Document ID: SEC-2014-1668-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2014-10-03T04:00Z

[Federal Register Volume 79, Number 192 (Friday, October 3, 2014)]
[Notices]
[Pages 59874-59876]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23569]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73246; File No. SR-Phlx-2014-59]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Delay the 
Implementation Period of the New Options Floor Broker Management System 
Until November 3, 2014

September 29, 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 19, 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.
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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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to extend the implementation rollout of its 
new Options Floor Broker Management System.
    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 purpose of the proposal is to extend the rollout of the 
Exchange's enhancements to the Options Floor Broker Management System 
(``FBMS''). Today, FBMS enables Floor Brokers and/or their employees to 
enter, route, and report transactions stemming from options orders 
received on the Exchange. FBMS also establishes an electronic audit 
trail for options orders represented by Floor Brokers on the Exchange. 
Floor Brokers can use FBMS to submit orders to Phlx XL, rather than 
executing the orders in the trading crowd.
    With the new FBMS, all options transactions on the Exchange 
involving at least one Floor Broker are required to be executed through 
FBMS. In connection with order execution, the Exchange allows FBMS to 
execute two-sided orders entered by Floor Brokers, including multi-leg 
orders up to 15 legs, after the Floor Broker has represented the orders 
in the trading crowd. FBMS also provides Floor Brokers with an enhanced 
functionality called the complex calculator that calculates and 
displays a suggested price of each individual component of a multi-leg 
order, up to 15 legs, submitted on a net debit or credit basis.
    The Exchange received approval to implement the FBMS enhancements 
as of June 1, 2013,\3\ and delayed implementation until July 2013,\4\ 
until September 2013,\5\ until December 2013,\6\ until March 2014,\7\ 
and again until September 1, 2014.\8\ The Exchange made a number of 
improvements intended to improve the performance of the new system.
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    \3\ Securities Exchange Act Release No. 69471 (April 29, 2013), 
78 FR 26096 (May 3, 2013) (SR-Phlx-2013-09).
    \4\ Securities Exchange Act Release No. 69811 (June 20, 2013), 
78 FR 38422 (June 26, 2013) (SR-Phlx-2013-67).
    \5\ Securities Exchange Act Release No. 70141 (August 8, 2013), 
78 FR 49565 (August 14, 2013) (SR-Phlx-2013-83).
    \6\ Securities Exchange Act Release No. 70629 (October 8, 2013), 
78 FR 62852 (October 22, 2013) (SR-Phlx-2013-100).
    \7\ Securities Exchange Act Release No. 71212 (December 31, 
2013), 79 FR 888 (January 7, 2014) (SR-Phlx-2013-129).
    \8\ Securities Exchange Act Release No. 72135 (May 9, 2014), 79 
FR 27966 (May 15, 2014) (SR-Phlx-2014-33).
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    Implementation began on March 7, 2014. In its most recent filing 
delaying implementation,\9\ the Exchange stated that the implementation 
period would be up to September 1, 2014, during which the new FBMS 
enhancements and related rules would operate along with the existing 
FBMS and rules.\10\ At this time, the Exchange needs additional time to 
complete the implementation because of technology issues with the new 
system. The new FBMS is available to all users (Floor Brokers) and in 
all options. Nevertheless, the Exchange believes that the Floor Brokers 
need additional time to familiarize themselves with the new features of 
FBMS, based on that ongoing experience, offer input regarding system 
performance, and provide the Exchange with the opportunity to address 
performance improvements. Given some technology issues that the 
Exchange has encountered during the implementation period, the delay is 
needed to allow Floor Brokers additional time to adapt to the new 
system as the Exchange works to improve the performance of the new 
system. As the performance issues are resolved, the delay will allow 
the Floor Brokers to migrate their business in a prudent manner. The 
delay is not as a result of major technology changes from the original 
proposal and no rule changes are being made; rather, the Exchange 
continues to work to, generally, make the system more user-friendly and 
provide more useful interfaces for the ultimate user, the Floor Broker.
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    \9\ Id.
    \10\ In the original filing, the Exchange stated its intent to 
implement these enhancements with a trial period of two to four 
weeks. Id.
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    Accordingly, the Exchange seeks an additional two month period 
(until November 3, 2014) to be able to continue the implementation 
rollout; the Exchange announced the specific date on which the trial 
period will end and the old FBMS will no longer be available in advance 
through an Options

[[Page 59875]]

Trader Alert. During the additional time period, the Exchange will 
continue to encourage Floor Brokers to use the new FBMS in order to 
help them become more familiar with the new features of FBMS.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ 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 enhancing FBMS to make the Exchange's markets more 
efficient, to the benefit of the investing public. Although the 
Exchange needs additional time to finalize the implementation rollout, 
this time period is expected to be limited, depending on user input, 
and will involve advance notice to the Exchange membership.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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. The Exchange continues to 
believe, as it stated when proposing these enhancements, that these 
enhancements to FBMS should result in the Exchange's trading floor 
operating in a more efficient way, which should help it compete with 
other floor-based exchanges and help the Exchange's Floor Brokers 
compete with floor brokers on other options exchanges.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    A written comment was received in support of the proposal.\13\ The 
Exchange did not solicit comments. The Comment Letter requested the 
Commission and Phlx postpone the implementation rollout of the new FBMS 
from September 1, 2014 to a later date. The Comment Letter alleges that 
the Floor Brokers did not have proper notice of the end of the 
implementation period. Also, the Comment Letter requests that the new 
FBMS be postponed to ensure the public outcry system is maintained. 
Consistent with what the Comment Letter requests, the Exchange is 
filing this delay of implementation to extend the implementation 
rollout of its new FBMS for an additional two month period. The 
Exchange has provided written notice on numerous occasions.\14\ With 
respect to preserving the open outcry system, the Exchange notes that 
under the new FBMS orders will continue to be represented in the 
trading crowd; order exposure has not been eliminated. The Exchange is 
merely modernizing how orders are executed and reported to support the 
maintenance of an accurate audit trail.
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    \13\ See letter from various Phlx Floor Brokers to Mary Jo 
White, Chairwoman of the Securities and Exchange Commission, dated 
August 28, 2014 (``Comment Letter'').
    \14\ See e.g. Options Trader Alerts 2014-26 and 2014-5.
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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) of the Act \15\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing.\17\ 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.\18\ The Exchange has requested that the Commission 
waive the 30-day operative delay so that the Exchange can implement the 
enhancements once they are ready from a technology perspective.
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    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ Id.
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    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 clarify when the delayed implementation of the FBMS 
will be effective and operative immediately. In addition, because the 
proposal only delays the implementation date of the FBMS and does not 
make any additional changes to the FBMS itself, it does not raise any 
novel regulatory issues. The Commission notes that the implementation 
period was scheduled to expire on September 1, 2014, when the existing 
FMBS would cease to operate and the new FBMS would be fully 
implemented. However, Phlx has indicated that it needs additional time 
to continue the implementation rollout of the new FMBS. Therefore, the 
Commission designates the proposal operative upon filing.\19\
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    \19\ 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: (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.\20\ If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule change should be approved or disapproved.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(C).
    \21\ Id.
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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-2014-59 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-2014-59. 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

[[Page 59876]]

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-2014-59, and should be 
submitted on or before October 24, 2014.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23569 Filed 10-2-14; 8:45 am]
BILLING CODE 8011-01-P