Document ID: SEC-2020-1306-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2020-08-18T04:00Z

[Federal Register Volume 85, Number 160 (Tuesday, August 18, 2020)]
[Notices]
[Pages 50842-50844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17961]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89527; File No. SR-Phlx-2020-38]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Memorialize 
Phlx's Business Continuity and Disaster Recovery for Its Trading Floor

August 12, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 29, 2020, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``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.
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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 proposes to modify Phlx Options 8, related to the Phlx 
Trading Floor, to memorialize its current Business Continuity and 
Disaster Recovery provisions.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, 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 proposes to amend its Trading Floor rules at Options 8, 
Section 26, Trading Halts, to memorialize its current Business 
Continuity and Disaster Recovery provisions.
Memorialize Business Continuity and Disaster Recovery Plan
    Today, Phlx has a Business Continuity and Disaster Recovery Plan 
for its Trading Floor (``BCP''), which BCP provides for a back-up 
physical location at The Philadelphia Navy Yard, in the event that the 
physical Trading Floor, currently located at 2929 Walnut Street, 
Philadelphia, becomes unavailable. The Exchange proposes to amend 
Options 8, Section 26 to add a new section ``g'' to memorialize its 
current Business Continuity and Disaster Recovery plans. The Exchange 
proposes to amend its Rules at Options 8, Section 26 to amend the title 
of the Rule from ``Trading Halts'' To ``Trading Halts, Business 
Continuity and Disaster Recovery.'' The Exchange proposes to state 
within Options 8, Section 26 at new section (g) that, ``The Exchange 
may activate its business continuity and disaster recovery plans to 
maintain fair and orderly markets in the event of a System failure, 
disaster, or other unusual circumstance that may threaten the ability 
to conduct business on the Exchange.'' The Exchange proposes to state 
with new (g) that the following provisions shall apply with respect to 
the Exchange's Trading Floor:

    (1) Loss of Trading Floor. If the physical location designated 
as the ``Trading Floor'' becomes unavailable, Phlx will enact its 
Business Continuity Plan and designate the Philadelphia Navy Yard as 
its ``Back-Up Trading Floor.''
    (2) Back-up Trading Floor Unavailable. In the event that the 
Back-Up Trading Floor becomes inoperable, the Exchange will only 
operate its electronic market and will not operate a Trading Floor. 
The Exchange will operate only its electronic market until the 
Exchange's Trading Floor facility is operational. Open outcry 
trading will not be available in the interim.
    (3) Other Back-Up Trading Arrangements. This Rule does not 
preclude the Exchange from conducting business, in the event the 
Trading Floor and Back-Up Trading Floor are rendered inoperable, 
pursuant to Options 4, Section 10.

    These provisions above, are contemplated today by Phlx's BCP and 
enacted pursuant to Phlx's emergency authority within By-Law Article 
VII, Section 7-5.\3\ The Exchange is proposing to memorialize these 
provisions of Phlx's BCP similar to Cboe Exchange, Inc. (``Cboe'') Rule 
5.24.\4\
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    \3\ Phlx By-Law Article VII, Section 7-5, Authority to Take 
Action Under Emergency or Extraordinary Market Conditions, provides, 
``The Board of Directors, or such person or persons or committee as 
may be designated by the Board of Directors, in the event of an 
emergency or extraordinary market conditions, shall have the 
authority to take any action regarding: (a) The trading in or 
operation of the national securities exchange operated by the 
Exchange or any other organized securities markets that may be 
operated by the Exchange, the operation of any automated system 
owned or operated by the Exchange, and the participation in any such 
system or any or all persons or the trading therein of any or all 
securities; and (b) the operation of any or all offices or systems 
of Members and Member Organizations, if, in the opinion of the Board 
of Directors or the person or persons hereby designated, such action 
is necessary or appropriate for the protection of investors or the 
public interest or for the orderly operation of the marketplace or 
the system.''
    \4\ Unlike Phlx, Cboe does not list a secondary back-up trading 
floor, but does specify its contingency plans for its Trading Floor.
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    Current Phlx Rules at Options 8, Section 1(a) specify, ``The 
Options 8 Rules shall apply to Exchange options transactions by and 
among members and member organizations physically located on the 
Exchange's options trading floor, including the trading

[[Page 50843]]

crowds, and shall govern all activity that occurs in the physical space 
designated by the Exchange as ``trading floor'' as well as trading 
conducted through the Options Floor Based Management . . .'' Pursuant 
to Phlx Options 8, Section 1(a) Phlx's Trading Floor is located at 2929 
Walnut Street, Philadelphia, PA (``Trading Floor.'') \5\ Pursuant to 
Phlx's BCP, The Philadelphia Navy Yard \6\ has been designated ``Back-
Up Trading Floor.''
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    \5\ See Options Trader Alert #2017--18.
    \6\ The Philadelphia Navy Yard is located at 4747 League Island 
Boulevard, Philadelphia, PA.
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    In the event that the Trading Floor becomes unavailable, Phlx would 
act under its emergency authority, within Phlx By-Law Article VII, 
Section 7-5, to enact its BCP. Phlx Floor Members would be notified of 
the enactment of a BCP with an Options Trader Alert. The Options Trader 
Alert would provide details regarding the relocation to the Back-Up 
Trading Floor, including timing and contact information for any 
additional questions. The Back-Up Trading Floor would have the same 
capability to utilize FBMS as the primary Trading Floor today. The 
Options 8 Trading Rules would remain in effect and surveillance staff 
would relocate to the Back-Up Trading Floor along with Floor Members. 
The Exchange would operate the Back-Up Trading Floor in the same manner 
as to the primary Trading Floor.
    Similarly, in order to relocate back to the primary Trading Floor, 
Floor Members would be notified with an Options Trader Alert of the 
timing to relocate to the primary location.
    The Exchange proposes to provide, within proposed Options 8, 
Section 26(g)(1), that, in the event of loss of the Trading Floor, if 
the physical location designated as the ``Trading Floor'' becomes 
unavailable, Phlx will enact its BCP and utilize the Philadelphia Navy 
Yard as its ``Back-Up Trading Floor.'' Further, Phlx proposes to 
provide within Options 8, Section 26(g)(2) in the event that the Back-
Up Trading Floor becomes unavailable or inoperable, the Exchange will 
only operate its electronic market and will not operate a Trading 
Floor. The Exchange will operate only its electronic market until the 
Exchange's Trading Floor facility is operational. Open outcry trading 
will not be available in the interim. Finally, the Exchange proposes to 
note within Options 8, Section 26(g)(3) that this rule does not 
preclude the Exchange from conducting business, in the event the 
Trading Floor and Back-Up Trading Floor are rendered inoperable, 
pursuant to Options 4, Section 10. Current Options 4, Section 10, Back-
Up Trading Arrangements, outlines rules applicable to hosting Phlx at 
another exchange in the event Phlx is disabled.
    The Exchange proposes to add the aforementioned provisions, from 
its BCP, within proposed Options 8, Section 26(g) to make clear to its 
floor market participants the potential outcomes for the Trading Floor 
in the event of a disruption.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ 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's proposal to amend Options 8, Section 26 to adopt a new 
section (g) to memorialize its current BCP is consistent with the Act.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The proposal adds provisions from Phlx's current BCP to proposed 
Options 8, Section 26(g), to make clear to its floor market 
participants the potential outcomes for the Trading Floor in the event 
of a disruption. Today, Phlx would act under its emergency authority, 
within Phlx By-Law Article VII, Section 7-5, to enact its BCP. Pursuant 
to the BCP, Phlx could relocate to its Back-Up Trading Floor in the 
event the primary Trading Floor was inoperable, only operate its 
electronic market (if the Back-Up Trading Floor were inoperable) or 
conduct business pursuant to Options 4, Section 10 under a Backup 
Trading Arrangement.
    In the event that the Trading Floor becomes unavailable, Phlx would 
act under its emergency authority, within Phlx By-Law Article VII, 
Section 7-5, to enact its BCP. Phlx Floor Members would be notified of 
the enactment of a BCP with an Options Trader Alert. The Options Trader 
Alert would provide details regarding the relocation to the Back-Up 
Trading Floor, including timing and contact information for any 
additional questions. The Back-Up Trading Floor would have the same 
capability to utilize FBMS as the primary Trading Floor today. The 
Options 8 Trading Rules would remain in effect and surveillance staff 
would relocate to the Back-Up Trading Floor along with Floor Members. 
The Exchange would operate the Back-Up Trading Floor in the same manner 
as to the primary Trading Floor. Similarly, in order to relocate back 
to the primary Trading Floor, Floor Members would be notified with an 
Options Trader Alert of the timing to relocate to the primary location.

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's proposal to amend Options 8, Section 26 to add a new 
section (g) to memorialize its current Business Continuity and Disaster 
Recovery plans does not impose an undue burden on competition. The 
proposal adds provisions from the BCP to proposed Options 8, Section 
26(g) to make clear to its floor market participants the potential 
outcomes for the Trading Floor in the event of a disruption, which 
exist today.

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)(iii) of the Act \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive

[[Page 50844]]

the 30-day operative delay so that the proposed rule change may become 
operative upon filing. The Exchange believes that its proposal to 
memorialize its current BCP in its rules will make clear to floor 
market participants the potential outcomes for the Trading Floor in the 
event of a disruption. The Commission believes that waiver of the 30-
day operative delay is consistent with the protection of investors and 
the public interest as it will provide the Exchange's member and member 
organizations with greater transparency regarding its BCP. Accordingly, 
the Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes of waiving the 30-day operative delay, the 
Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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-2020-38 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.

All submissions should refer to File Number SR-Phlx-2020-38. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2020-38 and should be submitted on 
or before September 8, 2020.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-17961 Filed 8-17-20; 8:45 am]
BILLING CODE 8011-01-P