Document ID: SEC-2023-0954-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2023-09-01T04:00Z

[Federal Register Volume 88, Number 169 (Friday, September 1, 2023)]
[Notices]
[Pages 60521-60525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18895]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98228; File No. SR-Phlx-2023-38]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 8 
Rules

August 28, 2023.
    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 14, 2023, 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 its Rules at Options 8 concerning 
Floor Trading.
    The text of the proposed rule change is available on the Exchange's 
website at

[[Page 60522]]

https://listingcenter.nasdaq.com/rulebook/phlx/rules, 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
    Phlx proposes to amend Options 8, Section 11, Floor Market Maker 
and Lead Market Maker Appointment, and reserve current Options 8, 
Section 16, Trading for Joint Account. Each change will be described 
below.
Options 8, Section 11
    The Exchange is proposing to amend Options 8, Section 11, Floor 
Market Maker and Lead Market Maker Appointment. Specifically, the 
Exchange proposes to remove the current burdensome process within 
Options 8, Section 11(b) regarding Floor Market Maker \3\ options 
assignments.
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    \3\ The term ``Floor Market Maker'' is a Market Maker who is 
neither an SQT or an RSQT. A Floor Market Maker may provide a quote 
in open outcry. See Phlx Options 8, Section 1(a)(4).
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    Today, pursuant to Options 8, Section 11(b), a Floor Market Maker 
shall notify the Exchange of each option, on an issue-by-issue basis, 
in which such Floor Market Maker intends to be assigned to make 
markets. Exchange options transactions initiated by such Market Maker 
on the Trading Floor for any account in which he had an interest shall 
to the extent prescribed by the Exchange be in such assigned classes. 
Such notification shall be in writing on a form prescribed by the 
Exchange (``Floor Market Maker Assignment Form''). Any change to such 
Floor Market Maker Assignment Form shall be made in writing by the 
Floor Market Maker prior to the end of the next business day in which 
such change is to take place. Receipt of the properly completed Floor 
Market Maker Assignment Form by a duly qualified Floor Market Maker 
applicant constitutes acceptance by the Exchange of such Floor Market 
Maker's assignment in, or termination of assignment in (as indicated on 
the Floor Market Maker Assignment Form), the options listed on such 
Floor Market Maker Assignment Form. All such assignments shall not be 
effective, and shall be terminated, in the event that such Floor Market 
Maker applicant fails to qualify as a Floor Market Maker on the 
Exchange.
    The Exchange is proposing to remove the rule text related to 
notifying the Exchange of each options class in which such Floor Market 
Maker intends to be assigned and, instead, provide that a Floor Market 
Maker has an assignment to trade open outcry in all options classes 
traded on the Exchange.\4\ This proposed rule text is similar to Cboe 
Exchange, Inc. (``Cboe'') Rule 5.50(e).\5\
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    \4\ The Exchange also proposes to remove the rule text 
prescribing that such notification should be in writing, how to make 
changes to the Floor Market Maker Assignment Form, and acceptance of 
the form by the Exchange.
    \5\ Cboe Rule 5.50(e) provide that, ``During Regular Trading 
Hours, a Market-Maker has an appointment to trade open outcry in all 
classes traded on the Exchange. A TPH organization that is 
registered as a Market-Maker may only trade in open outcry through 
one of its nominees. A Market-Maker must be physically present in 
the trading crowd to trade in open outcry.''
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    Today, a Floor Market Maker may only quote in open outcry on the 
Exchange's Trading Floor and may not enter electronic quotations into 
the electronic System.\6\ Today, Floor Market Makers may be called upon 
by an Options Exchange Official to make a market in a trading crowd.\7\ 
Further, Phlx requires that at least one Floor Market Maker is present 
at the trading post prior to representing an order for execution.\8\ By 
assigning a Floor Marker Maker in all options classes traded on the 
Exchange, similar to Cboe, Phlx believes it will attract additional 
liquidity to its trading floor by allowing Floor Market Makers to quote 
in all options classes traded on Phlx without an administrative 
barrier.\9\ An approved Floor Market Maker is permitted to quote \10\ 
in all options classes provided the Floor Market Maker is properly 
registered \11\ and remains in good standing.\12\ The process described 
in Options 8, Section 11(b) is a notification process, not an approval 
process. This proposed method of assignment will remove the burdensome 
manual process of completing a Floor Market Maker Assignment Form for 
the benefit of both Phlx members who must file the form and Exchange 
staff who must track assignments.
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    \6\ The Options 8 rules govern trading on Phlx's trading floor. 
A Floor Market Maker may not stream quotes. See supra note 3.
    \7\ See Options 8, Section 27(c) and (d).
    \8\ See Options 8, Section 28(a).
    \9\ Today, a Floor Market Maker that fails to notify the 
Exchange in a timely manner would not be permitted to quote in 
certain options in which they have not been assigned.
    \10\ Floor Market Makers are not subject to continuous quoting 
requirements pursuant to Options 8, Section 27(a). Further, Floor 
Market Makers are required to trade either (a) 1,000 contracts and 
300 transactions, or (b) 10,000 contracts and 100 transactions, on 
the Exchange each quarter. Transactions executed in the trading 
crowd where the contra-side is an ROT are not included. See Options 
8, Section 27(f). In meeting the trading requirements, Floor Market 
Makers are not required to quote in all assigned options series.
    \11\ See Options 8, Section 8.
    \12\ Pursuant to Options 8, Section 11(b), ``All such 
assignments shall not be effective, and shall be terminated, in the 
event that such Floor Market Maker applicant fails to qualify as a 
Floor Market Maker on the Exchange.'' Of note, the Exchange is not 
amending the process of assignment and approval to become the Floor 
Lead Market Maker. The term ``Floor Lead Market Maker'' is a member 
who is registered as an options Lead Market Maker pursuant to 
Options 2, Section 12(a) and has a physical presence on the 
Exchange's trading floor. See Options 8, Section 1(a)(3).
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    As provided in Options 8, Section 11(a), the Exchange, in its 
discretion, may require a unit to obtain additional staff depending 
upon the number of assigned options classes and associated order flow. 
The Exchange proposes to amend Options 3, Section 11(a) to specify that 
``The Exchange, in its discretion, may require a unit to obtain 
additional staff depending upon the number of assigned options classes 
that is being quoted and associated order flow.'' This change is being 
made as a Floor Market Maker will be assigned in all options classes 
pursuant to this proposal and the Exchange would monitor the amount of 
quoting activity in utilizing its discretion.
Options 8, Section 16
    The Exchange proposes to reserve Options 8, Section 16, Trading for 
a Joint Account, which requires the disclosure of accounts held jointly 
with other members. This rule was put in place to address conflicts of 
interest among members. Options 8, Section 16 is unnecessary because, 
today, there is no trading conducted in joint accounts on the trading 
floor. Also, Options 8, Section 16 is unnecessary because General 9, 
Section 67, Participation in Joint Accounts, requires, among other 
information, disclosure of other ownership and financial 
information.\13\
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    \13\ General 9, Section 67 requires a joint account to be 
reported to the Exchange by any member, member organization, or 
partner or stockholder therein, participating in such joint account 
before any transactions are effected on the Exchange for such joint 
account and shall include in substance the following: (1) Names of 
persons participating in such account and their respective interest 
therein; (2) Purpose of such account; (3) Amount of commitments in 
such account; and (4) A copy of any written agreement or instrument 
in writing relating to such account. See General 9, Section 67(b).

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[[Page 60523]]

    Today, all members (electronic and floor) are currently subject to 
General 9, Section 67, Participation in Joint Accounts, however only 
Phlx floor members are also subject to Options 8, Section 16. While 
Options 8, Section 16 requires prior approval of a joint account \14\ 
to initiate the purchase or sale on the Exchange of any security for 
any account in which he, his member organization or a participant 
therein, is directly or indirectly interested with any person other 
than such member organization or participant therein, General 9, 
Section 67, requires the reporting of joint accounts and permits Phlx 
staff to disapprove any joint account. Further, General 9, Section 67 
requires a Phlx member to report participation in such joint account 
before any transactions are effected on the Exchange for such joint 
account.
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    \14\ The Exchange notes that the approval is not on a 
transaction basis, rather it is on an account basis.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\15\ in general, and furthers the objectives of section 
6(b)(5) of the Act,\16\ 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.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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Options 8, Section 11
    The Exchange's proposal to amend Options 8, Section 11, Floor 
Market Maker and Lead Market Maker Appointment, is consistent with the 
Act and the protection of investors and the general public because 
assigning a Floor Marker Maker in all options classes traded on the 
Exchange will enable Phlx to attract additional liquidity to its 
trading floor by allowing Floor Market Makers to quote in all options 
classes traded on Phlx without any burdensome administrative barriers. 
Furthermore, the proposal will remove impediments to and perfect the 
mechanism of a free and open market by removing the manual process of 
completing a Floor Market Maker Assignment Form for the benefit of both 
Phlx members who must file the form and Exchange staff who must track 
assignments.
    With respect to protecting investors and the general public, Phlx 
continues to have rules in place to maintain orderly markets on its 
trading floor. Today, a Floor Market Maker may only quote in open 
outcry on the Exchange's Trading Floor and may not enter electronic 
quotations into the electronic System. Floor Market Makers may be 
called upon by an Options Exchange Official to make a market in a 
trading crowd.\17\ Further, Phlx requires that at least one Floor 
Market Maker is present at the trading post prior to representing an 
order for execution.\18\ An assigned Floor Market Maker is permitted to 
quote \19\ in all options classes provided the Floor Market Maker is 
properly registered \20\ and remains in good standing.\21\ This 
proposed rule text is similar to Cboe Rule 5.50(e).\22\
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    \17\ See Options 8, Section 27(c) and (d).
    \18\ See Options 8, Section 28(a).
    \19\ Floor Market Makers are not subject to continuous quoting 
requirements pursuant to Options 8, Section 27(a). Further, Floor 
Market Makers are required to trade either (a) 1,000 contracts and 
300 transactions, or (b) 10,000 contracts and 100 transactions, on 
the Exchange each quarter. Transactions executed in the trading 
crowd where the contra-side is an ROT are not included. See Options 
8, Section 27(f). In meeting the trading requirements, Floor Market 
Makers are not required to quote in all assigned options series.
    \20\ See Options 8, Section 8.
    \21\ Pursuant to Options 8, Section 11(b), ``All such 
assignments shall not be effective, and shall be terminated, in the 
event that such Floor Market Maker applicant fails to qualify as a 
Floor Market Maker on the Exchange.'' Of note, the Exchange is not 
amending the process of assignment and approval to become the Floor 
Lead Market Maker. The term ``Floor Lead Market Maker'' is a member 
who is registered as an options Lead Market Maker pursuant to 
Options 2, Section 12(a) and has a physical presence on the 
Exchange's trading floor. See Options 8, Section 1(a)(3).
    \22\ Cboe Rule 5.50(e) provide that, ``During Regular Trading 
Hours, a Market-Maker has an appointment to trade open outcry in all 
classes traded on the Exchange. A TPH organization that is 
registered as a Market-Maker may only trade in open outcry through 
one of its nominees. A Market-Maker must be physically present in 
the trading crowd to trade in open outcry.''
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    Amending Options 3, Section 11(a) to specify that ``The Exchange, 
in its discretion, may require a unit to obtain additional staff 
depending upon the number of assigned options classes that is being 
quoted and associated order flow'' is consistent with the Act and the 
protection of investors because the Exchange would monitor the amount 
of quoting activity in utilizing its discretion going forward.
Options 8, Section 16
    The Exchange's proposal to reserve Options 8, Section 16, Trading 
for a Joint Account, is consistent with the Act and the protection of 
investors and the general public because the rule is unnecessary. 
Today, there is no trading conducted in joint accounts on the trading 
floor. Also, Options 8, Section 16 is unnecessary because General 9, 
Section 67, Participation in Joint Accounts, requires, among other 
information, disclosure of other ownership and financial 
information.\23\ While Options 8, Section 16 requires prior approval of 
a joint account \24\ to initiate the purchase or sale on the Exchange 
of any security for any account in which he, his member organization or 
a participant therein, is directly or indirectly interested with any 
person other than such member organization or participant therein, 
General 9, Section 67, requires the reporting of joint accounts and 
permits Phlx staff to disapprove any joint account. Further, General 9, 
Section 67 requires a Phlx member to report participation in such joint 
account before any transactions are effected on the Exchange for such 
joint account.
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    \23\ General 9, Section 67 requires a joint account to be 
reported to the Exchange by any member, member organization, or 
partner or stockholder therein, participating in such joint account 
before any transactions are effected on the Exchange for such joint 
account and shall include in substance the following: (1) Names of 
persons participating in such account and their respective interest 
therein; (2) Purpose of such account; (3) Amount of commitments in 
such account; and (4) A copy of any written agreement or instrument 
in writing relating to such account. See General 9, Section 67(b).
    \24\ The Exchange notes that the approval is not on a 
transaction basis, rather it is on an account basis.
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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.
Options 8, Section 11
    The Exchange's proposal to amend Options 8, Section 11, Floor 
Market Maker and Lead Market Maker Appointment, does not impose an 
intra-market burden on competition because all Floor Marker Makers will 
be assigned in all options classes traded on the Exchange, provided the 
Floor Market Maker continues to qualify as a Floor Market Maker on the 
Exchange. The proposal will not require Floor Market Makers to quote in 
additional options series to meet their trading requirements \25\ 
unless they elect to do so.
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    \25\ Floor Market Makers are not subject to continuous quoting 
requirements pursuant to Options 8, Section 27(a). Further, Floor 
Market Makers are required to trade either (a) 1,000 contracts and 
300 transactions, or (b) 10,000 contracts and 100 transactions, on 
the Exchange each quarter. Transactions executed in the trading 
crowd where the contra-side is an ROT are not included. See Options 
8, Section 27(f). In meeting the trading requirements, Floor Market 
Makers are not required to quote in all assigned options series.

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[[Page 60524]]

    The Exchange's proposal to amend Options 8, Section 11, Floor 
Market Maker and Lead Market Maker Appointment, does not impose an 
inter-market burden on competition because Cboe \26\ also appoints its 
Market-Maker to trade open outcry in all classes traded on Cboe. 
Additionally, other options trading floors may elect to adopt a similar 
rule.
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    \26\ See Cboe Rule 5.50(e).
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    Amending Options 3, Section 11(a) to specify that ``The Exchange, 
in its discretion, may require a unit to obtain additional staff 
depending upon the number of assigned options classes that is being 
quoted and associated order flow'' does not impose an undue burden on 
intra-market competition because the Exchange would continue to apply 
this discretion in a fair manner by treating all similarly-situated 
Floor Market Makers in the same manner.
    Amending Options 3, Section 11(a) to specify that ``The Exchange, 
in its discretion, may require a unit to obtain additional staff 
depending upon the number of assigned options classes that is being 
quoted and associated order flow'' does not impose an undue burden on 
inter-market competition because other options trading floors markets 
may adopt a similar discretion.
Options 8, Section 16
    The Exchange's proposal to reserve Options 8, Section 16, Trading 
for a Joint Account, does not impose an intra-market burden on 
competition as no Phlx member on the trading floor would be subject to 
the rule. Additionally, all Phlx members and member organizations would 
be required to comply with General 9, Section 67.
    The Exchange's proposal to reserve Options 8, Section 16, Trading 
for a Joint Account, does not impose an inter-market burden on 
competition because other options trading floors may adopt similar 
rules.

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 \27\ and Rule 19b-
4(f)(6) thereunder.\28\
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    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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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    A proposed rule change filed under Rule 19b-4(f)(6) \29\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \30\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the Exchange 
may implement the proposed change and alleviate an administrative 
burden. The Exchange states that assigning Floor Market Makers in all 
options classes traded on the Exchange will enable Phlx to attract 
additional liquidity to its trading floor allowing Floor Market Makers 
to quote in all options classes traded on Phlx, without any burdensome 
administrative barrier, and that the proposal will also remove the 
manual process of completing a Floor Market Maker Assignment Form for 
the benefit of both Phlx members and Exchange staff. The Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest because the 
proposed rule change does not raise any new or novel issues. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposed rule change as operative upon filing.\31\
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    \29\ 17 CFR 240.19b-4(f)(6).
    \30\ 17 CFR 240.19b-4(f)(6)(iii).
    \31\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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 change 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-Phlx-2023-38 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-2023-38. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection.
    All submissions should refer to file number SR-Phlx-2023-38 and 
should be submitted on or before September 22, 2023.

[[Page 60525]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18895 Filed 8-31-23; 8:45 am]
BILLING CODE 8011-01-P