10536 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Notices 

104 15 U.S.C. 78o–6. 

105Section 19(b)(2) of the Act, as amended by the 

Securities Act Amendments of 1975, Pub. L. 94–29 

(June 4, 1975), grants the Commission flexibility to 

determine what type of proceeding—either oral or 

notice and opportunity for written comments—is 

appropriate for consideration of a particular 

proposal by a self-regulatory organization. See 

Securities Act Amendments of 1975, Senate Comm. 

on Banking, Housing & Urban Affairs, S. Rep. No. 

75, 94th Cong., 1st Sess. 30 (1975). 106 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release Nos. 69141 

(March 15, 2013), 78 FR 17262 (March 20, 2013); 

and 69344 (April 8, 2013), 78 FR 22001 (April 12, 

2013) (SR–Phlx–2013–29). 

4Securities Exchange Act Release No. 69344 

(April 8, 2013), 78 FR 22001 (April 12, 2013) (SR– 

Phlx–2013–29). 

equitable principles of trade, 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 Section 15D of the 

Act,104 which requires rules reasonably 

designed to address conflicts of interest 

that can arise when research analysts 

recommend equity securities in research 

reports and public appearances. 

IV. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the concerns 

identified above, as well as any others 

they may have with the proposed rule 

change. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposed rule change is inconsistent 

with Sections 15A(b)(9) and 15D, or any 

other provision of the Act, or the rules 

and regulation thereunder. Although 

there do not appear to be any issues 

relevant to approval or disapproval 

which would be facilitated by an oral 

presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b-4, any 

request for an opportunity to make an 

oral presentation.105

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposed rule changes should be 

approved or disapproved by March 19, 

2015. Any person who wishes to file a 

rebuttal to any other person’s 

submission must file that rebuttal by 

April 2, 2015. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2014–047 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2014–047. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. 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–FINRA–2014–047 and 

should be submitted on or before March 

19, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.106

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–03962 Filed 2–25–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74337; File No. SR–Phlx– 

2015–19] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change to Extend the 

Pilot Program Regarding Exchange 

Rule 1047(f)(v) 

February 20, 2015. 

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 February 

19, 2015, 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 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 the Substance 

of the Proposed Rule Change 

The Exchange proposes to extend the 

pilot program regarding Exchange Rule 

1047(f)(v), which provides for how the 

Exchange treats obvious and 

catastrophic options errors in response 

to the Plan to Address Extraordinary 

Market Volatility Pursuant to Rule 608 

of Regulation NMS under the Act (the 

‘‘Limit Up-Limit Down Plan’’ or the 

‘‘Plan’’).3 The Exchange proposes to 

extend the pilot period until October 23, 

2015. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqomxphlx.cchwallstreet. 

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 aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In April 2013,4 the Commission 

approved a proposal, on a one year pilot 

basis, to adopt Exchange Rule 1047(f)(v) 


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Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Notices 10537 

5The Plan was extended until February 20, 2015. 

The Plan was initially approved for a one-year pilot 

period, which began on April 8, 2013. Securities 

Exchange Act Release No. 71649 (March 5, 2014), 

79 FR 13696 (March 11, 2014). 6Unless otherwise specified, capitalized terms 

used in this rule filing are based on the defined 

terms of the Plan. 7Securities Exchange Act Release No. 71901 

(April 8, 2014), 79 FR 20955 (April 14, 2014) (SR– 

Phlx–2014–21). 

8The Exchange submitted a pilot report on 

September 30, 2014. 

9The Exchange agreed to provide similar data in 

the original proposal. See Securities Exchange Act 

Release No. 69344 (April 8, 2013), 78 FR 22001 

(April 12, 2013) (SR–Phlx–2013–29) at notes 4 and 

12. However, that data included two additional 

filters pertaining to the top 10 options and an inthe-money amount, which no longer apply. The 

Exchange provided historical data in the new form 

pursuant to this proposed rule change, going back 

to the beginning of the original pilot period. 

10 15 U.S.C. 78f. 

11 15 U.S.C. 78f(b)(5). 

to provide for how the Exchange will 

treat obvious and catastrophic options 

errors in response to the Plan, which is 

applicable to all NMS stocks, as defined 

in Regulation NMS Rule 600(b)(47).5

The Plan is designed to prevent trades 

in individual NMS stocks from 

occurring outside of specified Price 

Bands.6 The requirements of the Plan 

are coupled with Trading Pauses to 

accommodate more fundamental price 

moves (as opposed to erroneous trades 

or momentary gaps in liquidity). 

The Exchange extended the operation 

of Rule 1047(f)(v), which provides that 

trades are not subject to an obvious error 

or catastrophic error review pursuant to 

Rule 1092(a)(i) or (ii) during a Limit 

State or Straddle State in 2014.7 The 

Exchange now proposes to extend the 

pilot program for an additional pilot 

period ending October 23, 2015. The 

Exchange believes conducting an 

obvious error or catastrophic error 

review is impracticable given the lack of 

a reliable National Best Bid/Offer 

(‘‘NBBO’’) in the options market during 

Limit States and Straddle States, and 

that the resulting actions (i.e., nullified 

trades or adjusted prices) may not be 

appropriate given market conditions. 

Under the pilot, limit orders that are 

filled during a Limit State or Straddle 

State have certainty of execution in a 

manner that promotes just and equitable 

principles of trade, removes 

impediments to, and perfects the 

mechanism of a free and open market 

and a national market system. Moreover, 

given that options prices during brief 

Limit States or Straddle States may 

deviate substantially from those 

available shortly following the Limit 

State or Straddle State, the Exchange 

believes giving market participants time 

to re-evaluate a transaction would create 

an unreasonable adverse selection 

opportunity that would discourage 

participants from providing liquidity 

during Limit States or Straddle States. 

On balance, the Exchange believes that 

removing the potential inequity of 

nullifying or adjusting executions 

occurring during Limit States or 

Straddle States outweighs any potential 

benefits from applying those provisions 

during such unusual market conditions. 

The Exchange believes the benefits to 

market participants from the pilot 

program should continue on a pilot 

basis to coincide with the operation of 

the Limit Up-Limit Down Plan. The 

Exchange believes that continuing the 

pilot will protect against any 

unanticipated consequences and permit 

the industry to gain further experience 

operating the Plan. 

The Exchange will conduct an 

analysis concerning the elimination of 

obvious and catastrophic error 

provisions during Limit States and 

Straddle States and agrees to provide 

the Commission with relevant data to 

assess the impact of this proposed rule 

change. As part of its analysis, the 

Exchange will: (1) Evaluate the options 

market quality during Limit States and 

Straddle States; (2) assess the character 

of incoming order flow and transactions 

during Limit States and Straddle States; 

and (3) review any complaints from 

members and their customers 

concerning executions during Limit 

States and Straddle States. Additionally, 

the Exchange agrees to provide to the 

Commission data requested to evaluate 

the impact of the elimination of the 

obvious and catastrophic error 

provisions, including data relevant to 

assessing the various analyses noted 

above. By May 29, 2015, the Exchange 

shall provide to the Commission and the 

public assessments relating to the 

impact of the operation of the obvious 

error rules during Limit and Straddle 

States as follows: 8

1. Evaluate the statistical and 

economic impact of Limit and Straddle 

States on liquidity and market quality in 

the options markets. 

2. Assess whether the lack of obvious 

error rules in effect during the Straddle 

and Limit States are problematic. 

Each month the Exchange shall 

provide to the Commission and the 

public a dataset containing the data for 

each Straddle and Limit State in 

optionable stocks that had at least one 

trade on the Exchange during a Straddle 

or Limit State. For each of those options 

affected, each data record should 

contain the following information: 

• Stock symbol, option symbol, time 

at the start of the Straddle or Limit 

State, an indicator for whether it is a 

Straddle or Limit State, 

• For activity on the Exchange: 

• executed volume, time-weighted 

quoted bid-ask spread, time-weighted 

average quoted depth at the bid, timeweighted average quoted depth at the 

offer, 

• high execution price, low execution 

price, 

• number of trades for which a 

request for review for error was received 

during Straddle and Limit States, 

• an indicator variable for whether 

those options outlined above have a 

price change exceeding 30% during the 

underlying stock’s Limit or Straddle 

State compared to the last available 

option price as reported by OPRA before 

the start of the Limit or Straddle State 

(1 if observe 30% and 0 otherwise). 

Another indicator variable for whether 

the option price within five minutes of 

the underlying stock leaving the Limit 

or Straddle State (or halt if applicable) 

is 30% away from the price before the 

start of the Limit or Straddle State.9

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,10 in 

general, and with Section 6(b)(5) of the 

Act,11 in particular, which requires that 

the rules of an exchange be designed to 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest, because it should 

continue to provide certainty about how 

errors involving options orders and 

trades will be handled during periods of 

extraordinary volatility in the 

underlying security. The Exchange 

believes that it continues to be 

necessary and appropriate in the 

interest of promoting fair and orderly 

markets to exclude transactions 

executed during a Limit State or 

Straddle State from certain aspects of 

Rule 1092. 

Although the Limit Up-Limit Down 

Plan is operational, the Exchange 

believes that maintaining the pilot will 

help the industry gain further 

experience operating the Plan as well as 

the pilot provisions. 

Based on the foregoing, the Exchange 

believes the benefits to market 

participants should continue on a pilot 

basis to coincide with the operation of 

the Limit Up-Limit Down Plan. 


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10538 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Notices 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6)(iii). As required under 

Rule 19b–4(f)(6)(iii), the Exchange provided the 

Commission with written notice of its intent to file 

the proposed rule change, along with a brief 

description and the 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. 

14For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Exchange Act Release No. 73623 (Nov. 18, 

2014); 79 FR 69905 (Nov. 24, 2014) (‘‘Notice’’). On 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

Specifically, the proposal does not 

impose an intra-market burden on 

competition, because it will apply to all 

members. Nor will the proposal impose 

a burden on competition among the 

options exchanges, because, in addition 

to the vigorous competition for order 

flow among the options exchanges, the 

proposal addresses a regulatory 

situation common to all options 

exchanges. To the extent that market 

participants disagree with the particular 

approach taken by the Exchange herein, 

market participants can easily and 

readily direct order flow to competing 

venues. The Exchange believes this 

proposal will not impose a burden on 

competition and will help provide 

certainty during periods of 

extraordinary volatility in an NMS 

stock. 

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 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 from the date on 

which it was filed, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 12 and Rule 19b–4(f)(6)(iii) 

thereunder.13

The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposal may 

become operative immediately upon 

filing. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest, as it 

will allow the obvious error pilot 

program to continue uninterrupted 

while the industry gains further 

experience operating under the Plan, 

and avoid any investor confusion that 

could result from a temporary 

interruption in the pilot program. For 

this reason, the Commission designates 

the proposed rule change to be operative 

upon filing.14

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 rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2015–19 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 

Number SR–Phlx–2015–19. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

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

filing 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–Phlx– 

2015–19, and should be submitted on or 

before March 19, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–03960 Filed 2–25–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74340; File No. SR–FINRA– 

2014–048] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change To Adopt FINRA Rule 

2242; Debt Research Analysts and 

Debt Research Reports 

February 20, 2015. 

I. Introduction 

On November 14, 2014, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘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 to adopt 

new FINRA Rule 2242 (Debt Research 

Analysts and Debt Research Reports) to 

address conflicts of interest relating to 

the publication and distribution of debt 

research reports. The proposal was 

published for comment in the Federal 

Register on November 24, 2014.3 The 


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