Document ID: SEC-2015-1074-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2015-06-30T04:00Z

[Federal Register Volume 80, Number 125 (Tuesday, June 30, 2015)]
[Notices]
[Pages 37327-37329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15974]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75293; File No. SR-Phlx-2015-29]

Self-Regulatory Organizations; NASDAQ OMX Phlx LLC; Notice of 
Filing of Amendment No. 1 and Order Granting Accelerated Approval of 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend and 
Restate Certain Rules That Govern the NASDAQ OMX PSX

June 24, 2015.

I. Introduction

    On March 20, 2015, NASDAQ OMX PHLX LLC (``Phlx'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 amend and restate certain Phlx rules that 
govern NASDAQ OMX PSX (``PSX'') in order to provide a clearer and more 
detailed description of certain aspects of its functionality. The 
proposed rule change was published for comment in the Federal Register 
on April 6, 2015.\3\ The Commission received no comment letters 
regarding the proposed rule change. On May 13, 2015, the Commission 
extended to July 5, 2015, the time period in which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether the proposed rule change should be 
disapproved.\4\ On June 22, 2015, the Exchange filed Amendment No. 1 to 
the proposed rule change.\5\ This order approves the proposed rule 
change, as amended, on an accelerated basis.
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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. 74618 (March 31, 
2015), 80 FR 18452 (``Notice'').
    \4\ See Securities Exchange Act Release No. 74954, 80 FR 28739 
(May 19, 2015).
    \5\ In Amendment No. 1, the Exchange proposed to correct 
typographical errors in the original filing, further improve the 
clarity of certain rule language, and include additional explanation 
with regard to the purpose of the proposed rule change.
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II. Description of the Amended Proposal

    The Exchange proposes to amend and restate certain Phlx rules that 
govern PSX in order to provide additional detail and clarity regarding 
its order type functionality.\6\ This proposed rule change is a 
response to Chair White's request that each equities exchange conduct a 
comprehensive review of the operation of each of the order types that 
it offers to members.\7\
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    \6\ See Notice, 80 FR at 18452-53.
    \7\ See id. at 18453; see also Mary Jo White, Chair, Commission, 
Speech at the Sandler O'Neill & Partners, L.P. Global Exchange and 
Brokerage Conference (June 5, 2014), available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312.
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    While the Exchange believes that its current rules and other public 
disclosures provide a comprehensive description of the operation of PSX 
and are sufficient for members and the investing public to have an 
accurate understanding of its market structure, it also acknowledges 
that a restatement of certain rules will further clarify the operation 
of its system.\8\ For instance, Phlx believes that adding examples of 
order type operation to its rules will promote greater understanding of 
the Exchange's market structure.\9\ In addition, Phlx asserts that 
certain functionality previously described as an ``order type'' is more 
precisely characterized as an attribute that may be added to a 
particular order.\10\ Accordingly, this proposed rule change 
distinguishes between ``Order Types'' and ``Order Attributes,'' and 
provides descriptions of the Order Attributes that may be attached to 
particular Order Types.\11\
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    \8\ See Notice, 80 FR at 18453.
    \9\ Id.
    \10\ Id.
    \11\ Id.
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    Currently, Phlx Rule 3301 (Definitions) sets forth most of the 
rules governing Order Types and Order Attributes, as well as other 
defined terms that pertain to trading securities on PSX.\12\ Phlx 
proposes to amend Rule 3301. Phlx also proposes to amend the 
definitions pertaining to Order Types and Order Attributes and to 
relocate them from Rule 3301 to new Rules 3301A (Order Types) and 3301B 
(Order Attributes), respectively.\13\ In addition, Phlx proposes to 
delete Rule 3305 as the information contained therein is superseded by 
proposed Rules 3301A and 3301B.\14\ Lastly, Phlx proposes certain 
conforming and technical changes to Rule 3306.\15\
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    \12\ See Rule 3301.
    \13\ See proposed Rules 3301A and 3301B.
    \14\ See Rule 3305.
    \15\ Phlx states that, in subsequent proposed rule changes, it 
plans to restate the remainder of its Rules numbered 3302 through 
3316 so that they appear sequentially following Rule 3301B.
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    Phlx represents that, except where specifically stated otherwise, 
all proposed rules are restatements of existing rules and are not 
intended to reflect substantive changes to rule text or the operation 
of PSX.\16\ Proposed Rule 3301A related to Order Types

[[Page 37328]]

contains definitions and descriptions of Price to Comply Orders, Price 
to Display Orders (referred to as ``Price to Comply Post Orders'' in 
current Rule 3301),\17\ Non-Displayed Orders, Post-Only Orders, and 
Market Maker Peg Orders. Proposed Rule 3301B related to Order 
Attributes contains definitions and descriptions of time-in-force 
(``TIF'') modifiers, order size, order price, pegging, minimum 
quantity, routing, discretion, reserve size, attribution, intermarket 
sweep order designation, and display.\18\
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    \16\ See Notice, 80 FR at 18453.
    \17\ See Notice, 80 FR at 18456 n.29.
    \18\ The Notice contains additional details related to proposed 
Rules 3301A and 3301B. See Notice, 80 FR at 18452-70.
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    In Amendment No. 1, the Exchange proposes to add language further 
explaining the operation of the following order types: Post-Only 
Orders, orders with a TIF of IOC, including Routable Orders and Post-
Only Orders; Market Maker Peg Orders; orders with Midpoint Pegging, 
Primary Pegging or Market Pegging; and orders designated with both 
Pegging and Routing attributes.\19\ For example, the Exchange states 
that for Order Types that list both Pegging and Routing as possible 
Order Attributes, the two Order Attributes may be combined since 
Pegging serves to establish the price of the order, while Routing 
establishes the market center(s) to which the system's routing 
functionality may direct a routed order if liquidity is available at 
that price.\20\ The Exchange also proposes to add further specification 
regarding the availability of certain order types only through certain 
communication protocols by stating that a Post-Only Order with a TIF of 
IOC may not be entered through the RASH or FIX protocols.\21\ In 
addition, the Exchange proposes to add language stating that one or 
more Order Attributes may be assigned to a single order, but if the use 
of multiple Order Attributes would result in contradictory 
instructions, the system will reject the order or remove non-conforming 
Order Attributes.\22\
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    \19\ See Amendment No. 1.
    \20\ Id.
    \21\ Id.
    \22\ Id.
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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 the rules and 
regulations thereunder applicable to a national securities 
exchange.\23\ In particular, the Commission finds that the proposed 
rule change is consistent with section 6(b)(5) of the Act,\24\ which 
requires, among other things, that the rules of a national securities 
exchange be 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; and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \23\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the Exchange believes that the proposal 
is consistent with section 6(b)(5) of the Act because the reorganized 
and enhanced descriptions of its Order Types, Order Attributes, and 
related System functionality should promote just and equitable 
principles of trade and perfect the mechanisms of a free and open 
market and the national market system by providing greater clarity 
concerning certain aspects of the System's operations.\25\ In addition, 
the Commission notes that Phlx believes that the proposed rule change 
should contribute to the protection of investors and the public 
interest by making Phlx's rules easier to understand.\26\ Further, Phlx 
believes that additional specificity in its rules will promote a better 
understanding of the Exchange's operation, thereby facilitating fair 
competition among brokers and dealers and among markets.\27\
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    \25\ See Notice, 80 FR at 18467.
    \26\ Id.
    \27\ Id.
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    The Commission notes that, according to the Exchange, the proposal 
does not add any new functionality but instead re-organizes the 
Exchange's order type rules and provides additional detail regarding 
the order type functionality currently offered by the Exchange. Based 
on the Exchange's representation, the Commission believes that the 
proposed rule change does not raise any novel regulatory considerations 
and should provide greater specificity, clarity and transparency with 
respect to the order type functionality available on the Exchange. In 
addition, the Commission notes that the Exchange's proposed rule 
changes provide additional detail related to functionality for certain 
order types and the handling of orders during initial entry and after 
posting to the PSX Book. Accordingly, the Commission believes that this 
proposed rule change should provide greater transparency with respect 
to the Exchange's order type functionality. For these reasons, the 
Commission believes that the proposal should help to prevent fraudulent 
and manipulative acts and practices, promote just and equitable 
principles of trade, remove impediments to and perfect the mechanism of 
a free and open market and a national market system, and, in general, 
protect investors and the public interest.
    The Commission finds good cause to approve the filing, as amended 
by Amendment No. 1 to the proposed rule change, prior to the thirtieth 
day after the date of publication of notice of filing thereof in the 
Federal Register. The proposed amendments should further increase the 
Exchange's transparency with respect to the operation of various order 
types and modifiers, and serve to enhance investors' understanding of 
the tools available with respect to the handling of their orders. 
Accelerated approval would allow the Exchange to update its rule text 
immediately, thus providing users with greater clarity with respect to 
the use and potential use of functionality offered by the Exchange. In 
addition, the initial proposal was open for comment for twenty-one days 
after publication and generated no comment. Accordingly, the Commission 
believes that good cause exists, consistent with sections 6(b)(5) and 
19(b) of the Act,\28\ to approve the filing, as amended by Amendment 
No. 1 to the proposed rule change, on an accelerated basis.
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    \28\ 15 U.S.C. 78f(b)(5); 15 U.S.C. 78s(b).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2015-029 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.

[[Page 37329]]

    All submissions should refer to File Number SR-Phlx-2015-029. 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 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-2015-029 and should be 
submitted on or before July 21, 2015.

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\29\ that the proposed rule change (SR-Phlx-2015-29) be, and it 
hereby is, approved on an accelerated basis, as amended.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15974 Filed 6-29-15; 8:45 am]
 BILLING CODE 8011-01-P