Document ID: SEC-2013-0291-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-02-12T05:00Z

[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9977-9979]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03097]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68838; File No. SR-Phlx-2013-08]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Routing Functionality of the NASDAQ OMX PSX Market

 February 6, 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 January 23, 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 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.
---------------------------------------------------------------------------

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

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 add 
routing functionality to the NASDAQ OMX PSX Market (``System''). 
Specifically, the Exchange proposes to amend Rule 3315, Order Routing.
    Proposed new language is italicized.
* * * * *

NASDAQ OMX PSX

NASDAQ OMX PSX (Rules 3000-3407)

Rule 3000. NASDAQ OMX PSX

* * * * *

3315. Order Routing

    (a) Order Routing Process
    (1) No change.
    (A) No change.
    (i)-(vii) No change.
    (viii) XDRK is a routing option under which orders check the System 
for available shares and simultaneously route the remaining shares to 
destinations on the System routing table that are not posting Protected 
Quotations within the meaning of Regulation NMS. If shares remain un-
executed after routing, they are posted on the book. Once on the book, 
should the order subsequently be locked or crossed by another market 
center, the System will not route the order to the locking or crossing 
market center.
    (ix) XCST is a routing option under which orders check the System 
for available shares and simultaneously route the remaining shares to 
destinations on the System routing table that are not posting Protected 
Quotations within the meaning of Regulation NMS and to certain, but not 
all, exchanges. If shares remain un-executed after routing, they are 
posted on the book. Once on the book, should the order subsequently be 
locked or crossed by another market center, the System will not route 
the order to the locking or crossing market center.
    (B) No change.
    (b)-(d) Not applicable.
* * * * *
    (b) and (c) Not applicable.
* * * * *

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 proposed rule change is to attract additional 
business to and enhance the functionality offered by the Exchange's 
NASDAQ OMX PSX equities market by providing additional optional 
outbound routing services. Most equities exchanges today provide 
routing services and the Exchange offers a variety of routing 
strategies. Currently, Rule 3315, Order Routing, describes the order 
routing process and states that all routing shall be in compliance with 
Rule 611 of Regulation NMS under the Act.\3\ Furthermore, it enumerates 
PSX's routing strategies: PSTG, PSKN, PSCN, PSKP, PTFY, PMOP and PCRT.
---------------------------------------------------------------------------

    \3\ 17 CFR 242.611.
---------------------------------------------------------------------------

    Proposed Rule 3315(a)(1)(A)(viii) will provide that XDRK is a 
routing option under which orders check the System for available shares 
and simultaneously route to certain destinations on the System routing 
table that are not posting Protected Quotations within the meaning of 
Regulation NMS (i.e. ``dark venues'' or ``dark pools''). If shares 
remain un-executed after routing, they are posted on the book. Once on 
the book, should the order subsequently be locked or crossed by another 
market center, the System will not route the order to the locking or 
crossing market center. This strategy is intended to attract market 
participants that seek to execute on PSX or on dark pools without 
executing on another exchange. Members may seek to execute in this 
manner to interact with resting liquidity in addition to that available 
on PSX, while also minimizing market impact and transaction fees.
    For example, if the National Best Bid/Offer (``NBBO'') is $10.00-
$10.01, and PSX, DarkVenueA and ARCA each offer 100 shares at $10.01, a 
XDRK order to buy 1000 shares at $10.01 IOC will be handled as follows: 
100 shares for execution on PSX and 100 shares routed to DarkVenueA 
simultaneously at $10.01; the remaining 800 shares are not routed and 
not executed, and cancelled back to the entering participant because it 
was an IOC order. The order did not route to ARCA because it is not a 
dark venue. As a second example, if the NBBO is $10.00-$10.01, and PSX, 
DarkVenueA and ARCA each offer 100 shares at $10.01, a XDRK order to 
buy 1000 shares at $10.01 DAY will be handled as follows: 100 shares 
for execution on PSX and 100 shares routed to DarkVenueA simultaneously 
at $10.01; the remaining 800 shares are posted on the PSX book (because 
it is a DAY order). Once again, the order did not route to ARCA because 
it is not a dark venue.
    Proposed Rule 3315(a)(1)(A)(ix) will provide that XCST is a routing 
option under which orders check the System for available shares and 
simultaneously route to select dark venues and to certain low cost 
exchanges. If shares remain un-executed after routing, they

[[Page 9978]]

are posted on the book. Once on the book, should the order subsequently 
be locked or crossed by another market center, the System will not 
route the order to the locking or crossing market center. This strategy 
is also intended to attract market participants who seek to save on 
trading fees by only executing on the Exchange, on dark venues, or on 
no cost and low cost exchanges.
    For example, if the NBBO is $10.00-$10.01, and PSX, DarkVenueA and 
ARCA each offer 100 shares at $10.01, a XCST order to buy 1000 shares 
at $10.01 DAY will be handled as follows: 100 shares for execution on 
PSX and 100 shares routed to DarkVenueA simultaneously at $10.01; the 
remaining 800 shares are posted on the PSX book (because it is a DAY 
order). The order did not route to ARCA because it is neither a dark 
venue nor a no cost or low cost exchange. As a second example, if the 
NBBO is $9.90-$10.00, with BYX offering 100 shares at $10.00 and PSX, 
DarkVenueA and ARCA each offer 100 shares at $10.01, a XCST order to 
buy 1000 shares at $10.01 DAY will be handled as follows: 100 shares 
routed to BYX at $10.00, 100 shares for execution on PSX and 100 shares 
routed to DarkVenueA simultaneously at $10.01; the remaining shares are 
posted on the PSX book (because it is a DAY order). The order did not 
route to ARCA because it is neither a dark venue nor a no cost or low 
cost exchange.
    In all cases, these routing strategies are designed to comply with 
SEC Rule 611 and the other provisions of Regulation NMS.\4\ 
Accordingly, both XDRK and XCST will honor Protected Quotations within 
the meaning of Regulation NMS and will not route to any market centers 
included in their respective routing table at a price inferior to an 
available Protected Quotation. For example, if the NBBO is $9.90-
$10.00, with NYSE offering 100 shares at $10.00 and PSX, DarkVenueA and 
ARCA each offering 100 shares at $10.01, a XCST order to buy 1000 
shares at $10.01 DAY will not be routed because NYSE's Protected 
Quotation is not included in the routing table, by definition, for 
XCST.
---------------------------------------------------------------------------

    \4\ 17 CFR 242.611.
---------------------------------------------------------------------------

    The Exchange will notify its membership of the implementation date, 
which the Exchange expects will be on or about the 30th day after this 
filing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(5) of the Act,\6\ in particular, in that the proposal 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 regulating, clearing, 
settling, processing information with respect to, and 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, because PSX 
will be better able to serve its customers and compete with other 
markets by offering additional optional routing services. Specifically, 
the two new routing strategies will provide market participants with 
greater flexibility in routing orders without developing order routing 
strategies on their own.
---------------------------------------------------------------------------

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

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. PSX 
competes with many exchanges and other execution venues for the 
execution of orders in equities. Market participants can choose where 
to send their orders. Accordingly, the proposal is pro-competitive in 
that it affords the Exchange the opportunity to compete with other 
exchanges in terms of offering new routing strategies.

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

    Written comments were neither solicited nor 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) of the Act \7\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. The Exchange has 
provided the Commission written notice of its intent to file the 
proposed rule change, along with a brief description and text of the 
proposed rule change, at least five business days prior to the date of 
filing of the proposed rule change.

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-2013-08 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-2013-08. 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 the filing also will be available 
for

[[Page 9979]]

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-2013-08 and should be 
submitted on or before March 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03097 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P