Document ID: SEC-2013-1780-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62780-62782]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24664]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70673; File No. SR-Phlx-2013-99]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Clarifying 
Rule 1014 Regarding Daily Quoting Obligations

October 11, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on October 2, 2013, 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.
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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 is filing with the Commission a proposal to clarify 
that Rule 1014 (Obligations and Restrictions

[[Page 62781]]

Applicable to Specialists and Registered Options Traders) quoting 
obligations remain in effect on a daily basis even though compliance 
with such obligations may be determined on a monthly basis.
    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 this proposed rule change is to clarify that Rule 
1014 quoting obligations remain in effect on a daily basis even though 
compliance with such obligations may be determined on a monthly basis.
Background
    Market makers on the Exchange include Registered Options Traders 
(``ROTs''),\3\ Streaming Quote Traders (``SQTs''),\4\ Remote Streaming 
Quote Traders (``RSQTs''),\5\ specialists,\6\ and Remote 
Specialists.\7\ As set forth in Rule 1014, market makers have an 
obligation to make two-sided markets in options products listed on the 
Exchange. This rule change proposal does not negate, or attempt to 
change, any of the existing daily market making obligations established 
in Rule 1014. These Rule 1014 market making obligations continue in 
force. This proposal only clarifies that Rule 1014 quoting obligations 
remain in effect on a daily basis. This has been the case prior to the 
recent Exchange proposal establishing that compliance with quoting 
obligations may be determined on a monthly basis,\8\ and remains so 
without change.
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    \3\ An ROT is 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. See Rule 1014(b)(i).
    \4\ An SQT is an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically in 
options to which such SQT is assigned. An SQT may only submit such 
quotations while such SQT is physically present on the floor of the 
Exchange. See Rule 1014(b)(ii)(A).
    \5\ An RSQT is an ROT that is a member or member organization 
with no physical trading floor presence who has received permission 
from the Exchange to generate and submit option quotations 
electronically in options to which such RSQT has been assigned. An 
RSQT may only submit such quotations electronically from off the 
floor of the Exchange. See Rule 1014(b)(ii)(B).
    Rule 1014 also discusses other market makers including Directed 
SQTs and Directed RSQTs, which receive Directed Orders as defined in 
Rule 1080(l)(i)(A). Specialists may likewise receive Directed 
Orders.
    \6\ A member may not act as an options specialist (to include a 
Remote Specialist as defined in Rule 1020(a)(ii)) in any option 
unless such member is registered as an options specialist in such 
option by the Exchange pursuant to Rule 501 and such registration 
may be revoked or suspended at any time by the Exchange. See Rule 
1020(a)(i).
    \7\ A Remote Specialist is an options specialist in one or more 
classes that does not have a physical presence on an Exchange floor 
and is approved by the Exchange pursuant to Rule 501. See Rule 
1020(a)(ii).
    \8\ See Securities Exchange Act Release No. 67700 (August 21, 
2012) 77 FR 51835 (August 27, 2012) (SR-Phlx-2012-108) (notice of 
filing and immediate effectiveness) (the ``monthly compliance review 
proposal''). In the monthly compliance review proposal, the Exchange 
proposed in sub-sections (b)(ii)(D)(1) and (b)(ii)(D)(2) of Rule 
1014 that compliance with the quoting obligation will be determined 
on a monthly basis. This puts the Exchange and its members on an 
equal footing with other options markets such as NYSE Arca (Rule 
6.37B) and NYSE MKT (Rule 925.1NY) in terms of monthly compliance 
with the noted quoting obligations.
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    The daily market making obligations of market makers on the 
Exchange are set forth in Rule 1014. In particular, subsection 
(b)(ii)(D)(1) of Rule 1014 states that SQTs and RSQTs (when they do not 
function as Remote Specialists) shall be responsible to quote two-sided 
markets in not less than 60% of the series in which such SQTs or RSQTs 
are assigned; provided that, on any given day, a DRSQT or DSQT shall be 
responsible to quote two-sided markets in the lesser of 99% of the 
series listed on the Exchange or 100% of the series listed on the 
Exchange minus one call-put pair. The sub-section states also that 
whenever a DSQT or DRSQT enters a quotation in an option in which such 
DSQT or DRSQT is assigned, such DSQT or DRSQT must maintain until the 
close of that trading day quotations for the lesser of 99% of the 
series of the option listed on the Exchange or 100% of the series of 
the option listed on the Exchange minus one call-put pair. To satisfy 
the applicable requirements of this subparagraph (D)(1) with respect to 
quoting a series, an SQT, RSQT, DSQT, or DRSQT must quote such series 
90% of the trading day (as a percentage of the total number of minutes 
in such trading day) or such higher percentage as the Exchange may 
announce in advance. Subsection (b)(ii)(D)(2) of Rule 1014 states that 
a specialist (including the RSQT functioning as a Remote Specialist in 
particular options) shall be responsible to quote two-sided markets in 
the lesser of 99% of the series or 100% of the series minus one call-
put pair in each option in which such specialist is assigned. To 
satisfy the requirement of subsection (b)(ii)(D)(2) with respect to 
quoting a series, the specialist must quote such series 90% of the 
trading day (as a percentage of the total number of minutes in such 
trading day) or such higher percentage as the Exchange may announce in 
advance.\9\
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    \9\ For all market making obligations, see Rule 1014(b)(ii)(D).
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    As discussed, subsections (b)(ii)(D)(1) and (b)(ii)(D)(2) of Rule 
1014 currently state that compliance with quoting obligations may be 
determined on a monthly basis. To make it clear that daily quoting 
obligations remain, however, the Exchange is adding language to these 
subsections to state that determining compliance with the continuous 
quoting requirement on a monthly basis does not relieve market makers 
of their obligation to provide continuous two-sided quotes on a daily 
basis, nor will it prohibit the Exchange from taking disciplinary 
action against market makers for failing to meet the continuous quoting 
obligation each trading day. Compliance on a monthly basis allows the 
Exchange to review the market makers' daily compliance in the aggregate 
and determine the appropriate disciplinary action for single or 
multiple failures to comply with the continuous quoting requirement 
during the month period.
    This proposal clarifies that daily quoting requirements for market 
makers per Rule 1014 as specified remain the same and are not changed.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 62782]]

of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ 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. The Exchange would do this though a proposed rule change 
clarifying that daily quoting requirements pursuant to Rule 1014 are 
not changed by the monthly compliance review proposal, and remain the 
same, to the benefit of market participants.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 does not believe 
that this proposal should have any competitive impact because the 
Exchange's rules as noted are similar to those of other options 
exchanges.

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

    The Exchange believes that the foregoing proposed rule change may 
take effect upon filing with the Commission pursuant to Section 
19(b)(3)(A) \12\ of the Act and Rule 19b-4(f)(6)(iii) thereunder \13\ 
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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6)(iii). 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-2013-99 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2013-99. 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 inspection and 
copying 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 submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2013-99 and should be 
submitted on or before November 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24664 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P