16108 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Notices 

6 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3For a complete description of PIXL, see 

Securities Exchange Act Release No. 63027 (October 

1, 2010), 75 FR 62160 (October 7, 2010) (SR–Phlx– 

2010–108). 

4See Securities Exchange Act Release No. 62678 

(August 10, 2010), 75 FR 50021 (August 16, 2010) 

(SR–Phlx–2010–108) (Notice of Filing of Proposed 

Rule Change by NASDAQ OMX PHLX, Inc. Relating 

to a Proposed Price Improvement System, Price 

Improvement XL (PIXLSM)). 

5 Id. at p. 50021. 

a.m. and 3 p.m. Copies of such 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–ISE– 

2012–16 and should be submitted on or 

before April 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6497 Filed 3–16–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66583; File No. SR–Phlx– 

2012–32] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Price Improvement XL (‘‘PIXLSM’’) 

March 13, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on March 9, 

2012, NASDAQ OMX PHLX LLC 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to amend 

Rule 1080(n), Price Improvement XL 

(‘‘PIXLSM’’), to correct Rule 

1080(n)(i)(A)(2) pertaining to PIXL 

Orders (described below) for the 

account of a public customer with a size 

of less than 50 contracts. The amended 

rule would reflect the correct price at 

which an Initiating Member (described 

below) must guarantee the execution of 

a PIXL Order (described below) that the 

Initiating Member submits into a PIXL 

Auction (described below). 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, 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 the 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to correct Exchange Rule 

1080(n), which governs the Exchange’s 

price improvement auction mechanism, 

PIXL.3 In the PIXL mechanism, a 

member (an ‘‘Initiating Member’’) must 

guarantee the execution of (i.e., ‘‘stop’’) 

an order it represents as agent (‘‘PIXL 

Order’’) against principal interest or 

against any other order it represents as 

agent (an ‘‘Initiating Order’’) in the PIXL 

Auction (‘‘Auction’’), in which other 

participants may compete with the 

Initiating Member’s order to execute 

against the PIXL Order. The correction 

concerns rule text respecting public 

customer PIXL Orders for less than 50 

contracts that are entered into the 

Auction. 

Exchange Rule 1080(n)(i) describes 

the circumstances under which an 

Initiating Member may initiate an 

Auction. Rule 1080(n)(i)(A)(1) states 

that if the PIXL Order is for the account 

of a public customer and is for a size of 

50 contracts or more, the Initiating 

Member must stop the entire PIXL 

Order at a price that is equal to or better 

than the National Best Bid/Offer 

(‘‘NBBO’’) on the opposite side of the 

market from the PIXL Order, provided 

that such price must be at least one 

minimum price improvement increment 

(as determined by the Exchange but not 

smaller than one cent) better than any 

limit order on the limit order book on 

the same side of the market as the PIXL 

Order. The purpose of this provision is 

to ensure that public customer PIXL 

Orders for 50 contracts or more are 

guaranteed at least the NBBO but do not 

trade ahead of other limit orders already 

on the Exchange’s limit order book at 

the existing limit price. 

Currently, Exchange Rule 

1080(n)(i)(A)(2) states that if the PIXL 

Order is for the account of a public 

customer and is for a size of less than 

50 contracts, the Initiating Member must 

stop the entire PIXL Order at a price that 

is the better of: (i) the PHLX Best Bid/ 

Offer (‘‘PBBO’’) price on the opposite 

side of the market from the PIXL Order 

improved by at least one minimum 

price improvement increment, or (ii) the 

PIXL Order’s limit price (if the order is 

a limit order), provided in either case 

that such price is better than the NBBO 

(emphasis added), and at least one 

minimum price improvement increment 

better than any limit order on the book 

on the same side of the market as the 

PIXL Order. 

In its filing to adopt the rules 

governing PIXL, and in the Notice of 

Filing of Proposed Rule Change 

published in the Federal Register,4 the 

Exchange described its intent 

concerning the price at which an 

Initiating Member must stop a PIXL 

Order for the account of a public 

customer for a size of less than 50 

contracts: 

‘‘[i]f the PIXL Order is for the account of 

a public customer and is for a size of less 

than 50 contracts, the Initiating Member must 

stop the entire PIXL Order at a price that is 

the better of: (i) The PBBO price on the 

opposite side of the market from the PIXL 

Order improved by at least one minimum 

price improvement increment, or (ii) the 

PIXL Order’s limit price (if the order is a 

limit order), provided in either case that such 

price is at or better than the NBBO.’’ 

(emphasis added).5

Despite this representation in the 

Notice of Filing, current Rule 

1080(n)(i)(A)(2) states, in relevant part, 

‘‘[p]rovided in either case that such 

price is better than the NBBO’’ 

(emphasis added). By way of the 

omission of the words ‘‘at or’’ from Rule 

1080(n)(i)(A)(2), the current rule does 

not accurately describe the operation of 

PIXL, and does not reflect Exchange’s 

intent to permit Initiating Members to 


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Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Notices 16109 

6To initiate the Auction, the Initiating Member 

must mark the PIXL Order for Auction processing, 

and specify either: (a) A single price at which it 

seeks to execute the PIXL Order (a ‘‘stop price’’); 

(b) that it is willing to automatically match as 

principal or as agent on behalf of an Initiating Order 

the price and size of all PAN responses, and trading 

interest (‘‘auto-match’’) in which case the PIXL 

Order will be stopped at the NBBO on the Initiating 

Order side (if 50 contracts or greater) or, if less than 

50 contracts, the better of: (i) the PBBO price on the 

opposite side of the market from the PIXL Order 

improved by one minimum price improvement 

increment, or (ii) the PIXL Order’s limit price (if the 

order is a limit order), provided in either case that 

such price is at or better than the NBBO. See 

Exchange Rule 1080(n)(i)(A)(2). 

7See Securities Exchange Act Release No. 65043 

(August 5, 2011), 76 FR 49824 (August 11, 2011) 

(SR–Phlx–2011–104). 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(5). 

10 15 U.S.C. 78f(b)(8). 

11See Securities Exchange Act Release No. 34– 

59654 (March 30, 2009), 74 FR 15551 (April 6, 

2009) (SR–BX–2009–08) (order approving proposed 

rule change allowing entry of orders into PIP at the 

NBBO when BOX’s best bid or offer is inferior to 

the NBBO with no order size distinction). 

12See Securities Exchange Act Release No. 34– 

57847 (May 21, 2008), 73 FR 30987 (May 29, 2008) 

(SR–ISE–2008–29) (order approving proposed rule 

change allowing entry of orders into PIM at the 

NBBO when ISE’s best bid or offer is inferior to the 

NBBO with no order size distinction). 

submit contra-side interest on the 

opposite side of the market from its 

public customer PIXL Order with a size 

of less than 50 contracts at a price that 

is at or better than the NBBO. 

Stop Price 

Respecting contra-side interest on the 

opposite side of the market from its 

public customer PIXL Order with a size 

of less than 50 contracts, an Initiating 

Member must stop such PIXL Order at 

a price that is (i) improved over the 

PBBO, and (ii) at or better than the 

NBBO. The following scenarios 

illustrate this requirement: 

• If the PBBO is inferior to the NBBO, 

the Initiating Member must improve the 

PBBO and stop the PIXL Order at a price 

that is at the NBBO price or better than 

the NBBO price. 

• If the PBBO is equal to the NBBO, 

the Initiating Member must improve the 

PBBO and stop the PIXL Order at a price 

that is better than the NBBO price, since 

the only way to improve the PBBO price 

is to improve the NBBO price. 

The effect of this is that the PIXL 

Order will be guaranteed execution at a 

price that is better than the PBBO and 

at least as good as (‘‘at’’) the NBBO 

while providing the opportunity for 

execution at a price better than the 

NBBO. This is consistent with current 

Exchange rules describing the 

requirements for an Initiating Member 

to initiate an Auction respecting both 

public customer and non-public 

customer orders.6

Limit orders on the same side of the 

market as the PIXL Order will have 

priority at all prices in the PIXL 

Auction. The PIXL Order must, in order 

to initiate an Auction, be submitted 

with a better price than resting limit 

orders on the limit order book. 

The Notice of Filing illustrates the 

Exchange’s intent in establishing the 

price at which an Initiating Member 

must stop a PIXL Order for less than 50 

contracts. The Exchange therefore 

proposes simply to add the words ‘‘at 

or’’ to Rule 1080(n)(i)(A)(2) to reflect the 

actual price at which Initiating Members 

must stop public customer PIXL Orders 

with a size of less than 50 contracts. 

Rule 1080(n)(i)(A)(2) is part of a pilot 

that is effective for a period scheduled 

to expire July 18, 2012.7

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the Act,8

in general and with Section 6(b)(5) of 

the Act,9 in that it is 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, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest; and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers, 

or to regulate by virtue of any authority 

conferred by the Act matters not related 

to the purposes of the Act or the 

administration of the Exchange. 

The Exchange believes that the 

proposed rule change is also consistent 

with Section 6(b)(8) of the Act 10 in that 

it does not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

The Exchange believes this proposal 

will increase the likelihood that 

participants will initiate Auctions for 

public customer PIXL Orders with a size 

of fewer than 50 contracts because the 

Initiating Member can guarantee such 

public customer orders price 

improvement over the PBBO while 

providing an opportunity for price 

improvement over the NBBO. The 

Exchange believes the proposal will also 

encourage increased participation in 

PIXL by participants willing to trade 

with orders of fewer than 50 contracts 

at prices better than PBBO and at least 

equal to the NBBO. This increased 

participation should result in a greater 

number of opportunities for price 

improvement. 

The Exchange notes that both the 

Boston Options Exchange Group LLC 

(‘‘BOX’’) and the International 

Securities Exchange, LLC (‘‘ISE’’) allow 

entry of orders into Price Improvement 

Period (‘‘PIP’’) 11 and Price 

Improvement Mechanism (‘‘PIM’’),12

respectively, at the NBBO without 

distinguishing between orders of more 

than or fewer than 50 contracts. Because 

BOX and ISE are currently able to offer 

their customers price improvement at 

the NBBO for orders of fewer than 50 

contracts at the NBBO in PIP and PIM, 

respectively, the Exchange believes that 

it is important for competitive purposes 

that it be able to offer the same 

opportunities to its customers for price 

improvement via PIXL. 

Additionally, an Initiating Member 

must always improve the PBBO—a PIXL 

Order may not be stopped at a price that 

is the same as that of a limit order 

resting on the limit order book, thus 

protecting investors who have 

submitted such resting limit orders, and 

thereby protecting the public interest. 

This correction also protects investors 

and the public interest by accurately 

representing the price at which 

customer orders entered into the 

Auction are guaranteed an execution, 

making the process transparent in the 

marketplace as a whole. In particular, 

the Exchange believes this proposed 

rule change provides additional 

flexibility for Initiating Members to 

obtain executions on behalf of their 

customers while continuing to provide 

price improvement through meaningful, 

competitive PIXL Auctions. The 

Exchange also believes that that 

proposed rule change will ultimately 

enhance competition in the PIXL 

Auctions and provide customers with 

additional opportunities for price 

improvement. These changes are 

consistent with changes made by other 

exchanges and they serve to remove 

impediments to and to perfect the 

mechanism of a free and open market 

and a national market system. 

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. 


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16110 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Notices 

13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 13 and Rule 19b– 

4(f)(6) 14 thereunder. 

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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2012–32 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–Phlx–2012–32. This file 

number should be included on the 

subject line if email is used. 

To help the Commission process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/sro.shtml). 

Copies of the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of such filing also will be 

available for inspection and copying at 

the principal offices of the Exchange. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–Phlx–2012–32, and should 

be submitted on or before April 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6498 Filed 3–16–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66580; File No. SR–BATS– 

2012–012] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Modify Exchange Rule 

14.3, Entitled ‘‘General Procedures and 

Prerequisites for Initial and Continued 

Listing on the Exchange’’ 

March 13, 2012. 

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 March 8, 

2012, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) 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 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 Substance of 

the Proposed Rule Change 

The Exchange is filing with the 

Commission a proposal to amend Rule 

14.3, entitled ‘‘General Procedures and 

Prerequisites for Initial and Continued 

Listing on the Exchange’’ to include 

additional requirements for the listing of 

securities that are issued by the 

Exchange or any of its affiliates. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts 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 is proposing a rule 

change to adopt a new Rule 14.3(e) that 

would impose additional reporting 

requirements on the Exchange should 

the Exchange or an affiliate of the 

Exchange list a security on the Exchange 

(collectively, the ‘‘BATS Affiliates’’). In 

the event that a BATS Affiliate seeks to 

list a security on the Exchange (the 

‘‘Affiliate Security’’), the proposed rule 

change would require that prior to the 

initial listing of the Affiliate Security on 

the Exchange, Exchange personnel 

determine that such security satisfies 

the Exchange’s rules for listing, and 

such finding must be approved by the 

Regulatory Oversight Committee of the 

Exchange’s Board of Directors. The 

proposed rule change would also 

require the Exchange to prepare a 


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