Document ID: SEC-2016-1333-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ PHLX, LLC
Posted Date: 2016-08-01T04:00Z

[Federal Register Volume 81, Number 147 (Monday, August 1, 2016)]
[Notices]
[Pages 50582-50584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18055]

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SECURITIES AND EXCHANGE COMMISSION

[Release No.34-78419; File No. SR-Phlx-2016-78]

Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx Rule 
754 (Employees' Discretion as to Customers' Accounts)

July 26, 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 July 14, 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 amend Rule 754 of the Phlx rules. The text 
of the proposed rule change is available on the Exchange's Web site at 
http://nasdaqphlx.cchwallstreet.com/, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

[[Page 50583]]

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 Rule 754, 
which deals with employees' discretion as to customers' accounts and 
retitle the rule ``Discretionary Power as to Customers' Accounts.'' As 
discussed below, the Exchange has determined that these rules are 
outdated and it is more appropriate to follow the corresponding FINRA 
rule on this subject matter. Consequently, the Exchange is proposing to 
amend Rule 754 in the Phlx rules.
    Rule 754 concerns employees' discretion as to customers' accounts. 
The rule requires that no member or member organization shall permit 
any of his or its employees or any employee of another member or member 
organization to exercise discretion in the handling of a transaction 
for a customer of such member organization and no member, member 
organization, partner, officer or stockholder therein shall delegate to 
any such employee any discretionary power vested by a customer in such 
member, organization, partner, officer, or stockholder, unless in 
either case the prior written authorization of the customer has been 
received and, if such discretionary authority runs, directly or by re-
delegation, to an employee of another member or member organization, 
the carrying organization must obtain the prior written consent of the 
employer of the individual authorized to exercise discretion. The rule 
also requires that a member, partner, or officer in the carrying 
organization shall approve and initial each discretionary order entered 
by an employee of such organization or of another member or member 
organization on the day the order is entered.
    Further, the provisions of the rule do not apply to discretion as 
to the price at which or the time when an order given by a customer for 
the purchase or sale of a definite amount of a specified security shall 
be executed.
    The Exchange believes that the updated language in FINRA Rule 2510 
would be more appropriate. The language in FINRA Rule 2510 is more 
comprehensive in that it also covers excessive transactions; the 
authorization and acceptance of accounts; and the approval and review 
of transactions for the benefit of customers. The text of the rule is 
available on the FINRA Web site.
    Furthermore, The Nasdaq Stock Market LLC (``NASDAQ'') references 
NASD Rule 2510 (which mirrors FINRA Rule 2510) in place of providing 
alternative language at NASDAQ Rule 2510, and substantially similar 
language is used by The New York Stock Exchange, Inc. (``NYSE'') at 
NYSE Rule 408. Therefore changing the rule as proposed would ensure 
consistency for market participants providing customer account 
statements to customers which would also benefit customers and avoid 
the potential for confusion.
    Finally, FINRA Rule 2510 has been updated more frequently over the 
last few years to address issues raised in response to market 
participant feedback. This feedback is from a broader market 
participant base than that which is just available to the Exchange, and 
so making direct reference to this rule is likely to better serve 
market participants, customers and investors as a whole on an ongoing 
basis.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\3\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\4\ 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, 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.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed changes are consistent with just 
and equitable principles of trade because they update and delete 
outdated and potentially confusing rule text. Updating Rule 754 will 
lead to a more comprehensive rule, which ensures consistency across 
markets and products, and lends clarity, consistency and certainty to 
market participants, customers and investors alike. By referencing an 
existing FINRA rule, the Exchange is also future proofing the rule so 
that changes made to it to address a wider range of market feedback 
than that which is just available to the Exchange will be taken into 
account automatically and consistently.
B. Self-Regulatory Organization's Statement on Burden on Competition
    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. Rather it is designed to promote competition among exchanges 
by removing archaic rules in comparison to the rules of other 
exchanges. Last, the proposed changes promote clarity in the 
application of the Exchange's rule by updating the rule to bring it in 
line with other similar industry rules and eliminating unneeded rule 
text.
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 \5\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\6\
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    \5\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \6\ 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

[[Page 50584]]

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-2016-78 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-2016-78. 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 20549-1090, 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 submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2016-78 and should be 
submitted on or before August 22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18055 Filed 7-29-16; 8:45 am]
 BILLING CODE 8011-01-P