Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend and Correct Rule 1080.07, 57406-57408 [2015-24062]

Download as PDF 57406 Federal Register / Vol. 80, No. 184 / Wednesday, September 23, 2015 / Notices At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400. Dated: September 18, 2015. Brent J. Fields, Secretary. [FR Doc. 2015–24217 Filed 9–21–15; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75942; File No. SR–Phlx– 2015–49] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend and Correct Rule 1080.07 September 17, 2015. I. Introduction On June 5, 2015, NASDAQ OMX PHLX LLC (‘‘Exchange’’ or ‘‘Phlx’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend and correct several provisions in Phlx Rule 1080.07, ‘‘Complex Orders on Phlx XL,’’ which governs the trading of Complex Orders on the Phlx’s Complex Order System (‘‘System’’). The proposed rule change was published for comment in the Federal Register on June 23, 2015.3 On July 30, 2015, the Commission extended the time period for Commission action to September 21, 2015.4 The Commission received no comments regarding the proposal. This order institutes proceedings under Section 19(b)(2)(B) of the Act 5 to determine whether to disapprove the proposed rule change. mstockstill on DSK4VPTVN1PROD with NOTICES II. Description of the Proposal The Phlx proposes to make a number of changes to Phlx Rule 1080.07 to amend and correct inconsistencies in the rule and provide additional clarity regarding the trading of Complex Orders 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 75189 (June 17, 2015), 80 FR 35997 (‘‘Notice’’). 4 See Securities Exchange Act Release No. 75570, 80 FR 46619 (August 5, 2015). 5 15 U.S.C. 78s(b)(2)(B). 2 17 VerDate Sep<11>2014 18:00 Sep 22, 2015 Jkt 235001 on the Exchange. The Phlx’s System for trading Complex Orders includes a Complex Order Opening Process (‘‘COOP’’); the Complex Order Live Auction (‘‘COLA’’), an automated auction for seeking liquidity and price improvement for Complex Orders; and a Complex Limit Order Book (‘‘CBOOK’’). According to the Phlx, among other things, the proposal would revise Phlx Rule 1080.07 to: (i) Accurately describe the operation of the COOP and the execution of orders at the opening, including the treatment of Immediateor-Cancel (‘‘IOC’’) orders and Do Not Auction (‘‘DNA’’) orders at the opening; (ii) add definitions of ‘‘COOP Sweep’’ and ‘‘COLA Sweep,’’ and correct existing rule text to indicate that only Phlx XL market makers may submit COLA Sweeps; (iii) delete rule text that incorrectly states that a specialist could be entitled to receive 40% of the remainder of a COLA-eligible order, as well as rule text indicating that only a specialist’s interest at the cPBBO is aggregated for purposes of determining the specialist’s entitlement in the COLA, so that the revised rule will provide that the specialist is entitled to receive the greater of (a) the proportion of the aggregate size associated with the specialist’s COLA Sweep, SQT and RSQT COLA Sweeps, and non-SQT ROT Complex Orders on the CBOOK, or (b) the Enhanced Specialist Participation as described in Phlx Rule 1014(g)(ii); (iv) delete rule text indicating that, for allocation purposes, the size of a COLA Sweep or responsive Complex Order will be limited to the size of the COLA-eligible order, thereby clarifying that the size of a COLA Sweep or responsive Complex Order that exceeds the size of the COLA-eligible order may trade against remaining interest after the COLA-eligible order has been executed to the fullest extent possible; (v) revise rule text to indicate that other interest in a COLA may trade after a COLA-eligible order has been executed to the fullest extent possible, rather than in its entirety, and to correct the description of the execution of crossing interest after a COLA-eligible order has been executed; (vi) provide that the System will place a Complex Order received during a configurable period of time prior to the end of a trading session on the CBOOK after any marketable portion of the order has been executed; and (vii) describe the handling of all-or-none Complex Orders. In addition to these changes, the Phlx proposes to amend Phlx Rule 1080.07 to add a definition of ‘‘Firm.’’ 6 Specifically, the Phlx proposes to define 6 See PO 00000 Phlx Rule 1080.07(a)(x). Frm 00075 Fmt 4703 Sfmt 4703 a ‘‘Firm’’ to mean ‘‘a broker-dealer trading for its own (proprietary) account that is: A member of The Options Clearing Corporation (‘‘OCC’’) or maintains a Joint Back Office (‘‘JBO’’) arrangement with an OCC member.7 The Phlx also proposes to revise Phlx Rule 1080.07 to provide that orders from Firms, like orders from market makers, would not trigger a COLA.8 In addition, the Phlx proposes to treat Firms like market makers for purposes of determining the allocations and execution price that their trading interest will receive at the conclusion of a COLA.9 The Phlx proposes to treat Firm orders like non-Phlx market makers for purposes of these rules because the Phlx believes that the trading style and needs of Firms are more like market makers.10 The Phlx states that Firms are large, well-capitalized broker-dealers that trade for their own accounts and generally submit large orders, including orders that facilitate their clients’ orders or offset large positions taken to accommodate their customers.11 According to the Phlx, Firms must have the financial wherewithal that this role necessitates.12 Thus, the Phlx states that Firms, in general, are commonly viewed as liquidity providers, much like market makers.13 The Phlx states that Firms do not expect or need their Complex Orders to trigger a COLA, nor do they need or expect to submit Good Til Cancelled Orders, because these are features commonly associated with customers rather than liquidity providers who function to accommodate trading interest.14 The Phlx notes that both of these features involve a temporal component, and that both a delay and long-lasting interest are inconsistent 7 Id. Unless otherwise specified, Firms are included in the category of non-market-maker offfloor broker-dealer. Id. 8 See Phlx Rule 1080.07(e)(i)(B)(1). Orders from non-market maker off-floor broker-dealers that are not Firms would be COLA-eligible. See Phlx Rule 1080.07(e)(i)(B)(1) and Notice, 80 FR at 36003. 9 See Phlx Rule 1080.07(e)(viii)(C)(2) and Notice, 80 FR at 36003. Orders of non-market maker offfloor broker-dealers that are not Firms would be executed along with the orders of non-broker-dealer customers at the conclusion of the COLA. See Phlx Rule 1080.07(e)(viii)(C)(1) and Notice, 80 FR at 36003. At the same price, non-broker-dealer customer orders would be executed in time priority, while non-market-maker off-floor broker-dealer orders would be executed on a pro rata basis at each price level. See Phlx Rule 1080.07(e)(viii)(C)(1)(d). 10 See Notice, 80 FR at 36003. 11 See Notice, 80 FR at 36003–36004. 12 See Notice, 80 FR at 36004. In addition, Firms that are OCC clearing members must comply with OCC rules regarding, among other things, net capital, risk management procedures, and margin. See id. 13 See id. 14 See Notice, 80 FR at 36005. E:\FR\FM\23SEN1.SGM 23SEN1 Federal Register / Vol. 80, No. 184 / Wednesday, September 23, 2015 / Notices with the sort of accommodation that Firms provide.15 The Phlx believes that by tailoring its offerings to the needs and trading style of Firms, Firms are more likely to send orders to the Exchange.16 III. Proceedings To Determine Whether To Approve or Disapprove SR–Phlx– 2015–49 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 17 to determine whether the proposed rule change should be disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described in greater detail below, the Commission seeks and encourages interested persons to comment on the proposed rule change to inform the Commission’s analysis of whether to approve or disapprove the proposed rule change. Pursuant to Section 19(b)(2)(B) of the Act,18 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of, and input from commenters with respect to, the consistency of the proposed rule change with Section 6(b)(5) of the Act,19 which requires that the rules of a national securities exchange be designed, among other things, to prevent fraudulent and manipulative acts and practices, 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. In addition, under the Commission’s rules of procedure, a self-regulatory organization that proposes to amend its rules bears the burden of demonstrating that its proposal is consistent with the Act.20 In this regard: id. id. 17 15 U.S.C. 78s(b)(2)(B). 18 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also provides that proceedings to determine whether to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. The time for conclusion of the proceedings may be extended for up to 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding. 19 15 U.S.C. 78f(b)(5). 20 Rule 700(b)(3), 17 CFR 201.700(b)(3). The description of the proposed rule change, its purpose and operation, its effect, and a legal analysis of its consistency with the applicable requirements must all be sufficiently detailed and specific to support an affirmative Commission finding. Any failure of the self-regulatory organization to provide the information elicited by Form 19b–4 may result in the Commission not having a sufficient basis to make an affirmative finding that a proposed rule change is consistent with the Exchange Act and the rules and regulations thereunder that are applicable to the self-regulation organization.21 IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any others they may have identified with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change is consistent with Section 6(b)(5) or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval which would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b-4, any request for an opportunity to make an oral presentation.22 Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be approved or disapproved by October 14, 2015. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by October 28, 2015. The Commission asks that commenters address the sufficiency and merit of the Exchange’s statements in support of the proposed rule change, in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission asks that commenters address the sufficiency of the Exchange’s statements, which are set forth in the Notice,23 in support of its proposal to prevent Firms’ orders from 15 See mstockstill on DSK4VPTVN1PROD with NOTICES 16 See VerDate Sep<11>2014 18:00 Sep 22, 2015 Jkt 235001 21 Id. 22 Section 19(b)(2) of the Act, as amended by the Securities Acts Amendments of 1975, Public Law 94–29, 89 Stat. 97 (1975), grants the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Acts Amendments of 1975, Report of the Senate Committee on Banking, Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 23 See supra note 3. PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 57407 triggering a COLA, in addition to any other comments they may wish to submit about the proposed rule change. The Commission notes that the Phlx states that Firms, like market makers, are liquidity providers that function to accommodate the trading interest of their clients, and that Firms do not expect or need their orders to trigger a COLA. With respect to this conclusion, the Commission seeks comment on whether there are circumstances in which a Firm might want its order to trigger a COLA, and the potential impact of permitting or prohibiting Firms’ orders from triggering a COLA. 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–2015–49 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR-Phlx-2015–49. 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– E:\FR\FM\23SEN1.SGM 23SEN1 57408 Federal Register / Vol. 80, No. 184 / Wednesday, September 23, 2015 / Notices 2015–49 and should be submitted by October 14, 2015. Rebuttal comments should be submitted by October 28, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Brent J. Fields, Secretary. [FR Doc. 2015–24062 Filed 9–22–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75937; File Nos. SR–NYSE– 2015–31; SR–NYSEMKT–2015–56] Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE MKT LLC; Order Instituting Proceedings To Determine Whether To Disapprove the Proposed Rule Changes Amending the NYSE Trades Market Data and NYSE MKT Trades Market Data Product Offerings September 17, 2015. I. Introduction On July 16, 2015, New York Stock Exchange LLC (‘‘NYSE’’) and NYSE MKT LLC (‘‘NYSE MKT’’) (collectively, the ‘‘Exchanges’’) separately filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 proposed rule changes to amend, respectively, the NYSE Trades market data product offering and the NYSE MKT Trades market data product offering. The proposed rule changes were published for comment in the Federal Register on August 5, 2015.3 The Commission has received two comments on the proposals.4 This order institutes proceedings under Section 19(b)(2)(B) of the Act 5 to determine whether to disapprove the proposed rule changes. II. Description of the Proposals NYSE and NYSE MKT propose to modify the data content of their respective proprietary market data feeds: NYSE Trades and NYSE MKT CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release Nos. 75556 (July 30, 2015), 80 FR 46628 (SR–NYSE–2015–31) and 75559 (July 30, 2015), 80 FR 46642 (SR– NYSEMKT–2015–56) (‘‘Notices’’). 4 See Letter from Eric S. Hunsader, Nanex, LLC, dated August 14, 2015 (‘‘Nanex Letter’’); Letter from John Ramsay, Chief Market Policy Officer, IEX Group, Inc., to Brent J. Fields, Secretary, Commission, dated August 20, 2015 (‘‘IEX Letter’’). 5 15 U.S.C. 78s(b)(2)(B). Trades (collectively, the ‘‘Trades Feeds’’).6 The Trades Feeds currently provides subscribers and users on a real-time basis with the same last-sale information that each Exchange reports to the Consolidated Tape Association (‘‘CTA’’) for inclusion in the CTA Plan’s consolidated data streams. Specifically, each Exchange’s Trades Feeds includes, for each security traded on that Exchange, the real-time last-sale price, time and size information, bid/ask quotations, and a stock summary message. The stock summary message updates every minute and includes the offering Exchange’s opening price, high price, low price, closing price, and cumulative volume for the security.7 Each Exchange currently reports to the CTA and distributes on a real-time basis via the Trades Feeds its market’s last-sale information based on the completed execution of an arriving order. For example, currently, if an arriving order of 1,000 shares trades with five resting orders of 200 shares on NYSE, NYSE would bundle the executions and report a single completed trade of 1,000 shares both to the CTA and through NYSE Trades. NYSE MKT Trades operates in the same way. Each Exchange now proposes to distribute its last-sale information on its respective Trades Feed in a different manner than it distributes last-sale information to the CTA. Each Exchange would continue to distribute last-sale information to the CTA as described above, but last-sale information distributed via the Exchange’s Trades Feed would be based on the individual resting orders that are executed in the total completed trade and would not be bundled for reporting purposes. In the example above, NYSE would distribute via NYSE Trades the real-time NYSE last-sale information of five executions of 200 shares each,8 but would report to CTA a single completed trade of 1,000 shares. The Exchanges have represented that they would continue to make their lastsale information available through their Trades Feeds immediately after providing the last-sale information to the processor under the CTA Plan. The 24 17 mstockstill on DSK4VPTVN1PROD with NOTICES 1 15 VerDate Sep<11>2014 18:00 Sep 22, 2015 Jkt 235001 6 NYSE Trades is an NYSE-only last-sale market data feed and NYSE MKT Trades is a NYSE MKTonly last-sale market data feed. 7 See Securities Exchange Act Release Nos. 62187 (May 27, 2010), 75 FR 31500 (June 3, 2010) (SR– NYSEAmex–2010–35), 70065 (July 30, 2013), 78 FR 47450 (Aug. 5, 2013) (SR–NYSEMKT–2013–64) and 69273 (April 2, 2013), 78 FR 20969 (April 8, 2013) (SR–NYSEMKT–2013–30). 8 Each Exchange has proposed that the five transactions in such an example would have the same time stamp. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 Exchanges have argued that reporting last-sale information in an unbundled format, based on execution of the individual resting orders, rather than in an bundled format based on the completed execution of an incoming order would remove impediments to and perfect the mechanism of a free and open market by providing more granular trade information to vendors and subscribers who desire it, thus promoting competition and innovation. Each Exchanges has also proposed to remove the bid/ask data from its Trades Feed. Each Exchange currently has a data feed—the NYSE BBO data feed and the NYSE MKT BBO data feed—that includes the same bid/ask data currently included in the Exchange’s Trades Feed, and each Exchange has represented that its respective BBO feed would continue to include the best bids and offers for all securities that are traded on its facilities and for which it reports quotes to the Consolidated Quotation Association (‘‘CQA’’) under the Consolidated Quotation (‘‘CQ’’) Plan for inclusion in the CQ Plan’s consolidated quotation information data stream.9 Each Exchange has stated that removing the bid/ask data from its Trades Feeds would streamline its products and would align them with last-sale data feeds offered by other exchanges that offer last-sale data products, which do not include bid and offer information.10 Each Exchange has stated that it expects to offer both the current Trades Feed and the proposed Trades Feed for a limited transition period, after which it would stop offering the current Trades Feed and offer only the Trades Feed proposed in its filing. Each Exchange has stated that it would announce the transition dates in advance. Each Exchange has also stated that there would be no change to the fees for the Trades Feed in connection with the proposed changes. III. Comment Letters The Commission has received two comment letters on the proposals.11 Both commenters are opposed to the proposals. The commenters note that the NYSE and its affiliated exchanges are the only national securities exchanges that report their last-sale information to the securities information processor (‘‘SIP’’) in a 9 See, e.g., Securities Exchange Act Release No. 72326 (June 5, 2014), 79 FR 33605 (June 11, 2014) (SR–NYSEMKT–2014–49). 10 As examples, the Exchanges cited to the lastsale data products offered by The Nasdaq Stock Market, LLC and BATS, Inc. See NASDAQ Rule 7039 (Nasdaq Last Sale) and BATS Rule 11.22(g) (BATS Last Sale). 11 See supra note 4. E:\FR\FM\23SEN1.SGM 23SEN1

Agencies

[Federal Register Volume 80, Number 184 (Wednesday, September 23, 2015)]
[Notices]
[Pages 57406-57408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24062]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75942; File No. SR-Phlx-2015-49]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Amend and Correct Rule 1080.07

September 17, 2015.

I. Introduction

    On June 5, 2015, NASDAQ OMX PHLX LLC (``Exchange'' or ``Phlx'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend and correct several provisions in Phlx Rule 1080.07, ``Complex 
Orders on Phlx XL,'' which governs the trading of Complex Orders on the 
Phlx's Complex Order System (``System''). The proposed rule change was 
published for comment in the Federal Register on June 23, 2015.\3\ On 
July 30, 2015, the Commission extended the time period for Commission 
action to September 21, 2015.\4\ The Commission received no comments 
regarding the proposal. This order institutes proceedings under Section 
19(b)(2)(B) of the Act \5\ to determine whether to disapprove the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75189 (June 17, 
2015), 80 FR 35997 (``Notice'').
    \4\ See Securities Exchange Act Release No. 75570, 80 FR 46619 
(August 5, 2015).
    \5\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal

    The Phlx proposes to make a number of changes to Phlx Rule 1080.07 
to amend and correct inconsistencies in the rule and provide additional 
clarity regarding the trading of Complex Orders on the Exchange. The 
Phlx's System for trading Complex Orders includes a Complex Order 
Opening Process (``COOP''); the Complex Order Live Auction (``COLA''), 
an automated auction for seeking liquidity and price improvement for 
Complex Orders; and a Complex Limit Order Book (``CBOOK''). According 
to the Phlx, among other things, the proposal would revise Phlx Rule 
1080.07 to: (i) Accurately describe the operation of the COOP and the 
execution of orders at the opening, including the treatment of 
Immediate-or-Cancel (``IOC'') orders and Do Not Auction (``DNA'') 
orders at the opening; (ii) add definitions of ``COOP Sweep'' and 
``COLA Sweep,'' and correct existing rule text to indicate that only 
Phlx XL market makers may submit COLA Sweeps; (iii) delete rule text 
that incorrectly states that a specialist could be entitled to receive 
40% of the remainder of a COLA-eligible order, as well as rule text 
indicating that only a specialist's interest at the cPBBO is aggregated 
for purposes of determining the specialist's entitlement in the COLA, 
so that the revised rule will provide that the specialist is entitled 
to receive the greater of (a) the proportion of the aggregate size 
associated with the specialist's COLA Sweep, SQT and RSQT COLA Sweeps, 
and non-SQT ROT Complex Orders on the CBOOK, or (b) the Enhanced 
Specialist Participation as described in Phlx Rule 1014(g)(ii); (iv) 
delete rule text indicating that, for allocation purposes, the size of 
a COLA Sweep or responsive Complex Order will be limited to the size of 
the COLA-eligible order, thereby clarifying that the size of a COLA 
Sweep or responsive Complex Order that exceeds the size of the COLA-
eligible order may trade against remaining interest after the COLA-
eligible order has been executed to the fullest extent possible; (v) 
revise rule text to indicate that other interest in a COLA may trade 
after a COLA-eligible order has been executed to the fullest extent 
possible, rather than in its entirety, and to correct the description 
of the execution of crossing interest after a COLA-eligible order has 
been executed; (vi) provide that the System will place a Complex Order 
received during a configurable period of time prior to the end of a 
trading session on the CBOOK after any marketable portion of the order 
has been executed; and (vii) describe the handling of all-or-none 
Complex Orders.
    In addition to these changes, the Phlx proposes to amend Phlx Rule 
1080.07 to add a definition of ``Firm.'' \6\ Specifically, the Phlx 
proposes to define a ``Firm'' to mean ``a broker-dealer trading for its 
own (proprietary) account that is: A member of The Options Clearing 
Corporation (``OCC'') or maintains a Joint Back Office (``JBO'') 
arrangement with an OCC member.\7\ The Phlx also proposes to revise 
Phlx Rule 1080.07 to provide that orders from Firms, like orders from 
market makers, would not trigger a COLA.\8\ In addition, the Phlx 
proposes to treat Firms like market makers for purposes of determining 
the allocations and execution price that their trading interest will 
receive at the conclusion of a COLA.\9\
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    \6\ See Phlx Rule 1080.07(a)(x).
    \7\ Id. Unless otherwise specified, Firms are included in the 
category of non-market-maker off-floor broker-dealer. Id.
    \8\ See Phlx Rule 1080.07(e)(i)(B)(1). Orders from non-market 
maker off-floor broker-dealers that are not Firms would be COLA-
eligible. See Phlx Rule 1080.07(e)(i)(B)(1) and Notice, 80 FR at 
36003.
    \9\ See Phlx Rule 1080.07(e)(viii)(C)(2) and Notice, 80 FR at 
36003. Orders of non-market maker off-floor broker-dealers that are 
not Firms would be executed along with the orders of non-broker-
dealer customers at the conclusion of the COLA. See Phlx Rule 
1080.07(e)(viii)(C)(1) and Notice, 80 FR at 36003. At the same 
price, non-broker-dealer customer orders would be executed in time 
priority, while non-market-maker off-floor broker-dealer orders 
would be executed on a pro rata basis at each price level. See Phlx 
Rule 1080.07(e)(viii)(C)(1)(d).
---------------------------------------------------------------------------

    The Phlx proposes to treat Firm orders like non-Phlx market makers 
for purposes of these rules because the Phlx believes that the trading 
style and needs of Firms are more like market makers.\10\ The Phlx 
states that Firms are large, well-capitalized broker-dealers that trade 
for their own accounts and generally submit large orders, including 
orders that facilitate their clients' orders or offset large positions 
taken to accommodate their customers.\11\ According to the Phlx, Firms 
must have the financial wherewithal that this role necessitates.\12\ 
Thus, the Phlx states that Firms, in general, are commonly viewed as 
liquidity providers, much like market makers.\13\ The Phlx states that 
Firms do not expect or need their Complex Orders to trigger a COLA, nor 
do they need or expect to submit Good Til Cancelled Orders, because 
these are features commonly associated with customers rather than 
liquidity providers who function to accommodate trading interest.\14\ 
The Phlx notes that both of these features involve a temporal 
component, and that both a delay and long-lasting interest are 
inconsistent

[[Page 57407]]

with the sort of accommodation that Firms provide.\15\ The Phlx 
believes that by tailoring its offerings to the needs and trading style 
of Firms, Firms are more likely to send orders to the Exchange.\16\
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    \10\ See Notice, 80 FR at 36003.
    \11\ See Notice, 80 FR at 36003-36004.
    \12\ See Notice, 80 FR at 36004. In addition, Firms that are OCC 
clearing members must comply with OCC rules regarding, among other 
things, net capital, risk management procedures, and margin. See id.
    \13\ See id.
    \14\ See Notice, 80 FR at 36005.
    \15\ See id.
    \16\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-Phlx-
2015-49 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \17\ to determine whether the proposed rule 
change should be disapproved. Institution of such proceedings is 
appropriate at this time in view of the legal and policy issues raised 
by the proposed rule change. Institution of proceedings does not 
indicate that the Commission has reached any conclusions with respect 
to any of the issues involved. Rather, as described in greater detail 
below, the Commission seeks and encourages interested persons to 
comment on the proposed rule change to inform the Commission's analysis 
of whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\18\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of, and input from commenters with respect to, the consistency 
of the proposed rule change with Section 6(b)(5) of the Act,\19\ which 
requires that the rules of a national securities exchange be designed, 
among other things, to prevent fraudulent and manipulative acts and 
practices, 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
The time for conclusion of the proceedings may be extended for up to 
60 days if the Commission finds good cause for such extension and 
publishes its reasons for so finding.
    \19\ 15 U.S.C. 78f(b)(5).
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    In addition, under the Commission's rules of procedure, a self-
regulatory organization that proposes to amend its rules bears the 
burden of demonstrating that its proposal is consistent with the 
Act.\20\ In this regard:
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    \20\ Rule 700(b)(3), 17 CFR 201.700(b)(3).

The description of the proposed rule change, its purpose and 
operation, its effect, and a legal analysis of its consistency with 
the applicable requirements must all be sufficiently detailed and 
specific to support an affirmative Commission finding. Any failure 
of the self-regulatory organization to provide the information 
elicited by Form 19b-4 may result in the Commission not having a 
sufficient basis to make an affirmative finding that a proposed rule 
change is consistent with the Exchange Act and the rules and 
regulations thereunder that are applicable to the self-regulation 
organization.\21\
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    \21\ Id.
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any others they may have identified 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is consistent with Section 6(b)(5) or any other provision of the Act, 
or the rules and regulations thereunder. Although there do not appear 
to be any issues relevant to approval or disapproval which would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\22\
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    \22\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29, 89 Stat. 97 (1975), 
grants the Commission flexibility to determine what type of 
proceeding--either oral or notice and opportunity for written 
comments--is appropriate for consideration of a particular proposal 
by a self-regulatory organization. See Securities Acts Amendments of 
1975, Report of the Senate Committee on Banking, Housing and Urban 
Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 
30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by October 14, 2015. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
October 28, 2015. The Commission asks that commenters address the 
sufficiency and merit of the Exchange's statements in support of the 
proposed rule change, in addition to any other comments they may wish 
to submit about the proposed rule change. In particular, the Commission 
asks that commenters address the sufficiency of the Exchange's 
statements, which are set forth in the Notice,\23\ in support of its 
proposal to prevent Firms' orders from triggering a COLA, in addition 
to any other comments they may wish to submit about the proposed rule 
change. The Commission notes that the Phlx states that Firms, like 
market makers, are liquidity providers that function to accommodate the 
trading interest of their clients, and that Firms do not expect or need 
their orders to trigger a COLA. With respect to this conclusion, the 
Commission seeks comment on whether there are circumstances in which a 
Firm might want its order to trigger a COLA, and the potential impact 
of permitting or prohibiting Firms' orders from triggering a COLA.
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    \23\ See supra note 3.
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    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-2015-49 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2015-49. 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-

[[Page 57408]]

2015-49 and should be submitted by October 14, 2015. Rebuttal comments 
should be submitted by October 28, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(57).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-24062 Filed 9-22-15; 8:45 am]
 BILLING CODE 8011-01-P
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