82_FR_8255 82 FR 8241 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Amendment No. 1, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt a New Exception in Phlx Rule 1000(f) for Sub-MPV Split-Price Orders

82 FR 8241 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Amendment No. 1, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt a New Exception in Phlx Rule 1000(f) for Sub-MPV Split-Price Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 14 (January 24, 2017)

Page Range8241-8244
FR Document2017-01460

Federal Register, Volume 82 Issue 14 (Tuesday, January 24, 2017)
[Federal Register Volume 82, Number 14 (Tuesday, January 24, 2017)]
[Notices]
[Pages 8241-8244]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-01460]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79805; File No. SR-Phlx-2016-82]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
of Amendment No. 1, and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Adopt a New 
Exception in Phlx Rule 1000(f) for Sub-MPV Split-Price Orders

January 17, 2017.

I. Introduction

    On August 3, 2016, NASDAQ PHLX LLC (the ``Exchange'' or ``Phlx'') 
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 
provide an additional exception to the mandatory use of the Exchange's 
Floor Broker Management System (``FBMS'') pursuant to Rule 1000(f)(iii) 
to permit Floor Brokers to execute certain sub-minimum price variation 
(``sub-MPV'') split-price orders in the trading crowd. The proposed 
rule change was published for comment in the Federal Register on August 
22, 2016.\3\ On October 3, 2016, the Commission extended the time 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
approve or disapprove the proposed rule change to November 20, 2016.\4\ 
On November 17, 2016, the Commission instituted proceedings under 
Section 19(b)(2)(B) of the Act to determine whether to approve or 
disapprove the proposed rule change.\5\ On December 9, 2016, the 
Exchange filed Amendment No. 1 to the proposed rule change.\6\ The 
Commission received no comments on the proposed rule change. This order 
provides notice of filing of Amendment No. 1 and approves the proposal, 
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 Securities Exchange Act Release No. 78593 (August 16, 
2016), 81 FR 56724 (``Notice'').
    \4\ See Securities Exchange Act Release No. 79023 (October 3, 
2016), 81 FR 69877 (October 7, 2016).
    \5\ See Securities Exchange Act Release No. 79345 (November 17, 
2016), 81 FR 84629 (November 23, 2016).
    \6\ Amendment No. 1 updated the original filing to: (1) Reflect 
the implementation of the Exchange's new Floor Broker Management 
System (``FBMS 3'') on November 3, 2016; (2) modify proposed Rule 
1000(f)(iii)(D) to provide additional detail regarding how certain 
split-price orders will be rounded; and (3) offer three examples to 
illustrate how split-price orders will be handled pursuant to the 
proposed exception. Amendment No. 1 replaced the original proposed 
rule change in its entirety. 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-2016-82 (available at https://www.sec.gov/comments/sr=phlx-2016-82/phlx201682-1.pdf https://www.sec.gov/comments/sr-cboe-2016-071/cboe2016071.shtml). 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-2016-82_Amendment_1.pdf) when it filed Amendment No.1 with the 
Commission.
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II. Description of the Proposal \7\
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    \7\ A more detailed description of the proposal appears in the 
Notice and in Amendment No. 1.
---------------------------------------------------------------------------

A. Background

    Currently, Phlx Rule 1000(f) requires that all Exchange options 
transactions be executed in one of the following three ways: ``(i) 
[a]utomatically by the Exchange Trading System pursuant to Rule 1080 
and other applicable options rules; (ii) by and among members in the 
Exchange's options trading crowd none of whom is a Floor Broker; or 
(iii) through the Options [FBMS] for trades involving at least one 
Floor Broker.'' \8\ Although a Floor Broker may represent orders in the 
trading crowd, a Floor Broker is not permitted to execute an order in 
the trading crowd unless one of three exceptions applies.\9\ The 
exceptions to the mandatory use of the FBMS \10\ are set forth in Phlx 
Rule 1000(f)(iii). These exceptions allow a Floor Broker to execute a 
transaction in the trading crowd (rather than through the FBMS) if: (i) 
There is a problem with Exchange's systems; (ii) the Floor Broker is 
executing the trade pursuant to Phlx Rule 1059 (``Accommodation 
Transactions'') or Phlx Rule 1079 (``Flex Index, Equity and Currency 
Options''); or (iii) the transaction involves a multi-leg order with 
more than 15 legs.\11\
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    \8\ See Phlx Rule 1000(f).
    \9\ See Phlx Rule 1000(f)(iii).
    \10\ The original FBMS (``FBMS 1'') began operating in 2005. The 
Exchange retired FBMS 1 on March 31, 2016 after operating it 
concurrently with the Exchange's enhanced FBMS (``FBMS 2''), which 
was made available on March 7, 2014. As of April 1, 2016, the 
Exchange only operated FBMS 2. See Notice, supra note 3, at 56725. 
On November 3, 2016, the Exchange implemented FBMS 3 and retired 
FBMS 2. According to the Exchange, FBMS 3 is currently the sole 
operating version of FBMS on the Exchange. See Amendment No. 1, 
supra note 6, at 3 and 8-10. References throughout this Order to 
``FBMS'' refer to FBMS 3.
    \11\ See Notice, supra note 3, at 56726. See also Phlx Rule 
1000(f)(iii)(A)-(C). According to the Exchange, each time a Floor 
Broker uses one of the current exceptions to Phlx Rule 1000(f)(iii), 
the Floor Broker is required by Phlx Rule 1063(e)(ii), to record the 
information required by Phlx Rule 1063(e)(i) on paper trade tickets. 
The Exchange further represents that a Floor Broker may only 
represent an order for execution that has been timestamped with the 
time of entry on the trading floor. In addition, according to the 
Exchange, once an execution occurs, the trade ticket must be stamped 
with the time of execution of such order. See Notice, supra note 3, 
at 56726 and Amendment No. 1, supra note 6, at 11.
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B. Split-Price Order Exception Proposal

    Phlx Rule 1014(g)(i)(B) provides a priority rule regarding open 
outcry split-price transactions in equity options and options overlying 
ETFs to permit a member who is responding to an order for at least 100 
contracts who buys (sells) at least 50 contracts at a particular price 
to have priority over all others in purchasing (selling) up to an 
equivalent number of contracts of the same order at the next lower 
(higher) price without being required to yield to existing customer 
interest in the limit order book.\12\ Absent Phlx Rule 1014(g)(i)(B), 
such orders would be required to yield priority. The Exchange states 
that ``[t]he purpose behind the split-price priority exception was `to 
bring about the execution of large orders, which by virtue of their 
size and the need to execute them at multiple

[[Page 8242]]

prices may be difficult to execute without a limited exception to the 
priority rules.' '' \13\
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    \12\ See Notice, supra note 3, at 56726 (citing Securities 
Exchange Act Release No. 51820 (June 10, 2005), 70 FR 35759 (June 
21, 2005) (SR-Phlx-2005-28)) (approving pilot). See also Securities 
Exchange Act Release No. 55993 (June 29, 2007), 72 FR 37301 (July 9, 
2007) (SR-Phlx-2007-44) (permanent approval)).
    \13\ See Notice, supra note 3, at 56726. Floor Brokers that 
avail themselves of the split-price priority rule are obligated to 
ensure compliance with Section 11(a) of the Exchange Act. See 
Amendment No. 1, supra note 6, at 12.
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    According to the Exchange, split-price orders are currently 
processed using either FBMS or paper tickets. The use of FBMS or paper 
tickets depends on whether the split-price order can be evenly split 
using simple calculations or whether the split-price order involves 
non-even integers and sub-MPV price points, which requires a more 
complicated computation to determine the number of contracts to trade 
at two different price points.\14\ The Exchange represents that FBMS 
does not have the capability to calculate specific volumes at two 
different MPV prices for split-price orders placed in a sub-MPV 
price.\15\ To compensate for this system limitation, the Exchange is 
proposing to amend Phlx Rule 1000(f)(iii) to add a new exception from 
the mandatory use of the FBMS that would allow Floor Brokers to execute 
certain split-price orders in the trading crowd that would be validated 
by Phlx surveillance staff for compliance with applicable priority and 
trade-through rules.
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    \14\ See Notice, supra note 3, at 56726. Today, when the 
computation is more complicated, surveillance staff allows a Floor 
Broker to execute split-price orders involving non-even integers and 
sub-MPV price points in open outcry using paper tickets pursuant to 
Phlx Rule 1000(f)(iii)(A). See id.
    \15\ See id. at 56727. See Amendment No. 1, supra note 6, at 20.
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    Accordingly, the Exchange is proposing in Phlx Rule 1000(f)(iii)(D) 
to allow the following split-price orders to be executed in the trading 
crowd: (1) Simple orders not expressed in the applicable sub-MPV and 
that cannot be evenly split into two whole numbers to create a price at 
the midpoint of the MPV; and (2) complex and multi-leg orders with at 
least one option leg with an odd-numbered volume that must trade at a 
sub-MPV price or one leg that qualifies under (1) above.\16\
---------------------------------------------------------------------------

    \16\ See Notice, supra note 3, at 56724.
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    The Exchange represents that this exception ``is anticipated to be 
implemented infrequently and in the following [three] ways.'' \17\ 
Under the first scenario, a Floor Broker knows that, due to a system 
limitation, a sub-MPV split-price order cannot be handled by FBMS.\18\ 
In this case, the Floor Broker would comply with Phlx Rule 1063(e), 
expose the order in the trading crowd, and request the use of the 
proposed exception from the Options Exchange Official 
(``Official'').\19\ The Official would confirm his or her understanding 
of the order and the availability of the exemption, and if the Floor 
Broker's request is determined to be valid based on the split-price 
calculation, announce to application of the exemption to the Floor 
Broker and the trading crowd.\20\ After the Floor Broker negotiates and 
consummates the trade in the trading crowd, the Floor Broker would 
timestamp the paper ticket at the time the trade is consummated in the 
trading crowd, which would become the time of execution for the 
trade.\21\ The consummated trade would then be submitted to the 
Official to validate for compliance with priority and trade-through 
rules. If compliant, the Official would permit the Floor Broker to 
submit the manual split-price trade, via paper ticket, for trade 
reporting.\22\
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    \17\ See Amendment No. 1, supra note 6, at 13.
    \18\ See id.
    \19\ See id.
    \20\ See id. at 13-14.
    \21\ See id. at 14. The Exchange notes that, typically, the 
Official captures a timestamp reflecting the time the Official 
observed that the trade was consummated in the trading crowd and 
may, in its discretion, substitute this timestamp for the timestamp 
recorded by the Floor Broker at the time of consummation. See id.
    \22\ See Amendment No. 1, supra note 6, at 14-15. According to 
the Exchange, the paper ticket will reflect the timestamp captured 
by the Floor Broker or (as described above) the Official, which will 
reflect the time the trade was consummated in the trading crowd. See 
id.
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    The second scenario involves a situation in which a Floor Broker 
submits a split-price order to FBMS, but the Floor Broker does not 
realize that FBMS cannot handle the order because the price is outside 
the MPV.\23\ In this case, the Floor Broker would comply with Phlx Rule 
1063(e), expose the order in the trading crowd, and, upon consummation 
of the transaction, submit the order to FBMS for execution. Because 
FBMS cannot calculate the split-price for the order, FBMS would reject 
the submission and the Floor Broker would receive a rejection 
message.\24\ Upon the receipt of this message, the Floor Broker would 
inform the Official that FBMS rejected the split-price order. The 
Official would then review the terms of the consummated trade and, 
using the timestamp captured by the Floor Broker or Official,\25\ 
validate the consummated trade for compliance with priority and trade-
through.\26\ If the consummated trade is compliant, the Official would 
permit the Floor Broker to submit the manual split-price trade, via 
paper ticket reflecting the timestamp captured by the Floor Broker (or 
Official), for trade reporting.\27\
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    \23\ See id. at 15.
    \24\ See id. According to the Exchange, this might occur if the 
order is not priced in the minimum price increment and consequently 
FBMS would reject the trade. See id.
    \25\ According to the Exchange, the Floor Broker captures a 
timestamp for the time that the Floor Broker submitted the proposed 
execution in FBMS. The Exchange further represents that, as in 
scenario 1, the Official also would typically capture a timestamp 
reflecting the time that the Official observed the Floor Broker's 
attempt to execute the transaction in FBMS. Surveillance staff may, 
in its discretion, substitute this timestamp for the timestamp 
recorded by the Floor Broker as the time that the trade was 
consummated. See Amendment No. 1, supra note 6, at 15. See also 
supra note 21.
    \26\ See id. at 15-16.
    \27\ See id. at 16.
---------------------------------------------------------------------------

    The third scenario is similar to the second scenario; however, 
neither the Floor Broker nor the Official captures a reliable time that 
the consummated trade was submitted to FBMS for execution.\28\ In this 
case, the Official would require the Floor Broker to ``re-trade'' the 
order using a paper ticket in the sequence described in the first 
scenario above.\29\
---------------------------------------------------------------------------

    \28\ See id.
    \29\ See id.
---------------------------------------------------------------------------

    The Exchange also proposes that, in addition to split-price orders 
executed pursuant to proposed Phlx Rule 1000(f)(iii)(D), Phlx 
surveillance staff would approve all executions submitted under Phlx 
Rule 1000(f)(iii) to validate that such executions abide by applicable 
priority and trade-through rules.\30\ The Exchange also proposes to 
round prices if necessary to execute the trade at the MPV, but only to 
the benefit of a customer order, or, where multiple customer orders are 
involved, for the customer order that is earliest in time.\31\ Where no 
customer order is involved, the rounding of prices will be applied to 
the non-customer order that is earliest in time.\32\
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    \30\ See proposed Phlx Rule 1000(f)(iii).
    \31\ See proposed Phlx Rule 1000(f)(iii); see also Notice, supra 
note 3, at 56727.
    \32\ See Amendment No. 1, supra note 6, at 3 and 7.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of Section 6 of the Act \33\ and the rules and regulations 
thereunder applicable to a national securities exchange.\34\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\35\ which requires, among 
other things, that the rules of a national securities exchange

[[Page 8243]]

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; and not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f.
    \34\ 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).
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that the Exchange is proposing a new exception 
in Phlx Rule 1000(f)(iii)(D) that is designed to enable Floor Brokers 
to execute two types of split-price orders in the trading crowd that 
cannot be processed by FBMS because of a system limitation.\36\ The 
Exchange represents that its surveillance staff will oversee Floor 
Brokers' use of the proposed Phlx Rule 1000(f)(iii)(D) exception, which 
they do today for current exceptions provided under Phlx Rule 
1000(f)(iii).\37\ The Exchange further represents that for each 
execution pursuant to Phlx Rule 1000(f)(iii): (1) Exchange surveillance 
staff will verify that the conditions of the exception under Phlx Rule 
1000(f)(iii) are met and will ensure that the proposed exception for 
split-price orders will be used only rarely; \38\ (2) Exchange 
surveillance staff will approve executions pursuant to Phlx Rule 
1000(f)(iii) and validate compliance with applicable priority rules of 
the Exchange and trade-through rules of the Options Order Protection 
and Locked/Crossed Market Plan; \39\ and (3) all relevant trade data 
resulting from executions pursuant to Phlx Rule 1000(f)(iii) will be 
recorded on both paper tickets and in FBMS to ensure a proper audit 
trail for timely surveillance.\40\ The Commission notes that the 
activities of Phlx Surveillance under Rule 1000(f)(iii), including the 
substitution of timestamps, should be carried out in an objective 
manner and with due regard to the Exchange's obligations under the 
Act.\41\
---------------------------------------------------------------------------

    \36\ The Commission notes that the exception for split-price 
orders is similar in purpose to the current exceptions provided in 
Phlx Rule 1000(f)(iii)(B) and (C). See Securities Exchange Act 
Release No. 68960 (February 20, 2013), 78 FR 13132 (February 26, 
2013) (SR-Phlx-2013-09) (recognizing exceptions for certain 
executions to occur manually in the trading crowd and not through 
FBMS. ``[ ] FLEX orders will continue to be executable by Floor 
Brokers in the trading crowd pursuant to Rule 1079 and 1079A, rather 
than through FBMS. This is because FBMS will not be able to accept 
FLEX orders, which have varied and complicated terms. Similarly, 
accommodation transactions (also known as cabinet trades) will 
continue to be executable by Floor Brokers in the trading crowd 
pursuant to Rule 1059. Neither FLEX nor accommodation transactions 
are executed through Exchange systems today. Floor Brokers will also 
be permitted to execute orders in the trading crowd if they are 
handling an order with more than 15 legs, because the Exchange 
determined to limit the complexity of FBMS functionality and does 
not believe that many orders fall into this category or that Floor 
Brokers will be adversely affected.'').
    \37\ See Notice, supra note 3, at 56726. See also Amendment No. 
1, supra note 6, at 17. The Exchange notes its belief that it is 
``necessary and appropriate for the surveillance Staff to exercise 
independent judgment with respect to the proper timestamp for the 
consummation of trades on the floor of the Exchange.'' See Amendment 
No. 1, supra note 6, at 14, n.17. According to the Exchange, ``[t]he 
surveillance Staff is trained to observe objectively the conduct of 
floor participants, to detect conduct that improperly advantages 
floor participants, and to enforce Exchange rules.'' Id. Finally, 
the Exchange notes that it believes that ``[t]he absence of engaged 
and empowered surveillance Staff would undermine the integrity of 
the trading floor on the Exchange.'' Id.
    \38\ See Notice, supra note 3, at 56728. See also Amendment No. 
1, supra note 6, at 23.
    \39\ See Notice, supra note 3, at 56727. See also Amendment No. 
1, supra note 6, at 22. The Options Order Protection and Locked/
Crossed Market Plan is available at http://www.optionsclearing.com/components/docs/clearing/services/options_order_protection_plan.pdf.
    \40\ See Notice, supra note 3, at 56727. See also Amendment No. 
1, supra note 6, at 22.
    \41\ The Commission notes that Phlx surveillance staff might 
substitute the timestamp it captures for the timestamp captured by a 
Floor Broker if necessary to prevent conduct that would improperly 
advantage floor participants or to enforce compliance with the 
Exchange's rules. It is the Commission's understanding that such a 
substitution would happen only rarely and only if consistent with 
the authority conferred upon surveillance staff by the Exchange's 
rules. See Amendment No. 1., supra note 6, at 14, n.17.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act and the rules and regulations thereunder applicable 
to national securities exchanges.

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule 
Change

    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 rule-comments@sec.gov. Please include 
File No. SR-Phlx-2016-82 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 No. SR-Phlx-2016-82. 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 will also 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 No. SR-Phlx-2016-82 and should be 
submitted on or before February 14, 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 notice of the amended proposal in the 
Federal Register. As described above, in Amendment No. 1, Phlx updated 
its proposal to reflect the implementation of FBMS 3 and the retirement 
of FBMS 2; clarified how prices may be rounded for non-customer split-
price orders; and provided three examples that explain how split-price 
orders will be handled by the Exchange under the proposed 
exception.\42\ The Commission believes that Amendment No. 1 provided 
additional specificity regarding the operation of the new proposed 
exception in Phlx Rule 1000(f)(iii)(D). Accordingly, the Commission 
finds good cause, pursuant to Section 19(b)(2) of the Act,\43\ to 
approve the proposed rule change, as

[[Page 8244]]

modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \42\ See Amendment No. 1, supra note 6, at 3-4.
    \43\ 15 U.S.C. 78s(b)(2)
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\44\ that the proposed rule change (SR-Phlx-2016-82), as modified 
by Amendment No. 1, be, and hereby is, approved on an accelerated 
basis.
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    \44\ See id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
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    \45\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-01460 Filed 1-23-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                               Federal Register / Vol. 82, No. 14 / Tuesday, January 24, 2017 / Notices                                                       8241

                                                communications relating to the                          change was published for comment in                      Broker is not permitted to execute an
                                                proposed rule change between the                        the Federal Register on August 22,                       order in the trading crowd unless one of
                                                Commission and any person, other than                   2016.3 On October 3, 2016, the                           three exceptions applies.9 The
                                                those that may be withheld from the                     Commission extended the time period                      exceptions to the mandatory use of the
                                                public in accordance with the                           within which to approve the proposed                     FBMS 10 are set forth in Phlx Rule
                                                provisions of 5 U.S.C. 552, will be                     rule change, disapprove the proposed                     1000(f)(iii). These exceptions allow a
                                                available for Web site viewing and                      rule change, or institute proceedings to                 Floor Broker to execute a transaction in
                                                printing in the Commission’s Public                     determine whether to approve or                          the trading crowd (rather than through
                                                Reference Room, 100 F Street NE.,                       disapprove the proposed rule change to                   the FBMS) if: (i) There is a problem with
                                                Washington, DC 20549 on official                        November 20, 2016.4 On November 17,                      Exchange’s systems; (ii) the Floor Broker
                                                business days between the hours of                      2016, the Commission instituted                          is executing the trade pursuant to Phlx
                                                10:00 a.m. and 3:00 p.m. Copies of the                  proceedings under Section 19(b)(2)(B) of                 Rule 1059 (‘‘Accommodation
                                                filing also will be available for                       the Act to determine whether to approve                  Transactions’’) or Phlx Rule 1079 (‘‘Flex
                                                inspection and copying at the principal                 or disapprove the proposed rule                          Index, Equity and Currency Options’’);
                                                office of the Exchange. All comments                    change.5 On December 9, 2016, the                        or (iii) the transaction involves a multi-
                                                received will be posted without change;                 Exchange filed Amendment No. 1 to the                    leg order with more than 15 legs.11
                                                the Commission does not edit personal                   proposed rule change.6 The Commission
                                                                                                                                                                 B. Split-Price Order Exception Proposal
                                                identifying information from                            received no comments on the proposed
                                                submissions. You should submit only                     rule change. This order provides notice                    Phlx Rule 1014(g)(i)(B) provides a
                                                information that you wish to make                       of filing of Amendment No. 1 and                         priority rule regarding open outcry split-
                                                available publicly. All submissions                     approves the proposal, as modified by                    price transactions in equity options and
                                                should refer to File Number SR–C2–                      Amendment No. 1, on an accelerated                       options overlying ETFs to permit a
                                                2017–002 and should be submitted on                     basis.                                                   member who is responding to an order
                                                or before February 14, 2017.                                                                                     for at least 100 contracts who buys
                                                                                                        II. Description of the Proposal 7                        (sells) at least 50 contracts at a
                                                  For the Commission, by the Division of
                                                Trading and Markets, pursuant to delegated              A. Background                                            particular price to have priority over all
                                                authority.11                                                                                                     others in purchasing (selling) up to an
                                                                                                          Currently, Phlx Rule 1000(f) requires
                                                Eduardo A. Aleman,                                                                                               equivalent number of contracts of the
                                                                                                        that all Exchange options transactions
                                                                                                                                                                 same order at the next lower (higher)
                                                Assistant Secretary.                                    be executed in one of the following
                                                                                                                                                                 price without being required to yield to
                                                [FR Doc. 2017–01462 Filed 1–23–17; 8:45 am]             three ways: ‘‘(i) [a]utomatically by the
                                                                                                                                                                 existing customer interest in the limit
                                                BILLING CODE 8011–01–P                                  Exchange Trading System pursuant to
                                                                                                                                                                 order book.12 Absent Phlx Rule
                                                                                                        Rule 1080 and other applicable options
                                                                                                                                                                 1014(g)(i)(B), such orders would be
                                                                                                        rules; (ii) by and among members in the
                                                                                                                                                                 required to yield priority. The Exchange
                                                SECURITIES AND EXCHANGE                                 Exchange’s options trading crowd none
                                                                                                                                                                 states that ‘‘[t]he purpose behind the
                                                COMMISSION                                              of whom is a Floor Broker; or (iii)
                                                                                                                                                                 split-price priority exception was ‘to
                                                                                                        through the Options [FBMS] for trades
                                                [Release No. 34–79805; File No. SR–Phlx–                                                                         bring about the execution of large
                                                2016–82]                                                involving at least one Floor Broker.’’ 8
                                                                                                                                                                 orders, which by virtue of their size and
                                                                                                        Although a Floor Broker may represent
                                                                                                                                                                 the need to execute them at multiple
                                                Self-Regulatory Organizations;                          orders in the trading crowd, a Floor
                                                NASDAQ PHLX LLC; Notice of Filing of                                                                               9 See  Phlx Rule 1000(f)(iii).
                                                                                                          3 See  Securities Exchange Act Release No. 78593
                                                Amendment No. 1, and Order Granting                                                                                10 The  original FBMS (‘‘FBMS 1’’) began operating
                                                                                                        (August 16, 2016), 81 FR 56724 (‘‘Notice’’).
                                                Accelerated Approval of a Proposed                         4 See Securities Exchange Act Release No. 79023
                                                                                                                                                                 in 2005. The Exchange retired FBMS 1 on March
                                                Rule Change, as Modified by                                                                                      31, 2016 after operating it concurrently with the
                                                                                                        (October 3, 2016), 81 FR 69877 (October 7, 2016).        Exchange’s enhanced FBMS (‘‘FBMS 2’’), which
                                                Amendment No. 1, To Adopt a New                            5 See Securities Exchange Act Release No. 79345
                                                                                                                                                                 was made available on March 7, 2014. As of April
                                                Exception in Phlx Rule 1000(f) for Sub-                 (November 17, 2016), 81 FR 84629 (November 23,           1, 2016, the Exchange only operated FBMS 2. See
                                                MPV Split-Price Orders                                  2016).                                                   Notice, supra note 3, at 56725. On November 3,
                                                                                                           6 Amendment No. 1 updated the original filing to:
                                                                                                                                                                 2016, the Exchange implemented FBMS 3 and
                                                January 17, 2017.                                       (1) Reflect the implementation of the Exchange’s         retired FBMS 2. According to the Exchange, FBMS
                                                                                                        new Floor Broker Management System (‘‘FBMS 3’’)          3 is currently the sole operating version of FBMS
                                                I. Introduction                                         on November 3, 2016; (2) modify proposed Rule            on the Exchange. See Amendment No. 1, supra note
                                                                                                        1000(f)(iii)(D) to provide additional detail regarding   6, at 3 and 8–10. References throughout this Order
                                                   On August 3, 2016, NASDAQ PHLX                       how certain split-price orders will be rounded; and      to ‘‘FBMS’’ refer to FBMS 3.
                                                LLC (the ‘‘Exchange’’ or ‘‘Phlx’’) filed                (3) offer three examples to illustrate how split-price      11 See Notice, supra note 3, at 56726. See also

                                                with the Securities and Exchange                        orders will be handled pursuant to the proposed          Phlx Rule 1000(f)(iii)(A)–(C). According to the
                                                                                                        exception. Amendment No. 1 replaced the original         Exchange, each time a Floor Broker uses one of the
                                                Commission (‘‘Commission’’), pursuant                   proposed rule change in its entirety. To promote         current exceptions to Phlx Rule 1000(f)(iii), the
                                                to Section 19(b)(1) of the Securities                   transparency of its proposed amendment, when             Floor Broker is required by Phlx Rule 1063(e)(ii), to
                                                Exchange Act of 1934 (‘‘Act’’) 1 and Rule               Phlx filed Amendment No. 1 with the Commission,          record the information required by Phlx Rule
                                                19b–4 thereunder,2 a proposed rule                      it also submitted Amendment No. 1 as a comment           1063(e)(i) on paper trade tickets. The Exchange
                                                                                                        letter to the file, which the Commission posted on       further represents that a Floor Broker may only
                                                change to provide an additional                         its Web site and placed in the public comment file       represent an order for execution that has been
                                                exception to the mandatory use of the                   for SR–Phlx–2016–82 (available at https://               timestamped with the time of entry on the trading
                                                Exchange’s Floor Broker Management                      www.sec.gov/comments/sr=phlx-2016-82/                    floor. In addition, according to the Exchange, once
                                                                                                        phlx201682-1.pdf https://www.sec.gov/comments/           an execution occurs, the trade ticket must be
                                                System (‘‘FBMS’’) pursuant to Rule                      sr-cboe-2016-071/cboe2016071.shtml). The                 stamped with the time of execution of such order.
sradovich on DSK3GMQ082PROD with NOTICES




                                                1000(f)(iii) to permit Floor Brokers to                 Exchange also posted a copy of its Amendment No.         See Notice, supra note 3, at 56726 and Amendment
                                                execute certain sub-minimum price                       1 on its Web site (http://                               No. 1, supra note 6, at 11.
                                                variation (‘‘sub-MPV’’) split-price orders              nasdaqphlx.cchwallstreet.com/NASDAQPHLX/pdf/                12 See Notice, supra note 3, at 56726 (citing
                                                                                                        phlx-filings/2016/SR-Phlx-2016-82_                       Securities Exchange Act Release No. 51820 (June
                                                in the trading crowd. The proposed rule                 Amendment_1.pdf) when it filed Amendment No.1            10, 2005), 70 FR 35759 (June 21, 2005) (SR–Phlx–
                                                                                                        with the Commission.                                     2005–28)) (approving pilot). See also Securities
                                                  11 17 CFR 200.30–3(a)(12).                               7 A more detailed description of the proposal
                                                                                                                                                                 Exchange Act Release No. 55993 (June 29, 2007), 72
                                                  1 15 U.S.C. 78s(b)(1).                                appears in the Notice and in Amendment No. 1.            FR 37301 (July 9, 2007) (SR–Phlx–2007–44)
                                                  2 17 CFR 240.19b–4.                                      8 See Phlx Rule 1000(f).                              (permanent approval)).



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                                                8242                           Federal Register / Vol. 82, No. 14 / Tuesday, January 24, 2017 / Notices

                                                prices may be difficult to execute                       Official (‘‘Official’’).19 The Official                 validate the consummated trade for
                                                without a limited exception to the                       would confirm his or her understanding                  compliance with priority and trade-
                                                priority rules.’ ’’ 13                                   of the order and the availability of the                through.26 If the consummated trade is
                                                   According to the Exchange, split-price                exemption, and if the Floor Broker’s                    compliant, the Official would permit the
                                                orders are currently processed using                     request is determined to be valid based                 Floor Broker to submit the manual split-
                                                either FBMS or paper tickets. The use of                 on the split-price calculation, announce                price trade, via paper ticket reflecting
                                                FBMS or paper tickets depends on                         to application of the exemption to the                  the timestamp captured by the Floor
                                                whether the split-price order can be                     Floor Broker and the trading crowd.20                   Broker (or Official), for trade
                                                evenly split using simple calculations or                After the Floor Broker negotiates and                   reporting.27
                                                whether the split-price order involves                   consummates the trade in the trading                       The third scenario is similar to the
                                                non-even integers and sub-MPV price                      crowd, the Floor Broker would                           second scenario; however, neither the
                                                points, which requires a more                            timestamp the paper ticket at the time                  Floor Broker nor the Official captures a
                                                complicated computation to determine                     the trade is consummated in the trading                 reliable time that the consummated
                                                the number of contracts to trade at two                  crowd, which would become the time of                   trade was submitted to FBMS for
                                                different price points.14 The Exchange                   execution for the trade.21 The                          execution.28 In this case, the Official
                                                represents that FBMS does not have the                   consummated trade would then be                         would require the Floor Broker to ‘‘re-
                                                capability to calculate specific volumes                 submitted to the Official to validate for               trade’’ the order using a paper ticket in
                                                at two different MPV prices for split-                   compliance with priority and trade-                     the sequence described in the first
                                                price orders placed in a sub-MPV                         through rules. If compliant, the Official               scenario above.29
                                                price.15 To compensate for this system                   would permit the Floor Broker to submit                    The Exchange also proposes that, in
                                                limitation, the Exchange is proposing to                 the manual split-price trade, via paper                 addition to split-price orders executed
                                                amend Phlx Rule 1000(f)(iii) to add a                    ticket, for trade reporting.22                          pursuant to proposed Phlx Rule
                                                new exception from the mandatory use                        The second scenario involves a                       1000(f)(iii)(D), Phlx surveillance staff
                                                of the FBMS that would allow Floor                       situation in which a Floor Broker                       would approve all executions submitted
                                                Brokers to execute certain split-price                   submits a split-price order to FBMS, but                under Phlx Rule 1000(f)(iii) to validate
                                                orders in the trading crowd that would                   the Floor Broker does not realize that                  that such executions abide by applicable
                                                be validated by Phlx surveillance staff                  FBMS cannot handle the order because                    priority and trade-through rules.30 The
                                                for compliance with applicable priority                  the price is outside the MPV.23 In this                 Exchange also proposes to round prices
                                                and trade-through rules.                                 case, the Floor Broker would comply                     if necessary to execute the trade at the
                                                   Accordingly, the Exchange is                          with Phlx Rule 1063(e), expose the                      MPV, but only to the benefit of a
                                                proposing in Phlx Rule 1000(f)(iii)(D) to                order in the trading crowd, and, upon                   customer order, or, where multiple
                                                allow the following split-price orders to                consummation of the transaction,                        customer orders are involved, for the
                                                be executed in the trading crowd: (1)                    submit the order to FBMS for execution.                 customer order that is earliest in time.31
                                                Simple orders not expressed in the                       Because FBMS cannot calculate the                       Where no customer order is involved,
                                                applicable sub-MPV and that cannot be                    split-price for the order, FBMS would                   the rounding of prices will be applied
                                                evenly split into two whole numbers to                   reject the submission and the Floor                     to the non-customer order that is earliest
                                                create a price at the midpoint of the                    Broker would receive a rejection                        in time.32
                                                MPV; and (2) complex and multi-leg                       message.24 Upon the receipt of this
                                                                                                         message, the Floor Broker would inform                  III. Discussion and Commission
                                                orders with at least one option leg with
                                                                                                         the Official that FBMS rejected the split-              Findings
                                                an odd-numbered volume that must
                                                trade at a sub-MPV price or one leg that                 price order. The Official would then                       After careful review, the Commission
                                                qualifies under (1) above.16                             review the terms of the consummated                     finds that the proposed rule change, as
                                                   The Exchange represents that this                     trade and, using the timestamp captured                 modified by Amendment No. 1, is
                                                exception ‘‘is anticipated to be                         by the Floor Broker or Official,25                      consistent with the requirements of
                                                implemented infrequently and in the                                                                              Section 6 of the Act 33 and the rules and
                                                                                                           19 See  id.
                                                following [three] ways.’’ 17 Under the                                                                           regulations thereunder applicable to a
                                                                                                           20 See  id. at 13–14.
                                                first scenario, a Floor Broker knows that,                  21 See id. at 14. The Exchange notes that,
                                                                                                                                                                 national securities exchange.34
                                                due to a system limitation, a sub-MPV                    typically, the Official captures a timestamp
                                                                                                                                                                 Specifically, the Commission finds that
                                                split-price order cannot be handled by                   reflecting the time the Official observed that the      the proposed rule change is consistent
                                                FBMS.18 In this case, the Floor Broker                   trade was consummated in the trading crowd and          with Section 6(b)(5) of the Act,35 which
                                                                                                         may, in its discretion, substitute this timestamp for   requires, among other things, that the
                                                would comply with Phlx Rule 1063(e),                     the timestamp recorded by the Floor Broker at the
                                                expose the order in the trading crowd,                   time of consummation. See id.                           rules of a national securities exchange
                                                and request the use of the proposed                         22 See Amendment No. 1, supra note 6, at 14–15.

                                                exception from the Options Exchange                      According to the Exchange, the paper ticket will        timestamp recorded by the Floor Broker as the time
                                                                                                         reflect the timestamp captured by the Floor Broker      that the trade was consummated. See Amendment
                                                   13 See Notice, supra note 3, at 56726. Floor
                                                                                                         or (as described above) the Official, which will        No. 1, supra note 6, at 15. See also supra note 21.
                                                                                                         reflect the time the trade was consummated in the          26 See id. at 15–16.
                                                Brokers that avail themselves of the split-price         trading crowd. See id.                                     27 See id. at 16.
                                                priority rule are obligated to ensure compliance            23 See id. at 15.                                       28 See id.
                                                with Section 11(a) of the Exchange Act. See                 24 See id. According to the Exchange, this might        29 See id.
                                                Amendment No. 1, supra note 6, at 12.
                                                   14 See Notice, supra note 3, at 56726. Today,
                                                                                                         occur if the order is not priced in the minimum            30 See proposed Phlx Rule 1000(f)(iii).
                                                                                                         price increment and consequently FBMS would
                                                when the computation is more complicated,                                                                           31 See proposed Phlx Rule 1000(f)(iii); see also
                                                                                                         reject the trade. See id.
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                                                surveillance staff allows a Floor Broker to execute         25 According to the Exchange, the Floor Broker
                                                                                                                                                                 Notice, supra note 3, at 56727.
                                                split-price orders involving non-even integers and                                                                  32 See Amendment No. 1, supra note 6, at 3 and
                                                                                                         captures a timestamp for the time that the Floor
                                                sub-MPV price points in open outcry using paper                                                                  7.
                                                                                                         Broker submitted the proposed execution in FBMS.
                                                tickets pursuant to Phlx Rule 1000(f)(iii)(A). See id.                                                              33 15 U.S.C. 78f.
                                                   15 See id. at 56727. See Amendment No. 1, supra
                                                                                                         The Exchange further represents that, as in scenario
                                                                                                                                                                    34 In approving this proposed rule change, the
                                                                                                         1, the Official also would typically capture a
                                                note 6, at 20.                                           timestamp reflecting the time that the Official         Commission has considered the proposed rule’s
                                                   16 See Notice, supra note 3, at 56724.
                                                                                                         observed the Floor Broker’s attempt to execute the      impact on efficiency, competition, and capital
                                                   17 See Amendment No. 1, supra note 6, at 13.                                                                  formation. See 15 U.S.C. 78c(f).
                                                                                                         transaction in FBMS. Surveillance staff may, in its
                                                   18 See id.                                            discretion, substitute this timestamp for the              35 15 U.S.C. 78f(b)(5).




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                                                                              Federal Register / Vol. 82, No. 14 / Tuesday, January 24, 2017 / Notices                                                      8243

                                                be designed to prevent fraudulent and                   executions pursuant to Phlx Rule                       should be included on the subject line
                                                manipulative acts and practices, to                     1000(f)(iii) and validate compliance                   if email is used. To help the
                                                promote just and equitable principles of                with applicable priority rules of the                  Commission process and review your
                                                trade, to remove impediments to and                     Exchange and trade-through rules of the                comments more efficiently, please use
                                                perfect the mechanism of a free and                     Options Order Protection and Locked/                   only one method. The Commission will
                                                open market and a national market                       Crossed Market Plan; 39 and (3) all                    post all comments on the Commission’s
                                                system, and, in general, to protect                     relevant trade data resulting from                     Internet Web site (http://www.sec.gov/
                                                investors and the public interest; and                  executions pursuant to Phlx Rule                       rules/sro.shtml). Copies of the
                                                not be designed to permit unfair                        1000(f)(iii) will be recorded on both                  submission, all subsequent
                                                discrimination between customers,                       paper tickets and in FBMS to ensure a                  amendments, all written statements
                                                issuers, brokers, or dealers.                           proper audit trail for timely                          with respect to the proposed rule
                                                   The Commission notes that the                        surveillance.40 The Commission notes                   change that are filed with the
                                                Exchange is proposing a new exception                   that the activities of Phlx Surveillance               Commission, and all written
                                                in Phlx Rule 1000(f)(iii)(D) that is                    under Rule 1000(f)(iii), including the                 communications relating to the
                                                designed to enable Floor Brokers to                     substitution of timestamps, should be                  proposed rule change between the
                                                execute two types of split-price orders                 carried out in an objective manner and                 Commission and any person, other than
                                                in the trading crowd that cannot be                     with due regard to the Exchange’s
                                                processed by FBMS because of a system                                                                          those that may be withheld from the
                                                                                                        obligations under the Act.41                           public in accordance with the
                                                limitation.36 The Exchange represents                     For the foregoing reasons, the
                                                that its surveillance staff will oversee                                                                       provisions of 5 U.S.C. 552, will be
                                                                                                        Commission finds that the proposed                     available for Web site viewing and
                                                Floor Brokers’ use of the proposed Phlx                 rule change, as modified by Amendment
                                                Rule 1000(f)(iii)(D) exception, which                                                                          printing in the Commission’s Public
                                                                                                        No. 1, is consistent with Section 6(b)(5)
                                                they do today for current exceptions                                                                           Reference Room, 100 F Street NE.,
                                                                                                        of the Act and the rules and regulations
                                                provided under Phlx Rule 1000(f)(iii).37                                                                       Washington, DC 20549, on official
                                                                                                        thereunder applicable to national
                                                The Exchange further represents that for                                                                       business days between the hours of
                                                                                                        securities exchanges.
                                                each execution pursuant to Phlx Rule                                                                           10:00 a.m. and 3:00 p.m. Copies of such
                                                1000(f)(iii): (1) Exchange surveillance                 IV. Solicitation of Comments on                        filing will also be available for
                                                staff will verify that the conditions of                Amendment No. 1 to the Proposed Rule                   inspection and copying at the principal
                                                the exception under Phlx Rule                           Change                                                 office of the Exchange. All comments
                                                1000(f)(iii) are met and will ensure that                 Interested persons are invited to                    received will be posted without change;
                                                the proposed exception for split-price                  submit written data, views, and                        the Commission does not edit personal
                                                orders will be used only rarely; 38 (2)                 arguments concerning whether                           identifying information from
                                                Exchange surveillance staff will approve                Amendment No. 1 to the proposed rule                   submissions. You should submit only
                                                                                                        change is consistent with the Act.                     information that you wish to make
                                                   36 The Commission notes that the exception for
                                                                                                        Comments may be submitted by any of                    available publicly. All submissions
                                                split-price orders is similar in purpose to the                                                                should refer to File No. SR–Phlx–2016–
                                                current exceptions provided in Phlx Rule                the following methods:
                                                1000(f)(iii)(B) and (C). See Securities Exchange Act                                                           82 and should be submitted on or before
                                                Release No. 68960 (February 20, 2013), 78 FR 13132
                                                                                                        Electronic Comments                                    February 14, 2017.
                                                (February 26, 2013) (SR–Phlx–2013–09)                     • Use the Commission’s Internet
                                                (recognizing exceptions for certain executions to
                                                                                                        comment form (http://www.sec.gov/                      V. Accelerated Approval of Proposed
                                                occur manually in the trading crowd and not                                                                    Rule Change, as Modified by
                                                through FBMS. ‘‘[ ] FLEX orders will continue to        rules/sro.shtml); or
                                                be executable by Floor Brokers in the trading crowd       • Send an email to rule-comments@                    Amendment No. 1
                                                pursuant to Rule 1079 and 1079A, rather than            sec.gov. Please include File No. SR–
                                                through FBMS. This is because FBMS will not be                                                                   The Commission finds good cause to
                                                able to accept FLEX orders, which have varied and
                                                                                                        Phlx–2016–82 on the subject line.                      approve the proposed rule change, as
                                                complicated terms. Similarly, accommodation             Paper Comments                                         modified by Amendment No. 1, prior to
                                                transactions (also known as cabinet trades) will
                                                                                                                                                               the thirtieth day after the date of
                                                continue to be executable by Floor Brokers in the         • Send paper comments in triplicate
                                                trading crowd pursuant to Rule 1059. Neither FLEX                                                              publication of notice of the amended
                                                                                                        to Secretary, Securities and Exchange
                                                nor accommodation transactions are executed                                                                    proposal in the Federal Register. As
                                                through Exchange systems today. Floor Brokers will      Commission, 100 F Street NE.,
                                                                                                                                                               described above, in Amendment No. 1,
                                                also be permitted to execute orders in the trading      Washington, DC 20549–1090.
                                                crowd if they are handling an order with more than
                                                                                                                                                               Phlx updated its proposal to reflect the
                                                                                                        All submissions should refer to File No.               implementation of FBMS 3 and the
                                                15 legs, because the Exchange determined to limit
                                                the complexity of FBMS functionality and does not       SR–Phlx–2016–82. This file number                      retirement of FBMS 2; clarified how
                                                believe that many orders fall into this category or                                                            prices may be rounded for non-customer
                                                that Floor Brokers will be adversely affected.’’).         39 See Notice, supra note 3, at 56727. See also
                                                   37 See Notice, supra note 3, at 56726. See also      Amendment No. 1, supra note 6, at 22. The Options      split-price orders; and provided three
                                                Amendment No. 1, supra note 6, at 17. The               Order Protection and Locked/Crossed Market Plan        examples that explain how split-price
                                                Exchange notes its belief that it is ‘‘necessary and    is available at http://www.optionsclearing.com/        orders will be handled by the Exchange
                                                appropriate for the surveillance Staff to exercise      components/docs/clearing/services/options_order_       under the proposed exception.42 The
                                                independent judgment with respect to the proper         protection_plan.pdf.
                                                timestamp for the consummation of trades on the            40 See Notice, supra note 3, at 56727. See also     Commission believes that Amendment
                                                floor of the Exchange.’’ See Amendment No. 1,           Amendment No. 1, supra note 6, at 22.                  No. 1 provided additional specificity
                                                supra note 6, at 14, n.17. According to the                41 The Commission notes that Phlx surveillance      regarding the operation of the new
                                                Exchange, ‘‘[t]he surveillance Staff is trained to      staff might substitute the timestamp it captures for   proposed exception in Phlx Rule
sradovich on DSK3GMQ082PROD with NOTICES




                                                observe objectively the conduct of floor                the timestamp captured by a Floor Broker if
                                                participants, to detect conduct that improperly         necessary to prevent conduct that would
                                                                                                                                                               1000(f)(iii)(D). Accordingly, the
                                                advantages floor participants, and to enforce           improperly advantage floor participants or to          Commission finds good cause, pursuant
                                                Exchange rules.’’ Id. Finally, the Exchange notes       enforce compliance with the Exchange’s rules. It is    to Section 19(b)(2) of the Act,43 to
                                                that it believes that ‘‘[t]he absence of engaged and    the Commission’s understanding that such a             approve the proposed rule change, as
                                                empowered surveillance Staff would undermine the        substitution would happen only rarely and only if
                                                integrity of the trading floor on the Exchange.’’ Id.   consistent with the authority conferred upon
                                                   38 See Notice, supra note 3, at 56728. See also                                                               42 See   Amendment No. 1, supra note 6, at 3–4.
                                                                                                        surveillance staff by the Exchange’s rules. See
                                                Amendment No. 1, supra note 6, at 23.                   Amendment No. 1., supra note 6, at 14, n.17.             43 15   U.S.C. 78s(b)(2)



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                                                8244                          Federal Register / Vol. 82, No. 14 / Tuesday, January 24, 2017 / Notices

                                                modified by Amendment No. 1, on an                      notice of the filing of a proposed rule                 Items I, II, and III, below, which Items
                                                accelerated basis.                                      change, or within such longer period up                 have been prepared by the Exchange.
                                                                                                        to 90 days as the Commission may                        The Commission is publishing this
                                                VI. Conclusion
                                                                                                        designate if it finds such longer period                notice to solicit comments on the
                                                  It is therefore ordered, pursuant to                  to be appropriate and publishes its                     proposed rule change from interested
                                                Section 19(b)(2) of the Act,44 that the                 reasons for so finding or as to which the               persons.
                                                proposed rule change (SR–Phlx–2016–                     self-regulatory organization consents,
                                                82), as modified by Amendment No. 1,                    the Commission shall either approve the                 I. Self-Regulatory Organization’s
                                                be, and hereby is, approved on an                       proposed rule change, disapprove the                    Statement of the Terms of Substance of
                                                accelerated basis.                                      proposed rule change, or institute                      the Proposed Rule Change
                                                  For the Commission, by the Division of                proceedings to determine whether the                       The Exchange proposes to amend the
                                                Trading and Markets, pursuant to delegated              proposed rule change should be                          Schedule of Fees as described in more
                                                authority.45                                            disapproved. The 45th day for this filing               detail below.
                                                Eduardo A. Aleman,                                      is January 19, 2017.                                       The text of the proposed rule change
                                                Assistant Secretary.                                       The Commission is extending the 45-                  is available on the Exchange’s Web site
                                                [FR Doc. 2017–01460 Filed 1–23–17; 8:45 am]             day time period for Commission action                   at http://www.ise.com, at the principal
                                                BILLING CODE 8011–01–P
                                                                                                        on the proposed rule change. The                        office of the Exchange, and at the
                                                                                                        Commission finds that it is appropriate                 Commission’s Public Reference Room.
                                                                                                        to designate a longer period within
                                                                                                        which to take action on the proposed                    II. Self-Regulatory Organization’s
                                                SECURITIES AND EXCHANGE                                                                                         Statement of the Purpose of, and
                                                COMMISSION                                              rule change so that it has sufficient time
                                                                                                        to consider the Exchange’s proposal, the                Statutory Basis for, the Proposed Rule
                                                [Release No. 34–79810; File No. SR–                     comments received, and any response to                  Change
                                                NASDAQ–2016–161]
                                                                                                        the comments by the Exchange.                             In its filing with the Commission, the
                                                                                                           Accordingly, pursuant to Section                     Exchange included statements
                                                Self-Regulatory Organizations; The
                                                                                                        19(b)(2) of the Act 6 and for the reasons               concerning the purpose of and basis for
                                                Nasdaq Stock Market LLC; Notice of
                                                                                                        stated above, the Commission                            the proposed rule change and discussed
                                                Designation of Longer Period for
                                                                                                        designates March 5, 2017, as the date by                any comments it received on the
                                                Commission Action on Proposed Rule
                                                                                                        which the Commission shall either                       proposed rule change. The text of these
                                                Change To Adopt a New Extended Life
                                                                                                        approve or disapprove, or institute                     statements may be examined at the
                                                Priority Order Attribute Under Rule
                                                                                                        proceedings to determine whether to                     places specified in Item IV below. The
                                                4703, and To Make Related Changes to
                                                                                                        disapprove, the proposed rule change                    Exchange has prepared summaries, set
                                                Rules 4702, 4752, 4753, 4754, and 4757
                                                                                                        (File No. SR–NASDAQ–2016–161).                          forth in sections A, B, and C below, of
                                                January 17, 2017.                                         For the Commission, by the Division of                the most significant aspects of such
                                                   On November 17, 2016, The Nasdaq                     Trading and Markets, pursuant to delegated              statements.
                                                Stock Market LLC (‘‘Nasdaq’’ or                         authority.7
                                                ‘‘Exchange’’) filed with the Securities                                                                         A. Self-Regulatory Organization’s
                                                                                                        Eduardo A. Aleman,
                                                and Exchange Commission                                                                                         Statement of the Purpose of, and
                                                                                                        Assistant Secretary.
                                                (‘‘Commission’’), pursuant to Section                                                                           Statutory Basis for, the Proposed Rule
                                                                                                        [FR Doc. 2017–01465 Filed 1–23–17; 8:45 am]             Change
                                                19(b)(1) of the Securities Exchange Act                 BILLING CODE 8011–01–P
                                                of 1934 (‘‘Act’’) 1 and Rule 19b–4                                                                              1. Purpose
                                                thereunder,2 a proposed rule change to
                                                                                                                                                                   The purpose of the proposed rule
                                                adopt a new Extended Life Priority                      SECURITIES AND EXCHANGE                                 change is to amend the Exchange’s
                                                Order Attribute. The proposed rule                      COMMISSION                                              Schedule of Fees to eliminate, for all
                                                change was published for comment in
                                                                                                        [Release No. 34–79811; File No. SR–ISE–                 symbols other than FX symbols, the
                                                the Federal Register on December 5,                     2017–01]                                                $0.20 per contract fee applicable to
                                                2016.3 The Commission has received six
                                                                                                                                                                Professional Customers 3 for the
                                                comment letters on the proposal.4                       Self-Regulatory Organizations;
                                                   Section 19(b)(2) of the Act 5 provides                                                                       initiating or contra side of Qualified
                                                                                                        International Securities Exchange,                      Contingent Cross (‘‘QCC’’) orders or
                                                that within 45 days of the publication of               LLC; Notice of Filing and Immediate                     orders executed in the Solicitation
                                                                                                        Effectiveness of Proposed Rule                          Mechanism (‘‘Solicitation’’ orders). The
                                                  44 See id.
                                                  45 17
                                                                                                        Change To Amend the Schedule of                         proposed rule change will lower the
                                                        CFR 200.30–3(a)(12).
                                                  1 15 U.S.C. 78s(b)(1).
                                                                                                        Fees                                                    rebates that the Exchange provides to
                                                  2 17 CFR 240.19b–4.
                                                                                                        January 17, 2017.                                       members acting as agent when
                                                  3 See Securities Exchange Act Release No. 79428
                                                                                                           Pursuant to Section 19(b)(1) of the                  Professional Customers trade with other
                                                (November 30, 2016), 81 FR 87628.                                                                               Professional Customers and when they
                                                  4 See Letters to Brent J. Fields, Secretary,          Securities Exchange Act of 1934
                                                                                                        (‘‘Act’’),1 and Rule 19b–4 thereunder,2                 trade with Priority Customers for QCC
                                                Commission, from Joseph Saluzzi and Sal Arnuk,
                                                Partners, Themis Trading LLC, dated December 19,        notice is hereby given that on January 3,               and other solicited crossing orders 4 to
                                                2016; Eric Swanson, EVP, General Counsel and            2017, the International Securities                      the same per contract rates and volume
                                                Secretary, Bats Global Markets, Inc., dated
                                                                                                        Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’)                 tiers that the Exchange presently
                                                December 22, 2016; Adam Nunes, Head of Business                                                                 provides to members acting as agent
sradovich on DSK3GMQ082PROD with NOTICES




                                                Development, Hudson River Trading LLC, dated            filed with the Securities and Exchange
                                                December 22, 2016; Joanna Mallers, Secretary, FIA       Commission (‘‘Commission’’) the
                                                Principal Traders Group, dated December 23, 2016;       proposed rule change as described in                      3 A ‘‘Professional Customer’’ is a person or entity

                                                Adam C. Cooper, Senior Managing Director and                                                                    that is not a broker/dealer and is not a Priority
                                                Chief Legal Officer, Citadel Securities, dated                                                                  Customer. See ISE Rule 100(37C).
                                                                                                          6 15 U.S.C. 78s(b)(2).
                                                December 27, 2016; and Andrew Stevens, General                                                                    4 As used herein, the phrase ‘‘other solicited
                                                                                                          7 17 CFR 200.30–3(a)(31).
                                                Counsel, IMC Financial Markets, dated December                                                                  crossing orders’’ refers to solicited crossing orders
                                                28, 2016.                                                 1 15 U.S.C. 78s(b)(1).
                                                                                                                                                                executed in the Solicitation, Facilitation, and Price
                                                  5 15 U.S.C. 78s(b)(2).                                  2 17 CFR 240.19b–4.                                   Improvement Mechanisms.



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Document Created: 2018-02-01 15:12:27
Document Modified: 2018-02-01 15:12:27
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 8241 

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