Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices 34899 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Phlx Rule 1014(b) (defining a ROT). 

4See Phlx Rule 1020 (describing the functions of 

a Specialist). 

5See Securities Exchange Act Release No. 83339 

(May 29, 2018), 83 FR 25725 (‘‘Notice’’). 

6 In Amendment No. 1 the Exchange: (1) Renumbered proposed Phlx Rule 1081 as proposed 

Phlx Rule 1085 and (2) changed the proposed crossreferences in proposed Commentary .06 to Phlx 

Rule 1080 and in Options Floor Procedure Advices 

and Order & Decorum Regulations (‘‘Floor Advice’’) 

A–9 from Phlx Rule 1081 to Phlx Rule 1085. 

Amendment No. 1 is available at https://

www.sec.gov/comments/sr-phlx-2018-40/phlx201

840-3767632-162689.pdf). 

7See Notice, supra note 5, at 25726. 

8See id. 

9Phlx Rule 1000(f)(iii). 

10See Notice, supra note 5, at 25726. 

11See id. at 25725. 

12See id. at 25726. 

13A more detailed description of the proposal 

appears in the Notice and in Amendment No. 1. 

14See Notice, supra note 5, at 25726. 

15See id. 

16See id. These procedures and limitations 

regarding the use of Snapshot are currently set forth 

in Phlx Rule 1063(e)(v), but the Exchange proposes 

to move them to a new Phlx Rule 1069, where they 

will apply broadly to ‘‘members’’ rather than only 

to Floor Brokers. 

17See id. 

18See id. at 25726–27. 

19See id. at 25726–28; Amendment No. 1, supra 

note 6. The Exchange is proposing minor alterations 

to its Rules that presently govern the use of FBMS 

by Floor Brokers to, among other things, account for 

the fact that ROTS and Specialists negotiate orders 

on the floor for their own account and do not 

represent orders on behalf of others. See Notice, 

supra note 5, at 25728. In addition, the Exchange 

is proposing several changes to remove obsolete 

Continued 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR-NASDAQ-2018–052 and 

should be submitted on or before 

August 13, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15645 Filed 7–20–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83656; File No. SR–Phlx– 

2018–40] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing of 

Amendment No. 1, and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 1, To Extend the 

Applicability of the Floor Broker 

Management System and the Snapshot 

Functionality to Registered Options 

Traders and Specialists 

July 17, 2018. 

I. Introduction 

On May 24, 2018, Nasdaq PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

extend the applicability of the Floor 

Broker Management System and the 

Snapshot functionality to Registered 

Options Traders (‘‘ROTS’’) 3 and 

Specialists.4 The proposed rule change 

was published for comment in the 

Federal Register on June 4, 2018.5 On 

June 4, 2018, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.6 The Commission received no 

comment letters on the proposed rule 

change. This order provides notice of 

filing of Amendment No. 1 and 

approves the proposal, as modified by 

Amendment No. 1, on an accelerated 

basis. 

II. Description of the Proposal 

Currently, ROTs and Specialists 

executing orders in the trading crowd 

are required to record such orders and 

related execution details on paper 

trading tickets.7 ROTS and Specialists 

must then provide those matched trade 

tickets to an Exchange Data Entry 

Technician (‘‘DET’’), who manually 

enters the information written on the 

trade tickets into the Exchange’s 

electronic trading system.8 In contrast, 

unless one of five exceptions applies, 

Floor Brokers are required to enter 

orders originating in the trading crowd 

using the Exchange’s electronic order 

entry system—the ‘‘Floor Broker 

Management System’’ 9—and are not 

permitted to execute orders in the 

trading crowd. The Exchange proposes 

to change the order entry process for 

ROTS and Specialist by requiring them 

to utilize the same electronic order entry 

system that is currently used by Floor 

Brokers. To accomplish this transition, 

the Exchange proposes to change the 

name of its electronic order entry 

system from the ‘‘Floor Broker 

Management System’’ to the ‘‘Floor 

Based Management System’’ (‘‘FBMS’’) 

to reflect its expanded applicability to 

all members that operate on the 

Exchange’s trading floor—namely, Floor 

Brokers, ROT, and Specialists.10 In 

addition, the Exchange proposes to 

apply the same general obligations it 

currently imposes upon Floor Brokers 

regarding orders on the trading floor to 

ROTS and Specialists.11 The Exchange 

also proposes to extend FBMS’ 

Snapshot functionality to ROTs and 

Specialists.12 To effectuate these 

changes, the Exchange proposes several 

amendments and additions to its Rules 

and Floor Advices.13

Specifically, the Exchange proposes to 

amend Phlx Rule 1000(f) to require 

ROTs and Specialists to execute orders 

utilizing FBMS and to prohibit ROTs 

and Specialists from executing orders in 

the Exchange’s options trading crowd, 

unless one of five exceptions applies.14

These exceptions are listed in Phlx Rule 

1000(f)(iii)(A)–(E) and would permit a 

Floor Broker, ROT or Specialist to 

execute an order in the trading crowd if: 

(1) There is a problem with the 

Exchange’s systems; (2) the member is 

executing an order pursuant to Phlx 

Rule 1059 (‘‘Accommodation 

Transactions’’) or Phlx Rule 1079 

(‘‘FLEX Index, Equity, and Currency 

Options’’); (3) the transaction involves a 

multi-leg order with more than 15 legs; 

(4) the transaction involves certain splitprice orders that, due to FBMS system 

limitations, require manual calculation; 

or (5) the member elects to use of the 

Snapshot functionality to provisionally 

execute certain designated categories of 

trades, as described below.15

With respect to Snapshot, the 

Exchange proposes to allow ROTs and 

Specialists, like Floor Brokers, to use 

Snapshot to provisionally execute, in 

the options trading crowd, multi-leg 

orders and simple orders in options on 

exchange-traded funds (‘‘ETFs’’) that are 

included in the Options Penny Pilot, 

subject to the procedures for and the 

limitations to the use of Snapshot.16 The 

Exchange represents that it does not 

anticipate that the use of Snapshot by 

ROTs or Specialists will pose any 

increased or unique risks relative to its 

current use by Floor Brokers.17

Therefore, the Exchange proposes to 

utilize the same methods it currently 

uses to surveil Floor Brokers’ use of 

Snapshot to also monitor ROTs’ and 

Specialists’ uses of the Snapshot 

functionality.18

To implement the renaming of FBMS 

and the extension of FBMS (including 

its Snapshot functionality) to ROTs and 

Specialists, the Exchange also proposes 

to make changes to its Rules and Floor 

Advices, as well as to update multiple 

cross-references within its Rules and 

Floor Advices, so that its current 

requirements regarding the use of FBMS 

will apply to ROTS and Specialists.19


amozie on DSK3GDR082PROD with NOTICES1
34900 Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices 

language from its Rules and make conforming 

changes to its Rules. 

20See Notice, supra note 5, at 25728. See also 

Amendment No. 1, supra note 6. 

21See id. 

22See id. 

23 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

24 15 U.S.C. 78f(b)(5). 

25See Phlx Rule 1000(f). 

26See Phlx Rule 1000(f)(iii)(E). 

27See Notice, supra note 5, at 25726. 

28See id. 

29See id. 

30See id. at 25726 and 25728. 

31See id. at 25728. 

32See id. at 25726. 

33See id. at 25726 and 25729. 

34See id. at 25726. 

35See id. at 25726–27. 

36See id. at 25727 n.7. 

37See id. 

38See id. 

39See Securities Exchange Act Release No. 81980 

(October 30, 2017), 82 FR 51313 (November 3, 2017) 

(SR–Phlx–2017–34) (approving the Snapshot 

functionality as an exception to Phlx Rule 1000(f)). 

The Exchange represents that it will 

not require ROTs or Specialists to use 

FBMS until one month after the date on 

which the Commission approves the 

Exchange’s proposal.20 The Exchange 

will notify Members via an Options 

Trader Alert, to be posted on the 

Exchange’s website, at least seven 

calendar days prior to the date when 

FBMS will be available for use by ROTs 

and Specialists.21 The alert will also 

contain the mandatory start date.22

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

modified by Amendment No. 1, is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.23 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,24 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in securities 

and, in general, to protect investors and 

the public interest, and not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Commission notes that the 

Exchange’s rules currently require Floor 

Brokers to execute transactions through 

FBMS and prohibit Floor Brokers from 

executing orders in the trading crowd 

unless an exception applies.25 The 

Commission also notes that use of the 

Snapshot functionality is one of the 

current exceptions set forth in Phlx Rule 

1000(f), which allows Floor Brokers to 

provisionally execute, in the options 

trading crowd (as opposed to through 

FBMS), multi-leg orders and simple 

orders in options on ETFs that are 

included in the Options Penny Pilot.26

According to the Exchange, the 

manual order entry process that ROTs 

and Specialists currently use has 

become outmoded in comparison to its 

electronic order entry process.27

Specifically, the Exchange represents 

that because the manual process is less 

efficient, manual trades are often 

reported with a ‘‘Late’’ or ‘‘Out of 

Sequence’’ trade condition.28 The 

Exchange further represents that, 

compared to FBMS, the current manual 

process is more prone to human error 

and it does not establish an immediate 

audit trail for orders.29 The Exchange 

notes that its proposed extension of 

FBMS to ROTs and Specialists is 

intended to address these inefficiencies, 

mitigate risks, and improve the 

Exchange’s compliance record by 

establishing an immediately available 

audit trail.30 Moreover, the Exchange 

believes that requiring all members to 

use the same electronic order entry 

system (and to do so subject to the same 

general conditions, requirements, and 

exceptions) will help ensure fair and 

equal treatment for all members that 

operate on the trading floor.31 Further, 

the Exchange represents that it does not 

anticipate any unique risks associated 

with ROTs and Specialists use of FBMS 

and therefore believes that the current 

exceptions and conditions set forth in 

Phlx Rule 1000(f) should apply without 

modification to ROTs and Specialists. 

For example, according to the 

Exchange, FBMS’ Snapshot 

functionality was designed to mitigate 

the risk that, when engaging in floorbased trading, the market for multi-leg 

orders and simple orders in options on 

ETFs that are included in the Options 

Penny Pilot may move faster than a 

Floor Broker would be able to manually 

enter and submit a paper trade ticket on 

a trade consummated in the trading 

crowd.32 According to the Exchange, 

ROTs and Specialists are subject to this 

same risk and the Exchange does not 

perceive any unique risks or concerns 

associated with the use of Snapshot by 

ROTs and Specialists that would 

necessitate changes to, or restrictions 

on, market makers’ use of the Snapshot 

functionality.33 Therefore, the Exchange 

believes the Snapshot functionality is 

appropriate for use by ROTs and 

Specialists, notwithstanding the fact 

that ROTS and Specialists trade on a 

proprietary basis, rather than an agency 

basis like Floor Brokers.34 The Exchange 

represents that it will monitor ROTs’ 

and Specialists’ use of the Snapshot 

feature using the same methods that it 

currently uses to surveil Floor Brokers’ 

use of Snapshot.35

The Commission notes that proposed 

Phlx Rule 1069(a)(i)(B) will prohibit all 

members from triggering the Snapshot 

feature for the purpose of obtaining 

favorable, or avoiding unfavorable, 

priority or trade-through conditions. In 

addition, the Exchange represents that 

its surveillance staff will monitor ROTs 

and Specialists to determine whether 

they exhibit patterns of using Snapshot 

excessively, including in circumstances 

where the nature of the orders or 

movements in the markets for such 

orders do not reasonably warrant the 

use of Snapshot or the full extent of its 

use.36 The Exchange will compare the 

times of provisional executions in the 

crowd that Snapshot captures with the 

records of such times that Options 

Exchange Officials capture to ensure 

accuracy.37 The Exchange will also 

surveil for patterns of orders subject to 

Snapshots that ROTs and Specialists 

abandon without submitting them to the 

Trading System for final execution.38

The Commission notes that these 

measures were designed to ensure that 

Snapshot operates, and is used by Floor 

Brokers, in a manner that is consistent 

with the Act and Phlx’s Rules and notes 

that these measuer should similarly 

ensure that ROTs and Specialists 

electing to use the Snapshot 

functionality will do so in a manner that 

is consistent with the Act and Phlx’s 

Rules.39

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with Section 6(b)(5) 

of the Act and the rules and regulations 

thereunder applicable to national 

securities exchanges. 

IV. Solicitation of Comments on 

Amendment No. 1 

Interested persons are invited to 

submit written data, views, and 

arguments concerning whether 

Amendment No. 1 to the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 


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Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices 34901 

40See Amendment No. 1, supra note 6. 

41 15 U.S.C. 78s(b)(2). 

42 Id. 

43 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(4). 

5The Rules are available at http://www.dtcc.com/ 

legal/rules-and-procedures. Capitalized terms used 

herein and not otherwise defined shall have the 

meaning assigned to such terms in the Rules. 

6CNS and its operation are described in Rule 11 

and Procedure VII of the Rules. Id. 

• Send an email to rule-comments@

sec.gov. Please include File No. SR– 

Phlx–2018–40 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File No. 

SR–Phlx–2018–40. 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 (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 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 

10:00 a.m. and 3:00 p.m. Copies of such 

filing will also be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File No. 

SR–Phlx–2018–40 and should be 

submitted on or before August 13, 2018. 

V. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment No. 1 

The Commission finds good cause to 

approve the proposed rule change, as 

modified by Amendment No. 1, prior to 

the thirtieth day after the date of 

publication of notice of the amended 

proposal in the Federal Register. As 

described above, in Amendment No. 1, 

the Exchange (a) re-numbered proposed 

Phlx Rule 1081 as proposed Phlx Rule 

1085 and (b) changed the proposed 

cross-references in proposed 

Commentary .06 to Phlx Rule 1080 and 

in Floor Advice A–9 from Phlx Rule 

1081 to Phlx Rule 1085.40 The 

Commission believes that Amendment 

No. 1 simply modified certain proposed 

rule numbering and cross-referencing 

and does not raise novel regulatory 

issues. Accordingly, the Commission 

finds good cause, pursuant to Section 

19(b)(2) of the Act,41 to approve the 

proposed rule change, as modified by 

Amendment No. 1, on an accelerated 

basis. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,42 that the 

proposed rule change (SR–Phlx–2018– 

40), as modified by Amendment No. 1, 

be, and it hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.43

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15647 Filed 7–20–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83654; File No. SR–NSCC– 

2018–003] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of and 

Immediate Effectiveness of a Proposed 

Rule Change To Clarify and Enhance 

Rules Related to the CNS 

Reorganization Processing System 

and NSCC’s Authority To Reveal the 

Identity of Counterparties in Certain 

Circumstances 

July 17, 2018. 

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 July 9, 

2018, National Securities Clearing 

Corporation (‘‘NSCC’’) 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 clearing agency. NSCC filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(4) thereunder.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

modifications to the Rules and 

Procedures of NSCC (‘‘Rules’’) 5 in order 

to (1) clarify, correct, and enhance the 

description of the procedures by which 

NSCC processes transactions in 

securities that are eligible for its 

Continuous Net Settlement (‘‘CNS’’) 

system (‘‘CNS Securities’’) 6 and are 

subject to a corporate reorganization 

event through the CNS Reorganization 

Processing System; and (2) describe 

NSCC’s authority to identify to Members 

their counterparties for their positions 

in a subject security as of the critical 

date of an applicable payment or event, 

as described in greater detail below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

NSCC is proposing to make certain 

revisions to Procedure VII, Section H of 

the Rules, which describes, among other 

matters, NSCC’s CNS Reorganization 

Processing System. 

First, the proposed changes would 

clarify, correct, and enhance the 

description of the CNS Reorganization 

Processing System by (1) revising the 

description of the scope of corporate 

reorganization events that may be 

processed through the CNS 

Reorganization Processing System; (2) 

revising the description of the 

processing of voluntary reorganizations 

through the CNS Reorganization 

Processing System; and (3) making 

technical revisions to Section H of 


amozie on DSK3GDR082PROD with NOTICES1