Document ID: SEC-2016-1977-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ PHLX, LLC
Posted Date: 2016-11-14T05:00Z

[Federal Register Volume 81, Number 219 (Monday, November 14, 2016)]
[Notices]
[Pages 79546-79548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27234]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79249; File No. SR-Phlx-2016-86]

Self-Regulatory Organizations; NASDAQ PHLX LLC; Order Granting 
Approval of Proposed Rule Change To Delete or Amend Rule Language 
Relating to Specialists and Registered Options Traders

November 7, 2016.

I. Introduction

    On August 12, 2016, NASDAQ PHLX LLC (``Exchange'' or ``Phlx'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to delete or amend its rules relating to 
specialists and Registered Options Traders

[[Page 79547]]

(``ROTs''). The proposed rule change was published for comment in the 
Federal Register on August 31, 2016.\3\ On October 12, 2016, pursuant 
to Section 19(b)(2) of the Act,\4\ the Commission designated a longer 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change.\5\ The Commission received no 
comment letters on the proposed rule change. This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78680 (August 25, 
2016), 81 FR 60110 (August 31, 2016) (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 79087, 81 FR 71776 
(October 18, 2016). The Commission designated a longer period within 
which to take action on the proposed rule change and designated 
November 29, 2016, as the date by which it should approve, 
disapprove, or institute proceedings to determine whether to 
disapprove the proposed rule change.
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II. Description of the Proposal

    Phlx Rules 1022(b) and (c) currently require each specialist \6\ or 
ROT \7\ to provide to the Exchange reports of options and orders in a 
manner prescribed by the Exchange. Phlx Rule 1022(b) requires each 
specialist or ROT to report opening positions and each purchase and 
sale in each option in which the specialist or ROT is registered for 
each account reported pursuant to Phlx Rule 1022.\8\ Phlx Rule 1022(c) 
requires each specialist or ROT to report every order entered by the 
specialist or ROT for the purchase or sale of a security underlying any 
stock or Exchange-Traded Fund Share options contract traded on the 
Exchange or a security convertible into or exchangeable for such 
underlying security, as well as opening and closing positions in all 
such securities held in each account reported pursuant to Phlx Rule 
1022.\9\ The Exchange proposes to delete Phlx Rules 1022(b) and (c). 
The Exchange represents that the submission of these reports by 
specialists and ROTs is no longer necessary because most of the 
information in the reports is available to the Exchange from other 
sources.\10\
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    \6\ A ``specialist'' is an Exchange member who is registered as 
an options specialist pursuant to Phlx Rule 1020(a). Specialists are 
subject to quoting and registration obligations set forth in Phlx 
Rules 1014(b), 1020 and 1080.02.
    \7\ A ``ROT'' is defined in Phlx Rule 1014(b) as a regular 
member or a foreign currency options participant of the Exchange 
located on the trading floor who has received permission from the 
Exchange to trade in options for his own account. For the purposes 
of Phlx Rule 1014, the term ``ROT'' includes Streaming Quote Traders 
and Remote Streaming Quote Traders.
    \8\ See Notice, supra note 3, at 60110. The report is required 
to designate the time and type of tick at which such transaction was 
effected.
    \9\ See id. The report pertaining to orders must include the 
terms of each order, identification of the brokerage firms through 
which the orders were entered, the times of entry or cancellation, 
the times reports of executions were received and, if all or part of 
the order was executed, the quantity and execution price.
    \10\ See id. The Exchange represents that the information 
referred to in Phlx Rule 1022(b) is available from the Options 
Clearing Corporation and that much of the information referred to in 
Phlx Rule 1022(c) is available in the Intermarket Surveillance Group 
Equity Audit Trail.
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    Phlx Rule 1036(a) currently requires every limited partner, 
approved person, and every party who is affiliated with a specialist 
member organization to agree, in a stipulation approved by the 
Exchange, not to violate any Exchange rule or cause a specialist or a 
specialist member organization to violate these or any other rules 
relating to specialists. The Exchange proposes to delete Phlx Rule 
1036(a). The Exchange represents that the violation of a stipulation 
would have provided the Exchange with a separate basis for proceeding 
against the provider of the stipulation in the event of an Exchange 
rule violation.\11\ The Exchange believes that the stipulations are no 
longer necessary for that purpose and that the burden of collecting 
stipulations outweighs any benefits from the rule.\12\
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    \11\ See id.
    \12\ See id.
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    Phlx Rule 1036(b) provides that no issuer, or parent or subsidiary 
thereof, or any officer, director or 10% stockholder thereof, may 
become an approved person in a specialist member organization whose 
members are registered in a security of that issuer. The Exchange 
proposes to amend Phlx Rule 1036(b) to refer to members who are 
registered in options overlying a security of that issuer to specify 
that Phlx Rule 1036(b) applies only to options trading on the 
Exchange.\13\
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    \13\ The Exchange is also correcting the rule by changing the 
word ``who'' to ``whose.''
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    Phlx Rule 1037 provides that a specialist is liable for any loss 
sustained for orders entrusted to him which should have been executed, 
and for which he should have sent an execution report, when the 
specialist was made aware of the error by 9:30 on the business day 
following the submission of the order. The Exchange proposes to delete 
Phlx Rule 1037. The Exchange represents that today, specialists on the 
Exchange trade only for their own account and no longer handle orders 
for other market participants in their capacity as specialists; 
therefore, specialists would no longer be in a position to miss orders 
as contemplated by Rule 1037.\14\
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    \14\ See Notice, supra note 3, at 60111.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and rules and 
regulations thereunder applicable to a national securities 
exchange.\15\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\16\ which 
requires, among other things, that the rules of a national securities 
exchange be 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; and are not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \15\ In approving the proposed rule changes, the Commission has 
considered their impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the deletion of Phlx Rules 1022(b), 
1022(c), and 1036(a) should eliminate burdens on Phlx members that the 
Exchange believes are no longer necessary to carry out its oversight of 
its members. In addition, the Commission notes that the Exchange's 
proposal to delete Phlx Rules 1022(b), 1022(c), 1036(a), and 1037 
should benefit investors by helping to ensure that the Phlx rules 
correctly describe the current operations of the Exchange and 
obligations of its members. Finally, the Commission believes that 
amending Phlx Rule 1036(b) to specify that Phlx Rule 1036(b) applies 
only to options trading on the Exchange should add clarity to Phlx's 
rules.
    Accordingly, for the reasons discussed above, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act.

V. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\17\ that the proposed rule change (SR-PHLX-2016-86) be and hereby is 
approved.
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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ 17 CFR 200.30-3(a)(12).

[[Page 79548]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Brent J. Fields,
Secretary.
[FR Doc. 2016-27234 Filed 11-10-16; 8:45 am]
 BILLING CODE 8011-01-P