Document ID: SEC-2011-1598-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-10-18T04:00Z

[Federal Register Volume 76, Number 201 (Tuesday, October 18, 2011)]
[Notices]
[Pages 64401-64402]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26920]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65537; File No. SR-Phlx-2011-132]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
the Minimum Quantity Order

October 12, 2011.
    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 September 30, 2011, NASDAQ OMX PHLX LLC (``PHLX'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by PHLX. 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

    PHLX is filing this proposed rule change to modify the operation of 
its Minimum Quantity Order in the NASDAQ OMX PSX (``PSX'') system. PHLX 
proposes to implement the rule change on a date that is at least thirty 
days after the date of the filing, but prior to November 30, 2011. The 
text of the proposed rule change is available at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx, at PHLX's principal 
office, 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
    In order to provide enhanced functionality, PHLX is proposing to 
modify the functionality of its Minimum Quantity Order. Minimum 
Quantity Orders allow a market participant to specify a minimum share 
amount that the market participant seeks to obtain; accordingly, a 
Minimum Quantity Order will not execute unless the volume of liquidity 
available to execute against the order exceeds the designated minimum. 
A Minimum Quantity Order provides a means by which a market participant 
may avoid partial executions of orders at sizes that it considers 
inadequate to achieve its purposes. For example, a market participant 
seeking to sell a large position in a trading session with high 
volatility may use the order type to avoid selling only a small portion 
of the order at the price it considers acceptable.
    Currently, Minimum Quantity Orders must be designated with a time-
in-force of System Hours Immediate or Cancel or Market Hours Immediate 
or Cancel. As a result, the order can only be used to ``ping'' the PSX 
book to see if there is any posted liquidity that would allow the 
minimum execution. PHLX is proposing to remove this restriction so that 
a Minimum Quantity Order could post to the book if it cannot be 
executed immediately. Once posted, the order will execute if an 
incoming order that is marketable against it would satisfy its minimum 
quantity requirement. A Minimum Quantity Order that posts to the book 
is not displayed. Upon entry, all Minimum Quantity Orders must have a 
size, and a minimum quantity condition, of at least one round lot.
    Under PSX's unique price-size order priority, Minimum Quantity 
orders at a particular price will be executed after (i) Displayed 
Orders and (ii) Non-Displayed Orders without a minimum quantity 
condition and the reserve portion of Reserve Orders (``Non-Displayed 
Interest'') with a size of at least on [sic] round lot. As among 
equally priced Minimum Quantity orders, incoming orders that satisfy 
the minimum quantity condition will be allocated among the resting 
orders in the ascending order of the size of their minimum quantity 
condition.\3\
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    \3\ If there are two or more Minimum Quantity Orders with an 
equal minimum quantity condition, the System will determine the 
order of execution on the basis of a random function that assigns 
each order an equal probability of execution.

    Example: The book has four minimum quantity orders to buy at $10 
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with the following parameters:

O1: 300 shares, minimum quantity of 100 shares;
O2: 200 shares, minimum quantity of 200 shares;
O3: 500 shares, minimum quantity of 300 shares;
O4: 1000 shares, minimum quantity of 700 shares.

    A marketable order to sell 600 shares is entered. 300 shares of 
the incoming order will be assigned to O1, and 200 shares will be 
assigned to O2. The remainder of the incoming order will skip O3 and 
O4 because their minimum quantity conditions cannot be satisfied.

    In the event that the shares remaining in the size of a Minimum 
Quantity Order following a partial execution are less than the minimum 
quantity specified by the market participant entering the order, the 
minimum quantity value of the order will be reduced to the number of 
shares remaining. Thus, for example, if a market participant entered a 
Minimum Quantity Order with a size of 1,000 and a minimum quantity of 
500, and the order was marketable against a 600 share order on the 
book, the remaining

[[Page 64402]]

400 shares of the Minimum Quantity Order would post to the book with a 
minimum quantity restriction of 400 shares. If the shares remaining in 
the size of a Minimum Quantity Order following a partial execution are 
less than one round lot, however, the minimum quantity restriction will 
no longer be effective.
2. Statutory Basis
    PHLX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\4\ in general, and with Section 
6(b)(5) of the Act,\5\ 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 to the functioning of the Minimum Quantity Order will 
provide market participants with better control over their trading 
patterns, thereby providing them with greater potential to improve the 
quality of their order executions.
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    \4\ 15 U.S.C. 78f.
    \5\ 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. The changes to the 
Minimum Quantity Order will enhance the functionality offered by PHLX 
to its members, thereby promoting its competitiveness with other 
exchanges and non-exchange trading venues that already offer similar 
functionality.

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 \6\ and Rule 19b-
l4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-132 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-2011-132. This 
file number should be included on the subject line if e-mail 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 a.m. and 3 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of PHLX. 
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-2011-132 
and should be submitted on or before November 8, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26920 Filed 10-17-11; 8:45 am]
BILLING CODE 8011-01-P