Document ID: SEC-2016-1070-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ PHLX, LLC
Posted Date: 2016-06-22T04:00Z

[Federal Register Volume 81, Number 120 (Wednesday, June 22, 2016)]
[Notices]
[Pages 40734-40736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14715]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78091; File No. SR-Phlx-2016-41]

Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Make Clarifying 
Amendments to and Remove Obsolete Language From Rules 1053 and 1056

June 16, 2016.
    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 June 8, 2016, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') 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 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 make clarifying amendments to and remove 
obsolete language from Exchange Rules 1053, Filing of Trade 
Information, and 1056, Maintaining Office and Filing Signatures, 
relating to clearing of Exchange options transactions.
    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
    The Exchange proposes to make minor amendments to Rules 1053 and 
Rule 1056 relating to options clearing responsibilities of members. The 
changes are intended to update and improve readability of the rules by 
deleting archaic and internally inconsistent provisions.
    Phlx Rule 1053 currently provides that member organizations which 
are clearing members are responsible for supplying, ``at the time of 
execution'' certain trade information to the Exchange covering each 
Exchange options transactions ``effected during said business day'' for 
which such clearing member is responsible.\3\ The Exchange is deleting 
the phrase ``effected during said business day'' because the word 
``said'' has no antecedent in the rule and is therefore meaningless. As 
written the sentence is therefore awkward and illogical. The phrase 
being deleted adds nothing to the rule and stands in the way of 
comprehension of the rule's meaning.
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    \3\ Rule 1053 provides that ``[a]t the time of execution, each 
member organization which is a clearing member of the Options 
Clearing Corporation shall be responsible for supplying to the 
Exchange trade information in a form prescribed by the Exchange, 
covering each Exchange options transaction effected during said 
business day for which such clearing member is responsible. The 
trade information shall show for each transaction (i) the identity 
of the purchasing clearing member and the writing clearing member 
given up at the time of execution, (ii) the underlying stock, 
Exchange-Traded Fund Share or foreign currency, as the case may be, 
(iii) the exercise price, (iv) the expiration month, (v) the number 
of option contracts, (vi) the premium per share of the underlying 
stock or the premium per unit of the underlying foreign currency, 
(vii) whether a purchase or a writing transaction, (viii) except for 
a transaction in a specialist's account, whether an opening or 
closing, (ix) the identity of the account of the clearing member in 
which the transaction was effected, (x) if a closing writing 
transaction, whether a certificate will be surrendered, (xi) whether 
a put or call, and (xii) such other information as may be required 
by the Exchange. Each member or member organization which is a 
clearing member of the Options Clearing Corporation shall be 
responsible to the Exchange in respect of all trade information 
filed with the Exchange on such form prescribed by the Exchange.''
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    The Exchange is also deleting obsolete language following clause 
(x) in Rule 1053 which requires the clearing member to supply to the 
Exchange information as to whether a certificate will be surrendered if 
the transaction is a closing writing transaction. The deleted text is 
replaced with the word ``Reserved''. At one time, the By-Laws and the 
Rules of The Options Clearing Corporation (``OCC'') provided for the 
issuance of physical certificates in respect of options contracts at 
the request of OCC participants. Certificates could be issued in 
respect of any option contract included in a long position in a 
customer's account to evidence a clearing member's position as the 
holder of one or more options of a specified type (put or call) in a 
specified options series. The certificate was nonnegotiable and 
conferred no separate legal rights on the holder. Certificated options 
contracts could only be exercised or closed out upon the surrender of 
the physical certificate. Until the certificate was surrendered, any 
attempt by a clearing member to write a closing options transaction 
with respect to a corresponding long certificated options position was 
considered by OCC to be an opening transaction subject to OCC's margin 
requirements on short positions. In 1982, OCC eliminated all provisions 
in its By-Laws and Rules providing for, or referring to certificates, 
after concluding that certificates were unnecessary and imposed 
administrative burdens and costs on OCC and on clearing members.\4\ 
Because OCC no longer issues these certificates, Phlx Rule 1053(x) is 
obsolete.
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    \4\ See Securities Exchange Act Release No. 19064 (September 20, 
1982), 47 FR 42483 (September 27, 1982) (order approving SR-OCC-82-
15). The Exchange notes that the Chicago Board Options Exchange 
(``CBOE'') Rule 6.51(d) once contained the same language as Exchange 
Rule 1053(x). See Securities Exchange Act Release No. 16618 (March 
3, 1980), 45 FR 15352 (March 10, 1980). That language no longer 
appears in the CBOE rulebook.
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    Phlx Rule 1056 currently requires clearing members to maintain an 
office at a location approved by the Exchange for the purpose of 
comparing Exchange options transactions.\5\ The Exchange is

[[Page 40735]]

deleting the Exchange approval requirement because it has determined 
that the location of the clearing member's office is of no importance 
to the Exchange. The Exchange is also deleting the last sentence of the 
rule which requires that each member organization shall file with the 
Exchange a certified list of signatures of its representatives who are 
authorized to sign instruments and transact all business necessary for 
conducting comparison of Exchange options transactions. Although 
certain Exchange forms and procedures continue to require manual 
signatures, the Exchange does not believe the burdens of constantly 
updating the list of certified signatures is justified by any marginal 
benefit such a list may provide to Exchange staff who are not in any 
case handwriting experts trained to ascertain the validity of 
signatures.
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    \5\ Rule 1056 provides that ``[e]very member organization which 
is a clearing member of the Options Clearing Corporation shall 
maintain an office at a location approved by the Exchange for the 
purpose of comparing Exchange options transactions. Any such member 
organization may use for the purpose of these Rules the office of 
another member organization which is a clearing member of the 
Options Clearing Corporation provided such use is pursuant to a 
written agreement approved by the Exchange. There shall be present 
at such office, between such hours as the Exchange shall from time 
to time fix, on every business day a representative of the member 
organization authorized to sign in the name of the member 
organization all instruments and transact all business requisite in 
connection with the comparison of Exchange options transactions. 
Each such member organization shall file with the Exchange, in such 
form as the Exchange shall prescribe, a certified list of signatures 
of its representatives who are authorized to sign instruments and 
transact all business necessary for conducting comparison of 
Exchange options transactions.''
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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, 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, 
by improving the accuracy and readability of the amended rules.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    With respect to Rules 1053, deleting the illogical reference to 
``effected during said business day'' makes the rule understandable. 
Deleting an obsolete reference to a certificate which no longer has any 
meaning also eliminates a barrier to comprehension of that rule. With 
respect to Rule 1056, deleting the Exchange approval requirement 
eliminates a rule imposing an unnecessary administrative burden on the 
Exchange, given that the Exchange is indifferent in any event as to a 
clearing member's office location, thereby perfecting the mechanism of 
a free and open market and a national market system. Additionally, 
deleting the requirement that the Exchange be provided with a certified 
list of signatures eliminates another rule imposing an unnecessary 
administrative burden from the rulebook, streamlining the rulebook by 
removing a requirement whose marginal benefit, if any, is not justified 
by its cost. The Exchange notes that at least two other options 
exchanges, NASDAQ BX and NASDAQ Options Market, do not impose a similar 
``certified list of signatures'' requirement.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that clarifying amendments proposed 
herein will impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act inasmuch as they 
simply improve the accuracy and readability of the rules and delete 
unnecessary administrative burdens. As noted above with respect to the 
certified list of signatures requirement, at least two other options 
exchanges, NASDAQ BX and NASDAQ Options Market, do not impose a similar 
requirement. Eliminating the requirement on Phlx should therefore 
reduce a burden on competition.

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 foregoing 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, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \9\ 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.
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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: (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 SR-Phlx-2016-41 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-2016-41. 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 received will be posted without change; the Commission does 
not edit personal identifying information from

[[Page 40736]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
Phlx-2016-41 and should be submitted on or before July 13, 2016.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14715 Filed 6-21-16; 8:45 am]
 BILLING CODE 8011-01-P