[Federal Register Volume 88, Number 173 (Friday, September 8, 2023)]
[Notices]
[Pages 62129-62134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19358]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No, 34-98280; File No. SR-PHLX-2023-40]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
of Proposed Rule Change To Amend Equity 4, Rules 3301A and 3301B To 
Establish New ``Contra Midpoint Only'' and ``Contra Midpoint Only With 
Post-Only'' Order Types and To Make Other Corresponding Changes to the 
Rulebook

September 1, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 28, 2023, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Equity 4, Rules 3301A and 3301B \3\ 
to establish new ``Contra Midpoint Only'' and ``Contra Midpoint Only 
with Post-Only'' Order Types, and to make other corresponding changes 
to the Rulebook.
---------------------------------------------------------------------------

    \3\ References herein to Phlx Rules in the 3000 Series shall 
mean Rules in Phlx Equity 4.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed

[[Page 62130]]

any comments it received on the proposed rule change. The text of these 
statements may be examined at the places specified in Item IV below. 
The Exchange has prepared summaries, set forth in sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Equity 4, Rule 3301A(b) to establish 
``Contra Midpoint Only'' or ``CMO'' and ``Contra Midpoint Only with 
Post-Only'' or ``CMO+PO'' as new Order Types on the Exchange.
    A CMO is a Non-Displayed Order Type priced at the midpoint between 
the National Best Bid and the National Best Offer (the ``NBBO'' and the 
midpoint of the NBBO, the ``Midpoint''). The Exchange will remove a CMO 
resting on the Order Book upon entry of certain types of incoming 
Orders that are likely to result in unfavorable executions, including 
because the incoming Orders are likely to indicate price movements that 
would be more favorable to the resting CMO user than the prevailing 
price. Thus, the CMO provides protection to the resting CMO user 
against executions at the prevailing Midpoint price that the user may 
deem unfavorable. As explained below, once the System removes a CMO 
under these circumstances, the Exchange would submit a new CMO at the 
then-current Midpoint price automatically on behalf of the user.\4\
---------------------------------------------------------------------------

    \4\ In certain instances below, the Exchange uses the term 
``removal'' rather than the term ``cancellation'' to describe how 
the System would behave when handling a CMO. When the Exchange 
removes a CMO from its Order Book, it would not send a cancellation 
message when doing so, thus limiting the potential for information 
leakage.
---------------------------------------------------------------------------

    A CMO+PO is like a CMO, except that it provides for ``post-only'' 
functionality, meaning that like a Midpoint Peg Post-Only Order,\5\ a 
CMO+PO will execute upon entry only in circumstances where economically 
beneficial to the party entering the Order.
---------------------------------------------------------------------------

    \5\ See Rule 3301A(b)(6).
---------------------------------------------------------------------------

    The CMO and CMO+PO are Order Types that the Exchange has developed 
to provide market participants with options that allow them to make 
their own determinations with regards to various trade-offs that exist 
when executing their strategies in the markets. One such trade off 
might be the amount of liquidity they can obtain in the near term 
versus the potential for market movement relative to the Midpoint 
price. Some participants may value avoiding immediate executions in 
order to wait for a better price while others would rather obtain the 
liquidity instead of waiting.
    In this regard, CMO resembles an order type that the Exchange's 
sister market, the Nasdaq Stock Market LLC (``Nasdaq''), introduced in 
2018--the Midpoint Extended Life Order (``M-ELO'').\6\ Like CMO, M-ELO 
is also a non-displayed Order Type that executes only at the Midpoint. 
It is eligible to execute only against other M-ELOs, and it protects 
users from interacting with time-sensitive orders by requiring them to 
wait a period of time (a ``Holding Period'') before their M-ELO is 
eligible to execute (originally one-half second, and subsequently 
reduced to 10 milliseconds).\7\ In 2019, Nasdaq enhanced the M-ELO 
concept by adding the Midpoint Extended Life Order Plus Continuous Book 
(``M-ELO+CB'').\8\ A M-ELO+CB behaves exactly like a M-ELO, except that 
it may also interact with Midpoint Orders on Nasdaq's Continuous Book 
(and thus have access to larger sources of liquidity) to the extent 
that such Midpoint Orders, in turn, opt to rest on the Continuous Book 
for at least 10 milliseconds before becoming eligible to execute 
against a M-ELO+CB. CMO and CMO+PO are variations on the M-ELO/M-ELO+CB 
theme. M-ELOs only trade against other Orders from like-minded 
participants that are willing to wait the required time period before 
trading. CMOs and CMO+POs, by contrast, can trade in a wider array of 
situations, but like M-ELO, they will not trade in instances where the 
incoming order is likely to impact the prevailing price of the 
security. This will provide users of CMOs and CMO+POs with 
opportunities for more liquidity interaction than M-ELO but without a 
delay mechanism. On the other hand, CMOs and CMO+POs will provide more 
protection to users than regular Midpoint Orders, but with less 
opportunity to interact with liquidity. Instead of imposing a waiting 
period, the Exchange will remove a resting CMO when it faces incoming 
orders that have the potential to shift the Midpoint, while also 
providing an opportunity to a participant to receive price improvement 
when the System resubmits its CMO or CMO+PO to take advantage of a 
shift in the Midpoint.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 34-82825 (Mar. 7, 
2018), 83 FR 10937 (Mar. 13, 2018) (order approving SR-NASDAQ-2017-
074).
    \7\ In 2020, the Commission issued an order approving the 
Nasdaq's proposal to shorten the Holding Period for M-ELO and M-
ELO+CB Orders from one-half second to 10 milliseconds. See 
Securities Exchange Act Release No. 34-88743 (April 24, 2020), 85 FR 
24068 (April 30, 2020) (order approving SR-NASDAQ-2020-011).
    \8\ See Securities Exchange Act Release No. 34-86938 (September 
11, 2019), 84 FR 48978 (September 17, 2019) (order approving SR-
NASDAQ-2019-048).
---------------------------------------------------------------------------

    The specific proposed characteristics of the CMO are as follows:
    A CMO is a non-displayed Order Type with the Midpoint Pegging 
Attribute that will be priced and ranked in time order at the Midpoint. 
A user may cancel a CMO at any time.
    The System will remove a CMO Order automatically if a CMO is 
resting at the Midpoint on the PSX Book, an incoming Order is priced 
through the price of the CMO, the CMO would otherwise trade against the 
incoming Order,\9\ and one or more of the following conditions apply, 
which the Exchange anticipates are indicative of a pending price shift 
in favor of the CMO user:
---------------------------------------------------------------------------

    \9\ For example, if the incoming Order is filled fully by 
resting interest with price/time priority ahead of the resting CMO 
Order, then the System will not remove the CMO Order from the Order 
Book.
---------------------------------------------------------------------------

    <bullet> The incoming Order is Displayed and its size is greater 
than that of the resting CMO; or
    <bullet> The incoming Order is not Displayed, it is priced at or 
better than the far side of the NBBO, and its size is greater than that 
of the resting CMO.
    Again, in the first of these scenarios, the Exchange observes that 
the incoming Order has the potential to cause the NBBO to shift, such 
that removal of the CMO will be preferable to allowing the CMO to 
execute at a Midpoint price that may be stale. The System will then 
automatically re-submit a new CMO on behalf of the user after removing 
the original CMO. In the second scenario, the incoming Order may not 
cause a shift in the NBBO, due to its hidden nature, but because it is 
priced aggressively at the far side of the NBBO, it still offers a CMO 
user an opportunity for an execution that is more favorable than the 
prevailing midpoint price. CMO functionality enables a participant to 
avail itself of this opportunity.
    The following examples illustrate this concept. In the first 
example, assume that the National Best Bid is $10.00 and the National 
Best Offer is $11.00. Participant A enters Order 1, which is a CMO to 
buy 100 shares of X that is priced at $10.50--the midpoint of the NBBO. 
While Order 1 is resting on the Exchange Book, Participant B enters 
Order 2, which is a Displayed Order to sell 200 shares of X at $10.40. 
In this instance, Order 2 is larger than Order 1. If Order 1 was not a 
CMO and it had

[[Page 62131]]

executed against Order 2 at $10.50, then Participant A would have 
missed out on the favorable impact of Order 2 shifting the midpoint of 
the NBBO lower to $10.20. To avoid this outcome, however, the System 
would remove Order 1 from the Exchange Book and resubmit it as Order 3, 
priced at $10.20. Participant C then enters Order 4 to sell 100 shares 
of X at 10.20. Order 3 would then execute against Order 4 at $10.20, 
thus providing Participant A with price improvement.
    In a second example, assume again that the National Best Bid is 
$10.00 and the National Best Offer is $11.00. Participant A again 
enters Order 1, which is a CMO to buy 100 shares of X that is priced at 
$10.50. While Order 1 is resting on the Exchange Book, Participant B 
enters Order 2, which this time is a Non-Displayed Order to sell 200 
shares at $10.00. CMO functionality would activate for Order 1 both 
because Order 2 is larger than Order 1 and because Order 2 is priced at 
the far side of the NBBO. The System would resubmit Order 1 as Order 3, 
priced at $10.00. Order 3 would then execute at $10.00, again providing 
price improvement to Participant A.\10\
---------------------------------------------------------------------------

    \10\ There also may be scenarios where use of CMO might not 
ultimately benefit market participants, such as where the amount of 
price improvement associated with use of CMO is outweighed by the 
fee a participant would incur when its CMO is deemed to remove 
liquidity from the Exchange Book.
---------------------------------------------------------------------------

    Additionally, because a CMO inherently possesses the Midpoint 
Pegging Attribute, it will behave in accordance with Rule 3301B(d), 
which governs Orders with Midpoint Pegging. Thus, consistent with Rule 
3301B(d), the following behavior applies to CMOs:
    <bullet> A CMO user may only enter a CMO Order during Market Hours.
    <bullet> A CMO will have its price set upon initial entry and will 
thereafter have its price reset in accordance with changes to the 
relevant Inside Quotation. A CMO will receive a new timestamp whenever 
its price is updated \11\ and therefore will be evaluated with respect 
to possible execution in the same manner as a newly entered Order. If 
the price to which a CMO is pegged becomes unavailable, pegging would 
lead to a price at which the CMO cannot be posted, or if the Inside Bid 
and Inside Offer become crossed, then the CMO will be removed from the 
PSX Book and will be re-entered once there is a permissible price, 
provided however, that the System will cancel the CMO if no permissible 
pegging price becomes available within one second after the CMO was 
removed and no longer available on the PSX Book (the Exchange may, in 
the exercise of its discretion modify the length of this one second 
time period by posting advance notice of the applicable time period on 
its website).\12\
---------------------------------------------------------------------------

    \11\ A CMO will also receive a new timestamp whenever it is 
resubmitted after removal.
    \12\ A user may enter a CMO using RASH or OUCH.
---------------------------------------------------------------------------

    <bullet> If at the time of entry, there is no price to which a CMO, 
that has not been assigned a Time in Force of Immediate-or-Cancel, can 
be pegged or pegging would lead to a price at which the Order cannot be 
posted, or if the Inside Bid and Inside Offer are Crossed, then the CMO 
will not be immediately available on the PSX Book and will be entered 
once there is a permissible price; provided however, that the System 
will cancel the CMO if no permissible pegging price becomes available 
within one second after Order entry (the Exchange may, in the exercise 
of its discretion, modify the length of this one second time period by 
posting advance notice of the applicable time period on its website).
    <bullet> A CMO will have its price set upon initial entry to the 
Midpoint, unless the CMO has a limit price, and that limit price is 
lower than the Midpoint for a CMO to buy (higher than the Midpoint for 
CMO to sell), in which case the Order will be ranked on the PSX Book at 
its limit price. If the Inside Bid and Inside Offer are locked, a CMO 
will be priced at the locking price. However, even if the Inside Bid 
and Inside Offer are locked, an Order with CMO that locked an Order on 
the PSX Book would execute.
    <bullet> If a CMO has been assigned a Discretion Order Attribute, 
the CMO may execute at any price within the discretionary price range, 
even if beyond the limit price specified with respect to the Midpoint 
Pegging Order Attribute. If CMO is priced at its limit price, the price 
of the CMO may nevertheless be changed to a less aggressive price based 
on changes to the Inside Quotation.
    Unlike other Orders with the Midpoint Pegging Attribute, CMOs 
cannot be assigned a Routing Attribute, such that provisions of the 
Midpoint Pegging Rule that govern Midpoint Pegged Orders with Routing 
do not apply to CMOs.
    As noted above, a CMO will not be accepted outside of Market Hours. 
A CMO remaining unexecuted at the end of Market Hours will be cancelled 
by the System.
    The System will cancel CMOs when a trading halt is declared, and 
the System will reject any CMOs entered during a trading halt.\13\
---------------------------------------------------------------------------

    \13\ The Exchange also proposes to amend the Exchange's Rule 
governing Midpoint Pegging, at Rule 3301B(d), to add language 
stating that ``Orders with Midpoint Pegging will be cancelled by the 
System when a trading halt is declared, and any Orders with Midpoint 
Pegging entered during a trading halt will be rejected.'' Such 
language exists in a corresponding rule of the rulebook of the 
Exchange's sister exchange, the Nasdaq Stock Market, LLC, see Nasdaq 
Rule 4703(d), but was mistakenly omitted from Rule 3301B(d).
---------------------------------------------------------------------------

    A CMO user may opt to apply the Minimum Quantity, Trade Now, or 
Discretion Order Attributes and a Time-In-Force to a CMO. Again, the 
Non-Display and Midpoint Pegging Attributes always apply to CMOs.
    A CMO+PO will possess all the characteristics and attributes of a 
CMO, as described above, as well as those of a Managed Midpoint Peg 
Post-Only Order, as set forth in Rule 3301A(b)(6), with certain 
exceptions set forth below.
    Like a Midpoint Peg Post-Only Order, a CMO+PO is a Non-Displayed 
Order that is priced at the Midpoint and executes upon entry only in 
circumstances where economically beneficial to the party entering the 
Order.
    Like a Midpoint Peg Post-Only Order, the price of the CMO+PO will 
be updated repeatedly to equal the midpoint between the NBBO; provided, 
however, that the CMO+PO will not be priced higher (lower) than its 
limit price. In the event that the Midpoint between the NBBO becomes 
higher than (lower than) the limit price of a CMO+PO to buy (sell), the 
price of the CMO+PO will stop updating and the CMO+PO will post (with a 
Non-Display Attribute) at its limit price, but will resume updating if 
the Midpoint becomes lower than (higher than) the limit price of the 
CMO+PO to buy (sell). Similarly, if a CMO+PO is on the PSX Book and 
subsequently the NBBO is crossed, or if there is no NBBO, the Order 
will be removed from the PSX Book and will be re-entered at the new 
Midpoint once there is a valid NBBO that is not crossed. The CMO+PO 
receives a new timestamp each time its price is changed.
    All CMO+POs will be cancelled if they remain on the PSX Book at the 
end of Market Hours.\14\ Also like a Midpoint Peg Post-Only Order, a 
CMO+PO may not possess the Discretion or Routing Order Attributes, and 
a CMO+PO must be priced at more than $1 per share. Finally, unlike a 
Midpoint Peg Post-Only Order, RASH may be used to enter

[[Page 62132]]

a CMO+PO with a Time in Force of IOC (as well as OUCH, which can be 
used for such purposes with respect to a MPPO), and in such cases the 
Order will be canceled after determining whether it can be executed.
---------------------------------------------------------------------------

    \14\ A CMO+PO entered prior to the beginning of Market Hours 
will be rejected. A CMO+PO will be cancelled by the System when a 
trading halt is declared, and any CMO+PO entered during a trading 
halt will be rejected.
---------------------------------------------------------------------------

    CMO and CMO+PO executions will be reported to Securities 
Information Processors and provided in the Exchange's proprietary data 
feed without any new or special indication.
    As part of the surveillance the Exchange currently performs, CMOs 
and CMO+POs will be subject to real-time surveillance to determine if 
they are being abused by market participants. The Exchange is committed 
to determining whether there is opportunity or prevalence of behavior 
that is inconsistent with normal risk management behavior. Manipulative 
abuse is subject to potential disciplinary action under the Exchange's 
Rules, and other behavior that is not necessarily manipulative but 
nonetheless frustrates the purposes of the CMO or CMO+PO may be subject 
to penalties or other participant requirements to discourage such 
behavior, should it occur.\15\
---------------------------------------------------------------------------

    \15\ Punitive fees or other participant requirements tied to CMO 
and CMO+PO usage will be implemented by rule filing under Section 
19(b) of the Act, 15 U.S.C. 78s(b), should the Exchange determine 
that they are necessary to maintain a fair and orderly market.
---------------------------------------------------------------------------

    The Exchange plans to implement CMO and CMO+PO within thirty days 
after Commission approval of the proposal. The Exchange will make the 
CMO and CMO+PO available to all members and to all securities upon 
implementation. The Exchange will announce the implementation date by 
Equity Trader Alert.\16\
---------------------------------------------------------------------------

    \16\ The Exchange plans to propose a fee structure for the CMO 
and CMO+PO in a subsequent Commission rule filing.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\18\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest. In particular, the proposal is consistent with the Act 
because it would create additional options with respect to how 
participants can manage trading at the Midpoint. These additional 
options allow participants to tune their interactions more finely in 
the market, which can lead to more efficient trading opportunities on 
the Exchange for investors with similar investment objectives.\19\ Much 
like the analogous M-ELO Order Type, which Nasdaq introduced a few 
years ago, CMO and CMO+PO would provide market participants with a 
means to avoid certain execution scenarios which they may deem 
unfavorable. Unlike M-ELO, however, which imposes a waiting period upon 
participants to bring like-minded participants together, the CMO and 
CMO+PO would have no such waiting period. That is, the Exchange 
designed CMO and CMO+PO for participants that want Midpoint or better 
executions but have a greater urgency to execute their orders and are 
not concerned about interacting with other participants acting with 
similar or more urgency. At the same time, the CMO and CMO+PO will 
avoid interacting with orders that have the potential to shift the 
Midpoint, even without a holding period, by providing for the System to 
remove a CMO or CMO+PO from the Order Book when faced with incoming 
Orders that cross the Midpoint or otherwise have the potential to shift 
the Midpoint. The System will then automatically enter a new CMO to 
take advantage of a better ensuing Midpoint.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Cf. Securities Exchange Act Release No. 34-82825 (March 7, 
2018), 83 FR 10937 (March 13, 2018) (SR-NASDAQ-2017-074) (approving 
the Midpoint Extended Life Order (``M-ELO'') because it could 
``create additional and more efficient trading opportunities on the 
Exchange for investors with longer investment time horizons, 
including institutional investors, and could provide these investors 
with an ability to limit the information leakage and the market 
impact that could result from their orders.'').
---------------------------------------------------------------------------

    The CMO and CMO+PO will be available for voluntary use by all 
Exchange members. Although the proposal would enable market 
participants that use CMOs to avoid potentially adverse executions, 
while causing participants to miss executions to the extent that their 
incoming Orders trigger removal of CMOs, this treatment is fair. That 
is, the proposal would facilitate the provision of market-enhancing 
midpoint liquidity by providing a mechanism by which participants could 
post such liquidity safely and without fear of adverse executions. 
Exchange functionality which permits like-minded participants the 
ability to achieve their objectives in an efficient manner will improve 
overall execution quality on the market. Moreover, the protections that 
these Order Types provide are tailored to mitigate the risk of adverse 
executions, even though the entry of either an incoming Displayed Order 
larger than a CMO or an incoming spread-crossing Non-Displayed Order 
larger than a CMO would not necessarily result in an adverse execution 
in every conceivable circumstance.\20\ As the chart below demonstrates, 
mark-outs are significantly worse after executions against incoming 
contra-orders in the two scenarios covered by the proposed Rule than 
they are after executions in other scenarios. This data suggests that 
the CMO and CMO+PO would, indeed, help participants avoid poor quality 
executions that would likely occur otherwise.
---------------------------------------------------------------------------

    \20\ Cf. Order Approving a Proposed Rule Change to Add a New 
Discretionary Limit Order Type Called D-Limit, Securities Exchange 
Act Release No. 34-89686 (August 26, 2020), 85 FR 54438 (September 
1, 2020) (SR-IEX-2019-15) (``D-Limit orders will encourage long term 
investors to participate in the displayed exchange market by 
protecting them against one particular strategy employed by short 
term traders. It is not unfairly discriminatory for an exchange to 
address that advantage in a narrowly tailored manner that promotes 
investor protection and the public interest. Accordingly, the 
Commission concludes that IEX's proposal is not designed to permit 
unfair discrimination between customers, issuers, brokers, or 
dealers.'').

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

[[Page 62133]]

[GRAPHIC] [TIFF OMITTED] TN08SE23.014

    The Exchange also notes that the scenarios in which CMO and CMO+PO 
would apply constitute only a quarter of all midpoint executions adding 
liquidity on the Exchange.
[GRAPHIC] [TIFF OMITTED] TN08SE23.015

    Like all other Order Types, the Exchange will conduct real-time 
surveillance to monitor the use of CMOs and CMO+POs to ensure that such 
usage is appropriately tied to the intent of the Order Type. 
Transactions in CMOs and CMO+POs will be reported to the Securities 
Information Processor and will be provided in the Exchange's 
proprietary data feed in the same manner as all other transactions 
occurring on the Exchange, without any new or special indication that 
it is a CMO or CMO+PO execution. The Exchange believes that doing so is 
important to ensuring that investors are protected from any market 
impact that may occur if CMO executions were reported with a special 
indication.
    The Exchange does not believe that the proposed CMO or CMO+PO will 
negatively affect the quality of the market. To the contrary, the 
Exchange believes that the addition of CMO and CMO+PO will draw new 
market participants to the Exchange's transparent and well-regulated 
market. The CMO and CMO+PO will allow investors an opportunity to find 
like-minded counterparties at the Midpoint on the Exchange, while also 
limiting executions users may deem unfavorable and providing 
opportunities for price improvement. Insofar as the CMO and CMO+PO 
would provide new options for participants to achieve efficient, high-
quality midpoint executions, the CMO and CMO+PO stands to increase 
participation on the Exchange and to improve the quality of executions 
on the Exchange.
    Lastly, it is consistent with the Act to amend the Exchange's Rule 
governing Midpoint Pegging, at Rule 3301B(d), to add language stating 
that ``Orders with Midpoint Pegging will be cancelled by the System 
when a trading halt is declared, and any Orders with Midpoint Pegging 
entered during a trading halt will be rejected.'' Such language exists 
in a corresponding rule of the rulebook of the Exchange's sister 
exchange, the Nasdaq Stock Market, LLC, at Nasdaq Rule 4703(d), but was 
mistakenly omitted from Rule 3301B(d). In additional to correcting an 
inadvertent omission of this language from the Exchange's Rulebook, the 
proposed text codifies existing Exchange practice and corresponds to 
participant expectations for the behavior of Orders with Midpoint 
Pegging during trading halts.

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.
    The Exchange believes that the introduction of the CMO and CMO+PO 
will draw new market participants to the Exchange while also providing 
a new option for existing participants that wish to achieve high-
quality Midpoint (or better) executions, but do not wish for their 
Orders to be subject to a

[[Page 62134]]

Holding Period (as in M-ELO or M-ELO+CB orders on Nasdaq) or care about 
their counterparties being subject to the same. To the extent the 
proposed change is successful in attracting additional market 
participants or increasing existing participation on the Exchange, the 
Exchange believes that the proposed change will promote competition 
among trading venues by making the Exchange a more attractive trading 
venue for investors and participants.
    Additionally, adoption of the CMO and CMO+PO will not burden 
competition among market participants. The CMO and CMO+PO will be 
available to all Exchange members and it will be available on an 
optional basis. Thus, any member that seeks to avail itself of the 
benefits of a CMO or CMO+PO can choose accordingly. Although the 
proposal provides potential benefits for investors that select the CMO 
and CMO+PO, the Exchange believes that all market participants will 
benefit to the extent that this proposal contributes to a healthy and 
attractive market that is attentive to the needs of all types of 
investors.
    The proposal also will not adversely impact market participants 
that choose not to use these Order Types because no changes need to be 
made to participants' systems to account for it. As discussed above, 
CMO and CMO+PO executions will be reported the same as other 
executions, without any new or special indicator.
    In any event, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily choose 
between competing venues if they deem participation in the Exchange's 
market is no longer desirable. In such an environment, the Exchange 
must carefully consider the impact that any change it proposes may have 
on its participants, understanding that it will likely lose 
participants to the extent a change is viewed as unfavorable by them. 
Because competitors are free to modify the incentives and structure of 
their markets, the Exchange believes that the degree to which modifying 
the market structure of an individual market may impose any burden on 
competition is limited. Last, to the extent the proposed change is 
successful in attracting additional market participants or additional 
activity by existing participants, the Exchange also believes that the 
proposed change will promote competition among trading venues by making 
the Exchange a more attractive trading venue for participants and 
investors.
    The Exchange perceives no competitive impact associated with 
amending the Exchange's Rule governing Midpoint Pegging, at Rule 
3301B(d), to add language stating that ``Orders with Midpoint Pegging 
will be cancelled by the System when a trading halt is declared, and 
any Orders with Midpoint Pegging entered during a trading halt will be 
rejected.'' This proposal merely adds language that had been mistakenly 
omitted from the Exchange's Rulebook, but which exists in the 
corresponding rules of the Nasdaq Stock Market, LLC, and codifies 
existing Exchange practice as to Orders with Midpoint Pegging during a 
trading halt.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) by order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2f5d5a434a024c4042424a415b5c6f5c4a4c01484059"><span class="__cf_email__" data-cfemail="addfd8c1c880cec2c0c0c8c3d9deeddec8ce83cac2db">[email protected]</span></a>. Please include 
file number SR-PHLX-2023-40 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-PHLX-2023-40. 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 website (https://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 website 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. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-PHLX-2023-40 and should be 
submitted on or before September 29, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-19358 Filed 9-7-23; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>