Document ID: SEC-2014-1929-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, LLC
Posted Date: 2014-11-19T05:00Z

[Federal Register Volume 79, Number 223 (Wednesday, November 19, 2014)]
[Notices]
[Pages 68931-68932]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27309]

[[Page 68931]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73586; File No. SR-Phlx-2014-71]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Implementation of the New Options Floor Broker Management System 
Until November 3, 2015

November 13, 2014.
    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 October 31, 2014, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to extend the implementation rollout of its 
new Options Floor Broker Management System.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.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
    Currently, the Exchange operates two Floor Broker Management 
Systems concurrently on the options trading floor: The original Floor 
Broker Management System operating since 2005 (``old FBMS''); and the 
enhanced Floor Broker Management System (``new FBMS''). The purpose of 
the proposal is to continue the concurrent operation of old FBMS and 
new FBMS for a temporary period ending November 3, 2015 for the reasons 
stated below.
    Old FBMS enables Floor Brokers and/or their employees to enter, 
route, and report transactions stemming from options orders received on 
the Exchange. Old FBMS also establishes an electronic audit trail for 
options orders represented by Floor Brokers on the Exchange. Floor 
Brokers can also use old FBMS to submit orders to Phlx XL, rather than 
executing the orders in the trading crowd.
    New FBMS was launched in March 2014. With the new FBMS, all options 
transactions on the Exchange involving at least one Floor Broker are 
required to be executed by the new FBMS. In connection with order 
execution, the Exchange allows the new FBMS to execute two-sided orders 
entered by Floor Brokers, including multi-leg orders up to 15 legs, 
after the Floor Broker has represented the orders in the trading crowd. 
New FBMS also provides Floor Brokers with an enhanced functionality 
called the complex calculator that calculates and displays a suggested 
price of each individual component of a multi-leg order, up to 15 legs, 
submitted on a net debit or credit basis.
    The Exchange received approval to implement the new FBMS as of June 
1, 2013,\3\ and delayed implementation until July 2013,\4\ until 
September 2013,\5\ until December 2013,\6\ and until March 2014.\7\ 
Implementation began on March 7, 2014, with the new FBMS operating 
concurrently with the old FBMS. The Exchange intended to retire the old 
FBMS after a specified implementation period. The new FBMS has been 
fully rolled out to all Floor Brokers and in all options. Nevertheless, 
the Exchange delayed the retirement of the old FBMS until September 1, 
2014 \8\ and, most recently, until November 3, 2014,\9\ for reasons of 
the performance of the new FBMS.
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    \3\ Securities Exchange Act Release No. 69471 (April 29, 2013), 
78 FR 26096 (May 3, 2013) (SR-Phlx-2013-09).
    \4\ Securities Exchange Act Release No. 69811 (June 20, 2013), 
78 FR 38422 (June 26, 2013) (SR-Phlx-2013-67).
    \5\ Securities Exchange Act Release No. 70141 (August 8, 2013), 
78 FR 49565 (August 14, 2013) (SR-Phlx-2013-83).
    \6\ Securities Exchange Act Release No. 70629 (October 8, 2013), 
78 FR 62852 (October 22, 2013) (SR-Phlx-2013-100).
    \7\ Securities Exchange Act Release No. 71212 (December 31, 
2013), 79 FR 888 (January 7, 2014) (SR-Phlx-2013-129).
    \8\ Securities Exchange Act Release No. 72135 (May 9, 2014), 79 
FR 27966 (May 15, 2014) (SR-Phlx-2014-33).
    \9\ Securities Exchange Act Release No. 73246 (September 29, 
2014), 79 FR 59874 (October 3, 2014) (SR-Phlx-2014-59).
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    The Exchange has been making improvements intended to improve the 
performance of the new system. However, the Floor Brokers have 
experienced, among other things, some latency in order processing as 
well as some occasional difficulty accessing certain order entry 
screens in a timely manner. Accordingly, the Exchange does not believe 
that the old FBMS should be retired on November 3, 2014. Therefore, the 
Exchange proposes to continue operation of the old FBMS and new FBMS 
concurrently for a one year period ending November 3, 2015.
    During this time period, the Exchange intends to identify an 
alternative system to the new FBMS to ultimately replace both old FBMS 
and new FBMS.
    If an alternative to the new FBMS could be implemented sooner than 
this date, the Exchange will seek to implement it sooner. In addition, 
the Exchange will notify the Floor Brokers and file a proposed rule 
change addressing any changes to its rules before implementing any new 
system.
    During this additional time period, the Exchange will continue to 
permit Floor Brokers to use both the old and the new FBMS based on 
their business needs and Floor Brokers can choose whether to use one or 
both. Both old FBMS and new FBMS will continue to be available in all 
options and to all Floor Brokers. For example, a Floor Broker will be 
able to use the old FBMS for one order and the new FBMS for the next 
order. Accordingly, the Exchange believes that the performance issues 
with the new FBMS are less likely and should decrease because the Floor 
Broker can choose the old FBMS.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\

[[Page 68932]]

in particular, in that it is designed to promote just and equitable 
principles of trade and protect investors and the public interest, by 
providing options Floor Brokers with two different FBMS offerings for 
order entry and processing. Despite its performance issues, the new 
FBMS offers many beneficial features to the Floor Brokers that the old 
FBMS does not, such as the complex calculator and increased automation 
described above, such that the Exchange has determined not to shut down 
the new FBMS. This should enable Floor Brokers to operate their 
businesses and comply with the relevant rules, which is consistent with 
the protection of investors and the public interest. Continuing to 
operate both old FBMS and new FBMS concurrently for a temporary period 
should also promote just and equitable principles of trade by providing 
Floor Brokers with the tools to enter and process their orders 
efficiently. The proposal is not unfairly discriminatory because all 
Floor Brokers will be able to use both the old and the new FBMS.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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 that 
permitting Floor Brokers to use both the old FBMS and new FBMS for an 
additional period of time while the Exchange considers an alternative 
approach to address the efficient operation of the Exchange's trading 
floor should allow it to compete with other floor-based exchanges and 
help the Exchange's Floor Brokers compete with floor brokers on other 
options exchanges.

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 \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\ A proposed rule 
change filed under Rule 19b-4(f)(6) normally does not become operative 
for 30 days after the date of filing.\14\ However, Rule 19b-
4(f)(6)(iii) permits the Commission to designate a shorter time if such 
action is consistent with the protection of investors and the public 
interest.\15\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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.
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ Id.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission notes that the full implementation of 
the new FBMS was scheduled to occur on November 3, 2014. The Exchange 
has indicated that it has experienced performance issues with the new 
FBMS and that it needs additional time to identify an alternative 
system to the new FBMS. While it seeks this alternative, the Exchange 
represents that it will continue to operate the old FBMS and new FMBS 
concurrently and that all Floor Brokers may use either the old FBMS or 
the new FBMS. Based on the foregoing, the Commission has determined to 
waive the 30-day operative date so that the proposal may take effect 
upon filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission 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: (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.\17\ If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule change should be approved or disapproved.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(C).
    \18\ Id.
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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-2014-71 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2014-71. 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 offices 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 2014-71, 
and should be submitted on or before December 10, 2014.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27309 Filed 11-18-14; 8:45 am]
BILLING CODE 8011-01-P