Document ID: SEC-2018-1479-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2018-09-24T04:00Z

[Federal Register Volume 83, Number 185 (Monday, September 24, 2018)]
[Notices]
[Pages 48353-48354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20659]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84180; File No. SR-Phlx-2018-58]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 
1080(A)(I)(C) Relating to Options Floor Based Management System

September 18, 2018.
    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 7, 2018, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``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 amend Rule 1080(a)(i)(C) relating to 
Options Floor Based Management System (``FBMS'') in connection with 
offering an interface to submit orders to a particular Floor Broker on 
the options floor.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqphlx.cchwallstreet.com/, 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 proposes to offer a new FBMS FIX interface which 
connects to FBMS (``FBMS FIX Interface'') \3\ to allow members and non-
members to submit orders directly \4\ to a Floor Broker on the 
Exchange's trading floor. Today, a market participant desiring to 
submit an order to the trading floor may contact a Floor Broker 
telephonically, electronically using an external order management 
system, or via instant message.\5\ An order submitted via the FBMS FIX 
Interface would be created by the sender and routed to a Floor Broker. 
This order would be systematized so that the Floor Broker \6\ 
automatically receives the order and may then represent the order for 
execution. A member or non-member would not be able to send the order 
directly to the trading system for execution. Orders entered via the 
FBMS FIX Interface will require the interaction of a Floor Broker. 
Orders will continue to be represented in the trading crowd, regardless 
of the method in which the order was received. Orders would be executed 
in the matching engine using FBMS, after all requirements for exposure 
have been met. The proposed new FBMS FIX Interface will allow the 
following types of orders to be submitted directly to a Floor Broker: 
Simple Orders, Multi-leg Orders, Cross and Non-Cross Orders, Simple 
Cancels, Cancel and Replacement Orders and Floor Qualified Contingent 
Cross Orders.
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    \3\ This new interface is a separate and distinct connection 
from the existing FIX interface, which allows members to send orders 
to the electronic match engine.
    \4\ The interface would allow the market participant to 
designate a particular Floor Broker through the use of a FIX tag.
    \5\ An audit trail is maintained today for all orders received 
by a Floor Broker.
    \6\ A Floor Broker's employee may also send an order into FBMS 
or the System on behalf of the Floor Broker.
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    The Exchange believes this new feature will enhance the workflow of 
a Floor Broker by permitting orders to be directly submitted into FBMS 
for handling. The Exchange believes that this new functionality will 
offer market participants another method to direct liquidity to a Floor 
Broker on the trading floor. The Exchange proposes to amend Rule 
1080(a)(i)(C) to add the following sentence to the description of the 
FBMS protocol, ``In addition, a non-member or member may utilize an 
FBMS FIX interface to create and send an order into FBMS to be 
represented by a Floor Broker for execution.''
Implementation
    The Exchange proposes to implement this functionality in Q1 of 
2019. Market participants will be notified of the deployment date by 
way of an Options Trader Alert, which will be posted on the Exchange's 
website.
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, 
by proposing another method for market participants to submit orders to 
a particular Floor Broker on the Exchange's trading floor.
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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 would offer market participants an alternative to the 
current methods of submitting an order to a Floor Broker which include: 
(i) Calling a Floor Broker; (ii) electronically using an external order 
management system, or (iii) utilizing instant message. The Exchange 
believes that this proposal will promote more efficient work flow and 
provide ease in sending liquidity to the Exchange's trading floor. The 
Exchange notes that the requirements for submission of orders for 
execution within FBMS will continue to exist. The Exchange believes 
that this proposal is consistent with the Act because it will continue 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system by continuing to require a Floor 
Broker to expose these orders in the trading crowd prior to execution. 
A Floor Broker would continue to submit any orders to the matching 
engine for execution using FBMS, after all requirements for exposure 
have been met. Finally, this proposal is consistent with the Act 
because it protects investors and the public interest by

[[Page 48354]]

continuing to provide an audit trail for orders submitted through the 
FBMS FIX interface.
    The Exchange notes that while it is permitting a broader group of 
market participants to have access to FBMS, in this case with the FBMS 
FIX Interface, the Exchange does not believe that this amendment raises 
concern with respect to the quality of information received by the 
Floor Broker because the Floor Broker remains responsible for ensuring 
the order is in the proper form and contains the appropriate 
information for submission. As noted herein, members and non-members 
would not be able to send orders directly for execution into the 
matching engine through the FBMS FIX Interface. The Exchange believes 
that this expansion only seeks to provide a Floor Broker with an order 
that is available for representation without the need for the Floor 
Broker to manually enter the order into FBMS.

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 offers 
market participants the ability to send an order via the FBMS FIX 
Interface to a particular Floor Broker. The Exchange believes that 
these proposed amendments do not create a burden on inter-market 
competition because all members and non-members may send orders to a 
Floor Broker via the FBMS FIX Interface. As is the case today, any 
member or non-member may contact a Floor Broker to submit an order to 
the Phlx trading floor. The Exchange notes that the proposed rule 
creates a new modality for member and non-members to send orders to a 
Floor Broker for representation. Floor Brokers conduct an agency 
business. Other market participants that conduct a market making 
business have varied workflows as compared to a Floor Broker and would 
not benefit from a similar FBMS FIX Interface. The Exchange believes 
that this new interface does not create an intra-market burden on 
competition for these reasons.

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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of 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.
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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.

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 [email protected]. Please include 
File Number SR-Phlx-2018-58 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-2018-58. 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-2018-58 and should be submitted on 
or before October 15, 2018.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20659 Filed 9-21-18; 8:45 am]
 BILLING CODE 8011-01-P