Issue 37 (Monday, February 27, 2017)
[Federal Register Volume 82, Number 37 (Monday, February 27, 2017)]
[Notices]
[Pages 11967-11971]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-03729]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80074; File No. SR-Phlx-2016-105]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment No. 1, To Amend Rules 501, 507, 
508, 510, and 511 of the Exchange

February 21, 2017.

I. Introduction

    On December 21, 2016, NASDAQ PHLX LLC (``Phlx'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Rule 501 (Specialist Appointment), Rule 
507 (Application for Approval as an SQT, RSQT, or RSQTO and Assignment 
in Options), Rule 508 (Transfer Application), Rule 510 (SQT and RSQT 
Performance Evaluation), and Rule 511 (Specialist Allocation and 
Performance Evaluation).\3\ The proposed rule change was published for 
comment in the Federal Register on January 9, 2017.\4\ On February 15, 
2017, the Exchange filed Amendment No. 1 to the proposed rule change, 
which superseded the original filing in its entirety.\5\ The Commission 
received no comments on the proposed rule change. The Commission is 
publishing this notice to solicit comment on Amendment No. 1 to the 
proposed rule change from interested persons, and is approving the 
proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See infra notes 6-8 for definitions of Specialist, SQT, 
RSQT, and RSQTO.
    \4\ See Securities Exchange Act Release No. 79724 (January 3, 
2017), 82 FR 2418 (``Notice'').
    \5\ In Amendment No. 1, the Exchange: (1) Specified that members 
of the panel that may be appointed by the Board of Directors to 
consider certain appeals may not have been involved at all in the 
decision appealed from (rather than not being materially involved) 
and must otherwise have no conflict of interest; and (2) clarified 
that when selecting members for such panel, the Board of Directors 
shall choose individuals whose background, experience, and training 
qualify them to consider and make determinations regarding the 
subject matter to be presented to the panel (rather than considering 
these factors to the extent practicable). To promote transparency of 
its proposed amendment, when Phlx filed Amendment No. 1 with the 
Commission, it also submitted Amendment No. 1 as a comment letter to 
the file, which the Commission posted on its Web site and placed in 
the public comment file for SR-Phlx-2016-105 (available at https://www.sec.gov/comments/sr-phlx-2016-105/phlx2016105-1589879-132169.pdf). The Exchange also posted a copy of its Amendment No. 1 
on its Web site (http://nasdaqphlx.cchwallstreet.com/NASDAQPHLX/pdf/phlx-filings/2016/SR-Phlx-2016-105_Amendment_1.pdf) when it filed 
Amendment No. 1 with the Commission.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    The Exchange proposes to amend certain of its Series 500 Rules 
concerning the treatment of Specialists,\6\ SQTs,\7\ and RSQTs.\8\
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    \6\ A ``Specialist'' is an Exchange member who is registered as 
an options specialist pursuant to Rule 1020(a). A ``Remote 
Specialist'' is an options specialist that does not have a physical 
presence on an Exchange floor. See Rule 1020(a)(i) and (ii).
    \7\ An ``ROT'' is a regular member of the Exchange located on 
the trading floor who has received permission from the Exchange to 
trade in options for his own account. See Rule 1014(b)(i). A 
``Streaming Quote Trader'' or ``SQT'' is an ROT who has received 
permission from the Exchange to generate and submit option 
quotations electronically in options to which such SQT is assigned. 
See Rule 1014(b)(ii)(A).
    \8\ A ``Remote Streaming Quote Trader'' or ``RSQT'' is an ROT 
that is a member affiliated with a ``Remote Streaming Quote Trader 
Organization'' or ``RSQTO'' with no physical trading floor presence 
who has received permission from the Exchange to generate and submit 
option quotations electronically in options to which such RSQT has 
been assigned. See Rule 1014(b)(ii)(B). See also Rule 507(a).

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[[Page 11968]]

A. Back-Up Specialist Unit

    The Exchange proposes to amend Rule 501 to remove the concept of a 
back-up specialist unit.\9\ Currently, an initial application to become 
a specialist unit must include, among other things, information about 
the proposed specialist unit's back-up arrangements, to include a back-
up specialist unit and a substitute specialist unit. The back-up 
specialist unit provides staffing when necessary and is not associated 
with the specialist unit. The substitute specialist unit, which may be 
the same as the back-up specialist unit, serves as a substitute in the 
event that the specialist unit is unable to perform the duties of a 
Specialist.\10\
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    \9\ Specifically, the Exchange proposes to remove references to 
back-up specialist units in Rule 501(b) and (f)(ii), and delete a 
provision in Rule 501, Commentary .01, concerning treatment under 
Rule 748(b), which relates to designation of supervisors by member 
organizations of individuals employed by the back-up specialist 
unit. See proposed Rule 501(b), (f)(ii), and Commentary .01.
    \10\ See Rule 501(b).
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    The Exchange believes that the function of providing back-up 
staffing when needed from one specialist unit on the floor to another 
is no longer feasible because multiple specialist units are no longer 
present on the floor.\11\ The Exchange notes that the other initial 
application requirements in Rule 501 will remain unchanged.\12\
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    \11\ See Notice, supra, note 4, at 2419 n.10.
    \12\ See id. at 2419 (citing Rule 501(a) and (b)).
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B. Approval of SQT and RSQT Applications

    The Exchange proposes to amend Rule 507(a) to replace the role of 
the Board of Directors (``Board'') with Exchange staff with respect to 
deferring or limiting the approval of SQT and RSQT applications.\13\ 
Currently, the Board may defer, for a period to be determined in the 
Board's discretion, approval of qualifying applications for SQT or RSQT 
status pending any action required to address the issue of concern to 
the Board based on system constraints, capacity restrictions, or other 
factors relevant to the maintenance of a fair and orderly market. 
Further, the Board may not defer a determination of the approval of the 
application of any SQT or RSQT applicant, or place any limitations on 
access to the Exchange's electronic quoting and trading system on any 
SQT or RSQT applicant, unless the basis for such limitations or 
deferral have been objectively determined by the Board, subject to 
Commission approval or effectiveness pursuant to a rule change filing 
under Section 19(b) of the Act.\14\ The Exchange proposes to have 
Exchange staff perform this role of deferring or limiting approval of 
SQT and RSQT applications, subject to the rule's existing 
restrictions.\15\ The Exchange believes that this change will help with 
the administration and application of Rule 507.\16\
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    \13\ See proposed Rule 507(a) (replacing references to the 
``Board'' with ``Exchange'').
    \14\ See Rule 507(a).
    \15\ The Exchange explains that its Membership department, which 
currently reviews membership applications for equities and options 
members of the Exchange, would review applications for SQTs and 
RSQTs. See Notice, supra note 4, at 2419 n.12.
    \16\ See id. at 2419.
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C. Good Standing Requirement for Specialists, SQTs, and RSQTs

    The Exchange proposes to revise Rule 510 to implement a good 
standing requirement for Specialists, SQTs, and RSQTs.\17\ Currently, 
Rule 510 requires the Exchange to periodically conduct performance 
evaluations of member organizations that have SQTs and RSQTs to 
determine whether they have fulfilled specified performance standards. 
Rule 510 includes procedures the Exchange will follow if an SQT or RSQT 
fails to meet minimum performance standards and appeal rights.\18\ 
Similarly, Rule 511 requires the Exchange to at least annually, and as 
frequently as monthly, conduct evaluations of Specialists to determine 
whether they have fulfilled specified performance standards. Rule 511 
contains procedures for Specialists that fail to meet performance 
standards, including appeal rights. Rule 511 also contains provisions 
concerning the allocation of new options classes and transfers or 
reallocations of existing options classes, which can be based on the 
results of performance evaluations, including evaluations conducted 
upon special circumstances.\19\ The Exchange proposes to delete 
existing Rules 510 and 511 in their entirety and replace them with a 
new Rule 510 that will apply to Specialists, SQTs, and RSQTs and 
include good standing requirements and procedures if the participants 
fail to meet such requirements, including appeal rights.\20\
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    \17\ See proposed Rule 510.
    \18\ See Rule 510.
    \19\ See Rule 511.
    \20\ See proposed Rule 510. Consistent with this change, the 
proposal would conform the title of this rule. See id. Additionally, 
the proposal would reserve Rule 511. See proposed Rule 511.
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    Under the proposal, to remain in good standing as a Specialist, 
SQT, or RSQT, the Specialist, SQT, or RSQT would be required to:
     Continue to meet the requirements established in 
Commission Rule 15c3-1(a)(6)(i),\21\ and the requirements set forth in 
the Series 500 Rules in the Rules of the Exchange;
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    \21\ See 240 CFR 15c3-1(a)(6)(i) (net capital requirements for 
brokers or dealers).
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     continue to satisfy the Specialist, SQT, or RSQT 
qualification and market making requirements specified by the Exchange, 
as amended from time to time;
     comply with the Rules of the Exchange and the Options 
Rules as well as the rules of The Options Clearing Corporation and the 
rules of the Federal Reserve Board; and
     pay on a timely basis such member, transaction, and other 
fees as the Exchange shall prescribe.\22\
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    \22\ See proposed Rule 510(a).
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    The Exchange believes that in light of the proposed continuous and 
extensive good standing requirements and other rule requirements, the 
periodic evaluations currently applicable to Specialists, SQTs, and 
RSQTs are no longer needed.\23\ The Exchange represents that it will 
monitor compliance with good standing requirements across the 
Exchange.\24\
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    \23\ See Notice, supra note 4, at 2420 n.22.
    \24\ See id. at 2422 n.36. The Exchange explains that, for 
example, membership, listing, and finance groups monitor 
applications, allocations, and compliance with fee requirements, and 
the surveillance group will continue to monitor compliance with 
Exchange rules and pursue disciplinary actions for rule violations, 
as necessary (e.g., for failure to comply with continuous two-sided 
quoting requirements). See id.
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    The proposal would also provide that the good standing of a 
Specialist, SQT, or RSQT may be suspended, terminated, or otherwise 
withdrawn if any of the conditions for approval cease to be maintained 
or the Specialist, SQT, or RSQT violates any of its agreements with the 
Exchange or any of the provisions of the Rules of the Exchange or of 
the Options Rules. The Exchange would be required to provide written 
notice to a Specialist, SQT, or RSQT of a contemplated action regarding 
good standing. Additionally, a Specialist, SQT, or RSQT would be able 
to request, and the Exchange might hold, an informal meeting to discuss 
the alleged failure to remain in good standing and to explore possible 
appropriate remedies. Written notice of the date and time of the 
meeting would need to be given to the Specialist, SQT, or RSQT and no 
verbatim record would be kept. If the Exchange were to believe that 
there were no mitigating circumstances that would demonstrate 
substantial improvement of or reasonable

[[Page 11969]]

justification for the failure to meet good standing requirements, the 
Exchange could take appropriate action. Nothing in the informal meeting 
process would limit the Exchange from bringing disciplinary actions for 
violations of these rules.\25\ Finally, the Exchange notes that it will 
provide appeal rights from decisions concerning good standing, as 
described further below.\26\
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    \25\ See proposed Rule 510(b). The Exchange explains that, for 
example, it could pursue a disciplinary process against a member 
that commits an egregious market making violation evidenced by a 
pattern of repeated failure to make a two-sided market in assigned 
options. See Notice, supra note 4, at 2421 n. 32.
    \26\ See Notice, supra note 4, at 2421. See also infra Section 
0.
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    With respect to Rule 511, the Exchange believes it is proper to 
delete this rule because Specialists will be covered by Rule 510, with 
respect to good standing requirements, and will also be covered by 
other rules of the Exchange.\27\ The Exchange explains that it adopted 
Rule 511, with a process for Specialist evaluations and allocations, 
several decades ago for the purpose of dealing with an extensive on-
floor open outcry Specialist system that had multiple competing 
specialist units. The Exchange adds that the current system is mainly 
electronic and off-floor, and the remaining hybrid options floor does 
not have numerous competing Specialists.\28\
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    \27\ See Notice, supra note 4, at 2422.
    \28\ See id. The Exchange states that there is currently one 
specialist unit operating on the options floor. See id. The Exchange 
believes that even if additional Specialists begin to conduct 
business on the options floor, Rule 511 was designed for a very 
different, competitive floor environment and will not be needed. See 
id. at 2422 n. 38.
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D. Appeal Rights

    The Exchange proposes to amend Rule 507(e) to change the 
composition of the deliberative body that will hear an appeal to the 
Board, upon request by a member or member organization, from a decision 
of the Exchange pursuant to Rule 507, which concerns SQT, RSQT, and 
RSQTO applications and options assignments.\29\ Currently, an appeal 
from a decision pursuant to Rule 507 is heard by a special committee of 
the Board composed of three directors, at least one of whom must be 
independent.\30\ Under the proposal, such appeal would be heard by the 
full Board or a panel appointed by the Board composed of three members 
not involved in the Exchange decision appealed from and who otherwise 
have no conflict of interest (``Board Panel''). If the Board appointed 
a Board Panel, the Board would select three individuals to serve on the 
Board Panel, choosing individuals whose background, experience, and 
training qualify them to consider and make determinations regarding the 
subject matter to be presented to the Board Panel. Further, the Board 
Panel would consist of two members of the Exchange, or general partners 
or officers of member organizations, and one other person who would 
qualify as a public member as defined in Article I of the Exchange's 
By-Laws,\31\ whom the Board considers to be qualified.\32\
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    \29\ See proposed Rule 507(e).
    \30\ See Rule 507(e).
    \31\ Article I of the Exchange's By-Laws defines ``public 
member'' as ``a member of any committee appointed by the Board of 
Directors who has no material business relationship with a broker or 
dealer, the Exchange, or its affiliates.'' See By-Laws, Article 
I(hh). The Exchange notes that while at least one member of the 
current special committee must be an independent director, the Board 
Panel would require the inclusion of one person who would qualify as 
a public member, which requirement also provides some measure of 
independence. See Notice, supra note 4, at 2419 n. 14.
    \32\ See proposed Rule 507(e). The proposal would make 
conforming changes to the remainder of Rule 507(e), which addresses 
process requirements for the appeal, to replace references to 
``special committee'' with ``Board or Board Panel.'' The existing 
provision that there is no appeal to the Board from a decision of 
the special committee would be revised to apply to a decision of the 
Board Panel. See id.
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    The Exchange proposes to add Rule 510(c) to adopt parallel appeal 
rights for an appeal by a Specialist, SQT, or RSQT to the Board, upon 
request by a member or member organization interested therein, from a 
decision of the Exchange pursuant to Rule 510, which concerns good 
standing requirements.\33\ Currently, Rule 511(f) contains appeal 
procedures for decisions concerning performance evaluations of 
Specialists, which procedures are equivalent to those found in Rule 
507(e), while Rule 510(d) provides a right of direct appeal to the 
Board from a decision concerning performance evaluations of SQTs and 
RSQTs.\34\
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    \33\ See proposed Rule 510(c).
    \34\ See Rules 507(e), 511(f).
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    Under the proposal, a Specialist, SQT, or RSQT could request an 
appeal by filing a written notice of appeal with the Secretary of the 
Exchange within ten days after the decision being appealed has been 
rendered. The appeal would be heard by the Board or a Board Panel, 
which would be subject to the same composition requirements discussed 
above.\35\ The person requesting review would be permitted to submit a 
written statement to and appear before the Board or Board Panel. The 
Secretary of the Exchange would certify the record of the proceeding, 
if any, and the written decision, and would submit the documents to the 
Board or Board Panel. The Board or Board Panel's review of the action 
would be based solely on the record, the written decision, and any 
statement submitted by the person requesting the review. The Board or 
Board Panel would prepare and deliver to such person a written decision 
and reasons therefore. If the Board or Board Panel affirmed the action, 
the action would become effective ten days from the date of that 
decision. There would be no appeal to the Board from any decision of 
the Board Panel.\36\
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    \35\ See supra notes 31-32 and accompanying text.
    \36\ See proposed Rule 510(c).
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    The Exchange believes that the proposed appeal rights are 
appropriate because they would cover any decision of the Exchange 
regarding Rule 510 and any appeal would follow the proposed informal 
meeting process. The Exchange adds that the proposed process would 
serve as a secondary appeal to individuals not involved in making the 
initial decision and stated that it seeks to provide its members due 
process when seeking an appeal.\37\
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    \37\ See Notice, supra note 4, at 2421 n. 33.
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E. Additional and Conforming Changes

    The Exchange proposes to amend Rule 508, concerning transfer 
applications. First, the proposal would remove a reference to 
leasing.\38\ The Exchange explains that leasing is no longer practiced 
on the Exchange and it therefore is deleting this obsolete term.\39\ 
Second, the proposal would remove a reference to Rule 511.\40\ The 
Exchange explains that Rule 511 would be deleted by the proposal \41\ 
and Rule 508 will continue to indicate that failure to provide the 
exchange with prior notice of a transfer, in accordance with Rule 508, 
or failure to obtain Exchange approval of a transfer, permits the 
Exchange to recover the allocated securities and allocate them pursuant 
to Rule 506.\42\
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    \38\ See proposed Rule 508.
    \39\ See Notice, supra note 4, at 2420. The Exchange deleted 
another reference to leasing in its rules on the same basis. See 
Securities Exchange Act Release No. 77121 (February 11, 2016), 81 FR 
8308 (February 18, 2016) (SR-Phlx-2016-22).
    \40\ See proposed Rule 508.
    \41\ See supra notes 19-20 and accompanying text.
    \42\ See Notice, supra note 4, at 2420 & n.21.
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    Finally, the Exchange proposes to amend Rule 507(b)(iii)(C) to 
reflect the proposed changes to Rule 510 that would implement a good 
standing requirement.\43\ Currently, this provision provides that, when 
making a decision concerning an application for assignment in an option 
when there are more applicants for assignment in a particular option 
than there are

[[Page 11970]]

positions available, the Exchange shall consider the applicant's prior 
performance as a Specialist, SQT, or RSQT based on evaluations 
conducted pursuant to Rule 510.\44\ The Exchange explains that in light 
of the proposed good standing requirement, as discussed above,\45\ it 
has proposed to update this provision to state that the Exchange can 
consider the applicant's prior performance as a Specialist, SQT, or 
RSQT based on good standing pursuant to Rule 510.\46\
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    \43\ See proposed Rule 507(b)(iii)(C).
    \44\ See Rule 507(b)(iii)(C). Other factors for consideration 
include the financial and technical resources available to the 
applicant and the applicant's experience and expertise in market 
making or options trading. See Rule 507(b)(iii)(A), (B).
    \45\ See supra notes 17-20 and 22 and accompanying text.
    \46\ See Notice, supra note 4, at 2419.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\47\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\48\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
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    \47\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \48\ 15 U.S.C. 78f(b)(5).
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    The Exchange represents that, because of the development of 
liquidity-enhancing electronic market makers on the Exchange that make 
markets in the same options issues as Specialists and the diminution of 
the role that the Specialist plays in managing the order book on the 
Exchange, Specialists no longer need to have both a back-up specialist 
unit and a substitute specialist unit.\49\ The Commission notes that a 
substitute specialist unit will still be available if the specialist 
unit is unable to perform the duties of a Specialist and that the 
presence of SQTs and RSQTs, which have continuous quoting obligations, 
will serve as an additional source of liquidity for the Exchange if a 
specialist unit on the floor experiences a staffing problem.\50\
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    \49\ See Notice, supra note 4, at 2418-19.
    \50\ The Commission notes that currently Remote Specialists are 
not required to meet the back-up specialist unit requirement. See 
Rule 501(f)(ii). See also Securities Exchange Act Release No. 63717 
(January 14, 2011), 76 FR 4141 (January 24, 2011) (SR-Phlx-2010-
145).
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    The Commission notes that the proposal to require Exchange staff, 
rather than the Board, to make determinations to defer or limit an 
application of an SQT or RSQT is designed to facilitate the 
administration and application of Rule 507. The Commission also notes 
that any deferral or limitation would be objectively determined by the 
Exchange. The proposal would also require the Exchange to provide 
written notification to any SQT or RSQT applicant whose application is 
the subject of such limitation or deferral, describing the objective 
basis for such limitation or deferral. Further, an SQT or RSQT 
applicant would have the right to an appeal to the Board or a Board 
Panel from any such decision by Exchange staff pursuant to Rule 
507(e).\51\
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    \51\ See Notice, supra note 4, at 2419. See also supra Section 
II.D.
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    The Commission notes that the proposed good standing requirements 
are designed to evaluate compliance by Specialists, SQTs, and RSQTs 
with Exchange rules and the rules of the Commission and other 
regulators and are consistent with the rules of other options 
exchanges.\52\ The Exchange represents that its staff, including its 
surveillance group, will monitor compliance with such rules.\53\ The 
Commission notes that while Specialist allocation procedures are not 
included within proposed Rule 510, Specialists will continue to be 
subject to numerous existing rules, some of which address allocation of 
options.\54\
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    \52\ See BX Options Rules, Chapter VII, Section 4; Nasdaq 
Options Rules, Chapter VII, Section 4.
    \53\ See supra note 24 and accompanying text.
    \54\ See proposed Rule 508; Rules 506, 513. See also Rules 501, 
1014, 1022.
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    The Commission believes that the Exchange's use of the Board or a 
Board Panel to hear appeals of Exchange decisions pursuant to Rules 507 
and 510, as opposed to a special committee of the Board, would retain 
an opportunity for the SQT, RSQT, or Specialist to be heard on the 
matter before the Exchange takes remedial action. The Commission notes 
the requirements that members of the Board Panel will not be involved 
in the Exchange decision appealed from, have no conflicts of interest, 
and be considered by the Board to be qualified, and that one member 
will be a person who would qualify as a public member as defined in 
Article I of the By-Laws. The revised appeal procedures for decisions 
pursuant to Rule 510 concerning SQTs and RSQTs mirror procedures 
already in place in other contexts.
    Finally, the Commission believes that the proposal's minor, 
conforming revisions to Rules 507 and 508 are consistent with the Act.

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 to the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic 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-2016-105 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-2016-105. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make

[[Page 11971]]

available publicly. All submissions should refer to File Number SR-
Phlx-2016-105, and should be submitted on or before March 20, 2017.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of the notice of Amendment No. 1 in the 
Federal Register. As described above, in Amendment No. 1, Phlx updated 
its proposal to reflect: (1) That members of the Board Panel may not 
have been involved at all in the decision appealed from and must 
otherwise have no conflict of interest; and (2) that the Board shall 
choose individuals whose background, experience, and training qualify 
them to consider and make determinations regarding the subject matter 
to be presented to the panel. The Commission believes that Amendment 
No. 1 clarifies the criteria for ensuring the independence of the Board 
Panel that could hear an appeal pursuant to Rules 507 and 510. 
Accordingly, for the reasons noted above, the Commission finds good 
cause for approving the proposed rule change, as modified by Amendment 
No. 1, on an accelerated basis, pursuant to Section 19(b)(2) of the 
Act.\55\
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    \55\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\56\ that the proposed rule change (SR-Phlx-2016-105), as modified 
by Amendment No. 1 thereto, be, and hereby is, approved on an 
accelerated basis.
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    \56\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\57\
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    \57\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03729 Filed 2-24-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 37 / Monday, February 27, 2017 / Notices 11967

experience that competing exchanges with respect to the proposed rule 510 (SQT and RSQT Performance
will move to adopt similar functionality. change that are filed with the Evaluation), and Rule 511 (Specialist
Thus, the Exchange believes that this Commission, and all written Allocation and Performance
type of competition amongst exchanges communications relating to the Evaluation).3 The proposed rule change
is beneficial to the market place as a proposed rule change between the was published for comment in the
whole as it can result in enhanced Commission and any person, other than Federal Register on January 9, 2017.4
processes, functionality, and those that may be withheld from the On February 15, 2017, the Exchange
technologies. public in accordance with the filed Amendment No. 1 to the proposed
provisions of 5 U.S.C. 552, will be rule change, which superseded the
C. Self-Regulatory Organization’s available for Web site viewing and original filing in its entirety.5 The
Statement on Comments on the printing in the Commission’s Public Commission received no comments on
Proposed Rule Change Received From Reference Room, 100 F Street NE., the proposed rule change. The
Members, Participants, or Others Washington, DC 20549, on official Commission is publishing this notice to
No written comments were solicited business days between the hours of solicit comment on Amendment No. 1
or received with respect to the proposed 10:00 a.m. and 3:00 p.m. Copies of the to the proposed rule change from
rule change. filing also will be available for interested persons, and is approving the
inspection and copying at the principal proposed rule change, as modified by
III. Date of Effectiveness of the
office of the Exchange. All comments Amendment No. 1, on an accelerated
Proposed Rule Change and Timing for
received will be posted without change; basis.
Commission Action
the Commission does not edit personal
Within 45 days of the date of II. Description of the Proposed Rule
identifying information from
publication of this notice in the Federal Change, as Modified by Amendment
submissions. You should submit only
Register or such longer period up to 90 No. 1
information that you wish to make
days (i) as the Commission may available publicly. All submissions The Exchange proposes to amend
designate if it finds such longer period should refer to File Number SR– certain of its Series 500 Rules
to be appropriate and publishes its NYSEArca–2017–17 and should be concerning the treatment of Specialists,6
reasons for so finding or (ii) as to which submitted on or before March 20, 2017. SQTs,7 and RSQTs.8
the self-regulatory organization For the Commission, by the Division of 3 See infra notes 6–8 for definitions of Specialist,
consents, the Commission will: Trading and Markets, pursuant to delegated
(A) By order approve or disapprove SQT, RSQT, and RSQTO.
authority.30 4 See Securities Exchange Act Release No. 79724
the proposed rule change, or Eduardo A. Aleman, (January 3, 2017), 82 FR 2418 (‘‘Notice’’).
(B) institute proceedings to determine Assistant Secretary. 5 In Amendment No. 1, the Exchange: (1)
whether the proposed rule change Specified that members of the panel that may be
[FR Doc. 2017–03727 Filed 2–24–17; 8:45 am]
should be disapproved. appointed by the Board of Directors to consider
BILLING CODE 8011–01–P certain appeals may not have been involved at all
IV. Solicitation of Comments in the decision appealed from (rather than not being
materially involved) and must otherwise have no
Interested persons are invited to conflict of interest; and (2) clarified that when
submit written data, views, and SECURITIES AND EXCHANGE
selecting members for such panel, the Board of
arguments concerning the foregoing, COMMISSION Directors shall choose individuals whose
including whether the proposed rule [Release No. 34–80074; File No. SR–Phlx– background, experience, and training qualify them
to consider and make determinations regarding the
change is consistent with the Act. 2016–105]
subject matter to be presented to the panel (rather
Comments may be submitted by any of than considering these factors to the extent
the following methods: Self-Regulatory Organizations; practicable). To promote transparency of its
NASDAQ PHLX LLC; Notice of Filing of proposed amendment, when Phlx filed Amendment
Electronic Comments Amendment No. 1 and Order Granting No. 1 with the Commission, it also submitted
Amendment No. 1 as a comment letter to the file,
• Use the Commission’s Internet Accelerated Approval of Proposed which the Commission posted on its Web site and
comment form (http://www.sec.gov/ Rule Change, as Modified by placed in the public comment file for SR–Phlx–
rules/sro.shtml); or Amendment No. 1, To Amend Rules 2016–105 (available at https://www.sec.gov/
• Send an email to rule-comments@ 501, 507, 508, 510, and 511 of the comments/sr-phlx-2016-105/phlx2016105-1589879-
132169.pdf). The Exchange also posted a copy of its
sec.gov. Please include File Number SR– Exchange Amendment No. 1 on its Web site (http://
NYSEArca–2017–17 on the subject line. nasdaqphlx.cchwallstreet.com/NASDAQPHLX/pdf/
February 21, 2017.
phlx-filings/2016/SR-Phlx-2016-105_Amendment_
Paper Comments I. Introduction 1.pdf) when it filed Amendment No. 1 with the
• Send paper comments in triplicate On December 21, 2016, NASDAQ
Commission.
6 A ‘‘Specialist’’ is an Exchange member who is
to Brent J. Fields, Secretary, Securities PHLX LLC (‘‘Phlx’’ or the ‘‘Exchange’’) registered as an options specialist pursuant to Rule
and Exchange Commission, 100 F Street filed with the Securities and Exchange 1020(a). A ‘‘Remote Specialist’’ is an options
NE., Washington, DC 20549–1090. Commission (‘‘Commission’’), pursuant
specialist that does not have a physical presence on
an Exchange floor. See Rule 1020(a)(i) and (ii).
All submissions should refer to File to Section 19(b)(1) of the Securities 7 An ‘‘ROT’’ is a regular member of the Exchange
Number SR–NYSEArca–2017–17. This Exchange Act of 1934 (‘‘Act’’) 1 and Rule located on the trading floor who has received
file number should be included on the 19b–4 thereunder,2 a proposed rule permission from the Exchange to trade in options
subject line if email is used. To help the change to amend Rule 501 (Specialist for his own account. See Rule 1014(b)(i). A
Commission process and review your ‘‘Streaming Quote Trader’’ or ‘‘SQT’’ is an ROT who
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Appointment), Rule 507 (Application has received permission from the Exchange to
comments more efficiently, please use for Approval as an SQT, RSQT, or generate and submit option quotations
only one method. The Commission will RSQTO and Assignment in Options), electronically in options to which such SQT is
post all comments on the Commission’s Rule 508 (Transfer Application), Rule assigned. See Rule 1014(b)(ii)(A).
8 A ‘‘Remote Streaming Quote Trader’’ or ‘‘RSQT’’
Internet Web site (http://www.sec.gov/
is an ROT that is a member affiliated with a
rules/sro.shtml). Copies of the 30 17 CFR 200.30–3(a)(12). ‘‘Remote Streaming Quote Trader Organization’’ or
submission, all subsequent 1 15 U.S.C. 78s(b)(1). ‘‘RSQTO’’ with no physical trading floor presence
amendments, all written statements 2 17 CFR 240.19b–4. Continued

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A. Back-Up Specialist Unit such limitations or deferral have been the Specialist, SQT, or RSQT would be
The Exchange proposes to amend objectively determined by the Board, required to:
Rule 501 to remove the concept of a subject to Commission approval or • Continue to meet the requirements
effectiveness pursuant to a rule change established in Commission Rule 15c3–
back-up specialist unit.9 Currently, an
filing under Section 19(b) of the Act.14 1(a)(6)(i),21 and the requirements set
initial application to become a specialist
The Exchange proposes to have forth in the Series 500 Rules in the
unit must include, among other things,
Exchange staff perform this role of Rules of the Exchange;
information about the proposed • continue to satisfy the Specialist,
specialist unit’s back-up arrangements, deferring or limiting approval of SQT
and RSQT applications, subject to the SQT, or RSQT qualification and market
to include a back-up specialist unit and making requirements specified by the
a substitute specialist unit. The back-up rule’s existing restrictions.15 The
Exchange believes that this change will Exchange, as amended from time to
specialist unit provides staffing when time;
necessary and is not associated with the help with the administration and
application of Rule 507.16 • comply with the Rules of the
specialist unit. The substitute specialist Exchange and the Options Rules as well
unit, which may be the same as the C. Good Standing Requirement for as the rules of The Options Clearing
back-up specialist unit, serves as a Specialists, SQTs, and RSQTs Corporation and the rules of the Federal
substitute in the event that the specialist Reserve Board; and
The Exchange proposes to revise Rule
unit is unable to perform the duties of • pay on a timely basis such member,
a Specialist.10 510 to implement a good standing
transaction, and other fees as the
The Exchange believes that the requirement for Specialists, SQTs, and
Exchange shall prescribe.22
function of providing back-up staffing RSQTs.17 Currently, Rule 510 requires The Exchange believes that in light of
when needed from one specialist unit the Exchange to periodically conduct the proposed continuous and extensive
on the floor to another is no longer performance evaluations of member good standing requirements and other
feasible because multiple specialist organizations that have SQTs and rule requirements, the periodic
units are no longer present on the RSQTs to determine whether they have evaluations currently applicable to
floor.11 The Exchange notes that the fulfilled specified performance Specialists, SQTs, and RSQTs are no
other initial application requirements in standards. Rule 510 includes procedures longer needed.23 The Exchange
Rule 501 will remain unchanged.12 the Exchange will follow if an SQT or represents that it will monitor
RSQT fails to meet minimum compliance with good standing
B. Approval of SQT and RSQT performance standards and appeal
Applications requirements across the Exchange.24
rights.18 Similarly, Rule 511 requires the The proposal would also provide that
The Exchange proposes to amend Exchange to at least annually, and as the good standing of a Specialist, SQT,
Rule 507(a) to replace the role of the frequently as monthly, conduct or RSQT may be suspended, terminated,
Board of Directors (‘‘Board’’) with evaluations of Specialists to determine or otherwise withdrawn if any of the
Exchange staff with respect to deferring whether they have fulfilled specified conditions for approval cease to be
or limiting the approval of SQT and performance standards. Rule 511 maintained or the Specialist, SQT, or
RSQT applications.13 Currently, the contains procedures for Specialists that RSQT violates any of its agreements
Board may defer, for a period to be fail to meet performance standards, with the Exchange or any of the
determined in the Board’s discretion, including appeal rights. Rule 511 also provisions of the Rules of the Exchange
approval of qualifying applications for contains provisions concerning the or of the Options Rules. The Exchange
SQT or RSQT status pending any action allocation of new options classes and would be required to provide written
required to address the issue of concern transfers or reallocations of existing notice to a Specialist, SQT, or RSQT of
to the Board based on system options classes, which can be based on a contemplated action regarding good
constraints, capacity restrictions, or the results of performance evaluations, standing. Additionally, a Specialist,
other factors relevant to the including evaluations conducted upon SQT, or RSQT would be able to request,
maintenance of a fair and orderly special circumstances.19 The Exchange and the Exchange might hold, an
market. Further, the Board may not proposes to delete existing Rules 510 informal meeting to discuss the alleged
defer a determination of the approval of and 511 in their entirety and replace failure to remain in good standing and
the application of any SQT or RSQT them with a new Rule 510 that will to explore possible appropriate
applicant, or place any limitations on apply to Specialists, SQTs, and RSQTs remedies. Written notice of the date and
access to the Exchange’s electronic and include good standing requirements time of the meeting would need to be
quoting and trading system on any SQT and procedures if the participants fail to given to the Specialist, SQT, or RSQT
or RSQT applicant, unless the basis for meet such requirements, including and no verbatim record would be kept.
appeal rights.20 If the Exchange were to believe that
who has received permission from the Exchange to Under the proposal, to remain in good there were no mitigating circumstances
generate and submit option quotations standing as a Specialist, SQT, or RSQT,
electronically in options to which such RSQT has that would demonstrate substantial
been assigned. See Rule 1014(b)(ii)(B). See also Rule improvement of or reasonable
14 See Rule 507(a).
507(a).
9 Specifically, the Exchange proposes to remove 15 The Exchange explains that its Membership 21 See 240 CFR 15c3–1(a)(6)(i) (net capital
references to back-up specialist units in Rule 501(b) department, which currently reviews membership requirements for brokers or dealers).
and (f)(ii), and delete a provision in Rule 501, applications for equities and options members of 22 See proposed Rule 510(a).
Commentary .01, concerning treatment under Rule the Exchange, would review applications for SQTs 23 See Notice, supra note 4, at 2420 n.22.
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748(b), which relates to designation of supervisors and RSQTs. See Notice, supra note 4, at 2419 n.12. 24 See id. at 2422 n.36. The Exchange explains
by member organizations of individuals employed 16 See id. at 2419.
that, for example, membership, listing, and finance
by the back-up specialist unit. See proposed Rule 17 See proposed Rule 510.
groups monitor applications, allocations, and
501(b), (f)(ii), and Commentary .01. 18 See Rule 510.
10 See Rule 501(b).
compliance with fee requirements, and the
19 See Rule 511.
surveillance group will continue to monitor
11 See Notice, supra, note 4, at 2419 n.10. 20 See proposed Rule 510. Consistent with this compliance with Exchange rules and pursue
12 See id. at 2419 (citing Rule 501(a) and (b)).
change, the proposal would conform the title of this disciplinary actions for rule violations, as necessary
13 See proposed Rule 507(a) (replacing references rule. See id. Additionally, the proposal would (e.g., for failure to comply with continuous two-
to the ‘‘Board’’ with ‘‘Exchange’’). reserve Rule 511. See proposed Rule 511. sided quoting requirements). See id.

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Federal Register / Vol. 82, No. 37 / Monday, February 27, 2017 / Notices 11969

justification for the failure to meet good the Board would select three documents to the Board or Board Panel.
standing requirements, the Exchange individuals to serve on the Board Panel, The Board or Board Panel’s review of
could take appropriate action. Nothing choosing individuals whose the action would be based solely on the
in the informal meeting process would background, experience, and training record, the written decision, and any
limit the Exchange from bringing qualify them to consider and make statement submitted by the person
disciplinary actions for violations of determinations regarding the subject requesting the review. The Board or
these rules.25 Finally, the Exchange matter to be presented to the Board Board Panel would prepare and deliver
notes that it will provide appeal rights Panel. Further, the Board Panel would to such person a written decision and
from decisions concerning good consist of two members of the Exchange, reasons therefore. If the Board or Board
standing, as described further below.26 or general partners or officers of member Panel affirmed the action, the action
With respect to Rule 511, the organizations, and one other person would become effective ten days from
Exchange believes it is proper to delete who would qualify as a public member the date of that decision. There would
this rule because Specialists will be as defined in Article I of the Exchange’s be no appeal to the Board from any
covered by Rule 510, with respect to By-Laws,31 whom the Board considers decision of the Board Panel.36
good standing requirements, and will to be qualified.32 The Exchange believes that the
also be covered by other rules of the The Exchange proposes to add Rule proposed appeal rights are appropriate
Exchange.27 The Exchange explains that 510(c) to adopt parallel appeal rights for because they would cover any decision
it adopted Rule 511, with a process for an appeal by a Specialist, SQT, or RSQT of the Exchange regarding Rule 510 and
Specialist evaluations and allocations, to the Board, upon request by a member any appeal would follow the proposed
several decades ago for the purpose of or member organization interested informal meeting process. The Exchange
dealing with an extensive on-floor open therein, from a decision of the Exchange adds that the proposed process would
outcry Specialist system that had pursuant to Rule 510, which concerns serve as a secondary appeal to
multiple competing specialist units. The good standing requirements.33 individuals not involved in making the
Exchange adds that the current system Currently, Rule 511(f) contains appeal initial decision and stated that it seeks
is mainly electronic and off-floor, and procedures for decisions concerning to provide its members due process
the remaining hybrid options floor does performance evaluations of Specialists, when seeking an appeal.37
not have numerous competing which procedures are equivalent to
Specialists.28 those found in Rule 507(e), while Rule E. Additional and Conforming Changes
510(d) provides a right of direct appeal The Exchange proposes to amend
D. Appeal Rights to the Board from a decision concerning Rule 508, concerning transfer
The Exchange proposes to amend performance evaluations of SQTs and applications. First, the proposal would
Rule 507(e) to change the composition RSQTs.34 remove a reference to leasing.38 The
of the deliberative body that will hear Under the proposal, a Specialist, SQT, Exchange explains that leasing is no
an appeal to the Board, upon request by or RSQT could request an appeal by longer practiced on the Exchange and it
a member or member organization, from filing a written notice of appeal with the therefore is deleting this obsolete
a decision of the Exchange pursuant to Secretary of the Exchange within ten term.39 Second, the proposal would
Rule 507, which concerns SQT, RSQT, days after the decision being appealed remove a reference to Rule 511.40 The
and RSQTO applications and options has been rendered. The appeal would be Exchange explains that Rule 511 would
assignments.29 Currently, an appeal heard by the Board or a Board Panel, be deleted by the proposal 41 and Rule
from a decision pursuant to Rule 507 is which would be subject to the same 508 will continue to indicate that failure
heard by a special committee of the composition requirements discussed to provide the exchange with prior
Board composed of three directors, at above.35 The person requesting review notice of a transfer, in accordance with
least one of whom must be would be permitted to submit a written Rule 508, or failure to obtain Exchange
independent.30 Under the proposal, statement to and appear before the approval of a transfer, permits the
such appeal would be heard by the full Board or Board Panel. The Secretary of Exchange to recover the allocated
Board or a panel appointed by the Board the Exchange would certify the record of securities and allocate them pursuant to
composed of three members not the proceeding, if any, and the written Rule 506.42
involved in the Exchange decision decision, and would submit the Finally, the Exchange proposes to
appealed from and who otherwise have amend Rule 507(b)(iii)(C) to reflect the
31 Article I of the Exchange’s By-Laws defines
no conflict of interest (‘‘Board Panel’’). proposed changes to Rule 510 that
‘‘public member’’ as ‘‘a member of any committee
If the Board appointed a Board Panel, appointed by the Board of Directors who has no would implement a good standing
material business relationship with a broker or requirement.43 Currently, this provision
25 See proposed Rule 510(b). The Exchange
dealer, the Exchange, or its affiliates.’’ See By-Laws, provides that, when making a decision
explains that, for example, it could pursue a Article I(hh). The Exchange notes that while at least
disciplinary process against a member that commits one member of the current special committee must
concerning an application for
an egregious market making violation evidenced by be an independent director, the Board Panel would assignment in an option when there are
a pattern of repeated failure to make a two-sided require the inclusion of one person who would more applicants for assignment in a
market in assigned options. See Notice, supra note qualify as a public member, which requirement also particular option than there are
4, at 2421 n. 32. provides some measure of independence. See
26 See Notice, supra note 4, at 2421. See also infra Notice, supra note 4, at 2419 n. 14. 36 See proposed Rule 510(c).
Section 0. 32 See proposed Rule 507(e). The proposal would
37 See Notice, supra note 4, at 2421 n. 33.
27 See Notice, supra note 4, at 2422. make conforming changes to the remainder of Rule
38 See proposed Rule 508.
28 See id. The Exchange states that there is 507(e), which addresses process requirements for
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39 See Notice, supra note 4, at 2420. The
currently one specialist unit operating on the the appeal, to replace references to ‘‘special
options floor. See id. The Exchange believes that committee’’ with ‘‘Board or Board Panel.’’ The Exchange deleted another reference to leasing in its
even if additional Specialists begin to conduct existing provision that there is no appeal to the rules on the same basis. See Securities Exchange
business on the options floor, Rule 511 was Board from a decision of the special committee Act Release No. 77121 (February 11, 2016), 81 FR
designed for a very different, competitive floor would be revised to apply to a decision of the Board 8308 (February 18, 2016) (SR–Phlx–2016–22).
environment and will not be needed. See id. at 2422 Panel. See id. 40 See proposed Rule 508.

n. 38. 33 See proposed Rule 510(c). 41 See supra notes 19–20 and accompanying text.
29 See proposed Rule 507(e). 34 See Rules 507(e), 511(f). 42 See Notice, supra note 4, at 2420 & n.21.
30 See Rule 507(e). 35 See supra notes 31–32 and accompanying text. 43 See proposed Rule 507(b)(iii)(C).

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11970 Federal Register / Vol. 82, No. 37 / Monday, February 27, 2017 / Notices

positions available, the Exchange shall specialist unit on the floor experiences as defined in Article I of the By-Laws.
consider the applicant’s prior a staffing problem.50 The revised appeal procedures for
performance as a Specialist, SQT, or The Commission notes that the decisions pursuant to Rule 510
RSQT based on evaluations conducted proposal to require Exchange staff, concerning SQTs and RSQTs mirror
pursuant to Rule 510.44 The Exchange rather than the Board, to make procedures already in place in other
explains that in light of the proposed determinations to defer or limit an contexts.
good standing requirement, as discussed application of an SQT or RSQT is Finally, the Commission believes that
above,45 it has proposed to update this designed to facilitate the administration the proposal’s minor, conforming
provision to state that the Exchange can and application of Rule 507. The revisions to Rules 507 and 508 are
consider the applicant’s prior Commission also notes that any deferral consistent with the Act.
performance as a Specialist, SQT, or or limitation would be objectively
IV. Solicitation of Comments on
RSQT based on good standing pursuant determined by the Exchange. The
Amendment No. 1
to Rule 510.46 proposal would also require the
Exchange to provide written notification Interested persons are invited to
III. Discussion and Commission to any SQT or RSQT applicant whose submit written data, views, and
Findings application is the subject of such arguments concerning whether
limitation or deferral, describing the Amendment No. 1 to the proposed rule
After careful review, the Commission objective basis for such limitation or change is consistent with the Act.
finds that the proposed rule change is deferral. Further, an SQT or RSQT Comments may be submitted by any of
consistent with the requirements of the applicant would have the right to an the following methods:
Act and the rules and regulations appeal to the Board or a Board Panel Electronic Comments
thereunder applicable to a national from any such decision by Exchange
securities exchange.47 In particular, the staff pursuant to Rule 507(e).51 • Use the Commission’s Internet
Commission finds that the proposed The Commission notes that the comment form (http://www.sec.gov/
rule change is consistent with Section proposed good standing requirements rules/sro.shtml); or
6(b)(5) of the Act,48 which requires, are designed to evaluate compliance by • Send an email to rule-comments@
Specialists, SQTs, and RSQTs with sec.gov. Please include File Number SR–
among other things, that the rules of a
Exchange rules and the rules of the Phlx–2016–105 on the subject line.
national securities exchange be
designed to prevent fraudulent and Commission and other regulators and Paper Comments
manipulative acts and practices, to are consistent with the rules of other
• Send paper comments in triplicate
promote just and equitable principles of options exchanges.52 The Exchange
to Brent J. Fields, Secretary, Securities
trade, to remove impediments to and represents that its staff, including its
and Exchange Commission, 100 F Street
perfect the mechanism of a free and surveillance group, will monitor
NE., Washington, DC 20549–1090.
open market and a national market compliance with such rules.53 The
Commission notes that while Specialist All submissions should refer to File
system and, in general, to protect Number SR–Phlx–2016–105. This file
investors and the public interest. allocation procedures are not included
within proposed Rule 510, Specialists number should be included on the
The Exchange represents that, because will continue to be subject to numerous subject line if email is used. To help the
of the development of liquidity- existing rules, some of which address Commission process and review your
enhancing electronic market makers on allocation of options.54 comments more efficiently, please use
the Exchange that make markets in the The Commission believes that the only one method. The Commission will
same options issues as Specialists and Exchange’s use of the Board or a Board post all comments on the Commission’s
the diminution of the role that the Panel to hear appeals of Exchange Internet Web site (http://www.sec.gov/
Specialist plays in managing the order decisions pursuant to Rules 507 and rules/sro.shtml). Copies of the
book on the Exchange, Specialists no 510, as opposed to a special committee submission, all subsequent
longer need to have both a back-up of the Board, would retain an amendments, all written statements
specialist unit and a substitute specialist opportunity for the SQT, RSQT, or with respect to the proposed rule
unit.49 The Commission notes that a Specialist to be heard on the matter change that are filed with the
substitute specialist unit will still be before the Exchange takes remedial Commission, and all written
available if the specialist unit is unable action. The Commission notes the communications relating to the
to perform the duties of a Specialist and requirements that members of the Board proposed rule change between the
that the presence of SQTs and RSQTs, Panel will not be involved in the Commission and any person, other than
which have continuous quoting Exchange decision appealed from, have those that may be withheld from the
obligations, will serve as an additional no conflicts of interest, and be public in accordance with the
source of liquidity for the Exchange if a considered by the Board to be qualified, provisions of 5 U.S.C. 552, will be
and that one member will be a person available for Web site viewing and
44 See Rule 507(b)(iii)(C). Other factors for who would qualify as a public member printing in the Commission’s Public
consideration include the financial and technical Reference Room, 100 F Street NE.,
resources available to the applicant and the 50 The Commission notes that currently Remote Washington, DC 20549 on official
applicant’s experience and expertise in market Specialists are not required to meet the back-up business days between the hours of
making or options trading. See Rule 507(b)(iii)(A), specialist unit requirement. See Rule 501(f)(ii). See
(B). also Securities Exchange Act Release No. 63717
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
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45 See supra notes 17–20 and 22 and (January 14, 2011), 76 FR 4141 (January 24, 2011)
accompanying text. (SR–Phlx–2010–145). inspection and copying at the principal
46 See Notice, supra note 4, at 2419. 51 See Notice, supra note 4, at 2419. See also
office of the Exchange. All comments
47 In approving this proposed rule change, the supra Section II.D. received will be posted without change;
Commission has considered the proposed rule’s 52 See BX Options Rules, Chapter VII, Section 4;

impact on efficiency, competition, and capital Nasdaq Options Rules, Chapter VII, Section 4.
the Commission does not edit personal
formation. See 15 U.S.C. 78c(f). 53 See supra note 24 and accompanying text. identifying information from
48 15 U.S.C. 78f(b)(5). 54 See proposed Rule 508; Rules 506, 513. See submissions. You should submit only
49 See Notice, supra note 4, at 2418–19. also Rules 501, 1014, 1022. information that you wish to make

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Document Created: 2017-02-25 01:05:32
Document Modified: 2017-02-25 01:05:32
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 11967