Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the PHLX Market Exhaust Functionality, 1095-1098 [2012-101]
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Federal Register / Vol. 77, No. 5 / Monday, January 9, 2012 / Notices
spouse annuity the RRB uses Form AA–
3, Application for Spouse/Divorced
Spouse Annuity, and electronic Form
AA–3cert, Application Summary and
Certification.
The AA–3 application process gathers
information from an applicant about
their marital history, work history,
benefits from other government
agencies, railroad pensions and
Medicare entitlement for a spouse
annuity. An RRB representative
interviews the applicant either at a field
office (preferred), an itinerant point, or
by telephone. During the interview, the
RRB representative enters the
information obtained into an on-line
information system. Upon completion of
the interview, the system generates, for
the applicant’s review and traditional
pen and ink ‘‘wet’’ signature, Form AA–
3cert, Application Summary and
Certification, which is a summary of the
information that the applicant provided
or verified. When the RRB
representative is unable to contact the
applicant in person or by telephone, for
example, the applicant lives in another
country, a manual version of Form AA–
3 is used.
Consistent with 20 CFR 217.17, upon
completion of the AA–3 interview
process, the RRB proposes to provide, in
addition to the current Form AA–3cert
pen and ink ‘‘wet’’ signature, an
alternate signing method called
‘‘Attestation,’’ which will be
documented by new Form AA–3sum.
Attestation refers to an action taken by
the RRB representative to confirm and
annotate in the RRB records (1) the
applicant’s intent to file an application;
(2) the applicant’s affirmation under
penalty of perjury that the information
provided is correct; and (3) the
applicant’s agreement to sign the
application by proxy. The information
collected as part of the AA–3 interview
process will be the same irrespective of
whether the application is signed by a
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attestation. The only difference will be
the method of signature.
In addition, consistent with
Department of Treasury guidelines, the
RRB proposes revisions to Forms AA–3
and AA–3cert, to provide claimants a
Direct Express® Master Card® Debit
Card payment option. Other nonburden-impacting editorial and
formatting changes are proposed. One
response is requested of each
respondent. Completion of the forms is
required to obtain a benefit.
ESTIMATE OF ANNUAL RESPONDENT BURDEN
[The estimated annual respondent burden is as follows]
Annual
responses
Form No.
Time
(minutes)
Burden
(hours)
AA–3 (without assistance) ...........................................................................................................
AA–3cert (with assistance) ..........................................................................................................
AA–3sum (with assistance) .........................................................................................................
250
3,700
7,100
58
30
29
242
1,850
3,432
Total ......................................................................................................................................
11,050
........................
5,524
Additional Information or Comments:
To request more information or to
obtain a copy of the information
collection justification, forms, and/or
supporting material, contact Charles
Mierzwa, the RRB Clearance Officer, at
(312) 751–3363 or
Charles.Mierzwa@RRB.GOV. Comments
regarding the information collection
should be addressed to Patricia
Henaghan, Railroad Retirement Board,
844 North Rush Street, Chicago, Illinois
60611–2092 or emailed to
Patricia.Henaghan@RRB.GOV. Written
comments should be received within 60
days of this notice.
Charles Mierzwa,
Clearance Officer.
[FR Doc. 2012–190 Filed 1–6–12; 8:45 am]
BILLING CODE 7905–01–P
tkelley on DSK3SPTVN1PROD with NOTICES
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold an Open Meeting
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on Wednesday, January 11, 2012 at 10
a.m., in the Auditorium, Room L–002.
The subject matter of the Open
Meeting will be:
The Commission will consider
whether to approve the 2012 budget of
the Public Company Accounting
Oversight Board and will consider the
related annual accounting support fee
for the Board under Section 109 of the
Sarbanes-Oxley Act of 2002.
Commissioner Paredes, as duty
officer, determined that no earlier notice
thereof was possible.
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: January 5, 2012.
Elizabeth M. Murphy,
Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66087; File No. SR–Phlx–
2011–182]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
PHLX Market Exhaust Functionality
January 3, 2012.
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 December
22, 2011, 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, II,
and III 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.
[FR Doc. 2012–282 Filed 1–5–12; 4:15 pm]
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Exchange Rule 1082, Firm Quotations,
by modifying Exchange Rule
1082(a)(ii)(B)(4), Market Exhaust, to
reflect the Exchange’s discontinuation
of the Market Exhaust functionality
(hereinafter, ‘‘Market Exhaust’’), a
feature of the Exchange’s PHLX XL®
automated options trading system.3
The Exchange also proposes to amend
Exchange Rule 1080 by deleting a
reference to ‘‘Market Exhaust’’ from
Rule 1080(c).
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nasdaqtrader.com/
micro.aspx?id=PHLXRulefilings, 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 the
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 the
Statutory Basis for, the Proposed Rule
Change
tkelley on DSK3SPTVN1PROD with NOTICES
1. Purpose
The purpose of the proposed rule
change is to reflect in the Exchange
rules the discontinuation of the PHLX
XL Market Exhaust functionality.
In June, 2009, the Exchange added
several significant enhancements to its
automated options trading platform
(now known as PHLX XL), and adopted
rules to reflect those enhancements.4 As
part of the system enhancements, the
3 This proposal refers to ‘‘PHLX XL’’ as the
Exchange’s automated options trading system. In
May 2009 the Exchange enhanced the system and
adopted corresponding rules referring to the system
as ‘‘Phlx XL II.’’ See Securities Exchange Act
Release No. 59995 (May 28, 2009), 74 FR 26750
(June 3, 2009) (SR–Phlx–2009–32). The Exchange
intends to submit a separate technical proposed
rule change that would change all references to the
system from ‘‘Phlx XL II’’ to ‘‘PHLX XL’’ for
branding purposes.
4 See Securities Exchange Act Release No. 59995
(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR–
Phlx–2009–32).
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Exchange proposed, among other things,
Market Exhaust, which is defined
below. Several elements of Market
Exhaust have been part of a pilot (the
‘‘pilot’’) which was originally scheduled
to expire November 30, 2009, and later
extended through September 30, 2010.5
The Exchange subsequently modified
the pilot to address the manner in
which the PHLX XL system
disseminates quotes during and after the
Market Exhaust process.6 That
modification was implemented on a
pilot basis, scheduled to expire
November 30, 2010,7 and the pilot was
then extended through March 31, 2011.8
The pilot was then extended through
July 31, 2011,9 November 30, 2011,10
and its current expiration date of
February 29, 2012.11
Market Exhaust Functionality
The PHLX XL system initiates Market
Exhaust when there are no PHLX XL
participant quotations in the Exchange’s
disseminated market for a particular
series and an initiating order in the
series is received.12 The PHLX XL
system initiates a ‘‘Market Exhaust
Auction’’ for the initiating order, and
then goes through a series of steps
depending on the market conditions
present for the affected series, including
a broadcast to PHLX XL participants,
execution of all or part of the initiating
order, routing the initiating order (or
remaining contracts following
execution) to better priced away
markets, and a ‘‘Provisional Auction,’’
after which any unexecuted contracts
from the initiating order will be subject
to, and not executable outside of, an
Auction Quote Range (‘‘AQR’’). During
the Provisional Auction, any
unexecuted contracts from the initiating
order are displayed in the Exchange
quote for the remaining size for a brief
period not to exceed ten seconds and
subsequently cancelled back to the
entering participant if they remain
unexecuted, unless the member that
5 See Securities Exchange Act Release No. 60951
(November 6, 2009), 74 FR 59275 (November 17,
2009) (SR–Phlx–2009–95).
6 See Securities Exchange Act Release No. 63024
(September 30, 2010), 75 FR 61799 (October 6,
2010) (SR–Phlx–2010–134).
7 Id.
8 See Securities Exchange Act Release No. 63350
(November 19, 2010), 75 FR 73150 (November 29,
2010) (SR–Phlx–2010–156).
9 See Securities Exchange Act Release No. 64056
(March 8, 2011), 76 FR 13678 (March 14, 2011) (SR–
Phlx–2011–29).
10 See Securities Exchange Act Release No. 64833
(July 7, 2011), 76 FR 41317 (July 13, 2011) (SR–
Phlx–2011–95).
11 See Securities Exchange Act Release No. 65670
(November 2, 2011), 76 FR 69308 (November 8,
2011) (SR–Phlx–2011–144).
12 See Exchange Rule 1082(a)(ii)(B)(4).
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submitted the original order has
instructed the Exchange in writing to reenter the remaining size, in which case
the remaining size will be automatically
submitted as a new order.
Discontinuation of Market Exhaust
The Exchange proposes to
discontinue the application of Market
Exhaust on PHLX XL. The Exchange has
determined that Market Exhaust has
only affected a small number of orders,
given the specific set of circumstances
that must occur in order for Market
Exhaust to be initiated. Market Exhaust,
which was originally intended to
protect against erroneous executions
when there are no participant quotes on
the Exchange, may actually result in a
customer missing the opportunity to
access liquidity present on the order
book and/or on other exchanges while
their order is involved in the Market
Exhaust process. Once Market Exhaust
is discontinued on the Exchange, orders
received when there are no PHLX XL
participant quotations in the Exchange’s
disseminated market for the affected
series will be handled in accordance
with existing Exchange rules regarding
electronic order entry, execution,
routing, trade reporting, and firm
quotations.13
The Exchange proposes to amend
Rule 1082(a)(ii)(B)(4) by adopting Rule
1082(a)(ii)(B)(4)(a), which would state
that, if there are no offers both on the
Exchange and on away markets in the
affected series, market orders to buy in
the affected series will be cancelled
immediately, and an electronic report of
such cancellation will be transmitted to
the sender. The Exchange would cancel
such a market order because in this rare
circumstance there would be no
disseminated market on the Exchange
and no disseminated market on any
away market against which such market
order could be routed and executed, and
there would be no price at which the
Exchange could place such a market
order on the Exchange’s limit order
book.
Upon the discontinuation of Market
Exhaust, orders that would have been
handled under Market Exhaust will be
handled according to Exchange rules
that address specific market conditions.
Proposed Rule 1082(a)(ii)(B)(4)(b) would
address the PHLX XL system’s
functionality in the circumstance where
there are no offers on the Exchange and
there are offers on away markets in the
affected series. In such a circumstance,
13 See, e.g., Exchange Rules 1014, 1051, 1080, and
1082.
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Federal Register / Vol. 77, No. 5 / Monday, January 9, 2012 / Notices
1097
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.
Specifically, the Exchange believes
that the proposed discontinuation of
Market Exhaust protects investors and
the public interest by ensuring that
customers have the opportunity to
access liquidity present on the order
book and/or on other exchanges quickly,
instead of foregoing such opportunity
while their order is involved in the
Market Exhaust process. In the rare set
of circumstances that give rise to Market
Exhaust, investors should continue to
receive quality executions on PHLX and
at away markets (following routing if
appropriate).
Moreover, the proposed
discontinuation of Market Exhaust
removes impediments and perfects the
mechanism of a free and open market
and a national market system by
expediting the PHLX execution, routing
and trade reporting process, all to the
benefit of the markets as a whole.
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.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 18 in general, and furthers the
objectives of Section 6(b)(5) of the Act 19
tkelley on DSK3SPTVN1PROD with NOTICES
market orders to buy will be handled
pursuant to Exchange Rule 1080(m).14
Proposed Rule 1082(a)(ii)(B)(4)(c)
would address the PHLX XL system’s
functionality in the circumstance where
there are no bids or a zero priced bid on
the Exchange and there are no bids on
away markets in the affected series. In
such a circumstance, the Exchange will
disseminate a bid price of zero, and
market orders to sell will be handled
pursuant to Exchange Rule 1080(i).15
Proposed Rule 1082(a)(ii)(B)(4)(d)
would address the PHLX XL system’s
functionality in the circumstance where
there are no bids or a zero priced bid on
the Exchange and there are bids on
away markets in the affected series. In
such a circumstance, market orders to
sell will be handled pursuant to
Exchange Rule 1080(m).
The Exchange believes that the
proposed rule change benefits
customers and the marketplace as a
whole by simplifying the order handling
process and enabling customers to
immediately access posted liquidity on
the Exchange and away markets even
when there may not be PHLX
participant quotes present.16
The Exchange also proposes to amend
Exchange Rule 1080 by deleting a
reference to ‘‘Market Exhaust’’ from
Rule 1080(c).
The Exchange will complete the
discontinuation of the Market Exhaust
functionality on or before January 31,
2012.17
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–Phlx–2011–182. 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 on official business
days between the hours of 10 a.m. and
3 p.m. Copies of such filing also will be
available for inspection and copying at
the principal offices of the Exchange.
All comments received will be posted
without change; the Commission does
not edit personal identifying
14 Rule 1080(m), Order Routing, describes the
PHLX XL functionality by which eligible orders are
routed to away markets for possible execution.
15 Rule 1080(i) states that the system will convert
market orders to sell a particular option series to
limit orders to sell with a limit price of the
minimum trading increment applicable to such
series that are received when: (A) For options listed
only on the Exchange: (1) The Exchange’s
disseminated bid price in such option series is zero;
and (2) the Exchange’s disseminated quotation in
the series has a bid/ask differential less than or
equal to $0.25; or (B) For options that are listed on
multiple exchanges: (1) The disseminated NBBO
includes a bid price of zero in the series; and (2)
the Exchange’s disseminated quotation in the series
has a bid/ask differential less than or equal to $0.25.
Such orders will be automatically placed on the
limit order book in price-time priority.
16 Additionally, the Exchange notes that the
deletion of the rules concerning Market Exhaust
effects consistency between the rules and the PHLX
XL functionality in compliance with the Act.
17 The Exchange will issue a circular to
membership describing the discontinuation of
Market Exhaust prior to the effectiveness of such
discontinuation.
18 15 U.S.C. 78f(b).
19 15 U.S.C. 78f(b)(5).
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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.
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 after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 20 and Rule 19b–4(f)(6) 21
thereunder.
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change 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.
21 17
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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 rulecomments@sec.gov. Please include File
Number SR–Phlx–2011–182 on the
subject line.
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Federal Register / Vol. 77, No. 5 / Monday, January 9, 2012 / Notices
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–Phlx–2011–182, and should
be submitted on or before January 30,
2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–101 Filed 1–6–12; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–66075; File No. SR–C2–
2011–042]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Related to the Exchange’s
Automated Improvement Mechanisms
December 30, 2011.
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 December
22, 2011, the C2 Options Exchange,
Incorporated (‘‘Exchange’’ or ‘‘C2’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Exchange has designated the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend C2
Rules 6.51, Automated Improvement
Mechanism. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
www.c2exchange.com/Legal/
RuleFilings.aspx), at the Exchange’s
Office of the Secretary and at the
Commission’s Public Reference Room.
22 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
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 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.
1. Purpose
The purpose of the proposed rule
change is to amend C2 Rule 6.51 to
eliminate the requirement that there be
at least three market-makers quoting in
the relevant series in order for an
Auction to commence.
This proposed rule change is based on
the current rules of the Boston Options
Exchange Group, LLC (‘‘BOX’’) 5 and the
International Securities Exchange, LLC
(‘‘ISE’’) 6 relating to the Price
Improvement Period (‘‘PIP’’) and Price
Improvement Mechanism (‘‘PIM’’),
respectively, which are automated price
improvement mechanisms similar to
AIM.7
AIM allows a TPH to submit an
Agency Order along with a contra-side
second order (a principal order or a
solicited order for the same size as the
Agency Order) into an Auction where
other participants could compete with
the Initiating TPH’s second order to
execute against the Agency Order,
which guarantees that the Agency Order
will receive an execution. Once an
Auction commences, the Initiating TPH
cannot cancel it.8
C2 Rule 6.51(a)(4) currently requires
that there be at least three marketmakers quoting in the relevant series for
an Auction to commence. The Exchange
is proposing to eliminate this
5 See
BOX Rules Chapter V, Section 18.
ISE Rule 723.
7 AIM, PIP and PIM have certain characteristics in
common with each other. All three mechanisms (a)
Provide for the opportunity for customer price
improvement, (b) have certain periods where the
initial orders are exposed for potential price
improvement, (c) have certain guidelines regarding
the types of orders that may be eligible for price
improvement, and (d) have certain defined rules
related to the allocation of trades within price
improvement auctions, although there are
differences in the way orders are allocated.
8 See C2 Rule 6.51(b)(1)(A).
6 See
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requirement. The Exchange does not
believe that customer orders should be
denied the benefits of AIM simply
because there may be less than three
market-makers quoting in a relevant
options class at a specific point in time.
Any concern regarding an Auction
starting with a lower number of marketmakers quoting in a relevant series is
offset by the broad participation and
competition that would be present once
an Auction commenced.
In support of this proposal, the
Exchange notes that both PIP 9 and
PIM 10 permit auctions to commence
without the condition that there be a
minimum number of market-makers
quoting in the particular series. Further,
like PIP and PIM, responding to C2 AIM
auctions is open to all permit holders.
The Exchange believes that AIM, and in
turn the customers that benefit from
AIM, would be disadvantaged if the
three market-maker requirement
remained as a condition to start an
Auction because this requirement
potentially reduces the number of
Auctions and, as a result, opportunities
for price improvement. Because BOX
and ISE are currently able to offer their
customers price improvement without a
minimum quoter requirement in PIP
and PIM, respectively, the Exchange
believes it is important for competitive
purposes that it be able to offer the same
opportunities for price improvement on
C2 through AIM.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) 11 and the rules and regulations
thereunder and, in particular, the
requirements of Section 6(b) of the
Act.12 Specifically, the Exchange
believes the proposed rule change is
consistent with the Section 6(b)(5) 13
requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts, to remove impediments to and to
perfect the mechanism for a free and
9 See supra note 5; see also Securities Exchange
Act Release No. 34–58999 (November 21, 2008), 73
FR 72536 (November 28, 2008) (SR–BSE–2008–54)
(order approving proposed rule change to eliminate
requirement that there be at least three marketmakers quoting in the relevant series for an auction
to commence).
10 See supra note 6; see also Securities Exchange
Act Release No. 34–58710 (October 1, 2008), 73 FR
59008 (October 8, 2008) (SR–ISE–2008–63) (order
approving proposed rule change to eliminate
requirement that there be at least three marketmakers quoting in the relevant series for an auction
to commence).
11 15 U.S.C. 78s(b)(1).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
E:\FR\FM\09JAN1.SGM
09JAN1
]]>Agencies
[Federal Register Volume 77, Number 5 (Monday, January 9, 2012)]
[Notices]
[Pages 1095-1098]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-101]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66087; File No. SR-Phlx-2011-182]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
the PHLX Market Exhaust Functionality
January 3, 2012.
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 December 22, 2011, 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, II, and III 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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[[Page 1096]]
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend Exchange Rule 1082, Firm Quotations,
by modifying Exchange Rule 1082(a)(ii)(B)(4), Market Exhaust, to
reflect the Exchange's discontinuation of the Market Exhaust
functionality (hereinafter, ``Market Exhaust''), a feature of the
Exchange's PHLX XL[supreg] automated options trading system.\3\
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\3\ This proposal refers to ``PHLX XL'' as the Exchange's
automated options trading system. In May 2009 the Exchange enhanced
the system and adopted corresponding rules referring to the system
as ``Phlx XL II.'' See Securities Exchange Act Release No. 59995
(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32). The
Exchange intends to submit a separate technical proposed rule change
that would change all references to the system from ``Phlx XL II''
to ``PHLX XL'' for branding purposes.
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The Exchange also proposes to amend Exchange Rule 1080 by deleting
a reference to ``Market Exhaust'' from Rule 1080(c).
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
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 the
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to reflect in the
Exchange rules the discontinuation of the PHLX XL Market Exhaust
functionality.
In June, 2009, the Exchange added several significant enhancements
to its automated options trading platform (now known as PHLX XL), and
adopted rules to reflect those enhancements.\4\ As part of the system
enhancements, the Exchange proposed, among other things, Market
Exhaust, which is defined below. Several elements of Market Exhaust
have been part of a pilot (the ``pilot'') which was originally
scheduled to expire November 30, 2009, and later extended through
September 30, 2010.\5\ The Exchange subsequently modified the pilot to
address the manner in which the PHLX XL system disseminates quotes
during and after the Market Exhaust process.\6\ That modification was
implemented on a pilot basis, scheduled to expire November 30, 2010,\7\
and the pilot was then extended through March 31, 2011.\8\ The pilot
was then extended through July 31, 2011,\9\ November 30, 2011,\10\ and
its current expiration date of February 29, 2012.\11\
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\4\ See Securities Exchange Act Release No. 59995 (May 28,
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
\5\ See Securities Exchange Act Release No. 60951 (November 6,
2009), 74 FR 59275 (November 17, 2009) (SR-Phlx-2009-95).
\6\ See Securities Exchange Act Release No. 63024 (September 30,
2010), 75 FR 61799 (October 6, 2010) (SR-Phlx-2010-134).
\7\ Id.
\8\ See Securities Exchange Act Release No. 63350 (November 19,
2010), 75 FR 73150 (November 29, 2010) (SR-Phlx-2010-156).
\9\ See Securities Exchange Act Release No. 64056 (March 8,
2011), 76 FR 13678 (March 14, 2011) (SR-Phlx-2011-29).
\10\ See Securities Exchange Act Release No. 64833 (July 7,
2011), 76 FR 41317 (July 13, 2011) (SR-Phlx-2011-95).
\11\ See Securities Exchange Act Release No. 65670 (November 2,
2011), 76 FR 69308 (November 8, 2011) (SR-Phlx-2011-144).
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Market Exhaust Functionality
The PHLX XL system initiates Market Exhaust when there are no PHLX
XL participant quotations in the Exchange's disseminated market for a
particular series and an initiating order in the series is
received.\12\ The PHLX XL system initiates a ``Market Exhaust Auction''
for the initiating order, and then goes through a series of steps
depending on the market conditions present for the affected series,
including a broadcast to PHLX XL participants, execution of all or part
of the initiating order, routing the initiating order (or remaining
contracts following execution) to better priced away markets, and a
``Provisional Auction,'' after which any unexecuted contracts from the
initiating order will be subject to, and not executable outside of, an
Auction Quote Range (``AQR''). During the Provisional Auction, any
unexecuted contracts from the initiating order are displayed in the
Exchange quote for the remaining size for a brief period not to exceed
ten seconds and subsequently cancelled back to the entering participant
if they remain unexecuted, unless the member that submitted the
original order has instructed the Exchange in writing to re-enter the
remaining size, in which case the remaining size will be automatically
submitted as a new order.
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\12\ See Exchange Rule 1082(a)(ii)(B)(4).
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Discontinuation of Market Exhaust
The Exchange proposes to discontinue the application of Market
Exhaust on PHLX XL. The Exchange has determined that Market Exhaust has
only affected a small number of orders, given the specific set of
circumstances that must occur in order for Market Exhaust to be
initiated. Market Exhaust, which was originally intended to protect
against erroneous executions when there are no participant quotes on
the Exchange, may actually result in a customer missing the opportunity
to access liquidity present on the order book and/or on other exchanges
while their order is involved in the Market Exhaust process. Once
Market Exhaust is discontinued on the Exchange, orders received when
there are no PHLX XL participant quotations in the Exchange's
disseminated market for the affected series will be handled in
accordance with existing Exchange rules regarding electronic order
entry, execution, routing, trade reporting, and firm quotations.\13\
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\13\ See, e.g., Exchange Rules 1014, 1051, 1080, and 1082.
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The Exchange proposes to amend Rule 1082(a)(ii)(B)(4) by adopting
Rule 1082(a)(ii)(B)(4)(a), which would state that, if there are no
offers both on the Exchange and on away markets in the affected series,
market orders to buy in the affected series will be cancelled
immediately, and an electronic report of such cancellation will be
transmitted to the sender. The Exchange would cancel such a market
order because in this rare circumstance there would be no disseminated
market on the Exchange and no disseminated market on any away market
against which such market order could be routed and executed, and there
would be no price at which the Exchange could place such a market order
on the Exchange's limit order book.
Upon the discontinuation of Market Exhaust, orders that would have
been handled under Market Exhaust will be handled according to Exchange
rules that address specific market conditions. Proposed Rule
1082(a)(ii)(B)(4)(b) would address the PHLX XL system's functionality
in the circumstance where there are no offers on the Exchange and there
are offers on away markets in the affected series. In such a
circumstance,
[[Page 1097]]
market orders to buy will be handled pursuant to Exchange Rule
1080(m).\14\
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\14\ Rule 1080(m), Order Routing, describes the PHLX XL
functionality by which eligible orders are routed to away markets
for possible execution.
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Proposed Rule 1082(a)(ii)(B)(4)(c) would address the PHLX XL
system's functionality in the circumstance where there are no bids or a
zero priced bid on the Exchange and there are no bids on away markets
in the affected series. In such a circumstance, the Exchange will
disseminate a bid price of zero, and market orders to sell will be
handled pursuant to Exchange Rule 1080(i).\15\
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\15\ Rule 1080(i) states that the system will convert market
orders to sell a particular option series to limit orders to sell
with a limit price of the minimum trading increment applicable to
such series that are received when: (A) For options listed only on
the Exchange: (1) The Exchange's disseminated bid price in such
option series is zero; and (2) the Exchange's disseminated quotation
in the series has a bid/ask differential less than or equal to
$0.25; or (B) For options that are listed on multiple exchanges: (1)
The disseminated NBBO includes a bid price of zero in the series;
and (2) the Exchange's disseminated quotation in the series has a
bid/ask differential less than or equal to $0.25. Such orders will
be automatically placed on the limit order book in price-time
priority.
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Proposed Rule 1082(a)(ii)(B)(4)(d) would address the PHLX XL
system's functionality in the circumstance where there are no bids or a
zero priced bid on the Exchange and there are bids on away markets in
the affected series. In such a circumstance, market orders to sell will
be handled pursuant to Exchange Rule 1080(m).
The Exchange believes that the proposed rule change benefits
customers and the marketplace as a whole by simplifying the order
handling process and enabling customers to immediately access posted
liquidity on the Exchange and away markets even when there may not be
PHLX participant quotes present.\16\
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\16\ Additionally, the Exchange notes that the deletion of the
rules concerning Market Exhaust effects consistency between the
rules and the PHLX XL functionality in compliance with the Act.
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The Exchange also proposes to amend Exchange Rule 1080 by deleting
a reference to ``Market Exhaust'' from Rule 1080(c).
The Exchange will complete the discontinuation of the Market
Exhaust functionality on or before January 31, 2012.\17\
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\17\ The Exchange will issue a circular to membership describing
the discontinuation of Market Exhaust prior to the effectiveness of
such discontinuation.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \18\ in general, and furthers the objectives of Section
6(b)(5) of the Act \19\ 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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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that the proposed
discontinuation of Market Exhaust protects investors and the public
interest by ensuring that customers have the opportunity to access
liquidity present on the order book and/or on other exchanges quickly,
instead of foregoing such opportunity while their order is involved in
the Market Exhaust process. In the rare set of circumstances that give
rise to Market Exhaust, investors should continue to receive quality
executions on PHLX and at away markets (following routing if
appropriate).
Moreover, the proposed discontinuation of Market Exhaust removes
impediments and perfects the mechanism of a free and open market and a
national market system by expediting the PHLX execution, routing and
trade reporting process, all to the benefit of the markets as a whole.
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.
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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) \21\
thereunder.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is 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-2011-182 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2011-182. 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 on
official business days between the hours of 10 a.m. and 3 p.m. Copies
of such filing also will be available for inspection and copying at the
principal offices of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
[[Page 1098]]
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-Phlx-2011-182, and should be submitted on or before
January 30, 2012.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-101 Filed 1-6-12; 8:45 am]
BILLING CODE 8011-01-P
