82 FR 39639 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 925 To Create a Limited Exception to the Exchange's Procedures To Designate an Inactive Nominee as an Effective Permit Holder Intra-Day and Make a Non-Substantive Change to the Pricing Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 160 (August 21, 2017)

[Federal Register Volume 82, Number 160 (Monday, August 21, 2017)]
[Notices]
[Pages 39639-39641]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-17548]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81401; File No. SR-Phlx-2017-68]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 925 
To Create a Limited Exception to the Exchange's Procedures To Designate 
an Inactive Nominee as an Effective Permit Holder Intra-Day and Make a 
Non-Substantive Change to the Pricing Schedule

August 15, 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 August 7, 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.
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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 (i) amend Rule 925 to create a limited 
exception to the Exchange's existing procedures to designate an 
Inactive Nominee as an effective permit holder and (ii) make a non-
substantive change to its Pricing Schedule related to the fees assessed 
to Inactive Nominees.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqphlx.cchwallstreet.com/ 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 purpose of the proposed rule change is to (i) amend Rule 925 to 
create a limited exception to the Exchange's existing procedures to 
designate an Inactive Nominee \3\ as an effective permit holder and 
(ii) make a non-substantive change to its Pricing Schedule related to 
the fees assessed to Inactive Nominees.
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    \3\ The term ``inactive nominee'' shall mean a natural person 
associated with and designated as such by a member organization and 
who has been approved for such status and is registered as such with 
the Membership Department. An inactive nominee shall have no rights 
or privileges under a permit unless and until said inactive nominee 
becomes admitted as a member of the Exchange pursuant to the By-Laws 
and Rules of the Exchange. An inactive nominee merely stands ready 
to exercise rights under a permit upon notice by the member 
organization to the Membership Department on an expedited basis. See 
Rule 1(l).
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Rule 925
    Today, the Exchange allows members on the Exchange's trading floor 
to designate an ``Inactive Nominee'' pursuant to Rule 925. Rule 925(i) 
requires, among other criteria, that an individual must be approved as 
eligible to hold a permit in accordance with the Exchange's By-Laws and 
Rules in order to be eligible for Inactive Nominee status. 
Additionally, the member organization with whom an Inactive Nominee is 
affiliated must pay an Inactive Nominee Fee for the privilege of 
maintaining the Inactive Nominee status.\4\ Furthermore, the Rule 
stipulates that an Inactive Nominee does not have any rights or 
privileges of a permit holder unless and until the Inactive Nominee 
becomes an effective permit holder and all applicable Exchange fees are 
paid.
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    \4\ The Exchange currently charges an Inactive Nominee Fee of 
$600 for a six month period, which will be assessed to the member 
organization at a rate of $100 per month for the applicable six 
month period unless the member organization provides proper notice 
of its intent to terminate an inactive nominee prior to the first 
day of the next billing month. An inactive nominee's status expires 
after six months unless it has been reaffirmed in writing by the 
member organization or is sooner terminated. A member organization 
will be assessed the Inactive Nominee Fee every time the status is 
reaffirmed. See the Exchange's Pricing Schedule at: http://nasdaqphlx.cchwallstreet.com/NASDAQPHLXTools/PlatformViewer.asp?selectednode=chp_1_4_10&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx-rulesbrd%2F.
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    When a member organization desires to designate an Inactive Nominee 
as an effective permit holder, Rule 925(ii)(a) states that the member 
organization is required to notify the Exchange's

[[Page 39640]]

Membership Department, in writing, prior to the opening of trading on 
any business day the name of such Inactive Nominee. Further, the notice 
must identify the name of the permit holder that the Inactive Nominee 
will be acting on behalf of as well as the expected duration that such 
Inactive Nominee will remain activated.\5\
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    \5\ Inactive Nominees are essentially a pool of eligible 
individuals who can substitute for traders on the Exchange trading 
floor. The Inactive Nominee allows a member to have flexibility in 
obtaining coverage on the trading floor. An Inactive Nominee stands 
ready to assume a membership upon notice by the member requesting 
that a specific permit be transferred intra-firm on an expedited and 
temporary basis. This transfer allows an Inactive Nominee to become 
an effective member of the Exchange. For example, an Inactive 
Nominee might serve on behalf of a trader who needs to take leave 
for surgery, or could serve when a trader takes vacation leave. This 
allows a member organization to have full staff available to conduct 
business on the Exchange trading floor.
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    The Exchange now proposes to create a limited exception to the 
Exchange's existing procedures to designate an Inactive Nominee as an 
effective permit holder. In particular, the Exchange proposes to adopt 
a new provision at Rule 925(ii)(b) to permit member organizations to 
designate an Inactive Nominee intra-day in the event of an unforeseen 
emergency,\6\ provided that such intra-day designations must be 
approved by the Exchange's Chief Regulatory Officer (``CRO'') or his/
her designee prior to such Inactive Nominee becoming an effective 
permit holder. Other than to reduce the time period and to require 
prior approval of the CRO or his/her designee in the manner described 
above, the Exchange is not proposing any other changes to its existing 
procedures to designate an Inactive Nominee as an effective permit 
holder. Therefore, if a member organization seeks to obtain coverage on 
the trading floor intra-day due to unforeseen circumstances such as 
sudden illness, the proposed rule would still require the member 
organization to notify the Membership Department, in writing, of its 
desire to designate an Inactive Nominee as an effective permit holder 
intra-day. The notice must contain all of the information required 
under paragraph (ii)(a) (i.e., the name of such Inactive Nominee, the 
name of the permit holder that the Inactive Nominee will be acting on 
behalf of, and the expected duration that such Inactive Nominee will 
remain activated). Finally, the CRO or his/her designee must approve 
the member organization's intra-day designation in order for the 
Inactive Nominee to become an effective permit holder.
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    \6\ Such circumstances include sudden illness, family 
emergencies or other unavoidable factors.
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    The Exchange believes that the proposed rule change is reasonable 
and would serve to enhance the application of Rule 925 by allowing 
members to quickly obtain coverage on the trading floor in limited 
cases where an unforeseen emergency arises intra-day, therefore making 
it impossible for a member to notify the Membership Department within 
the required time period under the current Rule. While these 
extraordinary circumstances rarely arise, the proposed rule change 
would give the CRO (or his/her designee in the CRO's absence) the 
flexibility to approve the intra-day designation so that members are 
not adversely affected by unforeseen factors that prevented them from 
notifying the Exchange within the allotted time period. Because each 
individual on the floor is required to have a permit in order to trade, 
such emergencies could especially affect members who have small 
propriety businesses on the Exchange trading floor and therefore rely 
on these Inactive Nominees as their only substitutes. Similarly, since 
the time the Exchange adopted rules establishing the Inactive 
Nominee,\7\ the number of permit holders associated with a member 
organization on the Exchange trading floor has decreased. For the 
foregoing reasons, the Exchange seeks to address these extraordinary 
circumstances and allow its members to obtain coverage in such cases so 
that they may continue to conduct their businesses efficiently. The 
Exchange further believes that requiring the CRO's approval of the 
intra-day designation would serve as a check to ensure that such 
designations would be made on a limited case-by-case basis.
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    \7\ See Securities Exchange Act Release No. 39851 (April 10, 
1998), 63 FR 19282 (April 17, 1998) (SR-PHLX-97-35) (order approving 
rule changes to establish the Inactive Nominee).
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Pricing Schedule
    The Exchange is also proposing a non-substantive amendment to its 
Pricing Schedule at Section VI.A relating to the fees assessed to 
Inactive Nominees. In particular, Section VI.A of the Exchange's 
Pricing Schedule states that an Inactive Nominee is also assessed the 
Trading Floor Personnel Registration Fee.\8\ As part of a previous 
filing, the Exchange renamed this fee as a ``Clerk Fee'' but 
inadvertently retained the reference to ``Trading Floor Personnel 
Registration Fee'' in Section VI.A.\9\ The Exchange now proposes to 
replace the term ``Trading Floor Personnel Registration Fee'' with 
``Clerk Fee'' in this section. The Exchange will continue to assess 
Inactive Nominees the Clerk Fee as it is being assessed today.\10\
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    \8\ This fee is in addition to the Inactive Nominee Fee. See 
note 4 above.
    \9\ See Securities Exchange Release No. 66004 (December 19, 
2011), 76 FR 80442 (December 23, 2011) (SR-Phlx-2011-155).
    \10\ Today, an Inactive Nominee is assessed a Clerk Fee of $100 
per month. See Section VI.A of the Pricing Schedule at: http://nasdaqphlx.cchwallstreet.com/NASDAQPHLXTools/PlatformViewer.asp?selectednode=chp_1_4_10&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx-rulesbrd%2F.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    As discussed above, the Exchange believes that the proposed changes 
will allow members additional flexibility in obtaining coverage on the 
trading floor. Inactive Nominees are essentially a pool of eligible 
individuals who can substitute for traders on the Exchange's floor. By 
allowing members flexibility in obtaining coverage intra-day in limited 
circumstances as described above, the Exchange believes that the 
proposal would assist in facilitating the smooth functioning of its 
market operations, consistent with Section 6(b)(5) of the Act. The 
Exchange further believes that the proposed changes would allow members 
to have a prepared roster of substitute traders who are available even 
in unforeseen emergencies, which should help to facilitate transactions 
in securities and remove impediments to, and perfect the mechanism of, 
a free and open market, also consistent with Section 6(b)(5) of the 
Act.
    Finally, the Exchange believes it is appropriate to make the non-
substantive change in its Pricing Schedule to replace the obsolete 
reference to ``Trading Floor Personnel Registration Fee'' with ``Clerk 
Fee'' so that members and investors have a clear and accurate 
understanding of the Exchange's rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Because the purpose of the proposal is to provide members with 
additional flexibility to obtain coverage intra-day in limited 
circumstances and to make a non-substantive change as discussed

[[Page 39641]]

above, 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 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 \13\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 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.
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    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 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-2017-68 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-2017-68. 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-2017-68 and should be 
submitted on or before September 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-17548 Filed 8-18-17; 8:45 am]
 BILLING CODE 8011-01-P