Document ID: SEC-2016-0129-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2016-01-25T05:00Z

[Federal Register Volume 81, Number 15 (Monday, January 25, 2016)]
[Notices]
[Pages 4074-4076]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01307]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76929; File No. SR-Phlx-2016-03]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Make 
Nonsubstantive, Clarifying Amendments to Several Rules Relating to the 
Clearing of Exchange Options Transactions

January 19, 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 January 5, 2016, 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, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to make nonsubstantive, clarifying amendments 
to several rules 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

[[Page 4075]]

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 nonsubstantive amendments to 
four rules relating to options clearing responsibilities of members. 
The changes are intended to correct minor drafting errors, and to 
update and improve readability of the rules. The Exchange is also 
proposing to extend applicability of a rule concerning violations of 
The Options Clearing Corporation (``OCC'') rules to off-floor 
transactions as well as to on-floor transactions.
    Phlx Rule 1046, Clearing Arrangements, currently provides that a 
member or member organization conducting an options business must 
either be: (i) A clearing member of OCC; or (ii) have a clearing 
arrangement with an Exchange member organization that is a clearing 
member of OCC. The Exchange is revising the rule to simply state that a 
member or member organization conducting an options business must be a 
Clearing Member or have a clearing arrangement with a Clearing Member. 
The revision simply makes use of the existing defined term ``Clearing 
Member'' \3\ to improve readability. No change in meaning is intended.
---------------------------------------------------------------------------

    \3\ Exchange Rule 1000(b)(3) defines ``Clearing Member'' as ``a 
member organization which has been admitted to membership in the 
Options Clearing Corporation pursuant to the provisions of the rules 
of the Options Clearing Corporation.''
---------------------------------------------------------------------------

    Phlx Rule 1050, Violation Of By-Laws And Rules Of Options Clearing 
Corporation, currently provides for Exchange penalties in the event a 
member, member organization or director of a member organization that 
is a corporation ``shall be adjudged guilty in a proceeding under 
Article XVIII of the by-laws of a violation of any provision of the 
rules of the Options Clearing Corporation with respect to the 
reporting, clearance or settlement of any transaction on the options 
trading floor of this Corporation. . . . '' The Exchange is deleting 
the reference to a proceeding under Article XVIII of the by-laws, which 
the Exchange deleted in 2011,\4\ and is replacing it with a more 
general and accurate reference to ``an Exchange disciplinary 
proceeding.'' The Exchange is also replacing the reference to ``any 
transaction on the options trading floor of this Corporation'' with a 
reference to ``any Exchange options transaction'' in view of today's 
electronic options trading which is not limited to the trading floor 
and the fact that the Exchange is not otherwise referred to in the 
rulebook as ``this Corporation.'' The Exchange did not amend Rule 1050 
when it introduced off-floor trading, but is doing so now because 
whether a transaction takes place on-floor or off-floor has no bearing 
on the significance of any violation of the OCC rules. The Exchange has 
determined that there is no reason for off-floor transactions to be 
excluded from a requirement that transactions must be conducted in 
accordance with OCC rules. The new rule should ensure that off-floor 
transactions as well as on-floor transactions are conducted in a manner 
consistent with OCC rules.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 63981 (February 25, 
2011), 76 FR 12180 (March 4, 2011) (SR-Phlx-2011-13) (a rule 
proposal to, among other things, amend the Limited Liability Company 
Agreement and By-Laws to substantially conform to The NASDAQ Stock 
Market's Second Amended Limited Liability Company Agreement and By-
Laws).
---------------------------------------------------------------------------

    Phlx Rule 1052, Responsibility Of Clearing Options Members For 
Exchange Options Transactions, currently provides for the clearing of 
transactions of non-Clearing Members by a ``member organization which 
is a clearing member of the Options Clearing Corporation. . . .'' The 
Exchange again is replacing this quoted language with the more succinct 
defined term ``Clearing Member.'' \5\ The word ``Options'' is deleted 
from the rule's title as superfluous.
---------------------------------------------------------------------------

    \5\ Rule 1052 currently provides that every member organization 
which is a clearing member of the Options Clearing Corporation shall 
be responsible for the clearance of the Exchange options 
transactions of such member organization and of each member or 
member organization who gives up the name of such clearing member in 
an Exchange options transaction, provided the clearing member has 
authorized such member or member organization to give up its name 
with respect to Exchange options transactions.
---------------------------------------------------------------------------

    Finally, Rule 1054, Verification Of Trades And Reconciliation Of 
Uncompared Trades, imposes certain trade verification and 
reconciliation obligations on any ``member organization which is a 
clearing member of the Options Clearing Corporation.'' Once again the 
Exchange is replacing the cumbersome language in quotation marks with 
the succinct, defined term ``Clearing Member.'' The change is made 
simply to improve readability.
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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    With respect to Rules 1046, 1052 and 1054, employing the defined 
term ``Clearing Member'' rather than ``a clearing member of the Options 
Clearing Corporation'' shortens the rule and makes it more readable. 
With respect to Rule 1050, deletion of a reference to a nonexistent 
provision of the Exchange's bylaws and replacing it with a general 
reference to the Exchange's disciplinary proceedings should make the 
rule more understandable. Additionally with respect to Rule 1050, 
extending the applicability of the rule to off-floor transactions as 
well as to on-floor transactions should incentivize those who engage in 
off-floor transactions to comply with OCC rules, which is in the public 
interest.

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

    The Exchange does not believe that the 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. Additionally, 
Rule 1050, as amended, will apply to members transacting off the 
trading floor as well as those transacting on the trading floor, which 
should reduce a burden on competition on members who transact primarily 
on the trading floor and also on members of other markets whose rules 
require compliance with OCC rules in connection with transactions not 
occurring on a trading floor.

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.

[[Page 4076]]

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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-2016-03 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-2016-03. 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 such 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-2016-03, and should be 
submitted on or before February 16, 2016.
---------------------------------------------------------------------------

    \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. 2016-01307 Filed 1-22-16; 8:45 am]
BILLING CODE 8011-01-P