Document ID: SEC-2017-1442-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ PHLX, LLC
Posted Date: 2017-08-24T04:00Z

[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)]
[Notices]
[Pages 40197-40199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17906]

[[Page 40197]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81433; File No. SR-Phlx-2017-69]

Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Related to Quoting 
at the Opening

August 18, 2017.
    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 August 16, 2017, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``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 Phlx Rule 1017, entitled ``Openings 
in Options.''
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqphlx.cchwallstreet.com/ 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 purpose of this rule change is to amend Phlx Rule 1017, 
entitled ``Openings in Options'' to specifically amend opening 
obligations for Specialists.\3\ The Exchange notes that the proposed 
rule change is similar to a Nasdaq MRX, LLC (``MRX'') rule.\4\
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    \3\ The term ``Specialist'' applies to transactions for the 
account of a Specialist (as defined in Exchange Rule 1020(a)).
    \4\ See MRX Rule 701.
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    Today, Phlx Rule 1017(d)(iii) states that the Specialist assigned 
in a particular equity option must enter a Valid Width Quote not later 
than one minute following the dissemination of a quote or trade by the 
market for the underlying security or, in the case of index options, 
following the receipt of the opening price in the underlying index. The 
Specialist assigned in a particular U.S. dollar-settled FCO must enter 
a Valid Width Quote not later than 30 seconds after the announced 
market opening.
    First, the Exchange proposes to add the words ``or index'' to 
further clarify that the requirement applies to equities and index 
options. The Exchange proposes this addition to further clarify the 
requirement in Rule 1017(d)(iii) clearly applies to equity and index 
options.
    Second, the Exchange proposes to modify the Specialist's current 
obligation to enter Valid Width Quotes not later than one minute 
following the dissemination of a quote or trade by the market for the 
underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index for all assigned 
options, or in the case of a U.S. dollar-settled FCO after the 
announced market opening. The Exchange believes that the current 
requirement is very burdensome and instead proposes to add ``in 90% of 
their assigned series'' to require a Specialist to enter a Valid Width 
Quote not later than one minute following the dissemination of a quote 
or trade by the market for the underlying security or, in the case of 
index options, following the receipt of the opening price in 90% of 
their assigned series, or in the case of U.S. dollar-settled FCOs in 
90% of their assigned series not later than 30 seconds after the 
announced market opening.
    Further, the Exchange proposes to require Specialists to promptly 
enter a Valid Width Quote in the remainder of their assigned series, 
which did not open within one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
the underlying index or, with respect to a U.S. dollar-settled FCO, 
following the announced market opening. The Exchange's proposal is 
intended to account for market conditions which may prevent a 
Specialist from opening all assigned series, for example an extremely 
volatile market which may impact the Specialist's ability to enter 
aggressive quotes. Another example would be that news pertaining to a 
specific security is causing the underlying price to fluctuate rapidly 
and significantly, thereby causing the Specialist to await the 
underlying equity price to settle before entering a Valid Width Quote. 
The Exchange's surveillance staff would monitor to ensure that 
Specialists are complying with these requirements during the Opening 
Process.
    Today, the Opening Process for an options series will be conducted 
on or after 9:30 a.m. if the system has received, within two minutes 
(or such shorter time as determined by the Exchange and disseminated to 
membership on the Exchange's Web site) of the opening trade or quote on 
the market for the underlying security in the case of equity options 
or, in the case of index options, within two minutes of the receipt of 
the opening price in the underlying index (or such shorter time as 
determined by the Exchange and disseminated to membership on the 
Exchange's Web site), or within two minutes of market opening for the 
underlying currency in the case of a U.S. dollar-settled FCO (or such 
shorter time as determined by the Exchange and disseminated to 
membership on the Exchange's Web site) the Specialist's Valid Width 
Quote, the Valid Width Quotes of two Phlx Electronic Market Makers 
other than the Specialist or if neither the Specialist or two Phlx 
Electronic Market Makers have submitted Valid Width Quotes, within the 
specified timeframe then one Phlx Electronic Market Maker's Valid Width 
Quote.\5\
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    \5\ See Rule 1017(d)(i)(A)-(C).
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    The Exchange is also proposing to amend existing rule text in Phlx 
Rule 1017(d)(iii) to lowercase a reference to the ``Opening Price'' as 
that reference refers to the underlying security's opening price, not 
the defined Opening Price in Rule 1017(a)(iii).
Implementation
    The Exchange proposes to implement this rule change on September 
29, 2017.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\

[[Page 40198]]

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 for the reasons stated 
below.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange's first proposal at Rule 701(c)(3) to clarify that the 
requirement applies to equities and index options will make clear the 
applicability of the Specialist's requirement to enter Valid Width 
Quotes. This proposed amendment is non-substantive and is intended to 
add clarity to the rules.
    The second proposal to amend a Specialist's requirement to enter 
Valid Width Quotes during the Opening Process is consistent with the 
Act because the 90% requirement to provide a Valid Width Quote in a 
series to which the Specialist is assigned will continue to ensure that 
options series are opened in a timely manner, while not imposing a 
burdensome requirement on market participants. Specialists would be 
required to promptly enter a Valid Width Quote in the remainder of 
their assigned series, which did not open within one minute of the 
dissemination of a quote or trade by the market for the underlying 
security or in the case of index options, following the receipt of the 
opening price or, with respect to U.S. dollar-settled FCOs, following 
the announced market opening. The Exchange would monitor Specialists to 
ensure that they promptly provided a Valid Width Quote for the 
remainder of the series within a reasonable amount of time. The 
Exchange notes that market conditions could cause a Specialist to 
experience circumstances where opening 100% of all of their assigned 
series within one minute of the dissemination of a quote or trade by 
the market for the underlying security or, in the case of index 
options, following the receipt of the opening price in the underlying 
index or, with respect to U.S. dollar-settled FCOs, following the 
announced market opening, is not feasible.
    The Exchange believes that the proposed 90% Valid Width Quoting 
obligation, not later than one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
the underlying index or, with respect to U.S. dollar-settled FCOs, 
following the announced market opening, along with the ``prompt'' 
standard for the remaining 10% of their assigned series will ensure all 
series are opened in a timely manner. The Exchange's proposal accounts 
for market conditions which may prevent a Specialist from opening all 
assigned series, for example an extremely volatile market which may 
impact the Specialist's ability to enter aggressive quotes. Another 
example would be that news pertaining to a specific security is causing 
the underlying price to fluctuate rapidly and significantly, thereby 
causing the Specialist to await the underlying equity price to settle 
before entering a Valid Width Quote. The Exchange believes that the 
time frame for Specialists to provide a Valid Width Quote in 90% of 
their assigned series not later than one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or, with respect to U.S. dollar-
settled FCOs, following the announced market opening, will ensure 
liquidity on Phlx during the Opening Process.
    The Exchange desires to encourage Specialists to continue to make 
markets on Phlx at the Opening. The Exchange believes that requiring 
Specialists to provide a Valid Width Quote in 90% of their assigned 
options not later than one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
the underlying index or, with respect to U.S. dollar-settled FCOs, 
following the announced market opening along with the ``prompt'' 
standard for the remaining 10% will enhance the market making functions 
for Specialists and serve to maintain a fair and orderly market thereby 
promoting the protection of investors and the public interest.

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 proposal does not change 
the intense competition that exists among the options markets for 
options business including on the opening. Nor does the Exchange 
believe that the proposal will impose any burden on intra-market 
competition; the Opening Process involves many types of participants 
and interest.
    The Exchange's proposal to require a Specialist to enter a Valid 
Width Quote in 90% of their assigned series not later than one minute 
time following the dissemination of a quote or trade by the market for 
the underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index or, with respect 
to U.S. dollar-settled FCOs, following the announced market opening and 
promptly enter a Valid Width quote for the remaining 10% their assigned 
series does not create an undue burden on competition. The proposal 
will continue to ensure that options series are opened in a timely 
manner, while not imposing a burdensome requirement on market 
participants. Specialists would be required to promptly enter a Valid 
Width Quote in the remainder of their assigned series which were not 
open within one minute following the dissemination of a quote or trade 
by the market for the underlying security or, in the case of index 
options, following the receipt of the opening price in the underlying 
index or, with respect to U.S. dollar-settled FCOs, following the 
announced market opening. The Exchange would monitor Specialists to 
ensure that they promptly entered a Valid Width Quote for the remainder 
of their assigned series within a reasonable amount of time. The 
Exchange notes that market conditions could cause a Specialist to 
experience circumstances where entering a Valid Width Quote for 100% of 
all of their assigned series within one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or with respect to U.S. dollar-
settled FCOs within one minute after the announced market opening, is 
not feasible. The Exchange believes that the proposed 90% obligation to 
enter a Valid Width Quote not later than one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or, with respect to U.S. dollar-
settled FCOs, following the announced market opening for the underlying 
security along with the ``prompt'' standard for the remaining series 
will ensure all series are opened in a timely manner.

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

[[Page 40199]]

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)(iii) 
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)(iii).
    \9\ 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, 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.
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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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2017-69 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-2017-69. 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 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; 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-2017-69 and should be 
submitted on or before September 14, 2017.

    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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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17906 Filed 8-23-17; 8:45 am]
 BILLING CODE 8011-01-P