5630 Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 

6 15 U.S.C. 78s(b)(3)(A). 

7 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Commission 

has waived the five-day prefiling requirement in 

this case. 

8See Securities Exchange Act Release No. 63773 

(January 25, 2011) (SR–NYSEAmex–2010–109). See 

also Securities Exchange Act Release No. 63770 

(January 25, 2011) (SR–NYSEArca–2010–106). 

9For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 1 revises Phlx Rule 1080, 

Commentary .08(a)(i), to indicate that member 

organizations submitting Complex Orders with a 

stock/ETF component represent that such orders 

comply with the qualified contingent trade 

exemption from Rule 611(a) of Regulation NMS 

under the Exchange Act. 

4See Securities Exchange Act Release No. 63509 

(December 9, 2010), 75 FR 78320 (‘‘Notice’’). 

not believe that the additional price 

points will result in fractured liquidity. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not significantly affect the 

protection of investors or the public 

interest, does not impose any significant 

burden on competition, and, by its 

terms, does not become operative for 30 

days from the date on which it was 

filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 6 and Rule 19b– 

4(f)(6) thereunder.7

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposal is substantially 

similar to that of another exchange that 

has been approved by the Commission.8

Therefore, the Commission designates 

the proposal operative upon filing.9

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–BX–2011–006 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BX–2011–006. This file 

number should be included on the 

subject line if e-mail 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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–BX– 

2011–006 and should be submitted on 

or before February 22, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–2123 Filed 1–31–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63777; File No. SR–Phlx2010–157] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Order 

Approving a Proposed Rule Change, 

as Modified by Amendment Nos. 1 and 

2, Relating to Complex Orders 

January 26, 2011. 

I. Introduction 

On November 29, 2010, NASDAQ 

OMX PHLX LLC (‘‘Phlx’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (the ‘‘Act’’),1 and Rule 19b– 

thereunder,2 a proposed rule change to 

amend the rules governing the trading of 

Complex Orders on the Phlx’s electronic 

options trading platform, Phlx XL II, to, 

among other things: (i) Permit Complex 

Orders with up to six components, 

including the underlying stock or 

Exchange Traded Fund Share (‘‘ETF’’); 

(ii) establish a Do Not Auction (‘‘DNA’’) 

designation for Complex Orders; (iii) 

add a definition of conforming ratio; (iv) 

provide priority rules for Complex 

Orders traded on Phlx XL II; and (v) 

provide for the communication of the 

stock or ETF component of a Complex 

Order by the Exchange to Nasdaq 

Options Services LLC (‘‘NOS’’), the 

Phlx’s affiliated broker-dealer, for 

execution. The Exchange filed 

Amendment No. 1 to the proposal on 

December 6, 2010.3 The proposed rule 

change, as modified by Amendment No. 

1, was published for comment in the 

Federal Register on December 15, 

2010.4 The Exchange filed Amendment 

No. 2 to the proposal on January 11, 


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5Amendment No. 2 revises Phlx Rule 

1080(m)(iii)(A) to include text that was 

inadvertently omitted from Exhibit 5 of the Form 

19b–4 submission. Specifically, the revised text 

indicates that, in addition to its current routing 

function, the Routing Facility (as defined below) 

will execute and report the underlying security 

component of a Complex Order otherwise than on 

the Phlx, pursuant to Phlx Rule 1080.08(h). Phlx 

states that this change is a clarifying and technical 

correction to conform the text of Rule 

1080(m)(iii)(A) to: (i) The discussion in the Form 

19b–4 submission regarding the proposed 

additional functions of NOS; and (ii) proposed Rule 

1080.08(h). Because Amendment No. 2 is technical 

in nature, it is not subject to notice and comment. 

6See Notice. 

7See Phlx Rule 1080, Commentary .08(a)(i). In 

addition, the underlying security must be the 

deliverable for the options component of a stockoption order and must represent exactly 100 shares 

per option for regular way delivery. Id. 

8See Phlx Rule 1080, Commentary .08(a)(i). 

9 Id. 

10See Securities Exchange Act Release Nos. 

57620 (April 4, 2008), 73 FR 19271 (April 9, 2008) 

(‘‘QCT Exemptive Order’’). See also Securities 

Exchange Act Release No. 54389 (August 31, 2006), 

71 FR 52829 (September 7, 2006). 

11 17 CFR 242.611(a). 

12See Phlx Rule 1080, Commentary .08(a)(i) and 

Amendment No. 1. 

13See Phlx Rule 1080, Commentary .08(a)(ix). 

14See Notice at note 20. 

15See Phlx Rule 1080, Commentary .08(a)(viii). 

16 Id. 

17See Phlx Rule 1080, Commentary 

.08(a)(viii)(B). DNA Orders received prior to the 

opening or when the Complex Order Strategy is not 

available for trading will be cancelled. DNA Orders 

will initially be available only for Complex Orders 

with more than two options components or with an 

underlying security component. See Phlx Rule 

1080, Commentary .08(a)(viii)(A) and (C). 

18See Phlx Rule 1080, Commentary .08(a)(iv) and 

(vi). Specifically, the revised definitions indicate 

that when the underlying security is a component 

of a Complex Order, the best net debit or credit 

refers to the National Best Bid and/or Offer for the 

underlying security. 

19See Phlx Rule 1080, Commentary .08(a)(ii). 

20Phlx Rule 1033(d) states that when a member 

holding a hedge order, as defined in Rule 1066, and 

bidding or offering on the basis of a total credit or 

debit for the order has determined that the order 

may not be executed by a combination of 

transactions at or within the bids and offers 

established in the marketplace, then the order may 

be executed as a hedge order at the total credit or 

debit with one other member with priority over 

either the bid or the offer established in the 

marketplace that is not better than the bids or offers 

comprising such total credit or debit, provided that 

the member executes at least one option leg at a 

better price than established bid or offer for that 

option contract AND no option leg is executed at 

a price outside of the established bid or offer for 

that option contract. Hedge orders include spread, 

straddle, combination, and tied hedge orders. See 

Phlx Rule 1066(f). 

21Phlx Rule 1033(e) states that when a member 

holding a synthetic option order, as defined in Rule 

1066, and bidding or offering on the basis of a total 

credit or debit for the order has determined that the 

order may not be executed by a combination of 

transactions at or within the bids and offers 

established in the marketplace, then the order may 

be executed as a synthetic option order at the total 

credit or debit with one other member, provided 

that the member executes the option leg at a better 

price than the established bid or offer for that 

option contract, in accordance with Rule 1014. 

Synthetic option orders in open outcry, in which 

the option component is for a size of 100 contracts 

or more, have priority over bids (offers) of crowd 

participants who are bidding (offering) only for the 

option component of the synthetic option order, but 

not over bids (offers) of public customers on the 

limit order book, and not over crowd participants 

that are willing to participate in the synthetic 

option order at the net debit or credit price. 

22See Phlx Rule 1080, Commentary .08(a)(ix). 

2011.5 The Commission received no 

comments regarding the proposal, as 

amended. This order approves the 

proposed rule change, as amended. 

II. Description of the Proposal 

Currently, the Phlx’s rules provide for 

the electronic trading of Complex 

Orders composed of two options 

components. As described in greater 

detail below and in the Notice,6 the Phlx 

proposes to amend Phlx Rule 1080, 

Commentary .08, to provide for the 

electronic trading of Complex Orders 

composed of up to six components, 

which may include the underlying stock 

or ETF, and to make other changes to its 

rules governing the trading of Complex 

Orders on Phlx XL II. 

A. Definitions 

The proposal amends Phlx Rule 1080, 

Commentary .08(a)(i) to define a 

Complex Order, for purposes of that 

rule, as (i) an order involving the 

simultaneous purchase and/or sale of 

two or more different options series in 

the same underlying security, priced as 

a net debit or credit based on the 

relative prices of the individual 

components, for the same account, for 

the purpose of executing a particular 

investment strategy; or (ii) a stockoption order. A stock-option order is 

composed of an order to buy or sell a 

stated number of units of an underlying 

security (stock or ETF) coupled with the 

purchase or sale of options contract(s).7

A Complex Order could be composed of 

up to six options series or, in the case 

of a stock-option order, five options 

series and the underlying stock or ETF.8

Stock-option orders may only be 

executed against other stock-option 

orders and cannot be executed against 

orders for the individual components.9

A member may only submit a Complex 

Order with a stock or ETF component if 

the order complies with the qualified 

contingent trade exemption (‘‘QCT 

Exemption’’) 10 from Rule 611(a) of 

Regulation NMS under the Act,11 and a 

member submitting a Complex Order 

with a stock or ETF component 

represents that its order complies with 

the QCT Exemption.12

The proposal also adds a definition of 

conforming ratio for Complex Orders 

composed solely of options and for 

Complex Orders that include the 

underlying stock or ETF.13 For Complex 

Orders composed solely of options, a 

conforming ratio is where the ratio 

between the sizes of the options 

components of a Complex Order is 

equal to or greater than one-to-three 

(.333) and less than or equal to three-toone (3.00). For Complex Orders that 

include the underlying stock or ETF, a 

conforming ratio is where the ratio 

between any options component and the 

underlying security component is less 

than or equal to eight contracts to 100 

shares of the underlying security. 

Complex Orders with a conforming ratio 

will be accepted but Complex Orders 

with a nonconforming ratio will not.14

In addition, the proposal provides a 

DNA designation for Complex Orders.15

A DNA Order is not COLA-eligible, as 

defined in Phlx Rule 1080, Commentary 

.08(d)((ii)(B), and will not trigger or join 

a Complex Order Live Auction 

(‘‘COLA’’).16 DNA Orders are cancelled if 

not immediately executed.17

The proposal also updates the 

definitions of cPBBO and cNBBO to 

reflect the underlying security 

component of a stock-option order.18 In 

addition, the proposal clarifies the 

definition of Complex Order Strategy 

and indicates that the Phlx’s system will 

assign a strategy identifier to each 

Complex Order Strategy.19

B. Priority 

Currently, the priority provisions in 

Phlx Rule 1033(d) apply to Complex 

Orders trading on Phlx XL II and to 

complex orders trading on the Phlx’s 

floor.20 The priority provisions in Phlx 

Rule 1033(e) apply to orders trading on 

the Phlx’s floor that include a stock and 

an option component.21 The proposal 

adds new Phlx Rule 1080, Commentary 

.08(c)(iii) to provide priority provisions 

for Complex Orders, including Complex 

Orders with a stock or ETF component, 

trading on Phlx XL II. 

Specifically, Phlx Rule 1080, 

Commentary .08(c)(iii)(A), which 

applies to Complex Orders composed 

solely of options, states that Complex 

Orders consisting of a conforming 

ratio 22 may be executed at a total credit 

or debit price with priority over 

individual bids or offers established in 

the marketplace (including customers) 

that are not better than the bids or offers 

comprising such total credit or debit, 

provided that at least one option leg is 

executed at a better price than the 

established bid or offer for that option 

contract and no option leg is executed 

at a price outside of the established bid 

or offer for that option contract. The 


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23See Notice at notes 22–23 and accompanying 

text. 

24See Phlx Rule 1080, Commentary .08(a)(ix) and 

note 13, supra. 

25See Phlx Rule 1080, Commentary .08(c)(iii)(B). 

26See Phlx Rule 1080, Commentary .08(a)(i). 

27See Phlx Rule 1080(m)(iii). 

28 15 U.S.C. 78s(b). 

29See Securities Exchange Act Release No. 59995 

(May 28, 2009), 74 FR 26750 (June 3, 2009) (order 

approving File No. SR–Phlx–2009–32) (‘‘NOS 

Order’’). 

30 Id. The Commission also has approved NOS as 

an affiliate of Phlx for the limited purpose of 

providing routing services for Nasdaq Exchange for 

orders that first attempt to access liquidity on 

Nasdaq Exchange’s systems before routing to Phlx, 

subject to certain conditions. See Securities 

Exchange Act Release No. 58179 (July 17, 2008), 73 

FR 42874 (July 23, 2008) (order approving File No. 

SR–Phlx–2008–31). 

31See NOS Order, supra note 29. 32Phlx Rule 1080(m)(iii)(A), as amended, states, 

in part, that ‘‘The sole use of the Routing Facility 

by the Phlx XL II system will be to route orders in 

options listed and open for trading on the Phlx XL 

II system to away markets pursuant to Exchange 

rules on behalf of the Exchange and, in addition, 

where one component of a Complex Order is the 

underlying security, to execute and report such 

component otherwise than on the Exchange, 

pursuant to Rule 1080.08(h).’’ See Amendment No. 

2. See also Notice at note 31 and accompanying 

text. 

33See Notice at 78324. 

34See Phlx Rule 1080, Commentary .08(h). 

35See Notice at 78324 and at note 44 and 

accompanying text. 

36See Phlx Rule 1080, Commentary .08(h). 

37See Notice at note 34 and accompanying text. 

38See Notice at notes 31–32 and accompanying 

text. 

39See Notice at note 32 and accompanying text. 

40See Notice at notes 32–33 and accompanying 

text. In addition, the Phlx notes that Phlx Rule 

1080(m)(iii)(C) requires the Exchange to establish 

and maintain procedures and internal controls 

reasonably designed to adequately restrict the flow 

of confidential and proprietary information between 

the Phlx and NOS, and any other entity, including 

any affiliate of NOS. See Notice at note 33. 

41See Notice at notes 42–43 and accompanying 

text. 

42 Id. 

43See Notice at note 35 and accompanying text. 

The FINRA/Nasdaq TRF is a facility of FINRA that 

is operated by The NASDAQ OMX Group, Inc. 

(‘‘Nasdaq OMX’’) and utilizes Automated 

Confirmation Transaction (‘‘ACT’’) Service 

technology. See Notice at note 35. 

Phlx states that new Phlx Rule 1080, 

Commentary .08(c)(iii)(A) provides the 

same priority as Phlx Rule 1033(d), 

under the same conditions, to a broader 

class of Complex Orders.23

Phlx Rule 1080, Commentary 

.08(c)(iii)(B) states that where a 

Complex Order consists of the 

underlying stock or ETF and one 

options leg in a conforming ratio,24 such 

options leg does not have priority over 

bids and offers established in the 

marketplace, including customer orders. 

However, where a Complex Order 

consists of the underlying stock or ETF 

and more than one options leg in a 

conforming ratio, the options legs have 

priority over bids and offers established 

in the marketplace, including customer 

orders, if at least one options leg 

improves the existing market for that 

option.25

C. Execution of the Stock or ETF 

Component of a Complex Order 

1. Role of NOS 

To trade Complex Orders with a stock 

or ETF component through Phlx XL II, 

members of the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) or 

the NASDAQ Stock Market (‘‘Nasdaq’’) 

must have a Uniform Service Bureau/ 

Executing Broker Agreement (‘‘AGU’’) 

with NOS, and firms that are not 

members of FINRA or Nasdaq must have 

a Qualified Special Representative 

(‘‘QSR’’) arrangement with NOS.26 NOS, 

a broker-dealer and FINRA member, 

serves as the Phlx’s Routing Facility and 

is subject to regulation as a facility of 

the Phlx.27

Phlx Rule 985(b), ‘‘Restrictions on 

Affiliation,’’ generally prohibits the Phlx 

or an entity with which it is affiliated 

from acquiring or maintaining an 

ownership interest in, or engaging in a 

business venture with a Phlx member or 

an affiliate of a Phlx member in the 

absence of an effective filing with the 

Commission under Section 19(b) of the 

Act.28 NOS is a member of Phlx and also 

an indirect wholly-owned subsidiary of 

Phlx’s parent company, and therefore an 

affiliate of Phlx.29 The Commission has 

approved NOS as an affiliate of Phlx for 

the purpose of routing orders in options 

listed and open for trading on Phlx XL 

II to away market centers pursuant to 

Phlx rules on behalf of Phlx.30 Phlx Rule 

1080(m)(iii) states that ‘‘[t]he sole use of 

the Routing Facility by the Phlx XL II 

system will be to route orders in options 

listed and open for trading on the Phlx 

XL II system to away markets pursuant 

to Exchange rules on behalf of the 

Exchange.’’ 

For NOS to perform additional 

functions for the Phlx, the Phlx must 

file a proposed rule change with the 

Commission pursuant to Section 19 of 

the Act and the rules and regulations 

thereunder.31 In the current proposal, 

the Phlx proposes to allow NOS to act 

as the agent responsible for the 

execution of the stock or ETF 

component of a Complex Order in 

addition to its approved routing 

functions.32 NOS’s function with 

respect to the execution of the stock or 

ETF component of a Complex Order 

will be available to all Phlx member 

organizations.33

2. Execution of the Stock or ETF 

Component of a Complex Order 

Where one component of a Complex 

Order is the underlying stock or ETF, 

the Phlx will electronically 

communicate the underlying security 

component to NOS for execution 34 after 

the Phlx’s trading system determines 

that a Complex Order trade is possible 

and the prices for each of the 

components.35 The execution and 

reporting of the underlying security 

component of the order will occur 

otherwise than on the Exchange, and 

NOS will handle these orders pursuant 

to applicable rules regarding equity 

trading,36 including the rules governing 

trade reporting, trade-throughs, and 

short sales.37

NOS, a FINRA member, will be 

responsible for the proper execution, 

trade reporting, and submission to 

clearing of the underlying stock or ETF 

component of a Complex Trade.38 The 

Phlx notes that NOS is subject to 

examination by FINRA and is 

responsible for compliance with 

applicable rules, including NASD Rule 

3010, ‘‘Supervision,’’ which generally 

requires NOS to establish and maintain 

supervisory systems that are reasonably 

designed to achieve compliance with 

applicable securities laws and 

regulations and applicable NASD and 

FINRA rules.39 The Phlx represents that 

NOS intends to have in place policies 

related to confidentiality and the 

potential for informational advantages 

relating to its affiliates, which are 

intended to protect against the misuse of 

material non-public information.40

For the reasons described below, the 

Phlx believes that the processing of the 

stock or ETF component of a Complex 

Order under the proposal will comply 

with applicable rules regarding equity 

trading, including the rules governing 

trade reporting, trade-throughs, and 

short sales.41 The Phlx represents that 

NOS’s responsibilities respecting these 

equity trading rules will be documented 

in NOS’s written policies and 

procedures, and that NOS’s compliance 

with these policies and procedures is 

monitored, reviewed, and updated as 

part of NOS’s regular and routine 

regulatory program.42

3. Compliance With Trade Reporting 

Requirements and QCT Exemption 

The Phlx states that NOS will report 

trades in the underlying stock or ETF to 

the FINRA/Nasdaq Trade Reporting 

Facility (‘‘TRF’’).43

Phlx Rule 1080, Commentary .08(a)(i) 

permits a member to submit a Complex 

Order with a stock or ETF component 

only if the order complies with the QCT 

Exemption, and provides, further, that a 

member submitting a Complex Order 


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44See Phlx Rule 1080, Commentary .08(a)(i) and 

Amendment No. 1. The QCT Exemption applies to 

trade-throughs caused by the execution of an order 

involving one or more NMS stocks that are 

components of a ‘‘qualified contingent trade.’’ As 

described more fully in the QCT Exemptive Order, 

a qualified contingent trade is a transaction 

consisting of two or more component orders, 

executed as principal or agent, where: (1) At least 

one component order is an NMS stock; (2) all 

components are effected with a product or price 

contingency that either has been agreed to by the 

respective counterparties or arranged for by a 

broker-dealer as principal or agent; (3) the 

execution of one component is contingent upon the 

execution of all other components at or near the 

same time; (4) the specific relationship between the 

component orders (e.g., the spread between the 

prices of the component orders) is determined at 

the time the contingent order is placed; (5) the 

component orders bear a derivative relationship to 

one another, represent different classes of shares of 

the same issuer, or involve the securities of 

participants in mergers or with intentions to merge 

that have been announced or since cancelled; and 

(6) the Exempted NMS Stock Transaction is fully 

hedged (without regard to any prior existing 

position) as a result of the other components of the 

contingent trade. See QCT Exemptive Order, supra 

note 10. 

45See Notice at notes 37–39 and accompanying 

text. 

46 17 CFR 242.200 et seq. See Notice at note 40 

and accompanying text. 

47Telephone conversation between Andrea Orr, 

Special Counsel, Division of Trading and Markets 

Commission, with Edith Hallahan, Associate 

General Counsel, Phlx, on January 25, 2011. 

48See Notice at notes 40–42 and accompanying 

text. 

49 Id. 

50 Id. 

51 17 CFR 242.201 and 200(g). 

52See Securities Exchange Act Release No. 61595 

(February 26, 2010). 75 FR 11232 (March 10, 2010) 

53See Notice at note 41 and accompanying text. 

54See Securities Exchange Act Release No. 63247 

(November 4, 2010), 75 FR 68702 (November 9, 

2010) (File No. S7–08–09) (‘‘Compliance Date 

Extension Release’’). 

55See Notice at note 42 and accompanying text. 

56 Id. 

57 17 CFR 242.201. 

58See Notice at notes 40–42 and accompanying 

text. 

59See Phlx Rule 1080, Commentary .08(h). 

60 Id. 

61See Notice at note 43 and accompanying text. 

62See Notice at notes 43–44 and accompanying 

text. 

63See Notice at note 44 and accompanying text. 

64See Notice at note 46 and accompanying text. 

The Phlx also notes that Phlx Rule 985(c)(1) 

requires Nasdaq OMX, which owns NOS and the 

Exchange, to establish and maintain procedures and 

internal controls reasonably designed to ensure that 

NOS does not develop or implement changes to its 

system on the basis of non-public information 

regarding planned changes to the Exchange’s 

systems, obtained as a result of its affiliation with 

the Exchange, until such information is available 

generally to similarly situated Exchange members 

and member organizations in connection with the 

provision of inbound routing to the Exchange. See 

Notice at note 46. 

65See Notice notes 46–47 and accompanying text. 

66 Id. 

67The Phlx notes, however, that TRF and clearing 

fees, not charged by Phlx or NOS, may result. The 

Phlx states that the National Securities Clearing 

Corporation (‘‘NSCC’’) and ACT will bill firms 

directly for their use of the NSCC and ACT systems, 

respectively. The Phlx represents that, to the extent 

that NOS is billed by NSCC or ACT, it will not pass 

through to firms such fees for the stock or ETF 

component of a Complex Order. See Notice at note 

47. 

with a stock or ETF component 

represents that its order complies with 

the QCT Exemption.44 In addition, as 

described in greater detail in the Notice, 

the Phlx represents that its trading 

system will validate compliance with 

each of the requirements of the QCT 

Exemption, thereby assisting NOS in 

carrying out its responsibilities as agent 

for these orders.45

4. Compliance With Regulation SHO 

The Phlx represents that the proposal 

raises no issues of compliance with the 

currently operative provisions of 

Regulation SHO.46 The Phlx notes that 

when a Complex Order has a stock or 

ETF component, Regulation SHO 

requires a member organization to 

indicate whether that order involves a 

long or short sale. The Phlx states that 

its trading system will accept Complex 

Orders with a stock or ETF component 

marked to reflect either a long or short 

position and the trading system will 

reject orders not marked as either long 

or short.47 In addition, the Phlx states 

that the trading system will reject orders 

not marked as buy, sell, or sell short.48

The Phlx’s trading system will 

electronically deliver the stock or ETF 

component to NOS for execution. 

Simultaneous with the options 

execution on the Phlx, NOS will execute 

and report the stock or ETF component, 

which will contain the long or short 

indication as it was delivered to the 

Phlx’s trading system by the member 

organization.49 The Phlx also states that 

various surveillance and examination 

regulatory programs check for 

compliance with Regulation SHO.50

The Phlx notes that the Commission 

amended Rules 201 and Rule 200(g) of 

Regulation SHO 51 earlier this year to 

adopt a short sale-related circuit breaker 

that, if triggered, would impose a 

restriction on the price at which 

securities may be sold short (‘‘short sale 

price test restriction’’).52 Under these 

amendments, a broker-dealer may mark 

certain qualifying short sale orders as 

‘‘short exempt.’’ 53 The Phlx notes that 

the Commission extended the 

compliance date for the amendments to 

Rules 201 and 200(g) until February 28, 

2011.54 The Phlx states that after the 

new provisions of Regulation SHO 

become operative, NOS will accept 

orders marked ‘‘short exempt.’’ 55 The 

Exchange represents, further, that it 

intends to file a proposed rule change 

addressing the new provisions.56 In 

addition, the Phlx represents that NOS, 

as a trading center under Rule 201,57

will be compliant with the requirements 

of Regulation SHO.58

5. Execution Price of the Underlying 

Security and Electronic Processing 

Under the proposal, the execution 

price of the order for the underlying 

security must be within the security’s 

high-low range for the day at the time 

the Complex Order is processed and 

within a specified price from the current 

market, which the Phlx will establish in 

an Options Trader Alert.59 If the stock 

price is not within these parameters, the 

Complex Order is not executable.60

The Exchange believes that electronic 

submission of the stock or ETF 

component of a Complex Order should 

help ensure that the Complex Order, as 

a whole, is executed in a timely manner 

and at the desired price.61 The Phlx 

notes that electronic communication 

eliminates the need for each party to 

separately manually submit the stock or 

ETF component to a broker-dealer for 

execution.62 In addition, the Exchange 

emphasizes that the execution of the 

stock or ETF component of a Complex 

Order will be immediate, with the 

Phlx’s system calculating the stock or 

ETF price based on the net debit/credit 

price of the Complex Order, while also 

calculating and determining the 

appropriate options price(s), all 

electronically and immediately.63 The 

Exchange believes that this approach 

will not require the Exchange to later 

nullify options trades if the stock price 

cannot be achieved. 

The Exchange believes that it is 

appropriate for its affiliate, NOS, to act 

as the exclusive conduit for the 

execution of the stock or ETF 

component of a Complex Order.64 The 

Phlx states that, as a practical matter, 

complex order programs on other 

exchanges necessarily involve specific 

arrangements with a broker-dealer to 

facilitate prompt execution.65 The Phlx 

believes, further, that offering the 

benefits of prompt, seamless, automatic 

execution for both the options and stock 

or ETF components of a Complex Order 

is an important feature that should 

enhance the complex order processing 

available on options exchanges today.66

The Phlx represents that neither the 

Exchange nor NOS intends to charge a 

fee for the execution of the stock or ETF 

component of a Complex Order.67

D. Complex Order Entry, Processing, 

and Execution 

The Phlx proposes additional changes 

to Phlx Rule 1080, Commentary .08, 

relating to the entry, processing, and 


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68After the Phlx has fully rolled out its enhanced 

Complex Order system, Day orders also will become 

available for Complex Orders with two options 

components. See Phlx Rule 1080, Commentary 

.08(b)(ii). 

69See Notice at 78323. 

70See Phlx Rules 1080, Commentary 

.08(e)(vi)(A)(1), (f)(iii)(A), and (f)(iii)(B)(1). 

71See Notice at note 29 and accompanying text. 

72 Id. 

73 Id. 

74 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

75 15 U.S.C. 78f(b)(5). 

76See, e.g., ISE Rule 722(a)(1) and NYSEAmex 

Rule 900.3NY(e) (defining a complex order). See 

also NYSEAmex Rule 900.3NY(h)(2) (defining a 

Stock/Complex Order) and ISE Rule 722(a)(2) and 

NYSEAmex Rule 900.3NY(h)(1) (defining a stockoption order). 

77See Notice at note 20. 

78Throughout Phlx Rule 1080, Commentary .08, 

the proposal replaces references to the priority 

provisions in Phlx Rule 1033(d) with references to 

the priority provisions in Phlx Rule 1080, 

Commentary .08(c)(iii). Phlx Rule 1033(d) will 

continue to apply to trading on the Phlx’s floor, and 

the priority provisions in Commentary .08(c)(iii) 

will apply to Complex Orders trading on PHLX XL 

II. 

79See, e.g., ISE Rule 722(b)(2) and NYSEAmex 

Rule 980, Commentary .02. See also CBOE Rules 

6.45(e), 6.45A(b)(ii), and 6.45B(b)(ii). The Phlx 

states that Phlx Rule 1080, Commentary .08(c)(iii) 

provides the same priority as Phlx Rule 1033(d), 

under the same conditions, to a broader class of 

Complex Orders. See Notice at notes 22–23 and 

accompanying text. 

80Phlx Rule 1033(e) requires the option leg of a 

stock-option order (called a synthetic option order) 

to be executed at a price better than the established 

bid or offer for that option. For synthetic option 

orders trading in open outcry in which the option 

execution of Complex Orders. In this 

regard, the proposal revises Phlx Rule 

1080, Commentary .08(c)(i) to indicate 

that a Complex Order with an 

underlying security component is 

eligible to trade only when the 

underlying security component is open 

for trading on its primary market. 

In addition, the proposal revises Phlx 

Rule 1080, Commentary .08(e)(vi)(A)(1) 

to: (i) Add the word ‘‘legging’’ to refer to 

the execution of a COLA-eligible order 

against interest in the leg market, as 

described in that paragraph; and (ii) 

indicate that legging may not occur 

when the underlying security is a 

component of a Complex Order. 

Similarly, the proposal revises Phlx 

Rule 1080, Commentary .08(f)(iii), 

relating to executions against the 

CBOOK, to indicate that legging will not 

take place when the underlying security 

is a component of a Complex Order. 

Phlx Rule 1080, Commentary 

.08(e)(i)(B)(2) currently provides that a 

Complex Order received during the final 

ten seconds of a trading session is not 

COLA-eligible. The proposal modifies 

the rule to make this time configurable, 

but no longer than ten seconds. 

The proposal also amends Phlx Rule 

1080, Commentary .08(b)(ii) to allow 

Streaming Quote Traders (‘‘SQTs’’), 

Remote Streaming Quote Traders 

(‘‘RSQTs’’), non-SQT Registered Options 

Traders (‘‘ROTs’’), specialists, and nonPhlx market makers on another 

exchange to enter Complex Orders with 

more than two options components or 

an underlying security component as 

Day orders, in addition to entering them 

as Immediate or Cancel (‘‘IOC’’).68 The 

Phlx believes that this change could 

encourage more orders from these 

market participants. 

The proposal amends Phlx Rule 1080, 

Commentary .08(b)(iii) to indicate that 

Floor Brokers using the Options Floor 

Broker Management System (‘‘FBMS’’) 

may not enter DNA Orders, orders with 

a stock or ETF component, or orders 

with more than two legs. The Phlx notes 

that Floor Brokers are able to use 

systems other than FBMS to access Phlx 

XL II, and are unlikely to need or 

request changes to FBMS because they 

execute more complex orders in the 

trading crowd than through FBMS.69

The proposal also eliminates 

provisions that currently provide an 

SQT or RSQT quoting all of the 

components of a Complex Order in the 

leg market with priority over an SQT or 

RSQT quoting a single component of the 

order.70 The Phlx believes that these 

changes will simplify the allocation 

process as the Exchange’s system begins 

to accept more Complex Order types.71

The Phlx believes, further, that the 

benefits provided by these provisions 

are not material, and that they are not 

being realized intentionally by market 

participants.72 Under the revised rules, 

an SQT or RSQT quoting all 

components of a Complex Order will be 

on parity with SQTs and RSQTs quoting 

a single component.73

III. Discussion and Commission 

Findings 

The Commission finds that the 

proposed rule change, as amended, is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.74 In particular, the 

Commission finds that the proposal is 

consistent with Section 6(b)(5) of the 

Act,75 which requires, in part, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Currently, only Complex Orders with 

two options components may be traded 

on Phlx XL II. For the reasons discussed 

below, the Commission believes that the 

proposal, as amended, could facilitate 

the trading of Complex Orders by, 

among other things, permitting Complex 

Orders with up to six components, 

including the underlying stock or ETF, 

to be traded on Phlx XL II. 

A. Priority Rules 

As discussed above, the proposal 

adopts a new definition of Complex 

Order and adds a new defined term, 

conforming ratio, relating to Complex 

Orders. The Commission notes that the 

definition of a Complex Order in Phlx 

Rule 1080, Commentary .08(a)(i), 

including Complex Orders composed 

solely of options and Complex Orders 

composed of option(s) and the 

underlying stock or ETF, together with 

the definition of conforming ratio in 

Phlx Rule 1080, Commentary .08(a)(ix), 

are comparable to the definitions of 

Complex Order, Stock/Complex Order, 

and stock-option order adopted by other 

options exchanges.76

A Complex Order with a 

nonconforming ratio will not be 

accepted,77 and only Complex Orders 

with conforming ratios will be eligible 

for the priority treatment provided in 

Phlx Rule 1080, Commentary 

.08(c)(iii).78 Specifically, for Complex 

Orders composed solely of options, Phlx 

Rule 1080, Commentary .08(c)(iii)(A) 

provides that a Complex Order with a 

conforming ratio may be executed at a 

total net credit or debit with priority 

over individual bids or offers 

established in the marketplace 

(including customers) that are not better 

than the bids or offers comprising such 

total credit or debit, provided that at 

least one option leg is executed at a 

better price than the established bid or 

offer for that option and no option leg 

is executed at a price outside of the 

established bid or offer for that option. 

The priority provisions in Phlx Rule 

1080, Commentary .08(c)(iii)(A) are 

consistent with the existing priority 

provisions in Phlx Rule 1033(d), which 

will continue to apply to trading on the 

Phlx’s floor, and with the priority rules 

of other options exchanges.79

For Complex Orders composed of the 

underlying stock or ETF and one 

options leg in a conforming ratio, Phlx 

Rule 1080, Commentary .08(c)(iii)(B) 

provides that the options leg does not 

have priority over bids and offers 

established in the marketplace, 

including customer orders. This 

provision is similar to Phlx Rule 

1033(e),80 and to the requirements of 


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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 5635 

component is for 100 contracts or more, the 

synthetic option order has priority over crowd 

participants who are bidding (offering) only for the 

option component of the order, but over the bids 

(offers) of public customers in the limit order book, 

and not over crowd participants that are willing to 

participate in the synthetic option order at the net 

debit or credit price. 

81See, e.g., CBOE Rule 6.53C, Commentary .06(b) 

and NYSEAmex Rule 980NY, Commentary .03(b) 

(the option leg of a Stock-Option Order will not be 

executed on the exchange’s system at the 

exchange’s best bid (offer) in that series if one or 

more public customer orders are resting at that 

price on the electronic book, unless the option leg 

trades with such public customer order(s)); and ISE 

Rule 722(b)(2) (a stock-option order with one 

options leg has priority over bids and offers 

established in the marketplace by Professional 

Orders and market makers at the price of the 

options leg, but not over such bids or offers 

established by Priority Customer Orders). See also 

CBOE Rule 6.45(e) (stock-option orders have 

priority over bids (offers) of the trading crowd but 

not over bids (offers) in the public customer limit 

order book). 

82See Phlx Rule 1080, Commentary .08(c)(iii)(B). 

83 ISE Rule 722(b)(2) provides, in part, that the 

options legs of a stock-option order with more than 

one options leg may be executed at a total net credit 

or debit with one other Member without giving 

priority to established bids or offers that are no 

better than the bids or offers comprising the net 

credit or debit, provided that if any of the 

established bids or offers consist of a Priority 

Customer Order, the price of at least one leg must 

trade at a price that is better than the corresponding 

bid or offer in the marketplace by at least one 

minimum trading increment. 

84See Phlx Rule 1080, Commentary .08(h). 

85See Notice at note 34 and accompanying text. 

86See Notice at notes 31–32 and accompanying 

text. 

87Phlx Rule 1080(m)(iii)(A) states that NOS is 

subject to regulation as a facility of the Phlx. Phlx 

Rule 1080(m)(iii)(D) provides, further, that the 

books, records, premises, officers, directors, agents, 

and employees of NOS, as a facility of the Phlx, 

shall be deemed to be the books, records, premises, 

officers, directors, agents, and employees of the 

Phlx for purposes of and subject to oversight 

pursuant to the Act. The books and records of NOS, 

as a facility of the Phlx, shall be subject at all times 

to inspection and copying by the Phlx and the 

Commission. 

88See Notice at 78324. Phlx Rule 1080(m)(iii)(A) 

states that NOS is a member of an unaffiliated selfregulatory organization which the designated 

examining authority for NOS. 

89See Notice at 78324. 

90See Notice at note 32 and accompanying text. 

91See Notice at note 33 and accompanying text. 

In addition, the Phlx notes that Phlx Rule 

1080(m)(iii)(C) requires the Exchange to establish 

and maintain procedures and internal controls 

reasonably designed to adequately restrict the flow 

of confidential and proprietary information between 

the Phlx and NOS, and any other entity, including 

any affiliate of NOS. See Notice at note 33. 

92See Notice at 78325. 

93See Notice at note 47 and accompanying text. 

The Phlx notes, however, that TRF and clearing 

fees, not charged by Phlx or NOS, may result. The 

Phlx states that NSCC and ACT will bill firms 

directly for their use of NSCC and ACT systems, 

respectively. Further, the Phlx represents that, to 

the extent that NOS is billed by NSCC or Act, it will 

not pass through such fees to firms for the stock or 

ETF portion of a Complex Trade under this 

proposal. See Notice at note 47. 

94See NOS Order, supra note 30, at footnote 84. 

95 Id. 

96See Phlx Rule 1080, Commentary .08(a)(viii). 

97 Id. 

98See Phlx Rule 1080, Commentary .08(a)(iv) and 

(vi). 

99See Phlx Rule 1080, Commentary .08(a)(ii). 

other options exchanges.81 For a 

Complex Order composed of the 

underlying stock or ETF and more than 

one options leg in a conforming ratio, 

the options legs have priority over bids 

and offers established in the 

marketplace, including customer orders, 

if at least one options leg improves the 

existing market for that option.82 This 

provision is similar to ISE Rule 722(b).83

B. Execution of the Stock or ETF 

Component of a Complex Order 

1. NOS’s Role as Agent for the Stock or 

ETF Component of a Complex Order 

NOS serves as the Phlx’s Routing 

Facility. In addition to its currently 

approved routing functions, the Phlx 

proposes to allow NOS to act as the 

agent for orders to buy and sell the 

underlying stock or ETF component of 

a Complex Order. 

As described more fully above, after 

the Phlx’s system determines that a 

Complex Order trade is possible and the 

prices for the trade, the Phlx will 

electronically communicate the stock or 

ETF component of the Complex Order 

to NOS for execution. NOS, acting as 

agent for the orders to buy and sell the 

underlying stock or ETF, will execute 

the orders in the over-the-counter 

(‘‘OTC’’) market and will handle the 

orders pursuant to applicable rules 

regarding equity trading,84 including the 

rules governing trade reporting, tradethroughs, and short sales.85 NOS will be 

responsible for the proper execution, 

trade reporting, and submission to 

clearing of the underlying stock or ETF 

component of a Complex Order.86

Based in part on the Phlx’s statements 

and representations in the Notice, the 

Commission believes that the proposal 

to allow NOS to serve as the agent 

responsible for executing the stock or 

ETF component of a Complex Order is 

consistent with the Act. The 

Commission notes that, as a facility of 

the Phlx, NOS is subject to oversight by 

the Commission and by the Phlx.87 In 

addition, NOS, a member of FINRA, is 

responsible for compliance with 

applicable rules regarding equity 

trading, including rules governing trade 

reporting, trade-throughs and short 

sales, and is subject to examination by 

FINRA.88 Because NOS will execute the 

stock or ETF component of a Complex 

Order in the OTC market, the principal 

regulator of these trades will be FINRA, 

rather than the Phlx or Nasdaq.89

The Phlx notes that NASD Rule 3010 

generally requires NOS to establish and 

maintain supervisory systems that are 

reasonably designed to achieve 

compliance with applicable securities 

laws and regulations and applicable 

NASD and FINRA rules.90 The Phlx 

represents that NOS intends to have in 

place policies related to confidentiality 

and the potential for informational 

advantages relating to its affiliates, 

which are intended to protect against 

the misuse of material non-public 

information.91 The Phlx represents, 

further, that NOS’s responsibilities 

respecting applicable equity trading 

rules, including the rules governing 

trade reporting, trade-throughs, and 

short sales, will be documented in 

NOS’s written policies and procedures, 

and that NOS’s compliance with these 

policies and procedures is monitored, 

reviewed, and updated as part of NOS’s 

regular and routine regulatory 

program.92

The Phlx represents that neither the 

Exchange nor NOS intends to charge a 

fee for the execution of the stock or ETF 

component of a Complex Order.93 The 

Commission notes that if the Phlx or 

NOS decides in the future to charge fees 

for NOS’s execution of the stock or ETF 

component of a Complex Order, or to 

modify its rules relating to NOS’s 

execution of the stock or ETF 

component of a Complex Order, the 

Phlx would be responsible for filing the 

proposed fee or rule change with the 

Commission pursuant to Section 19(b) 

of the Act.94 The Commission notes, in 

addition, that NOS’s execution of the 

stock or ETF component of a Complex 

Order is subject to exchange nondiscrimination requirements.95

C. DNA Designation and Additional 

Definitions 

The proposal adopts a DNA 

designation for Complex Orders.96 A 

DNA Order is not COLA-eligible and 

will not trigger or join a COLA.97 The 

Commission believes that DNA Orders 

will provide additional flexibility in 

executing Complex Orders by allowing 

market participants to submit Complex 

Orders that will not trigger or join a 

COLA. 

The Commission believes that the 

revised definitions of cPPBO and 

cNBBO will update those definitions to 

reflect that the underlying security 

could be component of a Complex 

Order.98 The Commission believes that 

the changes to the definition of Complex 

Order Strategy 99 will help to clarify that 

term and the role of the Phlx’s system 

in assigning a strategy identifier to a 

Complex Order Strategy. 


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100See Phlx Rule 1080, Commentary .08(e)(B)(2). 

101See Notice at 78323. 

102 Id. 

103See Notice at note 29 and accompanying text. 

104 Id. 

105See Phlx Rules 1014(g)(vii) and 1080, 

Commentary .08(e)(vi)(A)(1), (f)(iii)(A), and 

(f)(iii)(B)(1). 

106 15 U.S.C. 78s(b)(2). 

107 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 

D. Complex Order Entry, Processing, 

and Execution 

The Commission finds that the 

changes to Phlx Rule 1080, Commentary 

.08(c)(i) indicating that a Complex Order 

with an underlying security component 

is eligible to trade only when the 

underlying security is open for trading 

on its primary market, and the changes 

to Phlx Rule 1080, Commentary 

.08(e)(vi)(A)(1) and .08(f)(iii) that 

indicate that legging may not occur, 

either in a COLA or against the CBOOK, 

when the underlying security is a 

component of a Complex Order, should 

help to clarify the operation of the 

Phlx’s rules relating to the execution of 

Complex Orders with an underlying 

stock or ETF component. Similarly, the 

Commission believes that adding the 

term ‘‘legging’’ to Phlx Rule 1080, 

Commentary .08(e)(vi)(A)(1) to refer to 

the activity described in that rule could 

help to clarify the rule. 

The amendment to Phlx Rule 1080, 

Commentary .08(e)(i)(B)(2) that permits 

the Phlx to determine the time period, 

which will not exceed ten seconds, at 

the end of a trading session when an 

order will not be COLA-eligible should 

provide the Phlx with flexibility in 

determining the time period within 

which the Exchange will not initiate a 

COLA during the final seconds of a 

trading session. The Commission notes 

that the Phlx will establish this time 

period in an Options Trader Alert.100

The Commission believes that 

modifying Phlx Rule 1080, Commentary 

.08(b)(ii) to allow SQTs, RSQTs, nonSQT ROTs, specialists, and non-Phlx 

market makers on another exchange to 

enter Complex Orders with more than 

two options components or an 

underlying security component as Day 

orders, in addition to entering them as 

IOC orders, could encourage these 

market participants to submit Complex 

Orders by providing them with greater 

flexibility in entering orders. 

The Commission believes that the 

amendments to Phlx Rule 1080, 

Commentary .08(b)(iii) indicating that 

Floor Brokers using the FBMS may not 

enter DNA Orders, orders with a stock 

or ETF component, or orders with more 

than two legs are reasonable because, 

according to the Phlx, Floor Brokers are 

able to use systems other than FBMS to 

access Phlx XL II.101 In addition, the 

Commission notes that the Phlx believes 

that Floor Brokers are unlikely to need 

or request changes to FBMS because 

they execute more complex orders in 

the trading crowd than through 

FBMS.102

The Commission believes that the 

changes to Phlx Rules 1080, 

Commentary .08(e)(vi)(A)(1), (f)(iii)(A), 

and (f)(iii)(B)(1) that place an SQT or 

RSQT quoting all components of a 

Complex Order on parity with SQTs and 

RSQTs quoting a single component are 

consistent with the Act. The Phlx 

believes that these changes will simplify 

the allocation process as PHLX XL II 

begins to accept more Complex Order 

types.103 In addition, the Phlx believes 

that the benefits provided by the current 

rules giving priority to SQTs and RSQTs 

quoting all components of a Complex 

Order are not material, and that they are 

not being realized intentionally by 

market participants.104 The Commission 

notes that under the revised rules, 

public customer orders will continue to 

have priority over SQTs and RSQTs.105

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,106 that the 

proposed rule change (File No. SR– 

Phlx–2010–157), as amended, is 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.107

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–2127 Filed 1–31–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63779; File No. SR–EDGX– 

2011–01] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Rule 11.9 

January 26, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 

21, 2011, the EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated the proposed rule change as 

constituting a non-controversial rule 

change under Rule 19b–4(f)(6) under the 

Act,3 which renders the proposal 

effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to amend 

Rule 11.9 to add its routing options, 

which are currently contained in its fee 

schedule, to the rule and to introduce 

additional options to the rule. The text 

of the proposed rule change is attached 

as Exhibit 5 and is available on the 

Exchange’s Web site at http:// 

www.directedge.com, at the Exchange’s 

principal office, and at the Public 

Reference Room of the Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

self-regulatory organization has 

prepared summaries, set forth in 

Sections A, B and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange’s current fee schedule 

contains a list of routing options. The 

Exchange proposes to move the current 

list of routing options from the fee 

schedule and codify it in Rule 

11.9(a)(3). In addition, the Exchange 

proposes to amend the existing routing 

option descriptions to provide 

additional clarity and introduce 

additional routing options to Rule 

11.9(a)(3). 

The Exchange intends to implement 

the rule change upon filing with the 

Commission with respect to all routing 

options, except ROOC, which the 

Exchange intends to implement on or 

about February 14, 2011. 


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