82 FR 19427 - Self-Regulatory Organizations; NASDAQ PHLX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1002 of the Exchange's Rules To Establish Certain Exemptions From Exercise Limits

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 80 (April 27, 2017)

[Federal Register Volume 82, Number 80 (Thursday, April 27, 2017)]
[Notices]
[Pages 19427-19429]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-08464]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80504; File No. SR-Phlx-2017-32]


Self-Regulatory Organizations; NASDAQ PHLX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1002 
of the Exchange's Rules To Establish Certain Exemptions From Exercise 
Limits

April 21, 2017.
    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 April 11, 2017, 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 Rule 1002 of the Exchange's Rules, 
as described in further detail below.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqphlx.cchwallstreet.com, at the principal 
office of

[[Page 19428]]

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 purpose of the proposed rule change is to amend Rule 1002 of 
the Exchange's rules (the ``Rules''), which pertains to exercise 
limits, so that it is more consistent with the rules of PHLX's sister 
exchange, Nasdaq ISE, LLC (``ISE'').
    Although Rule 1001 of the Exchange's Rules provides for numerous 
exemptions to the position limits that the Exchange imposes, Rule 
1002(c) provides that ``[t]he Exchange will not approve exercises 
exceeding the [exercise] limits established pursuant to this Rule 
except in highly unusual circumstances.'' Rule 1002(c) further provides 
that an exemption request must be made in writing and set forth the 
facts justifying the exemption, and that such a request is subject to 
the approval of an Options Exchange Official.\3\
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    \3\ See PHLX Rule 1002(c).
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    In contrast to PHLX, the rules of ISE do not impose such onerous 
requirements for approving exemptions from exercise limits. ISE Rule 
414(c) states that ``[f]or a Member that has been granted an exemption 
to position limits pursuant to Rule 413(a), the number of contracts 
which can be exercised over a five (5) business day period shall equal 
the Member's exempted position.'' Rule 413(a) provides for equity hedge 
and delta-based equity hedge position limit exemptions.
    The Exchange proposes to harmonize Rule 1002 with ISE Rule 414(c) 
by authorizing exercise limit exemptions as a matter of course, and 
without requiring members and member organizations to submit written 
requests and obtain specific approvals for these exemptions, to the 
extent that such members or member organizations are exempt from 
position limits as set forth in Rule 1001. Specifically, the Exchange 
proposes to replace the existing language of Rule 1002(c) with the 
language of ISE Rule 414(c), except that the Exchange proposes to 
specify that exercise exemption limits are available to members and 
member organizations to the extent that they are exempt from position 
limits pursuant to Rule 1001(l) (exempting equity option hedges) or 
Rule 1001(n) (exempting delta-based equity hedges).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\5\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanisms 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal promotes just and equitable 
principles of trade and a free and open market by granting exercise 
limit exemptions to a similar extent and under similar circumstances as 
do other options exchanges, while eliminating the onerous requirement 
that the Exchange's members and member organizations must obtain 
approval for such exemptions in each instance and pursuant to written 
requests. Additionally, broadening the availability of exercise limit 
exemptions would facilitate risk management practices of members and 
member organizations.

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.

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 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\6\
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    \6\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's intent to file 
the proposed rule change, along with a brief description and 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. The Exchange has satisfied this 
requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \7\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \8\ 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.
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    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
The Commission notes that the Exchange's proposal to adopt exemptions 
from exercise limits tracks the exemptions from such limits already in 
place in the rules of ISE. Accordingly, the Commission hereby waives 
the 30-day operative delay and designates the proposed rule change as 
operative upon filing.\9\
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    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 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

[[Page 19429]]

under Section 19(b)(2)(B) \10\ of the Act to determine whether the 
proposed rule change should be approved or disapproved.
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    \10\ 15 U.S.C. 78s(b)(2)(B).
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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-2017-32 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-2017-32. 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-2017-32 and should be 
submitted on or before May 18, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08464 Filed 4-26-17; 8:45 am]
BILLING CODE 8011-01-P