82 FR 28712 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1049, Communications to Customers
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 120 (June 23, 2017)
Federal Register Volume 82, Issue 120 (June 23, 2017)
| Page Range | 28712-28715 | |
| FR Document | 2017-13103 |
[Federal Register Volume 82, Number 120 (Friday, June 23, 2017)] [Notices] [Pages 28712-28715] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-13103] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80972; File No. SR-Phlx-2017-39] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1049, Communications to Customers June 19, 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 June 8, 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, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 1049, Communications to Customers. The proposed rule change is intended to update and modernize Rule 1049, to be retitled ``Options Communications,'' and to conform it to rules of other options exchanges regarding communications to customers. It makes both organizational and substantive changes that have previously been made by other options exchanges. 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 is a party to a 17d-2 agreement with the Financial Industry Regulatory Authority, Inc. (``FINRA'') and other options exchanges (the ``Options Multiparty 17d-2 Agreement'' or the ``17d-2 Agreement'').\3\ The 17d-2 Agreement allocates regulatory responsibilities with respect to broker-dealers, and persons associated therewith, that are members of more than one Participant (the ``Common Members'') and conduct a public business for compliance with specified common rules relating to the conduct by broker-dealers and associated persons of accounts for listed options, index warrants, currency index warrants, and currency warrants (collectively, ``Covered Securities''). Pursuant to the 17d-2 Agreement, FINRA is the Designated Options Examining Authority (``DOEA'') for its broker-dealer members that also are members of Phlx. Thus, FINRA has certain examination and enforcement responsibilities relating to compliance by Common Members with the rules of Phlx that are substantially similar to the rules of FINRA (the ``Common Rules'') identified in the 17d-2 Agreement. --------------------------------------------------------------------------- \3\ See Agreement by and among Bats BZX Exchange, Inc., BOX Options Exchange, LLC, the Chicago Board Options Exchange, Incorporated, C2 Options Exchange, Incorporated, the International Securities Exchange, LLC, Financial Industry Regulatory Authority, Inc., Miami International Securities Exchange, LLC, the NYSE MKT LLC, the NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ BX, Inc., the NASDAQ PHLX LLC, ISE Gemini, LLC, Bats EDGX Exchange, Inc., ISE Mercury, LLC and MIAX PEARL, LLC, Pursuant to Rule 17d-2 under the Securities Exchange Act of 1934. See also Securities Exchange Act Release No. 79929 (February 2, 2017), 82 FR 9757 (February 8, 2017). --------------------------------------------------------------------------- Phlx Rule 1049, Communications to Customers, is not currently a Common Rule under the 17d-2 Agreement. Rule 1049 sets forth a range of requirements applicable to members, member organizations, or persons associated with a member organization utilizing any advertisement, educational material, sales literature or other communications to any customer or member of the public. The purpose of this proposed rule change is to update, clarify and conform Rule 1049 to the rules of FINRA and other options exchanges regarding options communications to customers that are included as Common Rules under the 17d-2 Agreement, so that it too may qualify as a Common Rule under the 17d-2 Agreement. The proposed rule change would make both organizational and substantive changes that have previously been made by other exchanges in order to conform to FINRA rules.\4\ --------------------------------------------------------------------------- \4\ See, e.g., FINRA Rule 2220, CBOE Rule 9.21, MIAX Rule 1322, and ISE Rule 623. --------------------------------------------------------------------------- Specifically, this proposed rule change is based upon, and makes changes that have previously been made to, Chicago Board Options Exchange (``CBOE'') Rule 9.21 (a Common Rule) over the past ten years, on a cumulative basis, by SR-CBOE-2013-043;\5\ SR-CBOE-2010-035 \6\ and SR-CBOE-2007-30.\7\ Current Phlx Rule 1049 is very similar in content and organization to CBOE Rule 9.21 as it existed prior to approval of SR-CBOE-2007-30. Upon implementation of the amendments proposed herein, Exchange Rule 1049 would once again track CBOE Rule 9.21 nearly word for word.\8\ The [[Page 28713]] amendments, if adopted, would provide a more uniform approach to communications to customers regarding standardized options. The proposed changes are discussed below. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release 69807 (June 20, 2013), 78 FR 38423 (June 26, 2013) (SR-CBOE-2013-043) \6\ See Securities Exchange Act Release No. 62034 (May 4, 2010), 75 FR 26303 (May 10, 2010) (SR-CBOE-2010-35). This was an interim rule change relating to market letters which are no longer addressed in CBOE rules and are thus not addressed in this proposed rule change. \7\ See Securities Exchange Act Release No. 58823 (October 21, 2008), 73 FR 63747 (October 28, 2008) (SR-CBOE-2007-30). \8\ The only substantive difference between CBOE Rule 9.21 and proposed Phlx Rule 1049 is with respect to index warrants. Current Phlx Rule 1049 states at section (f) that the provisions of Rule 1049 are applicable to index warrants, and at Commentary .05 that, for purposes of the rule the term ``option'' is deemed to include index warrants and the term ``The Options Clearing Corporation'' is deemed to mean the issuer(s) of such warrants. CBOE Rule 9.21 does not contain comparable provisions. No changes are proposed with respect to these provisions. Provisions relating to index warrants were added to Rule 1049 by Phlx in 1994 as part of a comprehensive proposed rule change establishing rules for the listing and trading of stock index, currency and currency index warrants. See Securities Exchange Act Release No. 36167 (August 29, 1995), 60 FR 46667 (September 7, 1995). --------------------------------------------------------------------------- Redesignation of Rule 1049(e) to Proposed Rule 1049(a) and New Definitions Rule 1049(e) currently defines terms used in Rule 1049. Phlx proposes to redesignate paragraph (e) as paragraph (a). Phlx also proposes to delete the existing definitions of ``advertisement'',\9\ ``educational material'' \10\ and ``sales literature'',\11\ and to add new definitions of ``correspondence'', ``institutional communication'' and ``retail communication'' which collectively would constitute ``options communications'' under the revised rule. These new terms are necessary because FINRA, in reframing its customer communications rule, previously adopted these new terms to describe various categories of communications. The term ``correspondence'' would include any written (including electronic) communication distributed or made available to 25 or fewer retail customers within any 30 calendar-day period. The term ``institutional communication'' would include any written (including electronic) communication concerning options that is distributed or made available only to institutional investors, but would not include a member's internal communications.\12\ Finally, ``retail communication'' would be defined to mean any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. --------------------------------------------------------------------------- \9\ The term ``advertisement'' is currently defined in Rule 1049(e) as including any sales material that reaches a mass audience through public media such as newspapers, periodicals, magazines, radio, television, telephone recording, motion picture, audio or video device, telecommunications device, billboards, signs, or through written communications to customers or the public not required to be accompanied or preceded by one or more current Options Disclosure Documents. \10\ The term ``educational material'' is currently defined in Rule 1049(e)(ii) as including any explanatory material distributed or made generally available to customers or the public that is limited to information describing the general nature of the standardized options markets or one or more strategies. \11\ The term ``sales literature'' is currently defined in Rule 1049(e)(iii) as including any written communication (not defined as an ``advertisement'' or as ``educational material'') distributed or made available to customers or the public that contains any analysis, performance report, projection or recommendation with respect to options, underlying securities or market conditions, any standard forms of worksheets, or any seminar text which pertains to options and which is communicated to customers or the public at seminars, lectures or similar such events, or any Exchange-produced materials pertaining to options. \12\ The term institutional investor would mean any qualified investor as defined in Section 3(a)(54) of the Securities Exchange Act of 1934. --------------------------------------------------------------------------- The Exchange proposes corresponding amendments throughout Rule 1049 to the provisions referring to advertisement, educational material and sales literature, including deletion of Commentary .02A of Rule 1049, which outlines what is permitted in an advertisement, and Commentary .03 of Rule 1049, which concerns the content of educational material. Relocation of Rule 1049(a) to Proposed Rule 1049(d) Rule 1049(a) currently contains an outline of the ``General Rule'' for options communications. Phlx proposes to redesignate Rule 1049(a) as Rule 1049(d), and to incorporate limitations on the use of options communications currently contained in Commentary .01 of Rule 1049 into proposed Rule 1049(d).\13\ In addition, proposed Rule 1049(d)(iii) would amend current Rule 1049(a)(iii) by clarifying the types of cautionary statements and caveats that are prohibited. The Exchange is proposing to relocate to Rule 1049(d), and slightly modify, language currently found in Rule 1049 Commentary .01 governing acceptable content of options communications. Section A of Rule 1049 Commentary .04 currently sets forth the requirement that ``sales literature'' shall state that supporting documentation for any claims, comparisons, recommendations, statistics or other technical data, will be supplied upon request. The Exchange proposes to redesignate Section A of Rule 1049 Commentary .04 as proposed Rule 1049(d)(vii), which would have the effect of making those conditions applicable to options communications as defined in proposed Rule 1049 rather than to the deleted term ``sales literature.'' Proposed Rule 1049(d)(viii) would provide that certain aspects of the General Rule set forth in paragraphs (vi) and (vii) are inapplicable to institutional communications. --------------------------------------------------------------------------- \13\ Current Rule 1049(d), which limits the dissemination of written materials respecting options to persons who have not received the current Options Disclosure Document (``ODD''), would be deleted. Rules governing communications prior to or after delivery of the current ODD would be set forth in new Rule 1049(e). --------------------------------------------------------------------------- Proposed Amendments to Rule 1049(b) Phlx proposes to amend Rule 1049(b) to include the types of communications proposed to be added to the definition of ``options communications'' in proposed Rule 1049(a). Current Rule 1049(b) which imposes an obligation to obtain advance approval by a Registered Options Principal (``ROP'') for most options communications, would be replaced by new language set forth in Rule 1049(b)(i)-(iv). Rule 1049(b)(i) would preserve this requirement with respect to retail communications. However, proposed Rule 1049(b)(ii) would remove correspondence, as defined in Rule 1049(a), from the pre-approval requirement. All correspondence would, however, be subject to general supervision and review requirements.\14\ Additionally, proposed Rule 1049(b)(iii) would remove institutional communications, as defined in Rule 1049(a), from the pre-approval requirement, but would require each member or member organization to establish written procedures that are appropriate to its business, size, structure, and customers for review by a ROP of institutional communications used by the member or member organization. --------------------------------------------------------------------------- \14\ See Phlx Rule 1025. --------------------------------------------------------------------------- Finally, proposed Rule 1049(b)(iv) would require copies of the options communications to be retained by the member or member organization in accordance with Rule 17a-4 \15\ under the Securities Exchange Act of 1934. The names of the persons who prepared the options communications, the names of the persons who approved the options communications, and the source of any recommendations contained therein would also be required to be retained by the member or member organization and kept in the form and for the time periods required for options communications by Rule 17a-4. --------------------------------------------------------------------------- \15\ 17 CFR 240.17a-4. --------------------------------------------------------------------------- Proposed Amendments to Rule 1049(c) Rule 1049(c) currently requires members to obtain approval from the Exchange for every advertisement and all educational material. This requirement applies regardless of whether the options communications are used before or after the delivery of a current ODD. Phlx proposes to amend this provision to require Exchange approval only with respect to retail communications of a member or member organization pertaining to standardized options that is not accompanied or preceded by the applicable current ODD. Such retail communications would be required to be submitted at least ten calendar days prior to use (or such shorter period as the Exchange may allow in particular instances). The Exchange pre-approval requirement for options [[Page 28714]] communications used subsequent to the delivery of the ODD is being eliminated because the ODD is designed to alert the customer to the characteristics and risks associated with trading in options. Rule 1049(c) would also be amended to delete references to ``advertisements'' and ``educational material,'' which as discussed above would no longer be defined, and to include instead the types of communications added to the definition of ``options communications'' in proposed Rule 1049(a). The Exchange is also proposing to add language which would further exempt the ODD and a prospectus from Exchange review as these documents have other further requirements under the Securities Act of 1933. Proposed Rule 1049(e) Proposed new Rule 1049(e) would set forth (i) standards for options communications that are not preceded or accompanied by an ODD and (ii) standards for options communications used prior to delivery of an ODD. These requirements generally would clarify and restate the requirements contained in the current Commentary .02A of Rule 1049 which, as noted above, would be deleted. Proposed Amendments to Rule 1049 Commentary Sections Proposed new Commentary .01 would include and amend the provisions found in current Section A of Commentary .02 regarding how the Rule 1049(e)(i)(B) requirement that options communications contain contact information for obtaining a copy of the ODD may be satisfied. As noted above, the current provisions of Commentary .01 regarding limitations on the use of options communications are proposed to be incorporated into proposed Rule 1049(d).\16\ --------------------------------------------------------------------------- \16\ Commentary .01 Section A contains an example which is not being incorporated into proposed Rule 1049(d), as it is not found in CBOE Rule 9.21(d). --------------------------------------------------------------------------- Proposed Commentary .02, Projections, would be revised to amend and include the provisions currently located in Section B of Commentary .04, which pertain to standards for ``Sales Literature'' that contains projected performance figures. These provisions would be amended to apply to options communications rather than to the deleted defined term Sales Literature. As previously noted, the provisions of Commentary .02 that outline what is permitted in an advertisement are proposed to be deleted, and the provisions relating to standards for options communications used prior to delivery of the ODD are proposed to be incorporated into proposed Rule 1049(e)(ii). Proposed Rule 1049(e)(i) would limit all options communications that are not preceded or accompanied by the ODD. Proposed Commentary .03, Historical Performance, would be revised to amend and include the provisions currently found in Section C of Commentary .04 pertaining to standards for sales literature that contains historical performance figures. These provisions would be amended to apply to options communications rather than to the deleted defined term sales literature. Existing Commentary .03, which concerns the content of educational material (another defined term proposed to be deleted), is proposed to be deleted as noted above. Proposed Rule 1049(e)(i) would limit all options communications that are not preceded or accompanied by the ODD. Proposed Commentary .04, Options Programs, would contain the provisions of current Section D of Commentary .04, and would require communications regarding an options program (i.e., an investment plan employing the systematic use of one or more options strategies), the cumulative history or unproven nature of the program and its underlying assumptions to be disclosed. Commentary .04 currently sets forth the standards applicable to ``Sales Literature.'' The Exchange proposes to delete existing Sections E, F and G of Commentary .04 dealing with worksheets and recordkeeping with respect to communications that portray performance of past recommendations or actual transactions, in favor of the new customer communications rules applicable to options communications generally that are consistent with those of other options exchanges. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\17\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\18\ 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 to protect investors and the public interest, by conforming Rule 1049 more closely to the Common Rules regarding options communications under the 17d-2 Agreement. By doing so, the proposal also furthers the objectives of Section 6(b)(1) \19\ of the Act as the amendments would better enable the Exchange to be so organized as to have the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its members with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f(b). \18\ 15 U.S.C. 78f(b)(5). \19\ 15 U.S.C. 78f(b)(1). --------------------------------------------------------------------------- In its most recent approval order for the 17d-2 Agreement \20\ the Commission noted that Section 19(g)(1) of the Act,\21\ among other things, requires every self-regulatory organization (``SRO'') registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) \22\ or Section 19(g)(2) \23\ of the Act. --------------------------------------------------------------------------- \20\ See Securities and Exchange Act Release No. 79929 (February 2, 2017). \21\ 15 U.S.C. 78s(g)(1). \22\ 15 U.S.C. 78q(d)(1). \23\ 15 U.S.C. 78s(g)(2). --------------------------------------------------------------------------- Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker- dealers that maintain memberships in more than one SRO (``common members''). In its decision, the Commission noted that such regulatory duplication would add unnecessary expenses for common members and their SROs. Finally, it observed that under paragraph (c) of Rule 17d-2, the Commission may declare joint plans for the allocation of regulatory responsibilities with respect to their common members effective if, after providing for notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among the SROs, to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system, and is in conformity with the factors set forth in Section 17(d) of the Act. The 17d-2 Plan covering the Common Rules is designed to eliminate regulatory duplication and unnecessary expense for common members and the SROs including Phlx, with respect to the Common Rules. By amending Rule 1049 so that it, like CBOE Rule 9.21, is ``substantially similar'' to the FINRA rules of similar purpose and therefore eligible to become a Common Rule for purposes of the 17d-2 Agreement, the Exchange is eliminating regulatory duplication and unnecessary expense as contemplated by Commission Rule 17d- [[Page 28715]] 2, and facilitating more efficient regulatory compliance by its members.\24\ --------------------------------------------------------------------------- \24\ CBOE Rule 9.21 and FINRA Rules 2360(b)(18) and 2354 are designated as Common Rules under the 17d-2 Agreement. --------------------------------------------------------------------------- Additionally, the modernization of Rule 1049 promotes just and equitable principles of trade, removes impediments to and perfects the mechanism of a free and open market and a national market system, and protects investors and the public interest, because it is designed to alert members to requirements with respect to options communications and to bring clarity to its members and the public regarding the Exchange's options communications rule. The Exchange therefore believes that the proposed rule change will help ensure that investors are protected from potentially false or misleading communications with the public distributed by Exchange members. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the amendments to Rule 1049 proposed herein will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act inasmuch as the amendments conform Rule 1049 more closely to the Common Rules regarding options communications to customers under the 17d-2 Agreement. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \25\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\26\ --------------------------------------------------------------------------- \25\ 15 U.S.C. 78s(b)(3)(A)(iii). \26\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-Phlx-2017-39 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2017-39. 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-2017-39 and should be submitted on or before July 14, 2017. --------------------------------------------------------------------------- \27\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\27\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-13103 Filed 6-22-17; 8:45 am] BILLING CODE 8011-01-P
![28712 Federal Register / Vol. 82, No. 120 / Friday, June 23, 2017 / Notices
Office of Information and Regulatory .cchwallstreet.com/, at the principal rules of FINRA (the ‘‘Common Rules’’)
Affairs, Office of Management and office of the Exchange, and at the identified in the 17d–2 Agreement.
Budget, Room 10102, New Executive Commission’s Public Reference Room. Phlx Rule 1049, Communications to
Office Building, Washington, DC 20503, Customers, is not currently a Common
II. Self-Regulatory Organization’s Rule under the 17d–2 Agreement. Rule
or by sending an email to: Shagufta_
Statement of the Purpose of, and 1049 sets forth a range of requirements
Ahmed@omb.eop.gov; and (ii) Pamela
Statutory Basis for, the Proposed Rule applicable to members, member
Dyson, Director/Chief Information
Change organizations, or persons associated
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon, In its filing with the Commission, the with a member organization utilizing
100 F Street NE., Washington, DC 20549 Exchange included statements any advertisement, educational
or send an email to: PRA_Mailbox@ concerning the purpose of and basis for material, sales literature or other
sec.gov. Comments must be submitted to the proposed rule change and discussed communications to any customer or
OMB within 30 days of this notice. any comments it received on the member of the public. The purpose of
proposed rule change. The text of these this proposed rule change is to update,
Dated: June 19, 2017.
statements may be examined at the clarify and conform Rule 1049 to the
Eduardo A. Aleman, rules of FINRA and other options
Assistant Secretary. places specified in Item IV below. The
Exchange has prepared summaries, set exchanges regarding options
[FR Doc. 2017–13142 Filed 6–22–17; 8:45 am] communications to customers that are
forth in sections A, B, and C below, of
BILLING CODE 8011–01–P
the most significant aspects of such included as Common Rules under the
statements. 17d–2 Agreement, so that it too may
qualify as a Common Rule under the
SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s 17d–2 Agreement. The proposed rule
COMMISSION Statement of the Purpose of, and change would make both organizational
[Release No. 34–80972; File No. SR–Phlx– Statutory Basis for, the Proposed Rule and substantive changes that have
2017–39] Change previously been made by other
1. Purpose exchanges in order to conform to FINRA
Self-Regulatory Organizations; rules.4
NASDAQ PHLX LLC; Notice of Filing The Exchange is a party to a 17d–2 Specifically, this proposed rule
and Immediate Effectiveness of agreement with the Financial Industry change is based upon, and makes
Proposed Rule Change To Amend Rule Regulatory Authority, Inc. (‘‘FINRA’’) changes that have previously been made
1049, Communications to Customers and other options exchanges (the to, Chicago Board Options Exchange
‘‘Options Multiparty 17d–2 Agreement’’ (‘‘CBOE’’) Rule 9.21 (a Common Rule)
June 19, 2017. over the past ten years, on a cumulative
or the ‘‘17d–2 Agreement’’).3 The 17d–
Pursuant to Section 19(b)(1) of the 2 Agreement allocates regulatory basis, by SR–CBOE–2013–043;5 SR–
Securities Exchange Act of 1934 responsibilities with respect to broker- CBOE–2010–035 6 and SR–CBOE–2007–
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 dealers, and persons associated 30.7 Current Phlx Rule 1049 is very
notice is hereby given that on June 8, therewith, that are members of more similar in content and organization to
2017, NASDAQ PHLX LLC (‘‘Phlx’’ or than one Participant (the ‘‘Common CBOE Rule 9.21 as it existed prior to
‘‘Exchange’’) filed with the Securities Members’’) and conduct a public approval of SR–CBOE–2007–30. Upon
and Exchange Commission (‘‘SEC’’ or business for compliance with specified implementation of the amendments
‘‘Commission’’) the proposed rule common rules relating to the conduct by proposed herein, Exchange Rule 1049
change as described in Items I, II, and broker-dealers and associated persons of would once again track CBOE Rule 9.21
III, below, which Items have been accounts for listed options, index nearly word for word.8 The
prepared by the Exchange. The warrants, currency index warrants, and
Commission is publishing this notice to currency warrants (collectively,
4 See, e.g., FINRA Rule 2220, CBOE Rule 9.21,
solicit comments on the proposed rule ‘‘Covered Securities’’). Pursuant to the
MIAX Rule 1322, and ISE Rule 623.
5 See Securities Exchange Act Release 69807
change from interested persons. 17d–2 Agreement, FINRA is the (June 20, 2013), 78 FR 38423 (June 26, 2013) (SR–
I. Self-Regulatory Organization’s Designated Options Examining CBOE–2013–043)
Statement of the Terms of Substance of Authority (‘‘DOEA’’) for its broker- 6 See Securities Exchange Act Release No. 62034
dealer members that also are members (May 4, 2010), 75 FR 26303 (May 10, 2010) (SR–
the Proposed Rule Change CBOE–2010–35). This was an interim rule change
of Phlx. Thus, FINRA has certain relating to market letters which are no longer
The Exchange proposes to amend
examination and enforcement addressed in CBOE rules and are thus not addressed
Rule 1049, Communications to
responsibilities relating to compliance in this proposed rule change.
Customers. The proposed rule change is 7 See Securities Exchange Act Release No. 58823
by Common Members with the rules of
intended to update and modernize Rule (October 21, 2008), 73 FR 63747 (October 28, 2008)
Phlx that are substantially similar to the
1049, to be retitled ‘‘Options (SR–CBOE–2007–30).
8 The only substantive difference between CBOE
Communications,’’ and to conform it to
3 See Agreement by and among Bats BZX Rule 9.21 and proposed Phlx Rule 1049 is with
rules of other options exchanges Exchange, Inc., BOX Options Exchange, LLC, the respect to index warrants. Current Phlx Rule 1049
regarding communications to customers. Chicago Board Options Exchange, Incorporated, C2 states at section (f) that the provisions of Rule 1049
It makes both organizational and Options Exchange, Incorporated, the International are applicable to index warrants, and at
asabaliauskas on DSKBBXCHB2PROD with NOTICES
substantive changes that have Securities Exchange, LLC, Financial Industry Commentary .05 that, for purposes of the rule the
Regulatory Authority, Inc., Miami International term ‘‘option’’ is deemed to include index warrants
previously been made by other options Securities Exchange, LLC, the NYSE MKT LLC, the and the term ‘‘The Options Clearing Corporation’’
exchanges. NYSE Arca, Inc., The NASDAQ Stock Market LLC, is deemed to mean the issuer(s) of such warrants.
The text of the proposed rule change NASDAQ BX, Inc., the NASDAQ PHLX LLC, ISE CBOE Rule 9.21 does not contain comparable
is available on the Exchange’s Web Gemini, LLC, Bats EDGX Exchange, Inc., ISE provisions. No changes are proposed with respect
Mercury, LLC and MIAX PEARL, LLC, Pursuant to to these provisions. Provisions relating to index
site at http://nasdaqphlx Rule 17d–2 under the Securities Exchange Act of warrants were added to Rule 1049 by Phlx in 1994
1934. See also Securities Exchange Act Release No. as part of a comprehensive proposed rule change
1 15 U.S.C. 78s(b)(1). 79929 (February 2, 2017), 82 FR 9757 (February 8, establishing rules for the listing and trading of stock
2 17 CFR 240.19b–4. 2017). index, currency and currency index warrants. See
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2, and facilitating more efficient At any time within 60 days of the submissions. You should submit only
regulatory compliance by its members.24 filing of the proposed rule change, the information that you wish to make
Additionally, the modernization of Commission summarily may available publicly.
Rule 1049 promotes just and equitable temporarily suspend such rule change if All submissions should refer to File
principles of trade, removes it appears to the Commission that such Number SR–Phlx–2017–39 and should
impediments to and perfects the action is: (i) Necessary or appropriate in be submitted on or before July 14, 2017.
mechanism of a free and open market the public interest; (ii) for the protection For the Commission, by the Division of
and a national market system, and of investors; or (iii) otherwise in Trading and Markets, pursuant to delegated
protects investors and the public furtherance of the purposes of the Act. authority.27
interest, because it is designed to alert If the Commission takes such action, the Eduardo A. Aleman,
members to requirements with respect Commission shall institute proceedings Assistant Secretary.
to options communications and to bring to determine whether the proposed rule [FR Doc. 2017–13103 Filed 6–22–17; 8:45 am]
clarity to its members and the public should be approved or disapproved. BILLING CODE 8011–01–P
regarding the Exchange’s options IV. Solicitation of Comments
communications rule. The Exchange
therefore believes that the proposed rule Interested persons are invited to SECURITIES AND EXCHANGE
change will help ensure that investors submit written data, views, and COMMISSION
are protected from potentially false or arguments concerning the foregoing,
misleading communications with the including whether the proposed rule Submission for OMB Review;
change is consistent with the Act. Comment Request
public distributed by Exchange
Comments may be submitted by any of
members. Upon Written Request Copies Available
the following methods:
B. Self-Regulatory Organization’s From: Securities and Exchange
Electronic Comments Commission, Office of FOIA Services,
Statement on Burden on Competition
• Use the Commission’s Internet 100 F Street NE., Washington, DC
The Exchange does not believe that comment form (http://www.sec.gov/ 20549–2736.
the amendments to Rule 1049 proposed rules/sro.shtml); or Extension:
herein will impose any burden on • Send an email to rule-comments@ Rule 701. SEC File No. 270–306, OMB
competition not necessary or sec.gov. Please include File Number SR– Control No. 3235–0522.
appropriate in furtherance of the Phlx–2017–39 on the subject line.
purposes of the Act inasmuch as the Notice is hereby given that, pursuant
amendments conform Rule 1049 more Paper Comments to the Paperwork Reduction Act of 1995
closely to the Common Rules regarding • Send paper comments in triplicate (44 U.S.C. 3501 et seq.), the Securities
to Secretary, Securities and Exchange and Exchange Commission
options communications to customers
Commission, 100 F Street NE., (‘‘Commission’’) has submitted to the
under the 17d–2 Agreement.
Office of Management and Budget this
Washington, DC 20549–1090.
C. Self-Regulatory Organization’s request for extension of the previously
Statement on Comments on the All submissions should refer to File approved collection of information
Proposed Rule Change Received From Number SR–Phlx–2017–39. This file discussed below.
Members, Participants, or Others number should be included on the Rule 701(17 CFR 230.701) under the
subject line if email is used. To help the Securities Act of 1933 (‘‘Securities Act’’)
No written comments were either Commission process and review your (15 U.S.C. 77a et seq.) provides an
solicited or received. comments more efficiently, please use exemption for certain issuers from the
III. Date of Effectiveness of the only one method. The Commission will registration requirements of the
Proposed Rule Change and Timing for post all comments on the Commission’s Securities Act for limited offerings and
Commission Action Internet Web site (http://www.sec.gov/ sales of securities issued under
rules/sro.shtml). Copies of the compensatory benefit plans or contracts.
Because the foregoing proposed rule submission, all subsequent The purpose of Rule 701 is to ensure
change does not: (i) Significantly affect amendments, all written statements that a basic level of information is
the protection of investors or the public with respect to the proposed rule available to employees and others when
interest; (ii) impose any significant change that are filed with the substantial amounts of securities are
burden on competition; and (iii) become Commission, and all written issued in compensatory arrangements.
operative for 30 days from the date on communications relating to the Information provided under Rule 701 is
which it was filed, or such shorter time proposed rule change between the mandatory. We estimate that
as the Commission may designate, it has Commission and any person, other than approximately 300 companies annually
become effective pursuant to Section those that may be withheld from the rely on the Rule 701 exemption and that
19(b)(3)(A)(iii) of the Act 25 and public in accordance with the it takes 2 hours to prepare each
subparagraph (f)(6) of Rule 19b–4 provisions of 5 U.S.C. 552, will be response. We estimate that 25% of the
thereunder.26 available for Web site viewing and 2 hours per response (0.5 hours) is
printing in the Commission’s Public prepared by the company for a total
24 CBOE Rule 9.21 and FINRA Rules 2360(b)(18) Reference Room, 100 F Street NE., annual reporting burden of 150 hours
and 2354 are designated as Common Rules under (0.5 hours per response × 300
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Washington, DC 20549, on official
the 17d–2 Agreement.
25 15 U.S.C. 78s(b)(3)(A)(iii).
business days between the hours of responses).
26 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 10:00 a.m. and 3:00 p.m. Copies of the An agency may not conduct or
4(f)(6) requires a self-regulatory organization to give filing also will be available for sponsor, and a person is not required to
the Commission written notice of its intent to file inspection and copying at the principal respond to, a collection of information
the proposed rule change at least five business days office of the Exchange. All comments unless it displays a currently valid
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
received will be posted without change; control number.
Commission. The Exchange has satisfied this the Commission does not edit personal
requirement. identifying information from 27 17 CFR 200.30–3(a)(12).
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Document Created: 2017-06-23 03:37:58
Document Modified: 2017-06-23 03:37:58
| 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 28712 |
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