Document ID: SEC-2013-1410-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, LLC
Posted Date: 2013-08-08T04:00Z

[Federal Register Volume 78, Number 153 (Thursday, August 8, 2013)]
[Notices]
[Pages 48516-48518]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19148]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70101; File No. SR-Phlx-2013-78 ]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Trading Halts or Suspension When an Exchange Trading System Experiences 
Technical Failure or Failures

August 2, 2013.
    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 25, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 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 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 amend Exchange Rules 1047 and 1047A to 
expressly state another factor that is considered in determining 
whether trading on the Exchange in any class of option contracts should 
be halted or suspended.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 
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
    The Exchange is proposing to amend Exchange Rule 1047, entitled 
``Trading Rotations, Halts and Suspensions'' and Rule 1047A, entitled 
``Trading Rotations, Halts or Reopenings'' to expressly state a factor 
which is considered today in determining whether to halt or suspend 
trading in any class of option on the Exchange. Today, Exchange Rule 
1047 contains four factors that an Options Exchange Official \3\ may 
consider appropriate in the interests of a fair and orderly market and 
to protect investors when determining whether to halt or suspend 
options trading. The current factors are as follows: (i) Trading in the 
underlying stock or Exchange-Traded Fund Share has been halted or 
suspended in the primary market; (ii) the opening of such underlying 
stock or Exchange-Traded Fund Share in the primary market has been 
delayed because of unusual

[[Page 48517]]

circumstances; (iii) the Exchange has been advised that the issuer of 
the underlying stock or Exchange-Traded Fund Share is about to make an 
important announcement affecting such issuer; or (iv) other unusual 
conditions or circumstances are present. This fourth factor is the 
basis on which Options Exchange Officials today halt or suspend options 
trading for technical issues on Phlx.
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    \3\ See Rule 1. An ``Option Exchange Official'' is an Exchange 
staff member or contract employee designated as such by the Chief 
Regulatory Officer. A list of individual Options Exchange Officials 
shall be displayed on the Exchange Web site. The Chief Regulatory 
Officer shall maintain the list of Options Exchange Officials and 
update the Web site each time a name is added to, or deleted from, 
the list of Options Exchange Officials. In the event no Options 
Exchange Official is available to rule on a particular matter, the 
Chief Regulatory Officer or his/her designee shall rule on such 
matter.
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    The Exchange is proposing to expressly state that technical 
failures may be considered when determining to halt or suspend options 
trading. Specifically, the Exchange proposes to expressly note that an 
Options Exchange Official may consider a Trading System technical 
failure or failures including, but not limited to, the failure of the 
central processing system, a number of member or member organization 
trading applications, or the electrical power supply to the system 
itself or any related system in determining when to halt or suspend 
options trading. The Exchange proposes to define Trading System for 
purposes of this Rule as Phlx XL II, or any other Exchange quotation, 
transaction reporting, execution, order routing or other systems for 
trading options.
    The Exchange believes that a Trading System failure may be 
considered as an unusual condition or circumstance as noted in Rule 
1047(iv) and Rule 1047A(iii), however the Exchange desires to include 
specific language regarding a technical failure within the list of 
considerations, similar to other options exchanges. Today, this factor 
is included in the list of factors for halting or suspending options 
trading on The NASDAQ Options Market LLC (``NOM'') and the NASDAQ OMX 
BX, Inc. (``BX Options'').\4\ NOM and BX Options today halt or suspend 
options trading for technical failures utilizing the corresponding 
rules at Chapter V, Section 3. The Exchange believes that expressly 
stating this factor within Rules 1047 and 1047A will provide clearer 
guidance to Options Exchange Officials when they are determining 
whether to halt or suspend options trading on Phlx.
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    \4\ See NOM and BX Options Rules at Chapter V, Section 3.
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    Similarly, the Exchange proposes to add identical language to Rule 
1047A which relates to the trading of options on indices. Rule 1047A 
currently provides that ``[t]rading on the Exchange in any option may 
be halted with the approval of an Options Exchange Official, whenever 
trading on the primary market in any underlying security is halted or 
suspended. Trading shall be halted whenever an Options Exchange 
Official deems such action appropriate in the interests of a fair and 
orderly market and to protect investors. Among the factors that may be 
considered are the following: (i) Trading has been halted or suspended 
in the market that is the primary market for a plurality of the 
underlying stocks; (ii) the current calculation of the index derived 
from the current market prices of the stocks is not available; (iii) 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.'' The Exchange 
proposes to amend Rule 1047A by adding identical language to that 
proposed for Rule 1047. The Exchange also proposes to renumber Rules 
1047 and 1047(A) to include the added factor.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \6\ 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, 
by specifically noting that Options Exchange Officials may consider 
technical failures when halting or suspending options trading.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that expressly noting that a system technical 
failure should be among the factors considered by an Options Exchange 
Official in halting or suspending options trading provides greater 
clarity to the factors which may cause such a market halt or 
suspension. Today, a technical failure of either the exchange's Trading 
System or that of a number of Participants would be considered in 
halting or suspending options trading on NOM and BX Options.\7\ An 
Options Exchange Official must determine whether halting or suspending 
options trading is appropriate to ensure a fair and orderly market and 
also to protect investors. Options Exchange Officials must consider the 
factors enumerated within Rules 1047 and 1047A, depending on the 
options impacted, and make decisions as to whether to halt or suspend 
trading after an analysis of the facts. The Exchange believes that 
expressly noting Trading System failures as a consideration is 
appropriate because such failures could prevent a fair and orderly 
market and impact investors. The Exchange believes that the addition of 
the proposed text provides greater clarity to the factors to be 
considered by Options Exchange Officials.
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    \7\ See NOM and BX Options Rules at Chapter V, Section 3.
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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 believes this 
proposed rule change will benefit investors by specifically noting that 
technical issues are a consideration for an Options Exchange Official 
when determining whether to halt or suspend options trading. Today, the 
Exchange halts and suspends options trading for such technical failures 
when those failures impact investors as do other options exchanges. 
This proposal will provide greater clarity to Options Exchange 
Officials in making these determinations.

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)(ii) of the Act \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \9\ 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: (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. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved. The Exchange has 
provided the Commission

[[Page 48518]]

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-2013-78 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-2013-78. 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 such 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-2013-78 and should be 
submitted on or before August 29, 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. 2013-19148 Filed 8-7-13; 8:45 am]
BILLING CODE 8011-01-P