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20 15 U.S.C. 78s(b)(3)(A). 21 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. 

22 17 CFR 240.19b–4(f)(6)(iii). 

23 Id. 

24For 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). 

25 15 U.S.C. 78s(b)(3)(C). 

26 Id. 27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 72119 

(May 7, 2014), 79 FR 27351 (‘‘Notice’’). 

4See Securities Exchange Act Release No. 72447 

(June 23, 2014), 79 FR 36569 (June 27, 2014). 

5See Letter from Michael J. Simon, Secretary and 

General Counsel, International Securities Exchange, 

LLC, dated June 3, 2014 (‘‘ISE Letter I’’); Letter from 

Michael J. Simon, Secretary and General Counsel, 

International Securities Exchange, LLC, dated July 

8, 2014 (‘‘ISE Letter II’’). 

6See Letter from Carla Behnfeldt, Associate 

General Counsel, The NASDAQ OMX Group, Inc., 

dated June 20, 2014 (‘‘Phlx Response Letter’’). 

7 In Amendment No. 1, the Exchange clarifies a 

reference to a previous Phlx filing and an example. 

Amendment No. 1 has been placed in the public 

comment file for SR–Phlx–2014–23 at http:// 

www.sec.gov/comments/sr-phlx-2014-23/ 

phlx201423.shtml (see letter from Carla Behnfeldt, 

Associate General Counsel, The NASDAQ OMX 

Group, Inc., to Secretary, Commission, dated July 

30, 2014) and also is available on the Exchange’s 

Web site at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/pdf/phlx-filings/2014/SRPhlx-2014-23_Amendment_1.pdf. 

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, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 20 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.21

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative for 30 days after the 

date of filing.22 However, Rule 19b– 

4(f)(6)(iii) permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest.23

FINRA has requested that the 

Commission waive the 30-day operative 

delay so that FINRA can immediately 

delay the implementation dates, as 

provided in this proposal. 

The Commission believes that the 

waiver of the 30-day operative delay is 

consistent with the protection of 

investors and the public interest as it 

will allow FINRA to extend the 

implementation dates of certain changes 

approved pursuant to SR–FINRA–2013– 

050 in a timely manner. Therefore, the 

Commission designates the proposal 

operative upon filing.24

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act.25

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved.26

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– 

FINRA–2014–039 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–FINRA–2014–039. 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 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– 

2014–039, and should be submitted on 

or before October 29, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–23982 Filed 10–7–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73291; File No. SR–Phlx– 

2014–23] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Order 

Approving Proposed Rule Change, as 

Modified by Amendment No. 1, Related 

to the Priority Afforded to In-Crowd 

Participants Respecting Crossing, 

Facilitation, and Solicited Orders in 

Open Outcry Trading 

October 2, 2014. 

I. Introduction 

On April 23, 2014, NASDAQ OMX 

PHLX LLC (‘‘Exchange’’ or ‘‘Phlx’’) 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 revise the priority afforded to 

in-crowd participants respecting 

crossing, facilitation, and solicited 

orders in open outcry trading 

(‘‘Proposal’’). The proposed rule change 

was published for comment in the 

Federal Register on May 13, 2014.3 On 

June 23, 2014, the Commission 

extended the time period in which to 

either approve the Proposal, disapprove 

the Proposal, or institute proceedings to 

determine whether to approve or 

disapprove the Proposal to August 11, 

2014.4 The Commission received two 

comment letters from one commenter 

regarding the Proposal 5 and one 

response letter from Phlx.6 On July 30, 

2014, the Exchange filed Amendment 

No. 1 to the Proposal (‘‘Amendment No. 

1’’).7 On August 4, 2014, the 

Commission instituted proceedings 


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8 15 U.S.C. 78s(b)(2)(B). 

9See Securities Exchange Act Release No. 72751, 

(August 4, 2014), 79 FR 46474 (August 8, 2014) 

(‘‘Order Instituting Proceedings’’). 

10See Order Instituting Proceedings. The 

comment period closed on August 29, 2014, and the 

rebuttal period closed on September 12, 2014. 

11An SQT is defined in Exchange Rule 

1014(b)(ii)(A) as a Registered Options Trader 

(‘‘ROT’’) who has received permission from the 

Exchange to generate and submit option quotations 

electronically in options to which such SQT is 

assigned. Types of ROTs include SQTs, RSQTs and 

non-SQTs, which by definition are neither SQTs 

nor RSQTs. A Registered Options Trader is defined 

in Exchange Rule 1014(b)(i) as a regular member of 

the Exchange located on the trading floor who has 

received permission from the Exchange to trade in 

options for his own account. See Phlx Rules 

1014(b)(i) and (ii). 

12A Remote Specialist is a qualified RSQT 

approved by the Exchange to function as a 

specialist in one or more options if the Exchange 

determines that it cannot allocate such options to 

a floor based specialist. A Remote Specialist has all 

the rights and obligations of a specialist, unless 

Exchange rules provide otherwise. See Phlx Rules 

501 and 1020. 

13A RSQT is defined in Exchange Rule 

1014(b)(ii)(B) as an ROT that is a member affiliated 

with a Remote Streaming Quote Trader 

Organization (‘‘RSQTO’’) with no physical trading 

floor presence who has received permission from 

the Exchange to generate and submit option 

quotations electronically in options to which such 

RSQT has been assigned. A qualified RSQT may 

function as a Remote Specialist upon Exchange 

approval. An RSQT may only submit such 

quotations electronically from off the floor of the 

Exchange. An RSQT may not submit option 

quotations in eligible options to which such RSQT 

is assigned to the extent that the RSQT is also 

approved as a Remote Specialist in the same 

options. An RSQT may only trade in a market 

making capacity in classes of options in which he 

is assigned or approved as a Remote Specialist. An 

RSQTO is a member organization in good standing 

that satisfies the RSQTO readiness requirements in 

Phlx Rule 507(a)(i). 

14A crossing order occurs when an options Floor 

Broker holds orders (except for floor qualified 

contingent cross orders, as defined in Exchange 

Rule 1064(e)) to buy and sell the same option series. 

Such a Floor Broker may cross such orders, 

provided that the trading crowd is given an 

opportunity to bid and offer for such option series 

in accordance with Exchange rules. See Phlx Rule 

1064(a). 

15A facilitation order occurs when an options 

Floor Broker holds an options order (except for 

floor qualified contingent cross orders, as defined 

in Exchange Rule 1064(e)) for a public customer 

and a contra-side order. Such a Floor Broker may 

execute such orders as a facilitation order, provided 

that such Floor Broker proceeds in accordance with 

Exchange rules concerning facilitation orders. See 

Phlx Rule 1064(b). 

16A solicitation occurs whenever an order (except 

for floor qualified contingent cross orders, as 

defined in Exchange Rule 1064(e)), other than a 

cross, is presented for execution in the trading 

crowd resulting from an away-from-the-crowd 

expression of interests to trade by one broker dealer 

to another. See Phlx Rule 1064(c). 

17A ‘‘Floor Broker’’ is an individual who is 

registered with the Exchange for the purpose, while 

on the Exchange’s options floor, of accepting and 

handling options orders received from members 

and member organizations. See Phlx Rule 1060. 

18A ‘‘Specialist’’ is an Exchange member who is 

registered as an options specialist pursuant to Rule 

1020(a). 

19This in-crowd priority applies only to crossing, 

facilitation, and solicited orders represented in 

open outcry, and does not apply to orders 

submitted electronically via the Exchange’s 

electronic options trading platform, to which other 

priority rules apply. See, e.g., Phlx Rules 

1014(g)(vii) and (viii). 

20According to the Exchange, public customer 

limit orders represented in the trading crowd and 

resting on the limit order book have, and will 

continue to have, priority over all other participants 

and accordingly must be executed up to the 

aggregate size of such orders before any in-crowd 

participant is entitled to priority. Public customer 

orders on the limit order book that are eligible for 

execution are required to be executed before a Floor 

Broker may execute its order in the crowd and/or 

with a contra-side order it holds. See Phlx Rule 

1014, Commentary .05(c)(ii). 

21See Amendment No. 1, supra note 7. 

22See Notice, 79 FR at 27352. See also 

Amendment No. 1, supra note 7. 

23See Notice, 79 FR at 27352. See also 

Amendment No. 1, supra note 7. 

24See Notice, 79 FR at 27352–53. See also 

Chicago Board Options Exchange (‘‘CBOE’’) Rule 

6.74, Crossing Orders. 

25See Notice, 79 FR at 27353. 

26See Notice, 79 FR at 27353–54. 

27See supra note 5. 

28See supra note 6. 

pursuant to Section 19(b)(2)(B) of the 

Act 8 to determine whether to approve 

or disapprove the proposed rule change 

and published Amendment No. 1 for 

comment.9 The Order Instituting 

Proceedings was published for comment 

in the Federal Register on August 8, 

2014.10 In response to the Order 

Instituting Proceedings, the Commission 

received no comment letters on the 

Proposal. This order approves the 

proposed rule change, as modified by 

Amendment No. 1. 

II. Description of the Proposal 

The Exchange proposes to amend 

Phlx Rule 1014, Commentary .05(c)(ii), 

to afford priority in open outcry trading 

to in-crowd participants over out-ofcrowd Streaming Quote Traders 

(‘‘SQTs’’),11 Remote Specialists,12 and 

Remote Streaming Quote Traders 

(‘‘RSQTs’’) 13 and over out-of-crowd 

broker-dealer limit orders on the limit 

order book (but not over public 

customer orders) in crossing,14

facilitation,15 and solicited 16 orders, 

regardless of order size. 

Currently, Commentary .05(c)(i) to 

Phlx Rule 1014 provides that, in the 

event that a Floor Broker 17 or 

specialist 18 presents a non-electronic 

order in which an RSQT is assigned or 

which is allocated to a Remote 

Specialist, and/or in which an SQT 

assigned in such option is not a crowd 

participant (collectively, ‘‘Non-Crowd 

Participants’’), such Non-Crowd 

Participant may not participate in trades 

stemming from such a non-electronic 

order unless the non-electronic order is 

executed at the price quoted by the NonCrowd Participant at the time of 

execution. If the non-electronic order is 

executed at the price quoted by the NonCrowd Participant, the Non-Crowd 

Participant may participate in the trade 

unless the order was a crossing, 

facilitation, or solicited order with a size 

of at least 500 contracts on each side.19

If the order is a crossing, facilitation, or 

solicited order with a size of at least 500 

contracts on each side, Commentary 

.05(c)(ii) gives priority to in-crowd 

participants (including, for purposes of 

Commentary .05(c)(ii) only, Floor 

Brokers) over Non-Crowd Participants 

and over out-of-crowd broker-dealer 

limit orders on the limit order book, but 

not over public customer orders.20

The Exchange proposes to eliminate 

the 500 contract minimum order size 

from Phlx Rule 1014, Commentary 

.05(c)(ii). As amended, the rule would 

afford priority to in-crowd participants 

over Non-Crowd Participants and outof-crowd broker-dealer limit orders in 

crossing, facilitation, and solicited 

orders regardless of the size of those 

orders. The Exchange states that it 

initially permitted Non-Crowd 

Participants to participate in Floor 

Broker crosses to foster electronic 

options trading.21 In 2006, the Exchange 

adopted the size requirement, which 

continued to permit Non-Crowd 

Participants to participate in smaller 

(under five hundred contracts) Floor 

Broker crosses.22 According to the 

Exchange, electronic options trading is 

well-established and there is no longer 

a need for such special rules and 

incentives to develop electronic trading 

further.23 The Exchange notes that 

another options exchange does not have 

the same differentiation of priority for 

orders of fewer than 500 contracts.24

The Exchange believes that its Proposal 

will encourage order flow providers to 

send additional crossing, facilitation, 

and solicited orders to the Exchange 

without concern that the order may not 

be completely executed by the trading 

crowd.25 The Exchange also believes 

that affording priority to in-crowd 

participants regardless of size will 

attract additional smaller cross orders to 

the Exchange and allow in-crowd 

market makers to compete for smaller 

orders.26

III. Comment Letters and Phlx’s 

Response 

As noted above, the Commission 

received two comment letters from one 

commenter 27 and one response letter 

from Phlx.28

In its first letter, the commenter 

opposes the Proposal and requests that 

the Commission institute proceedings to 


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29See ISE Letter I. 

30See ISE Letter I. 

31See ISE Letter I. 

32See ISE Letter I at 1–2. 

33See ISE Letter I at 2. 

34See ISE Letter I at 2. 

35See ISE Letter I at 2. 

36See ISE Letter I at 2. 

37See ISE Letter I at 2. The commenter expressed 

its view that it is inappropriate to ignore electronic 

quotes, especially for smaller orders where 

substantial capital commitment or efforts to find 

liquidity are not necessary. See id. 

38See Phlx Response Letter. 

39See Phlx Response Letter (citing CBOE Rule 

6.74, Crossing Orders). 

40See Phlx Response Letter at 2. 

41See Phlx Response Letter at 2. 

42See Phlx Response Letter at 2. 

43See Phlx Response Letter. 

44See ISE Letter II. 

45See ISE Letter II. 

46See ISE Letter II at 1–2. 

47See ISE Letter II at 2. 

48See ISE Letter II at 2. 

49See ISE Letter II at 2. 

50 15 U.S.C. 78f(b). 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). 

51 15 U.S.C. 78f(b)(5). 

52See supra note 5. 

disapprove the Proposal. The 

commenter argues that the Proposal 

unfairly denies electronic participants 

the ability to participate in the 

execution of open outcry orders along 

with in-crowd participants at the same 

price.29 The commenter states its view 

that the Exchange has not provided 

sufficient justification for allocating 

smaller trades negotiated on its floor to 

counterparties in the trading crowd 

ahead of same-priced orders from 

electronic participants.30 The 

commenter believes that the Proposal 

will encourage Phlx participants to 

bring more orders to the floor, where 

they may receive a higher trade 

allocation and may be able to internalize 

a trade, instead of executing those 

orders through electronic auction 

systems.31 The commenter argues that, 

even with the current 500 contract 

minimum, Phlx’s priority rules 

disadvantage orders being internalized 

to the benefit of the internalizing 

brokers, as these orders receive 

relatively little price competition.32 The 

commenter suggests that giving priority 

to small orders on the floor will further 

skew participants’ incentives to bring 

orders to the floor to achieve a 

frictionless ‘‘clean cross’’ and deprive 

customers of vigorous competition for 

these orders.33 The commenter states 

that most electronic auctions require 

that orders be exposed to all other 

participants trading on the exchange, 

and orders that are not exposed, such as 

qualified contingent crosses, are 

required to be for a large size.34

The commenter also argues that, 

because no trade information is 

disseminated about orders executed on 

the floor to electronic participants, who 

may be willing to provide liquidity to 

orders executed on the Exchange floor, 

such orders will not benefit from 

potential price improvement built into 

electronic auctions.35 The commenter 

believes that the Proposal will largely 

limit price competition for small orders 

to participants physically present in the 

crowd at the time a floor cross is 

announced and transacted.36 The 

commenter further argues that the 

Proposal would ignore electronic orders 

and quotes, especially for small orders, 

and cause more orders to be crossed at 

prices that have not been sufficiently 

vetted by the participants most likely to 

offer price improvement.37

In response to the commenter’s 

concerns regarding in-crowd liquidity, 

Phlx states that on-floor liquidity on 

Phlx in many issues exceeds the 

displayed wider electronic markets.38

Phlx argues that the Proposal merely 

removes the 500 contract minimum and 

that another options exchange, CBOE, 

does not have the same differentiation 

of priority for orders of fewer than 500 

contracts.39 Phlx believes that attracting 

smaller orders to the trading floor 

fosters an environment for on-floor 

liquidity providers to continue to 

provide price improvement and size 

improvement.40 In response to the 

commenter’s suggestion that the 

Proposal will facilitate internalization, 

Phlx states that priority will be afforded 

to all in-crowd participants, including 

market makers, not just Floor Brokers.41

Phlx also believes that the Proposal 

should encourage small participants, 

such as floor-based market makers, to 

continue to make markets, which Phlx 

believes will improve the quality of 

execution for these smaller orders.42

In its second letter, the commenter 

replies to the Phlx Response Letter and 

reiterates its request that the 

Commission institute proceedings to 

disapprove the Proposal. In response to 

Phlx’s statement that, based on Phlx’s 

experience, on-floor liquidity on Phlx in 

many issues exceeds the displayed 

wider electronic markets,43 the 

commenter requests that the 

Commission require Phlx to provide 

data that would allow the Commission 

to gauge the level of participation of 

floor-based market makers against 

orders represented in open outcry, and 

price improvement provided by these 

participants.44 The commenter 

questions whether Phlx needs to afford 

priority to in-crowd liquidity providers 

if they are offering active price 

improvement.45 The commenter states 

its view that to the extent that in-crowd 

participants provide price improvement 

to orders represented in open outcry, 

their orders are already entitled to 

priority over other orders at a worse 

price, including electronic quotes.46 The 

commenter asserts that the Proposal is 

intended to allow in-crowd participants 

to internalize orders without being 

subject to competition from active 

liquidity providers in the electronic 

markets.47 The commenter argues that 

Phlx’s reliance on the CBOE rule is 

irrelevant as the Phlx Proposal must 

stand on its own, and, in any event, 

believes that the in-crowd priority rules 

of Phlx and CBOE are not in the public 

interest.48 The commenter argues that 

the proposed expansion of these rules 

would only foster internalization and 

curtail price improvement.49

IV. Discussion and Commission 

Findings 

After careful review of the proposed 

rule change as well as the comment 

letters and the Phlx response letter 

received on the Proposal, 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 and, in 

particular, with Section 6(b) of the 

Act.50 In particular, the Commission 

finds that the proposed rule change is 

consistent with Section 6(b)(5) of the 

Act,51 which requires, among other 

things, that the rules of a national 

securities exchange be designed to 

prevent fraudulent and manipulative 

acts and practices, 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 

not be designed to permit unfair 

discrimination between customers, 

issuers, brokers or dealers. 

As noted above, the Commission 

received two comment letters from one 

commenter in response to the proposed 

rule change.52 The commenter raised 

concerns about whether the Exchange’s 

proposed revisions to its rules governing 

priority during open outcry were 

appropriate, as more fully described 


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53See ISE Letters I and II. See also notes 29–37 

and 44–49 and accompanying text describing the 

issues and concerns raised by these comments. 

54See supra notes 29–37 and 44–49 and 

accompanying text. 

55See Notice, 79 FR at 27353. 

56See Amendment No. 1 at 4. 

57See, e.g., CBOE Rule 6.74; NYSE MKT Rule 

934NY; NYSE Arca Rule 6.47. CBOE Rule 6.74 

provides that for purposes of establishing priority 

at the same price, bids and offers of In-Crowd 

Market Participants have first priority, except with 

respect to public customer orders resting in the 

electronic book; and all other bids and offers 

(including bids and offers of broker-dealer orders in 

the electronic book and electronic quotes of MarketMakers) have second priority. NYSE MKT Rule 

934NY(b)(3) provides that, for a non-facilitation 

cross, if there are bids or offers in the Consolidated 

Book better than the proposed execution price or 

Customer Orders in the Consolidated Book priced 

at the proposed execution price, the Floor Broker 

must trade against such bids or offers in the 

Consolidated Book. Once bids or offers in the Book 

are satisfied, the Floor Broker may cross the balance 

of the orders, if any, to be crossed. NYSE Arca Rule 

6.47 provides that, for crossing orders, the Floor 

Broker must trade against: (i) Customer bids or 

offers on the Consolidated Book priced equal or 

better than the proposed execution price; and (ii) 

better-priced non-Customer bids or offers on the 

Consolidated book along with any equal-priced 

non-Customer bids and offers that are ranked ahead 

of any equal-priced Customer bids and offers. 

58As noted above, the Exchange’s proposal is 

intended to bring its floor priority rules for crossing, 

facilitation, and solicited orders in line with the 

floor priority rules of certain other options 

exchanges. However, the Commission is aware of 

the concerns, as expressed by the commenter, that 

the rules of an options trading floor should allow 

for sufficient competition for orders. This concern 

is one that the Commission staff intends to continue 

to evaluate in the context of its ongoing empirical 

consideration of market structure. For example, 

there currently is relatively little information 

available about the extent and nature of floor 

crossing transactions. The Commission staff, 

however, expects that an exchange with a trading 

floor, as part of its regulatory obligations, will 

monitor the extent to which competition is 

maintained in floor crossing transactions. One way 

an exchange could do so would be to assess 

periodically the level of participation in such 

crossing transactions by market makers and other 

market participants, aside from the firm that 

initiated the cross, and review whether its rules 

appropriately allow for such competition. In 

addition, the Commission reminds broker-dealers 

that the duty of best execution requires them to 

assess periodically the quality of competing markets 

to assure that order flow is directed to the markets 

providing the most beneficial terms for their 

customer orders. See, e.g., Order Execution 

Obligations, Securities Exchange Act Release No. 

37619A (September 6, 1996), 61 FR 48290 at 48322– 

33 (September 12, 1996). Broker-dealers must 

examine their procedures for seeking to obtain best 

execution in light of market and technology changes 

and modify those practices if necessary to enable 

their customers to obtain the best reasonably 

available prices. See id. at 48323. In doing so, 

broker-dealers must take into account price 

improvement opportunities, and whether different 

markets may be more suitable for different types of 

orders or particular securities. See id. 

59 15 U.S.C. 78s(b)(2). 

60 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)(ii). 

above.53 In its review of the proposal, 

the Commission has carefully 

considered all of the comments 

received. The Commission 

acknowledges the concerns raised by 

the commenter, as detailed above,54

about the potential impact on 

competition resulting from the Proposal 

in the Exchange’s rules governing 

priority and order allocation for open 

outcry transactions. At the same time, 

the Commission also acknowledges the 

Exchange’s belief that this Proposal will 

encourage order flow providers to send 

additional crossing, facilitation, and 

solicited orders to the Exchange,55 as 

well as its belief that today, electronic 

options trading is well-established and 

no longer requires special rules and 

incentives to develop further.56

Phlx Rule 1014, Commentary 

.05(c)(ii), as proposed to be revised, 

describes priority for crossing, 

facilitation, and solicited orders in open 

outcry transactions. The proposed rules 

governing open outcry during crossing, 

facilitation, and solicited transactions 

on the Exchange floor are similar to the 

rules governing priority in crossing 

transactions at other exchanges.57 Given 

that other options exchanges currently 

have rules that provide lower priority to 

non-priority customer orders on the 

electronic book during crossing 

transactions on those exchanges, the 

Exchange’s proposed revisions to its 

priority scheme for floor transactions 

will allow Phlx to compete with other 

floor-based exchanges that have 

substantially similar rules. Accordingly, 

the Commission believes that it would 

be appropriate and consistent with the 

Act to approve the Exchange’s proposed 

rule change.58

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 59 that the 

proposed rule change, as modified by 

Amendment No. 1, (SR–Phlx–2014–23) 

be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.60

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–23984 Filed 10–7–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73287; File No. SR–CME– 

2014–39] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Make Amendments to CME 

ClearPort Hours for Certain 

Commodity Index Cleared OTC Swap 

Contracts 

October 2, 2014. 

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 

September 25, 2014, Chicago Mercantile 

Exchange Inc. (‘‘CME’’) 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 

primarily by CME. CME filed the 

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

of the Act,3 and Rule 19b–4(f)(4)(ii) 4

thereunder, so that the proposal was 

effective upon filing with the 

Commission. 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 

CME is filing proposed rules changes 

that are limited to its business as a 

derivatives clearing organization. CME 

proposes to amend the current CME 

ClearPort hours for certain enumerated 

commodity index cleared swap 

contracts. The proposed changes are as 

follows: 

Clearing code Cleared OTC Swap product DCM Rulebook 

chapter 

CAW ............................ AUD Chicago Soft Red Winter Swap (Cleared Only) .......................................................................... CBT 14G 

CCS ............................. Corn Calendar Swap (Clearing Only) .................................................................................................. CBT 10C 

CPC ............................. USD Malaysian Crude Palm Oil Calendar Swap (Cleared Only) ........................................................ CME 204A 


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