Document ID: SEC-2013-1446-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-08-14T04:00Z

[Federal Register Volume 78, Number 157 (Wednesday, August 14, 2013)]
[Notices]
[Pages 49572-49574]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19666]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70142; File No. SR-Phlx-2013-81]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt 
Rule 1015 Regarding Accommodation Claims

DATED:
    August 8, 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 26, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change as described in Items I and I, 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The Exchange proposes to adopt Rule 1015 (Accommodations) which 
would create a limited set of exceptions to the Exchange's existing 
limitation of liability rules. The text of the proposed rule change is 
below. Proposed additions are underlined.

NASDAQ OMX PHLX LLC Rules

* * * * *

Options Rules

    Rule 1015. Accommodations [Reserved]

    Notwithstanding the limitations of liability set forth in Exchange 
Rules 652, 1102A, 1011B, and 3226, the Exchange, subject to the express 
limits set forth below, may compensate users of NASDAQ OMX PHLX for 
losses directly resulting from the actual failure of Phlx XL II, or any 
other Exchange quotation,

[[Page 49573]]

transaction reporting, execution, order routing or other systems or 
facility to correctly process an order, Quote/Order, message, or other 
data, provided that NASDAQ OMX PHLX has acknowledged receipt of the 
order, Quote/Order, message, or data.
    (1) For the aggregate of all claims made by all market participants 
related to the use of NASDAQ OMX PHLX during a single calendar month, 
the Exchange's liability shall not exceed the larger of $500,000, or 
the amount of the recovery obtained by the Exchange under any 
applicable insurance policy.
    (2) In the event all of the claims arising out of the use of NASDAQ 
OMX PHLX cannot be fully satisfied because in the aggregate they exceed 
the maximum amount of liability provided for in this Rule, then the 
maximum amount will be proportionally allocated among all such claims 
arising during a single calendar month.
    (3) All claims for compensation pursuant to this Rule shall be in 
writing and must be submitted no later than 12:00 p.m. ET on the next 
business day following the day on which the use of NASDAQ OMX PHLX gave 
rise to such claims. Nothing in this rule shall obligate the Exchange 
to seek recovery under any applicable insurance policy.
* * * * *

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 purpose of this proposed rule change is to adopt Rule 1015, a 
rule that on a voluntary basis creates an exception to the Exchange's 
limitation of liability rules under specified circumstances for the 
trading of standardized options listed and traded on the Exchange. 
Proposed Rule 1015, entitled ``Accommodations,'' is substantially 
similar to Exchange Rule 3226, the Accommodations provision currently 
applicable to the trading of equities on PSX, the Exchange's equities 
trading facility.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 62877 (Sept. 9, 
2010), 75 FR 56633 (Sept. 14, 2010) (approving SR-PHLX-2010-79).
---------------------------------------------------------------------------

    Proposed Rule 1015 states that the Exchange may compensate members 
for claims in certain circumstances notwithstanding that Exchange Rules 
652, 1102A and 1011B, state that the Exchange and its affiliates shall 
not be liable for any losses, damages, or other claims arising out of 
the actual failure of Phlx XL II, or any other Exchange quotation, 
transaction reporting, execution, order routing or other systems or 
facility. Rules 652(c), 1102A and 1011B currently (1) limit the 
Exchange's liability for the trading of options and (2) establish the 
Exchange's ability to obtain reimbursement for the costs of defending 
liability actions (Rule 652), for the trading of certain index options 
(1102A), and for the trading of certain cash index participations 
(1011B). Rule 3226 contains a limitation of liability provision and an 
accommodations provision, but it applies only to equities trading. By 
placing the Accommodation Policy within the Rule 1000 Series, the 
Exchange makes the Accommodation rule applicable generally to the 
trading of all options issued by the Options Clearing Corporation and 
traded on the Exchange, and not applicable to the trading of equities 
which are governed by Exchange Rule 3226.
    Subsection (1) of the proposed rule states that the Exchange may 
compensate members for claims made by all market participants related 
to the use of Phlx XL II, or any other Exchange quotation, transaction 
reporting, execution, order routing or other systems or facility. Under 
the proposal, the aggregate of payments for all claims during a single 
calendar month shall not exceed the larger of $500,000, or the amount 
of the recovery obtained by PHLX under any applicable insurance policy.
    Proposed subsection (2) specifies how accommodation funds shall be 
allocated in the event all of the claims submitted during a single 
calendar month exceed the $500,000 limit. Specifically, if claims 
cannot be fully satisfied because in the aggregate they exceed the 
maximum amount of liability provided for in the Rule ($500,000), then 
the maximum amount will be proportionally allocated among all such 
claims arising during a single calendar month.
    Finally, proposed subsection (b)(3) specifies the requirements and 
procedures applicable to the submission of accommodation claims. 
Specifically, claims for compensation must be submitted in writing and 
must be submitted no later than 12:00 p.m. ET on the next business day 
following the day on which the use of NASDAQ OMX PHLX gave rise to such 
claims. Subsection (3) also states that nothing in the proposed rule 
obligates the Exchange to seek recovery under any applicable insurance 
policy. If the Exchange does seek recovery and does receive an 
insurance recovery, the amount of that recovery limits the 
accommodation funds available for the incident supporting the recovery.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \5\ 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 proposal supports this policy by establishing a fair and 
transparent process by which the Exchange can accommodate claims for 
reimbursement for the failure of specified systems in specified 
facilities and under specified conditions. The Exchange believes that 
its proposal to adopt Rule 1015 (Accommodations) under specified 
circumstances will promote fairness in the marketplace in situations 
where one or more firm's claim results from a problem in a function 
performed by the Exchange's trading system that is solely the fault of 
the Exchange.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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. Specifically, the Exchange 
believes that the proposed rule imposes no burden on competition 
because accommodations policies are not the subject of competition 
among exchanges. In other words, exchanges, PHLX included, do not 
compete based on the size or scope of accommodations policies. If such 
competition existed, the proposed rule change would actually be pro-
competitive by making the accommodation process more transparent and 
fair.

[[Page 49574]]

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) \7\ thereunder because 
the proposal does not: (i) Significantly affect the protection of 
investors or the public interest; (ii) impose any significant burden on 
competition; and (iii) by its terms, become operative for 30 days from 
the date on which it was filed, or such shorter time as the Commission 
may designate if consistent with the protection of investors and the 
public interest.\8\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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, or such shorter time as 
designated by the Commission. The Exchange has satisfied this 
requirement.
---------------------------------------------------------------------------

    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.\9\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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-2013-81 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-2013-81. 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-2013-81 and should be 
submitted on or before September 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19666 Filed 8-13-13; 8:45 am]
BILLING CODE 8011-01-P