Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1, To Introduce the Minimum Life Order as a New Order Type, 78057 [2011-32141]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 241 (Thursday, December 15, 2011)]
[Notices]
[Page 78057]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32141]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65926; File No. SR-Phlx-2011-141]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment No. 
1, To Introduce the Minimum Life Order as a New Order Type

December 9, 2011.
    On October 12, 2011, 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 
introduce the Minimum Life Order as new order type for use in the 
NASDAQ OMX PSX (``PSX'') system. The proposed rule change was published 
for comment in the Federal Register on October 28, 2011.\3\ On October 
26, 2011, the Exchange filed Amendment No. 1 to the proposed rule 
change.\4\ The Commission has received one comment letter on the 
proposed rule change.\5\ The Exchange responded to the comment letter 
on November 28, 2011.\6\ This order approves the proposed rule change, 
as modified by Amendment No. 1.
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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. 65610 (October 24, 
2011), 76 FR 67012 (``Notice'').
    \4\ Amendment No. 1 to the proposed rule change reflects the 
October 19, 2011 approval of the proposed rule change by the Board 
of Directors of Phlx. This is a technical amendment and is not 
subject to notice and comment as it does not materially affect the 
substance of the filing.
    \5\ See Letter dated November 1, 2011, from Sal Arnuk and Joe 
Saluzzi, Themis Trading, LLC, to Elizabeth M. Murphy, Secretary, 
Commission.
    \6\ See Letter dated November 28, 2011, from John M. Yetter, 
Vice President & Deputy General Counsel, NASDAQ OMX, to Elizabeth M. 
Murphy, Secretary, Commission (``Comment Response'').
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    The Exchange proposes, by amending its rules to add Rule 
3301(f)(11), to introduce the Minimum Life Order as a new order type 
for use on PSX. A Minimum Life Order may not be cancelled by the 
entering participant for 100 milliseconds following receipt by the 
Exchange. If a market participant entering a Minimum Life Order submits 
a cancel message with respect to a Minimum Life Order at the same time 
as the order, or at any point during the ``no cancel'' window, the 
cancel message will not be rejected, but will be effected only 
following the expiration of the window (assuming the order has not 
already been executed). All Minimum Life Orders must be designated as 
Displayed Orders.
    The Commission received one comment letter, which was generally 
supportive of the proposed rule change.\7\ The commenter, however, 
expressed concern that predatory traders will be able to know when an 
order has a minimum life because there will be a new flag in the data 
feed.\8\ The commenter is concerned that predatory traders would be 
able to use such information to further model price behavior in the 
markets.\9\ The Exchange stated in its response to the commenter that 
Minimum Life Orders will not be distinguished from other Displayed 
Orders in any data that will be disseminated to market 
participants.\10\ The Exchange notes that the flag mentioned by the 
commenter will be used for order entry, but not for order display.\11\
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    \7\ See supra note 5. However, the commenter does believe that, 
in order for the minimum order live to be truly effective, that it 
cannot be a voluntary order offered by just one exchange, but should 
apply to all orders.
    \8\ Id.
    \9\ Id.
    \10\ See Comment Response, supra note 6.
    \11\ Id.
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    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \12\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\13\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\14\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, 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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    \12\ 15 U.S.C. 78f.
    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange's new Minimum Life Displayed Order type, which cannot 
be cancelled until after a 100 millisecond window has expired, allows 
market participants to elect to commit to trade for that time period 
and thus, according to the Exchange, is designed to encourage removers 
of liquidity to route orders to the Exchange in anticipation of 
receiving higher fill rates.\15\ The Commission believes that the 
Minimum Life Order could provide additional trading opportunities on 
the Exchange, consistent with just and equitable principles of trade, 
and is designed to encourage displayed liquidity and offer PSX market 
participants additional options when posting liquidity on PSX, 
consistent with removing impediments to and perfecting the mechanisms 
of a free and open market and a national market system, the protection 
of investors and the public interest.
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    \15\ See Notice, supra note 3.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-Phlx-2011-141), as amended, 
be, and hereby is, approved.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32141 Filed 12-14-11; 8:45 am]
BILLING CODE 8011-01-P