Document ID: SEC-2013-0994-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-05-30T04:00Z

[Federal Register Volume 78, Number 104 (Thursday, May 30, 2013)]
[Notices]
[Pages 32501-32503]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12794]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69632; File No. SR-Phlx-2013-56]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a 
Rule Governing Cancellation of Orders in the Event of an Issuer 
Corporate Action Related to a Dividend, Payment or Distribution, and To 
Make Related Clarifications to Rule Text

May 23, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on May 16, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
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\ 15 U.S.C. 78a.
    \3\ 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 proposes to adopt a rule governing cancellation of 
orders in the event of an issuer corporate action related to a 
dividend, payment or distribution, and to make related clarifications 
to rule text.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx/, 
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
    Phlx is proposing to adopt Rule 3311 to address the treatment of 
quotes/orders in securities that are the subject of issuer corporate 
actions related to a dividend, payment or distribution (a ``corporate 
action''). The rule will apply to any trading interest that is carried 
on the PSX book overnight.\4\ The proposed Phlx rule would provide that 
in the event of any corporate action, Phlx will cancel open quote/
orders on the ex-date of the action, thereby imposing on the member 
that entered the order the responsibility for determining whether it 
wishes to reenter the order and if so, at what price and size. The 
cancellation would occur immediately prior to the opening of the Phlx 
Equities Market at 8 a.m. on the ex-date of the corporate action, and 
the member would receive a cancellation notice, so that it could, if it 
desired, reenter the order at the commencement of trading on the ex-
date.
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    \4\ Phlx notes that its market participants have not 
historically made use of such good-`till-cancelled trading interest, 
but believes that a rule should be adopted to ensure that the 
treatment of such orders is clearly specified by its rules. The 
Commission notes that Phlx stated in Form 19b-4 regarding SR-Phlx-
2013-56 that the term ``PSX'' refers to NASDAQ OMX PSX.
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    In addition, Phlx is proposing to amend Rule 3306(b) to make it 
clear that quotes do not necessarily remain open overnight. 
Specifically, Phlx is modifying a description of open quotes, the 
original intent of which is unclear and that accordingly may result in 
confusion.\5\ The sentence in question

[[Page 32502]]

appears to reflect the idea that an open quote (i.e., a quote 
designated to remain open at the end of the trading day) would be 
processed in the same manner as a System Hours GTC Order. While 
accurate, this statement does not reflect the fact that a quote may 
also accurately be described as an Attributable Order entered by a PSX 
Market Maker or Equities ECN (i.e., trading interest that is identified 
as having been entered by a particular market participant). Moreover, 
although an Attributable Order may be entered with a time-in-force of 
good-`till-cancelled and thereby remain open overnight, such orders 
have not historically been used by Phlx market participants. 
Accordingly, Phlx believes that the focus of the current sentence on 
orders remaining open might imply that all quotes would remain open 
overnight, when as a factual matter this would be the case only to the 
extent a quote was designated as good-`till-cancelled. Phlx proposes to 
amend the sentence to provide that ``Quotes will be processed as 
Attributable Orders, with such time-in-force designation as the PSX 
Market Maker or Equities ECN may assign.'' Finally, Phlx proposes to 
amend the rule to capitalize the word ``System'' to reflect that it is 
a defined term in the rules governing PSX.
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    \5\ The rule in question was adopted recently as part of a 
proposed rule change that adopted rules in effect at The NASDAQ 
Stock Market (``NASDAQ'') and/or NASDAQ OMX BX (``BX'') with respect 
to market making. Securities Exchange Act Release No. 69452 (April 
25, 2013), 78 FR 25512 (May 1, 2013) (SR-Phlx-2013-24). Proposed 
rule changes to amend the corresponding NASDAQ and BX rules in a 
manner similar to this proposed rule change were filed while SR-
Phlx-2013-24 was awaiting approval. See Securities Exchange Act 
Release No. 69454 (April 25, 2013), 78 FR 25506 (May 1, 2013) (SR-
NASDAQ-2013-068); Securities Exchange Act Release No. 69456 (April 
25, 2013), 78 FR 25510 (May 1, 2013) (SR-BX-2013-031).
     It should be noted that although Phlx rules now permit members 
to register and trade as PSX Market Makers or Equities ECNs, no 
member has yet currently registered with such a status. Accordingly, 
the following discussion regarding the use and processing of quotes 
should be understood as not having a direct impact on any current 
Phlx market participants. Rather, the proposed rule change is 
intended to ensure that the rules that would govern such matters are 
clear.
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2. Statutory Basis
    Phlx believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\6\ in general, and with Section 
6(b)(5) of the Act \7\ 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. Specifically, Phlx believes 
that the change will simplify Phlx's rule governing adjustment of open 
quotes/orders in the event of corporate actions by making it clear that 
all such quotes/orders will be cancelled, thereby ensuring that market 
participants have appropriate notice of the possibility that they may 
either deem it advisable not to reenter such quotes/orders, or to 
reenter them with such adjustments to price and/or size as the market 
participant deems advisable to reflect the corporate action. Thus, the 
change will facilitate transactions in securities and perfect the 
mechanism of a free and open market by providing additional assurance 
that market participants carefully manage the trading interest that 
they enter into Phlx. In addition, the proposed changes to Rule 3306 
are designed to improve the clarity and accuracy of that rule.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Phlx 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. Specifically, Phlx 
believes that the rule change does not affect the availability or 
pricing of goods or services offered by the Exchange, and therefore 
does not impact competition between the Exchange and others. Rather, 
the change is designed to adopt and clarify rules to better describe 
the operation of the Exchange's trading systems, but in a manner that 
does not restrict the ability of members to enter and update trading 
interest in PSX.

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

    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 \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \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.
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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.

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-2013-56 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-2013-56. 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

[[Page 32503]]

available publicly. All submissions should refer to File Number SR-
Phlx-2013-56 and should be submitted on or before June 20, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12794 Filed 5-29-13; 8:45 am]
BILLING CODE 8011-01-P