65742 Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 

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

2 17 CFR 240.19b–4. 

3 In addition to FLEX Options, FLEX currency 

options are also traded on the Exchange. These 

flexible index, equity, and currency options provide 

investors the ability to customize basic option 

features including size, expiration date, exercise 

style, and certain exercise prices; and may have 

expiration dates within five years. See Rule 1079. 

FLEX currency options traded on the Exchange are 

also known as FLEX World Currency Options 

(‘‘WCO’’) or Foreign Currency Options (‘‘FCO’’). 

The pilot program discussed herein does not 

encompass FLEX currency options. 

4Market index options and industry index 

options are broad-based index options and narrowbased index options, respectively. See Rule 

1000A(b)(11) and (12). 

5Subsection (a)(8)(A) also provides a third 

alternative: (iii) 50 contracts in the case of FLEX 

currency options. However, this alternative is not 

part of the Pilot Program. 

6See Securities Exchange Act Release No. 67094 

(June 1, 2012), 77 FR 33796 (June 7, 2012) (SR– 

Phlx–2012–76) (notice of filing and immediate 

effectiveness of proposal to extend Pilot Program). 

The Pilot Program was instituted in 2010. See 

Securities Exchange Act Release No. 62900 

(September 13, 2010), 75 FR 57098 (September 17, 

2010) (SR–Phlx–2010–123) (notice of filing and 

immediate effectiveness of proposal to institute 

Pilot Program). 

7The Exchange notes that any positions 

established under this Pilot would not be impacted 

by the expiration of the Pilot. For example, a 10- 

contract FLEX equity option opening position that 

overlies less than $1 million in the underlying 

security and expires in January 2015 could be 

established during the Pilot. If the Pilot Program 

were not extended, the position would continue to 

exist and any further trading in the series would be 

subject to the minimum value size requirements for 

continued trading in that series. 

8The Exchange has not experienced any adverse 

market effects with respect to the Pilot Program. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73474; File No. SR–Phlx– 

2014–69] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Regarding 

Extension of FLEX Option No Minimum 

Value Size Pilot Program 

October 30, 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 October 

24, 2014, 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 Substance of 

the Proposed Rule Change 

The Exchange is filing with the 

Commission a proposal to amend Phlx 

Rule 1079 (FLEX Index, Equity and 

Currency Options) to extend a pilot 

program that eliminates minimum value 

sizes for FLEX index options and FLEX 

equity options (together known as 

‘‘FLEX Options’’).3

The text of the amended Exchange 

rule is set forth immediately below. 

Additions are italicized and deletions 

are [bracketed]. 

Rules of the Exchange 

Options Rules 

* * * * * 

Rule 1079. FLEX Index, Equity and 

Currency Options 

A Requesting Member shall obtain 

quotes and execute trades in certain 

non-listed FLEX options at the specialist 

post of the non-FLEX option on the 

Exchange. The term ‘‘FLEX option’’ 

means a FLEX option contract that is 

traded subject to this Rule. Although 

FLEX options are generally subject to 

the rules in this section, to the extent 

that the provisions of this Rule are 

inconsistent with other applicable 

Exchange rules, this Rule takes 

precedence with respect to FLEX 

options. 

(a)–(f) No Change. 

***Commentary:llllll 

.01 Notwithstanding subparagraphs 

(a)(8)(A)(i) and (a)(8)(A)(ii) above, for a 

pilot period ending the earlier of 

øOctober 31, 2014¿ February 28, 2015, 

or the date on which the pilot is 

approved on a permanent basis, there 

shall be no minimum value size 

requirements for FLEX options. 

* * * * * 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqomxphlx.cchwall

street.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 

The purpose of this proposed rule 

change is to amend Phlx Rule 1079 

(FLEX Index, Equity and Currency 

Options) to extend a pilot program that 

eliminates minimum value sizes for 

FLEX Options (the ‘‘Pilot Program’’ or 

‘‘Pilot’’). 

Rule 1079 deals with the process of 

listing and trading FLEX equity, index, 

and currency options on the Exchange. 

Rule 1079(a)(8)(A) currently sets the 

minimum opening transaction value 

size in the case of a FLEX Option in a 

newly established (opening) series if 

there is no open interest in the 

particular series when a Request-forQuote (‘‘RFQ’’) is submitted (except as 

provided in Commentary .01 to Rule 

1079): (i) $10 million underlying 

equivalent value, respecting FLEX 

market index options, and $5 million 

underlying equivalent value respecting 

FLEX industry index options; 4 (ii) the 

lesser of 250 contracts or the number of 

contracts overlying $1 million in the 

underlying securities, with respect to 

FLEX equity options (together the 

‘‘minimum value size’’).5

Presently, Commentary .01 to Rule 

1079 states that by virtue of the Pilot 

Program ending October 31, 2014, or the 

date on which the pilot is approved on 

a permanent basis, there shall be no 

minimum value size requirements for 

FLEX Options as noted in subsections 

(a)(8)(A)(i) and (a)(8)(A)(ii) of Rule 

1079.6

The Exchange now proposes to extend 

the Pilot Program for a pilot period 

ending the earlier of February 28, 2015, 

or the date on which the Pilot is 

approved on a permanent basis.7

The Exchange believes that there is 

sufficient investor interest and demand 

in the Pilot Program to warrant an 

extension. The Exchange believes that 

the Pilot Program has provided 

investors with additional means of 

managing their risk exposures and 

carrying out their investment objectives. 

Extension of the Pilot Program would 

continue to provide greater 

opportunities for traders and investors 

to manage risk through the use of FLEX 

Options, including investors that may 

otherwise trade in the unregulated over 

the counter (‘‘OTC’’) market where 

similar size restrictions do not apply.8

In support of the proposed extension 

of the Pilot Program, the Exchange has 

under separate cover submitted to the 

Commission a Pilot Program Report 

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Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 65743 

9 5 U.S.C. section 552. The Exchange notes that 

it expects to file a proposal for permanent approval 

of the Pilot Program. With this proposal, the 

Exchange will submit a Report that is publicly 

available. In the event the Pilot Program is not 

permanently approved by February 28, 2015, the 

Exchange will submit an additional Report covering 

the extended Pilot period. 

10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78s(b)(3)(A). 13 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, 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. 

14 17 CFR 240.19b–4(f)(6). 

15 17 CFR 240.19b–4(f)(6)(iii). 

16For 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). 

(‘‘Report’’) that provides an analysis of 

the Pilot Program covering the period 

during which the Pilot has been in 

effect. This Report includes: (i) Data and 

analysis on the open interest and 

trading volume in (a) FLEX equity 

options that have an opening 

transaction with a minimum size of 0 to 

249 contracts and less than $1 million 

in underlying value; (b) FLEX index 

options that have an opening 

transaction with a minimum opening 

size of less than $10 million in 

underlying equivalent value; and (ii) 

analysis of the types of investors that 

initiated opening FLEX Options 

transactions (i.e., institutional, high net 

worth, or retail). The Report has been 

submitted to the Commission and the 

Exchange has requested confidential 

treatment under the Freedom of 

Information Act.9

2. Statutory Basis 

The Exchange’s proposal is consistent 

with Section 6(b) of the Act 10 in 

general, and furthers the objectives of 

Section 6(b)(5) of the Act 11 in 

particular, in that it is 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 facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system. 

Specifically, the Exchange believes that 

the proposed extension of the Pilot 

Program, which eliminates the 

minimum value size applicable to 

opening transactions in new series of 

FLEX Options, would provide greater 

opportunities for investors to manage 

risk through the use of FLEX Options. 

The Exchange notes that it has not 

experienced any adverse market effects 

with respect to the Pilot Program. 

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. To the 

contrary, the proposal would give 

traders and investors the opportunity to 

more effectively tailor their trading, 

investing and hedging through FLEX 

options traded on the Exchange. Prior to 

the Pilot, options that represented 

opening transactions in new series that 

could not meet a minimum value size 

could not trade via FLEX on the 

Exchange, but rather had to trade OTC. 

Extension of the Pilot enables such 

options to continue to trade on the 

Exchange. 

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 prior to 30 days from the date 

on which it was filed, or such shorter 

time as the Commission may designate, 

the proposed rule change has become 

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

of the Act 12 and Rule 19b–4(f)(6) 

thereunder.13

A proposed rule change filed under 

Rule 19b–4(f)(6) 14 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),15 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 Exchange 

may seamlessly continue its Pilot 

Program without interruption. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest.16 The Commission notes 

that waiving the 30-day operative delay 

would prevent the expiration of the 

Pilot Program on October 31, 2014, prior 

to the extension of the pilot program 

becoming operative. Therefore, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposal operative upon filing. 

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. 

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 SRPhlx-2014–69 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–2014–69. 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 the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

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65744 Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 

17 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. 73093 

(September 15, 2014), 79 FR 56421 (‘‘Notice’’). 

4Regular Trading Hours is defined in Rule 1.5(w). 

5Pre-Opening Session is defined in Rule 1.5(r). 

6BATS Book is defined in Rule 1.5(e). 

7Eligible Auction Order is defined in Rule 

11.23(a)(8). 

8Regular Hours Only is currently defined in Rule 

11.23(a)(22) but, as described infra, the Exchange 

has proposed to replace Rule 11.23(a)(22) with 

proposed Rule 11.9(b)(7). 

9NBBO is defined in BATS Rule 1.5(o). 

10Only orders designated RHO would be queued 

for Opening Process participation when submitted 

during the Pre-Opening Session; orders not so 

designated would continue to be executable 

immediately upon entry during the Pre-Opening 

Session. 

11See proposed Rule 11.9(b)(7). Proposed Rule 

11.9(b)(7) also would specify that any remaining 

portion of market RHO order will be cancelled 

immediately following any auction in which it is 

not executed. Id. The Exchange also has proposed 

to delete the word ‘‘limit’’ from Rule 11.9(b) 

because a RHO order can be either a limit order or 

a market order. See proposed Rule 11.9(b). 

12User is defined in Rule 1.5(cc). 

13See proposed Rule 11.24(a). 14See proposed Rule 11.24(a)(2). For the 

definitions of BATS’ order types, see Rule 11.9. 

15See proposed Rule 11.24(a)(2). 

16 Id. 

17 Id. 

18See proposed Rule 11.24(a). 

19See proposed Rule 11.24(a)(1). 

20 Id. 

21See proposed Rule 11.24(a)(3). 

22 Id. According to the Exchange, time priority is 

more appropriate for the Opening Process than 

price-time priority because the price of the order is 

not particularly important to the Opening Process, 

so long as the order is priced at or more aggressively 

than the midpoint of the NBBO. As such, the 

Exchange believes that there is no reason to reward 

a more aggressive order with priority in the 

Opening Process. See Notice, supra note 3, 79 FR 

at 56422. 

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– 

2014–69 and should be submitted on or 

before November 26, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–26232 Filed 11–4–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73473; File No. SR–BATS– 

2014–037] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Order Granting 

Approval of a Proposed Rule Change 

To Establish an Opening Process for 

Non-BATS-Listed Securities 

October 30, 2014. 

I. Introduction 

On September 3, 2014, BATS 

Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘BATS’’) 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 add new BATS 

Rule (‘‘Rule’’) 11.24, entitled ‘‘Opening 

Process for Non-BATS-Listed 

Securities,’’ and to make several 

corresponding changes, in order to 

modify the manner in which the 

Exchange opens trading for non-BATSlisted securities at the beginning of the 

day and after trading halts. The 

proposed rule change was published for 

comment in the Federal Register on 

September 19, 2014.3 The Commission 

did not receive any comments on the 

proposed rule change. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The Exchange has proposed to 

implement a process for opening trading 

in non-BATS-listed securities at the 

beginning of Regular Trading Hours 4

and re-opening trading in such 

securities following a trading halt. 

Currently, the Exchange accepts orders 

in non-BATS-listed securities during the 

Pre-Opening Session,5 and any such 

orders are immediately eligible for 

execution. Orders that are on the BATS 

Book 6 at the beginning of Regular 

Trading Hours remain on the BATS 

Book, subject to the User’s instructions, 

and trading continues into Regular 

Trading Hours without any transition 

period. Upon a halt, the Exchange 

currently cancels all orders on the BATS 

Book, except Eligible Auction Orders,7

and does not accept any orders until the 

halt is lifted. The time-in-force of 

Regular Hours Only (‘‘RHO’’) 8 that the 

Exchange currently offers is not 

available for non-BATS-listed securities 

(it is only available for BATS-listed 

securities). 

Under the proposal, the Exchange 

would amend its rules to allow orders 

in non-BATS-listed securities to be 

designated RHO, and would accept and 

queue any such orders during the PreOpening Session for execution at the 

midpoint of the NBBO 9 shortly after the 

beginning of Regular Trading Hours (the 

‘‘Opening Process’’).10 The Exchange 

also has proposed to implement a 

similar process for re-opening trading 

after a halt, suspension, or pause 

(collectively, a ‘‘Halt’’), under which a 

User’s orders would remain on the 

BATS Book unless the User has 

designated that they be cancelled upon 

a Halt (the ‘‘Re-Opening Process’’). 

Specifically, the Exchange has 

proposed to replace current Rule 

11.23(a)(22) with proposed new Rule 

11.9(b)(7), which would re-define RHO 

as a time-in-force modifier that applies 

to all securities, both BATS-listed and 

non-BATS-listed.11 Prior to the 

beginning of Regular Trading Hours, 

Users 12 that wish to participate in the 

Opening Process for a non-BATS-listed 

security may enter orders to buy or sell 

with a time in force of RHO.13 All orders 

that are marked as RHO may participate 

in the Opening Process except BATS 

Post Only Orders, Partial Post Only at 

Limit Orders, ISO orders not modified 

by Rule 11.24(a)(1) (as described below), 

and Minimum Quantity Orders.14 Limit 

orders with a Reserve Quantity could 

participate to the full extent of their 

displayed size and Reserve Quantity.15

Discretionary Orders could participate 

only up to their ranked price for buy 

orders or down to their ranked price for 

sell orders; the discretionary range of 

such orders would not be eligible for 

participation in the Opening Process.16

All Pegged Orders and Mid-Point Peg 

Orders would be eligible for execution 

in the Opening Process based on their 

pegged prices.17 Orders cancelled before 

the Opening Process and orders not 

designated RHO would not be eligible to 

participate in the Opening Process.18

Pursuant to proposed Rule 11.24(a)(1), 

during the period between 9:30 a.m. 

Eastern Time and the occurrence of the 

Opening Process, all non-RHO orders, 

subject to order instructions, and ISOs 

designated RHO may execute against 

eligible Pre-Opening Session contra-side 

interest resting in the BATS Book.19 The 

Exchange has proposed to convert any 

unexecuted portion of an ISO 

designated RHO entered during this 

period into a non-ISO and queue the 

order for participation in the Opening 

Process.20

The Exchange has proposed to 

implement the Opening Process shortly 

after the beginning of Regular Trading 

Hours, at which point the Exchange 

would attempt to execute all orders 

eligible for the Opening Process in a 

particular non-BATS-listed security at 

the midpoint of the NBBO.21 All such 

orders would be processed in time 

sequence beginning with the order with 

the oldest time stamp, and would be 

matched until there is no remaining 

volume or there is an order imbalance.22

All MTP modifiers would be ignored 

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