Federal Register / Vol. 82, No. 196 / Thursday, October 12, 2017 / Notices 47585 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 81409 

(August 16, 2017), 82 FR 39925 (‘‘Notice’’). 

5An SQT is an ROT who has received permission 

from the Exchange to generate and submit option 

quotations electronically in options to which such 

SQT is assigned. An SQT may only submit such 

quotations while such SQT is physically present on 

the floor of the Exchange. An SQT may only trade 

in a market making capacity in classes of options 

in which the SQT is assigned. See Phlx Rule 

1014(b)(ii)(A). 

6An RSQT is an ROT that is a member or member 

organization 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. See 

Phlx Rule 1014(b)(ii)(B). 

7A non-SQT ROT is an ROT who is neither an 

SQT nor an RSQT. See Phlx Rule 1014(b)(ii)(C). The 

Exchange notes that by definition, non-SQT ROTs 

do not ‘‘stream’’ quotes, meaning send quotes 

electronically to the Exchange; instead, pursuant to 

Commentary .18 of Phlx Rule 1014, they submit 

limit orders electronically and respond to Floor 

Brokers verbally. See Notice, supra note 4, at 39926. 

8Transactions executed in the trading crowd 

where the contra-side is an ROT would continue to 

be ineligible to satisfy this quarterly trading 

requirement. See Notice, supra note 4, at 39927. 

9See Phlx Rule 1014.03. 

10See Phlx Rule 1014.01. 

11See Notice, supra note 4, at 39927. 

12See id. The Exchange states that it is not 

seeking to burden these market participants by 

limiting the type of qualifying transactions eligible 

to meet the requirement. See id. 

13 15 U.S.C. 78f(b). 

14 In approving these proposed rule changes, the 

Commission has considered the proposed rules’ 

impact on efficiency, competition, and capital 

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

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

16See Notice, supra note 4, at 39927. 

17See id. at 39926 and 39928. 

18See id. at 39928. 

19See id. at 39927 and 39928. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81826; File No. SR–Phlx– 

2017–67] 

Self-Regulatory Organizations; 

NASDAQ PHLX LLC; Order Approving 

a Proposed Rule Change Relating to 

Quarterly Trading Requirements 

October 5, 2017. 

I. Introduction 

On August 3, 2017, NASDAQ PHLX 

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

the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’),2 and 

Rule 19b–4 thereunder,3 a proposed rule 

change regarding quarterly trading 

requirements applicable to Registered 

Options Traders (‘‘ROTs’’). The 

proposed rule change was published for 

comment in the Federal Register on 

August 22, 2017.4 The Commission 

received no comments on the proposal. 

This order approves the proposed rule 

change. 

II. Description of the Proposal 

The Exchange proposes two 

amendments to a quarterly trading 

requirement applicable to certain ROTs. 

ROTs can be either Streaming Quote 

Traders 5 (‘‘SQTs’’), Remote SQTs 6

(‘‘RSQTs’’) or non-SQT ROTs.7

Currently, Phlx Rule 1014, Commentary 

.01 requires SQTs and non-SQT ROTs, 

but not RSQTs, to trade 1,000 contracts 

and 300 transactions on the Exchange 

each quarter (excluding transactions 

executed in the trading crowd where the 

contra-side is an ROT). The Exchange 

proposes to: (1) Apply the quarterly 

trading requirement only to non-SQT 

ROTs (and no longer to SQTs); and (2) 

add a new alternative standard to meet 

this requirement. Specifically, the 

Exchange proposes to amend Phlx Rule 

1014, Commentary .01 to require only a 

non-SQT ROT to trade either (a) 1,000 

contracts and 300 transactions (the 

‘‘1000/300 Alternative,’’ which is the 

current requirement) or (b) 10,000 

contracts and 100 transactions (the 

‘‘New Alternative’’), on the Exchange 

each quarter.8 The Exchange notes that, 

similar to the current 1000/300 

Alternative, the New Alternative is a 

pure trading requirement, not limited, 

like other trading requirements, to 

assigned options 9 and in person 

trading.10 Accordingly, the Exchange 

proposes that the New Alternative 

requirement can be fulfilled with trades 

and contracts that are not in assigned 

options and not executed in person, 

although the existing trading 

requirements respecting ‘‘in assigned’’ 

options and ‘‘in person’’ trading must 

still be met.11 In addition, the Exchange 

proposes that limit orders can continue 

to be counted toward either minimum 

trading requirement.12

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of 

Section 6 of the Act 13 and the rules and 

regulations thereunder applicable to the 

Exchange.14 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,15 which requires, 

among other things, that the rules of an 

exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, 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. 

The Commission believes that the 

Exchange’s proposal to apply the 

quarterly trading requirement only to 

non-SQT ROTs is consistent with the 

Act. The Exchange has noted that SQTs 

are subject to continuous quoting 

requirements when trading 

electronically in their assigned series.16

In contrast, the Exchange represents that 

non-SQT ROTs are not similarly subject 

to continuous quoting obligations as 

they do not electronically stream quotes 

into the Exchange and may only quote 

verbally in response to Floor Brokers 

representing orders in the trading crowd 

or submit limit orders electronically.17

Accordingly, the Exchange believes that, 

because SQTs are already subject to 

continuous quoting obligations, it is 

appropriate to exclude them from the 

quarterly trading requirement and to 

impose obligations in a manner 

consistent with their business model.18

The Commission therefore believes that 

this aspect of the proposal is reasonably 

designed to preserve the market making 

function performed by ROTs and to 

ensure that ROTs continue to provide 

adequate liquidity to the Exchange, 

while applying standards that reflect the 

differing operating models of SQTs and 

non-SQT ROTs. Accordingly, the 

Commission believes that the 

Exchange’s proposal to amend Phlx 

Rule 1014, Commentary .01 to apply the 

quarterly trading requirement only to 

non-SQT ROTs is consistent with 

Section 6(b)(5) of the Act in that it is 

reasonably designed to help promote 

just and equitable principles of trade, 

and to protect investors and the public 

interest, and is not designed to permit 

unfair discrimination. 

The Commission also believes that the 

Exchange’s proposed amendment to 

create the New Alternative quarterly 

trading requirement is consistent with 

the Act. The Exchange represents that in 

recent years it has observed lower 

trading volumes on its floor, as well as 

increased use of mechanisms such as 

the Qualified Contingent Cross (‘‘QCC’’) 

mechanism for larger orders, in which 

non-SQT ROTs may not submit 

responses.19 The Exchange notes that it 

has also become difficult for non-SQT 

ROTs to meet the 1000/300 Alternative 

because non-SQT ROTs do not stream 

quotes electronically, but instead quote 

verbally in response to Floor Brokers 

representing orders in the trading 


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47586 Federal Register / Vol. 82, No. 196 / Thursday, October 12, 2017 / Notices 

20See id. at 39928. 

21See id. at 39927 and 39928. 

22See id. at 39927. 

23 15 U.S.C. 78s(b)(2). 

24 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4Unless otherwise specified, the capitalized 

terms used herein have the same meanings as set 

forth in the Plan. 

crowd, where they cannot control the 

size or frequency of trading interest.20

The Exchange asserts that the New 

Alternative serves as a reasonable 

standard by which to assess the level of 

liquidity provided by non-SQT ROTs, 

albeit with a focus on an additional 

liquidity metric of fewer trades that are 

larger in size.21 The Exchange states 

that, since 100 transactions is only 33% 

of the current requirement, it proposes 

to increase the total number of executed 

contracts requirement in the New 

Alternative by 900 percent to 10,000 

contracts, so as not to dilute the overall 

trading requirement.22 The Commission 

therefore believes that the Exchange’s 

proposal should continue to encourage 

active market making and thereby 

promote the provision of liquidity to the 

market. The Commission also notes that 

non-SQT ROTs continue to have the 

option of complying with the current 

requirement (i.e., the 1000/300 

Alternative) if they so choose. 

Accordingly, the Commission believes 

that the Exchange’s proposed 

amendments to create the New 

Alternative standard to satisfy the 

quarterly trading requirement is 

reasonably designed to preserve the 

market making function performed by 

non-SQT ROTs and thereby serves to 

maintain a fair and orderly market and 

should remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system and help protect investors and 

the public interest, consistent with 

Section 6(b)(5) of the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 23 that the 

proposed rule change (SR–Phlx–2017– 

67), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–21996 Filed 10–11–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81824; File No. SR–FINRA– 

2017–031] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend FINRA Rule 

6121 To Reflect Recent Amendments 

to the Regulation NMS Plan To 

Address Extraordinary Market 

Volatility 

October 5, 2017. 

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 29, 2017, Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared by FINRA. FINRA 

has designated the proposed rule change 

as constituting a ‘‘non-controversial’’ 

rule change under paragraph (f)(6) of 

Rule 19b–4 under the Act,3 which 

renders the proposal effective upon 

receipt of this filing by 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 

FINRA is proposing to amend FINRA 

Rule 6121 (Trading Halts Due to 

Extraordinary Market Volatility) to 

reflect recent amendments to the 

Regulation NMS Plan to Address 

Extraordinary Volatility (‘‘Plan’’) 

regarding the resumption of trading in a 

security subject to the Plan.4

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA 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. FINRA 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 

FINRA Rule 6121.01 (Resumption of 

Trading in Securities Subject to the 

Regulation NMS Plan to Address 

Extraordinary Market Volatility) 

(‘‘Rule’’) addresses the circumstances 

under which a member may resume 

trading otherwise than on an exchange 

following a Trading Pause or Regulatory 

Halt in an NMS Stock that is subject to 

the Plan. 

The Rule currently provides that, 

following a Trading Pause or Regulatory 

Halt in an NMS Stock that is subject to 

the Plan, a member may resume trading 

otherwise than on an exchange if 

trading has commenced on the Primary 

Listing Exchange (or on another national 

securities exchange in the case of the 

resumption of trading following a tenminute Trading Pause) and either: (1) 

The member has received the Price 

Bands from the Processor; or (2) if 

immediately following a Trading Pause 

or Regulatory Halt the member has not 

yet received the Price Bands from the 

Processor, the member has calculated an 

upper price band and lower price band 

consistent with the methodology 

provided for in Section V of the Plan 

and ensures that any transactions prior 

to the receipt of the Price Bands from 

the Processor are within the ranges 

provided for pursuant to the Plan. In 

addition, the Rule provides that, where 

the Primary Listing Exchange does not 

reopen for trading at the end of a tenminute Trading Pause (and has issued 

notice that it cannot resume trading for 

a reason other than a significant 

imbalance), a member may resume 

trading otherwise than on an exchange 

if trading has commenced in such NMS 

Stock on at least one other national 

securities exchange. 

On January 19, 2017, the Commission 

approved the Twelfth Amendment to 

the Plan, which provides, among other 

things, that a Trading Pause will 

continue until the Primary Listing 

Exchange has reopened trading using its 

established reopening procedures, even 

if such reopening is more than 10 

minutes after the beginning of a Trading 


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