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[Federal Register Volume 80, Number 48 (Thursday, March 12, 2015)]
[Notices]
[Pages 13049-13051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-05605]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74453; File No. SR-Phlx-2015-10]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 1082.02 and .03

March 6, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 23, 2015, NASDAQ OMX PHLX LLC (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') a 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 1082.02 and .03, as described 
below.
    The text of the proposed rule change is below. Proposed new 
language is italicized. Proposed deletions are in brackets.
* * * * *

Rule 1082. Firm Quotations

    (a)-(d) No change.
    .01 No change.
    .02 Locked Markets. In the event that an SQT, RSQT, and/or 
specialist's electronically submitted quotations interact with the 
electronically submitted quotations of other SQTs, RSQTs and/or the 
specialist, resulting in the dissemination of a ``locked'' quotation 
(e.g., $1.00 bid--1.00 offer), the [following shall occur:
    (a) The Exchange will disseminate the locked market and both 
quotations will be deemed ``firm'' disseminated market quotations;
    (b) A ``counting period'' not to exceed .25 of one second will 
begin during which SQTs, RSQTs and/or specialists whose quotations are 
locked may eliminate the locked market. Provided, however, that in 
accordance with subparagraph (a) above, such SQT, RSQT and/or 
specialist shall be obligated to execute orders at their disseminated 
quotation. The duration of the counting period will be established by 
the Exchange, will be the same for all options traded on the Exchange, 
and will not exceed .25 of one second. The duration of the counting 
period will be published in an Options Trader Alert, which will be 
available on the Exchange's Web site.
    During the counting period SQTs and specialists located in the 
Crowd Area in which the option that is the subject of the locked market 
is traded will continue to be obligated to respond to Floor Brokers as 
set forth in Rule 1014, Commentary .05(c), and will continue to be 
obligated for one contract in open outcry to other SQTs, non-SQT ROTs, 
and specialists. If at the end of the counting period the quotations 
remain locked, the] locked quotations will automatically execute 
against each other in accordance with the allocation algorithm set 
forth in Rule 1014(g)(vii).
    [The quotation that is locked may be executed by an order during 
the counting period.]
    .03 Crossed Markets. The Exchange will not disseminate an 
internally crossed market (e.g., $1.10 bid, 1.00 offer). If an SQT, 
RSQT or specialist electronically submits a quotation [in a Streaming 
Quote Option] (``incoming quotation'') that would cross an existing 
quotation (``existing quotation''), the Exchange will[: (i)] Change the 
incoming quotation such that it locks the existing quotation and 
automatically execute the locked quotations against each other in 
accordance with the allocation algorithm set forth in Rule 
1014(g)(vii).
    [; (ii) send a notice to the SQT, RSQT or specialist that submitted 
the existing quotation indicating that its quotation was crossed; and 
(iii) send a notice to the specialist, SQT or RSQT that submitted the 
incoming quotation, indicating that its quotation crossed the existing 
quotation and was changed. Such a locked market shall be handled in 
accordance with Commentary .01 above. During the counting period, if 
the existing quotation is cancelled subsequent to the time the incoming 
quotation is changed, the incoming quotation will automatically be 
restored to its original terms.]
* * * * *

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
    The purpose of the proposal is to amend two commentaries to Rule 
1082 because the timers no longer operate. Rule 1082.02 currently 
addresses what occurs when a Streaming Quote Trader's (``SQT''), Remote 
SQT's (``RSQT''), and/or specialist's electronically submitted 
quotations interact with the electronically submitted quotations of 
other SQTs, RSQTs and/or the specialist. Under this provision, the 
Exchange disseminates the resulting locked market and both quotations 
are deemed ``firm'' disseminated market quotations. Furthermore, a 
counting period not to exceed .25 of one second may begin during which 
SQTs, RSQTs and/or specialists whose quotations are locked may 
eliminate the locked market, provided, however, that such SQT, RSQT 
and/or specialist shall nevertheless be obligated to execute orders at 
that price. The rule provides that the duration of the counting period 
is established by the Exchange, will be the same for all options traded 
on the Exchange and will not exceed .25 of one second.\3\ In March 
2010, the Exchange reduced this counting period to zero, which is 
within the range contemplated by the rule (does not exceed .25 of one

[[Page 13050]]

second).\4\ The result is that any such locking quotations trade 
immediately with no delay. Accordingly, the Exchange is proposing to 
amend Rule 1080.02 to reflect this.
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    \3\ The duration of the counting period is the same for all 
options traded on the Exchange and is published in an Options Trader 
Alert, which is available on the Exchange's Web site.
    \4\ See http://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2010-16
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    Similarly, Rule 1082.03 currently addresses what occurs when an 
SQT's, RSQT's, and/or specialist's electronically submitted quotations 
cross the electronically submitted quotations of other SQTs, RSQTs and/
or the specialist. Under the rule, the resulting crossed market is not 
disseminated, but rather the incoming crossing quotation is changed 
such that it locks the existing quotation and the crossing SQT, RSQT or 
specialist is notified thereof. The specialist, SQT or RSQT that 
submitted the existing quotation is notified that the quotation was 
crossed. The locked market is disseminated for the time of the counting 
period. In March 2010, the Exchange reduced this counting period to 
zero as well. The result is that any such crossing quotations trade 
immediately with no delay at the locked price.\5\ Accordingly, the 
Exchange is proposing to amend Rule 1080.02 [sic] to reflect this. As 
part of deleting the counting period respecting crossed quotations, the 
Exchange is also eliminating the notice to the SQT, RSQT or specialist 
that submitted the existing quotation indicating that its quotation was 
crossed as well as the notice to the specialist, SQT or RSQT that 
submitted the incoming quotation indicating that its quotation crossed 
the existing quotation, because such notice is no longer necessary. The 
purpose of the notice was to inform the SQT, RSQT or specialist of the 
counting period in case the SQT, RSQT or specialist sought to update 
the quotation; now that an automatic execution occurs, the quotation 
cannot be updated because a trade will already have occurred.
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    \5\ Id.
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    The Exchange believes that eliminating the counting period in both 
situations is appropriate because it results in an immediate execution; 
it also eliminates potential firm quote concerns respecting those 
quotations during the counting period.
    Noting that the counting periods have been set to zero, the 
Exchange eliminated the counting period from its system altogether and 
is now updating its rule to reflect that. The Exchange believes that 
its electronic quoting participants (SQTs, RSQTs and specialists) 
benefit from an immediate execution, because they have certainty of 
what has executed right away and can determine how to update their 
quotes afterwards.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \7\ in particular, in that it is designed to promote 
just and equitable principles of trade and protect investors and the 
public interest by permitting locking and crossing quotations to trade 
immediately, without a delay. Specifically, such immediate execution 
without a delay timer should help the market operate more efficiently. 
Moreover, market making participants can submit new quotes to the 
marketplace more quickly after such executions.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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. In fact, the immediate 
executions under this proposal should help the Exchange compete with 
other exchanges. With respect to intra-market competition among 
specialists, SQTs and RSQTs, such competition should be enhanced, 
because their respective quotations execute immediately, without a 
delay.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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 \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately upon filing. The 
Commission previously recognized that continued locking and crossing of 
the market can negatively impact market quality.\14\ The Commission 
notes that the Exchange's proposal is designed to trade locked or 
crossed quotations without delay. The Commission believes that waiver 
of the operative delay is consistent with the protection of investors 
and the public interest because such waiver would allow the Exchange to 
implement a rule that would provide for the immediate execution of 
locked or crossed markets. Accordingly, the Commission hereby waives 
the 30-day operative delay and designates the proposal operative upon 
filing.\15\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ See Securities Exchange Act Release No. 34-43863 (August 
23, 2002), 67 FR 55897, 55900 n.37 (August 30, 2002) (SR-NASD-2002-
56).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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

[[Page 13051]]

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 [email protected]. Please include 
File Number SR-Phlx-2015-10 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-2015-10. 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 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-2015-10, 
and should be submitted on or before April 2, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-05605 Filed 3-11-15; 8:45 am]
BILLING CODE 8011-01-P
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