Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot Program Regarding Options Obvious and Catastrophic Errors in Response to the Regulation NMS Plan To Address Extraordinary Market Volatility, 20955-20957 [2014-08284]
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Federal Register / Vol. 79, No. 71 / Monday, April 14, 2014 / Notices
20955
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–NYSE–2014–16. 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 (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 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
publicly available. All submissions
should refer to File Number SR–NYSE–
2014–16 and should be submitted on or
before May 5, 2014.
[Release No. 34–71901; File No. SR–Phlx–
2014–21]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Extend the
Pilot Program Regarding Options
Obvious and Catastrophic Errors in
Response to the Regulation NMS Plan
To Address Extraordinary Market
Volatility
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
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–08280 Filed 4–11–14; 8:45 am]
mstockstill on DSK4VPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
April 8, 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 April 7,
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 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
pilot program regarding Exchange Rule
1047(f)(v), which provides for how the
Exchange treats obvious and
catastrophic options errors in response
to the Plan to Address Extraordinary
Market Volatility Pursuant to Rule 608
of Regulation NMS under the Act (the
‘‘Limit Up-Limit Down Plan’’ or the
‘‘Plan’’).3 The Exchange proposes to
extend the pilot period until February
20, 2015.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release Nos. 69141
(March 15, 2013), 78 FR 17262; and 69344 (April
8, 2013), 78 FR 22001 (April 12, 2013) (SR–Phlx–
2013–29).
2 17
11 17
CFR 200.30–3(a)(12).
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1. Purpose
In April 2013, the Commission
approved a proposal, on a one year pilot
basis, to adopt Exchange Rule 1047(f)(v)
to provide for how the Exchange will
treat obvious and catastrophic options
errors in response to the Plan, which is
applicable to all NMS stocks, as defined
in Regulation NMS Rule 600(b)(47).4
The Plan is designed to prevent trades
in individual NMS stocks from
occurring outside of specified Price
Bands.5 The requirements of the Plan
are coupled with Trading Pauses to
accommodate more fundamental price
moves (as opposed to erroneous trades
or momentary gaps in liquidity).
The Exchange proposes to extend the
operation of Rule 1047(f)(v), which
provides that trades are not subject to an
obvious error or catastrophic error
review pursuant to Rule 1092(a)(i) or (ii)
during a Limit State or Straddle State,
for an additional pilot period ending
February 20, 2015. The Exchange
believes conducting an obvious error or
catastrophic error review is
impracticable given the lack of a reliable
National Best Bid/Offer (‘‘NBBO’’) in the
options market during Limit States and
Straddle States, and that the resulting
actions (i.e., nullified trades or adjusted
prices) may not be appropriate given
market conditions. Under the pilot,
limit orders that are filled during a
Limit State or Straddle State have
certainty of execution in a manner that
promotes just and equitable principles
of trade, removes impediments to, and
perfects the mechanism of a free and
open market and a national market
system. Moreover, given that options
prices during brief Limit States or
Straddle States may deviate
substantially from those available
shortly following the Limit State or
Straddle State, the Exchange believes
4 The Plan was recently proposed to be extended
until February 20, 2015. See Securities Exchange
Act Release No. 71649 (March 5, 2014), 79 FR
13696 (March 11, 2014) (File No. 4–631). The Plan
was initially approved for a one-year pilot, which
began on April 8, 2013 and the pilot period is
currently scheduled to end on April 8, 2014.
5 Unless otherwise specified, capitalized terms
used in this rule filing are based on the defined
terms of the Plan.
E:\FR\FM\14APN1.SGM
14APN1
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20956
Federal Register / Vol. 79, No. 71 / Monday, April 14, 2014 / Notices
giving market participants time to reevaluate a transaction would create an
unreasonable adverse selection
opportunity that would discourage
participants from providing liquidity
during Limit States or Straddle States.
On balance, the Exchange believes that
removing the potential inequity of
nullifying or adjusting executions
occurring during Limit States or
Straddle States outweighs any potential
benefits from applying those provisions
during such unusual market conditions.
The Exchange believes the benefits to
market participants from the pilot
program should continue on a pilot
basis to coincide with the operation of
the Limit Up-Limit Down Plan. The
Exchange believes that continuing the
pilot will protect against any
unanticipated consequences and permit
the industry to gain further experience
operating the Plan.
The Exchange will conduct an
analysis concerning the elimination of
obvious and catastrophic error
provisions during Limit States and
Straddle States and agrees to provide
the Commission with relevant data to
assess the impact of this proposed rule
change. As part of its analysis, the
Exchange will: (1) Evaluate the options
market quality during Limit States and
Straddle States; (2) assess the character
of incoming order flow and transactions
during Limit States and Straddle States;
and (3) review any complaints from
members and their customers
concerning executions during Limit
States and Straddle States. Additionally,
the Exchange agrees to provide to the
Commission data requested to evaluate
the impact of the elimination of the
obvious and catastrophic error
provisions, including data relevant to
assessing the various analyses noted
above. By September 30, 2014, the
Exchange shall provide to the
Commission assessments relating to the
impact of the operation of the obvious
error rules during Limit and Straddle
States as follows:
1. Evaluate the statistical and
economic impact of Limit and Straddle
States on liquidity and market quality in
the options markets.
2. Assess whether the lack of obvious
error rules in effect during the Straddle
and Limit States are problematic.
Each month the Exchange shall provide
to the SEC and the public a dataset
containing the data for each Straddle
and Limit State in optionable stocks that
had at least one trade on the Exchange
during a Straddle or Limit State. For
each of those options affected, each data
record should contain the following
information:
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17:39 Apr 11, 2014
Jkt 232001
• Stock symbol, option symbol, time
at the start of the straddle or limit state,
an indicator for whether it is a straddle
or limit state,
• For activity on the Exchange:
• executed volume, time-weighted
quoted bid-ask spread, time-weighted
average quoted depth at the bid, timeweighted average quoted depth at the
offer,
• high execution price, low execution
price,
• number of trades for which a
request for review for error was received
during Straddle and Limit States,
• an indicator variable for whether
those options outlined above have a
price change exceeding 30% during the
underlying stock’s Limit or Straddle
state compared to the last available
option price as reported by OPRA before
the start of the Limit or Straddle state (1
if observe 30% and 0 otherwise).
Another indicator variable for whether
the option price within five minutes of
the underlying stock leaving the Limit
or Straddle state (or halt if applicable)
is 30% away from the price before the
start of the Limit or Straddle state.6
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
provisions of Section 6 of the Act,7 in
general and with Section 6(b)(5) of the
Act,8 in particular, which requires that
the rules of an exchange be designed to
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, protect
investors and the public interest,
because it should continue to provide
certainty about how errors involving
options orders and trades will be
handled during periods of extraordinary
volatility in the underlying security.
The Exchange believes that it continues
to be necessary and appropriate in the
interest of promoting fair and orderly
markets to exclude transactions
executed during a Limit State or
Straddle State from certain aspects of
Rule 1092.
Although the Limit Up-Limit Down
Plan is operational, the Exchange
6 The Exchange agreed to provide similar data in
the original proposal. See Securities Exchange Act
Release No. 69344 (April 8, 2013), 78 FR 22001
(April 12, 2013) (SR–Phlx–2013–29) at notes 4 and
12. However, that data included two additional
filters pertaining to the top 10 options and an inthe-money amount, which will no longer apply.
The Exchange intends to provide historical data in
the new form pursuant to this proposed rule
change, going back to the beginning of the original
pilot period once such data can be reasonably
compiled.
7 15 U.S.C. 78f.
8 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
believes that maintaining the pilot will
help the industry gain further
experience operating the Plan as well as
the pilot provisions.
Based on the foregoing, the Exchange
believes the benefits to market
participants should continue on a pilot
basis to coincide with the operation of
the Limit Up-Limit Down Plan.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
Specifically, the proposal does not
impose an intra-market burden on
competition, because it will apply to all
members. Nor will the proposal impose
a burden on competition among the
options exchanges, because, in addition
to the vigorous competition for order
flow among the options exchanges, the
proposal addresses a regulatory
situation common to all options
exchanges. To the extent that market
participants disagree with the particular
approach taken by the Exchange herein,
market participants can easily and
readily direct order flow to competing
venues. The Exchange believes this
proposal will not impose a burden on
competition and will help provide
certainty during periods of
extraordinary volatility in an NMS
stock.
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 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 if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 9 and Rule 19b–4(f)(6)(iii)
thereunder.10
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii). 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
10 17
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Federal Register / Vol. 79, No. 71 / Monday, April 14, 2014 / Notices
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange stated that waiver
of this requirement will allow the
Exchange to extend the pilot program
prior to its expiration on April 8, 2014.
The Exchange also stated that waiver of
this requirement would ensure the pilot
program would align with the pilot
period for the Plan and would ensure
that trading in options that overlay NMS
Stocks continues to be appropriately
modified to reflect market conditions
that occur during a Limit State or a
Straddle State. For these reasons, the
Commission believes that the proposed
rule change presents no novel issues
and that waiver of the 30-day operative
delay is consistent with the protection
of investors and the public interest.
Therefore, the Commission designates
the proposed rule change to be operative
upon filing.11
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
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 rule-comments@
sec.gov. Please include File Number SR–
Phlx–2014–21 on the subject line.
mstockstill on DSK4VPTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
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.
11 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).
VerDate Mar<15>2010
17:39 Apr 11, 2014
Jkt 232001
All submissions should refer to File
Number SR–Phlx–2014–21. 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 (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 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–
2014–21 and should be submitted on or
before May 5, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–08284 Filed 4–11–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71898; File No. SR–
NYSEMKT–2014–27]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Rule 13—
Equities Governing Pegging Interest
April 8, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 25,
2014, NYSE MKT LLC (‘‘NYSE MKT’’ or
12 17
CFR 200.30–3(a)(12).
1 15 U.S.C.78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00102
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Sfmt 4703
20957
‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 13—Equities (Orders and
Modifiers) governing Pegging Interest.
The text of the proposed rule change is
available on the Exchange’s Web site at
www.nyse.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
self-regulatory organization 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 those 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 parts 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 amend
Rule 13—Equities (Orders and
Modifiers) (‘‘Rule 13’’) to (i) remove
DMM interest as eligible to be set as
pegging interest; (ii) remove Market
Pegging Interest; and (iii) remove the
ability to add an offset value to be
specified for pegging interest.
The Exchange notes that it recently
amended its rules governing pegging
interest to move the rule text that
provided for pegging on the Exchange
from Rule 70.26—Equities (Pegging for
d-Quotes and e-Quotes) 3 to Rule 13 and
amend such text to (i) permit DMM
interest to be set as pegging interest; (ii)
change references from NBB, NBO and
NBBO to PBB, PBO and PBBO,
respectively; (iii) permit pegging interest
to peg to the opposite side of the market
3 E-Quotes are Floor broker agency interest files.
D-Quotes are e-Quotes for which a Floor broker has
entered discretionary instructions as to size and/or
price.
E:\FR\FM\14APN1.SGM
14APN1
]]>Agencies
[Federal Register Volume 79, Number 71 (Monday, April 14, 2014)]
[Notices]
[Pages 20955-20957]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08284]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71901; File No. SR-Phlx-2014-21]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Extend
the Pilot Program Regarding Options Obvious and Catastrophic Errors in
Response to the Regulation NMS Plan To Address Extraordinary Market
Volatility
April 8, 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 April 7, 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 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the pilot program regarding
Exchange Rule 1047(f)(v), which provides for how the Exchange treats
obvious and catastrophic options errors in response to the Plan to
Address Extraordinary Market Volatility Pursuant to Rule 608 of
Regulation NMS under the Act (the ``Limit Up-Limit Down Plan'' or the
``Plan'').\3\ The Exchange proposes to extend the pilot period until
February 20, 2015.
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release Nos. 69141 (March 15, 2013),
78 FR 17262; and 69344 (April 8, 2013), 78 FR 22001 (April 12, 2013)
(SR-Phlx-2013-29).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at https://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
In April 2013, the Commission approved a proposal, on a one year
pilot basis, to adopt Exchange Rule 1047(f)(v) to provide for how the
Exchange will treat obvious and catastrophic options errors in response
to the Plan, which is applicable to all NMS stocks, as defined in
Regulation NMS Rule 600(b)(47).\4\ The Plan is designed to prevent
trades in individual NMS stocks from occurring outside of specified
Price Bands.\5\ The requirements of the Plan are coupled with Trading
Pauses to accommodate more fundamental price moves (as opposed to
erroneous trades or momentary gaps in liquidity).
---------------------------------------------------------------------------
\4\ The Plan was recently proposed to be extended until February
20, 2015. See Securities Exchange Act Release No. 71649 (March 5,
2014), 79 FR 13696 (March 11, 2014) (File No. 4-631). The Plan was
initially approved for a one-year pilot, which began on April 8,
2013 and the pilot period is currently scheduled to end on April 8,
2014.
\5\ Unless otherwise specified, capitalized terms used in this
rule filing are based on the defined terms of the Plan.
---------------------------------------------------------------------------
The Exchange proposes to extend the operation of Rule 1047(f)(v),
which provides that trades are not subject to an obvious error or
catastrophic error review pursuant to Rule 1092(a)(i) or (ii) during a
Limit State or Straddle State, for an additional pilot period ending
February 20, 2015. The Exchange believes conducting an obvious error or
catastrophic error review is impracticable given the lack of a reliable
National Best Bid/Offer (``NBBO'') in the options market during Limit
States and Straddle States, and that the resulting actions (i.e.,
nullified trades or adjusted prices) may not be appropriate given
market conditions. Under the pilot, limit orders that are filled during
a Limit State or Straddle State have certainty of execution in a manner
that promotes just and equitable principles of trade, removes
impediments to, and perfects the mechanism of a free and open market
and a national market system. Moreover, given that options prices
during brief Limit States or Straddle States may deviate substantially
from those available shortly following the Limit State or Straddle
State, the Exchange believes
[[Page 20956]]
giving market participants time to re-evaluate a transaction would
create an unreasonable adverse selection opportunity that would
discourage participants from providing liquidity during Limit States or
Straddle States. On balance, the Exchange believes that removing the
potential inequity of nullifying or adjusting executions occurring
during Limit States or Straddle States outweighs any potential benefits
from applying those provisions during such unusual market conditions.
The Exchange believes the benefits to market participants from the
pilot program should continue on a pilot basis to coincide with the
operation of the Limit Up-Limit Down Plan. The Exchange believes that
continuing the pilot will protect against any unanticipated
consequences and permit the industry to gain further experience
operating the Plan.
The Exchange will conduct an analysis concerning the elimination of
obvious and catastrophic error provisions during Limit States and
Straddle States and agrees to provide the Commission with relevant data
to assess the impact of this proposed rule change. As part of its
analysis, the Exchange will: (1) Evaluate the options market quality
during Limit States and Straddle States; (2) assess the character of
incoming order flow and transactions during Limit States and Straddle
States; and (3) review any complaints from members and their customers
concerning executions during Limit States and Straddle States.
Additionally, the Exchange agrees to provide to the Commission data
requested to evaluate the impact of the elimination of the obvious and
catastrophic error provisions, including data relevant to assessing the
various analyses noted above. By September 30, 2014, the Exchange shall
provide to the Commission assessments relating to the impact of the
operation of the obvious error rules during Limit and Straddle States
as follows:
1. Evaluate the statistical and economic impact of Limit and
Straddle States on liquidity and market quality in the options markets.
2. Assess whether the lack of obvious error rules in effect during
the Straddle and Limit States are problematic.
Each month the Exchange shall provide to the SEC and the public a
dataset containing the data for each Straddle and Limit State in
optionable stocks that had at least one trade on the Exchange during a
Straddle or Limit State. For each of those options affected, each data
record should contain the following information:
Stock symbol, option symbol, time at the start of the
straddle or limit state, an indicator for whether it is a straddle or
limit state,
For activity on the Exchange:
executed volume, time-weighted quoted bid-ask spread,
time-weighted average quoted depth at the bid, time-weighted average
quoted depth at the offer,
high execution price, low execution price,
number of trades for which a request for review for error
was received during Straddle and Limit States,
an indicator variable for whether those options outlined
above have a price change exceeding 30% during the underlying stock's
Limit or Straddle state compared to the last available option price as
reported by OPRA before the start of the Limit or Straddle state (1 if
observe 30% and 0 otherwise). Another indicator variable for whether
the option price within five minutes of the underlying stock leaving
the Limit or Straddle state (or halt if applicable) is 30% away from
the price before the start of the Limit or Straddle state.\6\
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\6\ The Exchange agreed to provide similar data in the original
proposal. See Securities Exchange Act Release No. 69344 (April 8,
2013), 78 FR 22001 (April 12, 2013) (SR-Phlx-2013-29) at notes 4 and
12. However, that data included two additional filters pertaining to
the top 10 options and an in-the-money amount, which will no longer
apply. The Exchange intends to provide historical data in the new
form pursuant to this proposed rule change, going back to the
beginning of the original pilot period once such data can be
reasonably compiled.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the provisions of Section 6 of the Act,\7\ in general and with Section
6(b)(5) of the Act,\8\ in particular, which requires that the rules of
an exchange be designed to promote just and equitable principles of
trade, remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general, protect
investors and the public interest, because it should continue to
provide certainty about how errors involving options orders and trades
will be handled during periods of extraordinary volatility in the
underlying security. The Exchange believes that it continues to be
necessary and appropriate in the interest of promoting fair and orderly
markets to exclude transactions executed during a Limit State or
Straddle State from certain aspects of Rule 1092.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(5).
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Although the Limit Up-Limit Down Plan is operational, the Exchange
believes that maintaining the pilot will help the industry gain further
experience operating the Plan as well as the pilot provisions.
Based on the foregoing, the Exchange believes the benefits to
market participants should continue on a pilot basis to coincide with
the operation of the Limit Up-Limit Down Plan.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
Specifically, the proposal does not impose an intra-market burden on
competition, because it will apply to all members. Nor will the
proposal impose a burden on competition among the options exchanges,
because, in addition to the vigorous competition for order flow among
the options exchanges, the proposal addresses a regulatory situation
common to all options exchanges. To the extent that market participants
disagree with the particular approach taken by the Exchange herein,
market participants can easily and readily direct order flow to
competing venues. The Exchange believes this proposal will not impose a
burden on competition and will help provide certainty during periods of
extraordinary volatility in an NMS stock.
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 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 if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6)(iii). 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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[[Page 20957]]
The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Exchange stated that waiver of this requirement will allow
the Exchange to extend the pilot program prior to its expiration on
April 8, 2014. The Exchange also stated that waiver of this requirement
would ensure the pilot program would align with the pilot period for
the Plan and would ensure that trading in options that overlay NMS
Stocks continues to be appropriately modified to reflect market
conditions that occur during a Limit State or a Straddle State. For
these reasons, the Commission believes that the proposed rule change
presents no novel issues and that waiver of the 30-day operative delay
is consistent with the protection of investors and the public interest.
Therefore, the Commission designates the proposed rule change to be
operative upon filing.\11\
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\11\ 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 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 rule-comments@sec.gov. Please include
File Number SR-Phlx-2014-21 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-2014-21. 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 (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 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-2014-21 and should be
submitted on or before May 5, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08284 Filed 4-11-14; 8:45 am]
BILLING CODE 8011-01-P
