Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Price Improvement XL (“PIXLSM, 16108-16110 [2012-6498]

Download as PDF 16108 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Notices a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE– 2012–16 and should be submitted on or before April 9, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–6497 Filed 3–16–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–66583; File No. SR–Phlx– 2012–32] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Price Improvement XL (‘‘PIXLSM’’) March 13, 2012. emcdonald on DSK29S0YB1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 2 thereunder, notice is hereby given that on March 9, 2012, 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. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend Rule 1080(n), Price Improvement XL (‘‘PIXLSM’’), to correct Rule 1080(n)(i)(A)(2) pertaining to PIXL Orders (described below) for the account of a public customer with a size of less than 50 contracts. The amended rule would reflect the correct price at which an Initiating Member (described below) must guarantee the execution of a PIXL Order (described below) that the Initiating Member submits into a PIXL Auction (described below). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 13:40 Mar 16, 2012 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 correct Exchange Rule 1080(n), which governs the Exchange’s price improvement auction mechanism, PIXL.3 In the PIXL mechanism, a member (an ‘‘Initiating Member’’) must guarantee the execution of (i.e., ‘‘stop’’) an order it represents as agent (‘‘PIXL Order’’) against principal interest or against any other order it represents as agent (an ‘‘Initiating Order’’) in the PIXL Auction (‘‘Auction’’), in which other participants may compete with the Initiating Member’s order to execute against the PIXL Order. The correction concerns rule text respecting public customer PIXL Orders for less than 50 contracts that are entered into the Auction. Exchange Rule 1080(n)(i) describes the circumstances under which an Initiating Member may initiate an Auction. Rule 1080(n)(i)(A)(1) states that if the PIXL Order is for the account of a public customer and is for a size of 50 contracts or more, the Initiating Member must stop the entire PIXL Order at a price that is equal to or better than the National Best Bid/Offer (‘‘NBBO’’) on the opposite side of the market from the PIXL Order, provided that such price must be at least one minimum price improvement increment (as determined by the Exchange but not 3 For a complete description of PIXL, see Securities Exchange Act Release No. 63027 (October 1, 2010), 75 FR 62160 (October 7, 2010) (SR–Phlx– 2010–108). 6 17 VerDate Mar<15>2010 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. Jkt 226001 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 smaller than one cent) better than any limit order on the limit order book on the same side of the market as the PIXL Order. The purpose of this provision is to ensure that public customer PIXL Orders for 50 contracts or more are guaranteed at least the NBBO but do not trade ahead of other limit orders already on the Exchange’s limit order book at the existing limit price. Currently, Exchange Rule 1080(n)(i)(A)(2) states that if the PIXL Order is for the account of a public customer and is for a size of less than 50 contracts, the Initiating Member must stop the entire PIXL Order at a price that is the better of: (i) the PHLX Best Bid/ Offer (‘‘PBBO’’) price on the opposite side of the market from the PIXL Order improved by at least one minimum price improvement increment, or (ii) the PIXL Order’s limit price (if the order is a limit order), provided in either case that such price is better than the NBBO (emphasis added), and at least one minimum price improvement increment better than any limit order on the book on the same side of the market as the PIXL Order. In its filing to adopt the rules governing PIXL, and in the Notice of Filing of Proposed Rule Change published in the Federal Register,4 the Exchange described its intent concerning the price at which an Initiating Member must stop a PIXL Order for the account of a public customer for a size of less than 50 contracts: ‘‘[i]f the PIXL Order is for the account of a public customer and is for a size of less than 50 contracts, the Initiating Member must stop the entire PIXL Order at a price that is the better of: (i) The PBBO price on the opposite side of the market from the PIXL Order improved by at least one minimum price improvement increment, or (ii) the PIXL Order’s limit price (if the order is a limit order), provided in either case that such price is at or better than the NBBO.’’ (emphasis added).5 Despite this representation in the Notice of Filing, current Rule 1080(n)(i)(A)(2) states, in relevant part, ‘‘[p]rovided in either case that such price is better than the NBBO’’ (emphasis added). By way of the omission of the words ‘‘at or’’ from Rule 1080(n)(i)(A)(2), the current rule does not accurately describe the operation of PIXL, and does not reflect Exchange’s intent to permit Initiating Members to 4 See Securities Exchange Act Release No. 62678 (August 10, 2010), 75 FR 50021 (August 16, 2010) (SR–Phlx–2010–108) (Notice of Filing of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to a Proposed Price Improvement System, Price Improvement XL (PIXLSM)). 5 Id. at p. 50021. E:\FR\FM\19MRN1.SGM 19MRN1 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Notices submit contra-side interest on the opposite side of the market from its public customer PIXL Order with a size of less than 50 contracts at a price that is at or better than the NBBO. Stop Price emcdonald on DSK29S0YB1PROD with NOTICES Respecting contra-side interest on the opposite side of the market from its public customer PIXL Order with a size of less than 50 contracts, an Initiating Member must stop such PIXL Order at a price that is (i) improved over the PBBO, and (ii) at or better than the NBBO. The following scenarios illustrate this requirement: • If the PBBO is inferior to the NBBO, the Initiating Member must improve the PBBO and stop the PIXL Order at a price that is at the NBBO price or better than the NBBO price. • If the PBBO is equal to the NBBO, the Initiating Member must improve the PBBO and stop the PIXL Order at a price that is better than the NBBO price, since the only way to improve the PBBO price is to improve the NBBO price. The effect of this is that the PIXL Order will be guaranteed execution at a price that is better than the PBBO and at least as good as (‘‘at’’) the NBBO while providing the opportunity for execution at a price better than the NBBO. This is consistent with current Exchange rules describing the requirements for an Initiating Member to initiate an Auction respecting both public customer and non-public customer orders.6 Limit orders on the same side of the market as the PIXL Order will have priority at all prices in the PIXL Auction. The PIXL Order must, in order to initiate an Auction, be submitted with a better price than resting limit orders on the limit order book. The Notice of Filing illustrates the Exchange’s intent in establishing the price at which an Initiating Member must stop a PIXL Order for less than 50 contracts. The Exchange therefore proposes simply to add the words ‘‘at or’’ to Rule 1080(n)(i)(A)(2) to reflect the 6 To initiate the Auction, the Initiating Member must mark the PIXL Order for Auction processing, and specify either: (a) A single price at which it seeks to execute the PIXL Order (a ‘‘stop price’’); (b) that it is willing to automatically match as principal or as agent on behalf of an Initiating Order the price and size of all PAN responses, and trading interest (‘‘auto-match’’) in which case the PIXL Order will be stopped at the NBBO on the Initiating Order side (if 50 contracts or greater) or, if less than 50 contracts, the better of: (i) the PBBO price on the opposite side of the market from the PIXL Order improved by one minimum price improvement increment, or (ii) the PIXL Order’s limit price (if the order is a limit order), provided in either case that such price is at or better than the NBBO. See Exchange Rule 1080(n)(i)(A)(2). VerDate Mar<15>2010 13:40 Mar 16, 2012 Jkt 226001 actual price at which Initiating Members must stop public customer PIXL Orders with a size of less than 50 contracts. Rule 1080(n)(i)(A)(2) is part of a pilot that is effective for a period scheduled to expire July 18, 2012.7 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,8 in general and with Section 6(b)(5) of the Act,9 in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and 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; and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers, or to regulate by virtue of any authority conferred by the Act matters not related to the purposes of the Act or the administration of the Exchange. The Exchange believes that the proposed rule change is also consistent with Section 6(b)(8) of the Act 10 in that it does not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes this proposal will increase the likelihood that participants will initiate Auctions for public customer PIXL Orders with a size of fewer than 50 contracts because the Initiating Member can guarantee such public customer orders price improvement over the PBBO while providing an opportunity for price improvement over the NBBO. The Exchange believes the proposal will also encourage increased participation in PIXL by participants willing to trade with orders of fewer than 50 contracts at prices better than PBBO and at least equal to the NBBO. This increased participation should result in a greater number of opportunities for price improvement. The Exchange notes that both the Boston Options Exchange Group LLC (‘‘BOX’’) and the International Securities Exchange, LLC (‘‘ISE’’) allow entry of orders into Price Improvement 7 See Securities Exchange Act Release No. 65043 (August 5, 2011), 76 FR 49824 (August 11, 2011) (SR–Phlx–2011–104). 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(5). 10 15 U.S.C. 78f(b)(8). PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 16109 Period (‘‘PIP’’) 11 and Price Improvement Mechanism (‘‘PIM’’),12 respectively, at the NBBO without distinguishing between orders of more than or fewer than 50 contracts. Because BOX and ISE are currently able to offer their customers price improvement at the NBBO for orders of fewer than 50 contracts at the NBBO in PIP and PIM, respectively, the Exchange believes that it is important for competitive purposes that it be able to offer the same opportunities to its customers for price improvement via PIXL. Additionally, an Initiating Member must always improve the PBBO—a PIXL Order may not be stopped at a price that is the same as that of a limit order resting on the limit order book, thus protecting investors who have submitted such resting limit orders, and thereby protecting the public interest. This correction also protects investors and the public interest by accurately representing the price at which customer orders entered into the Auction are guaranteed an execution, making the process transparent in the marketplace as a whole. In particular, the Exchange believes this proposed rule change provides additional flexibility for Initiating Members to obtain executions on behalf of their customers while continuing to provide price improvement through meaningful, competitive PIXL Auctions. The Exchange also believes that that proposed rule change will ultimately enhance competition in the PIXL Auctions and provide customers with additional opportunities for price improvement. These changes are consistent with changes made by other exchanges and they serve to remove impediments to and to perfect the mechanism of a free and open market and a national market system. 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. 11 See Securities Exchange Act Release No. 34– 59654 (March 30, 2009), 74 FR 15551 (April 6, 2009) (SR–BX–2009–08) (order approving proposed rule change allowing entry of orders into PIP at the NBBO when BOX’s best bid or offer is inferior to the NBBO with no order size distinction). 12 See Securities Exchange Act Release No. 34– 57847 (May 21, 2008), 73 FR 30987 (May 29, 2008) (SR–ISE–2008–29) (order approving proposed rule change allowing entry of orders into PIM at the NBBO when ISE’s best bid or offer is inferior to the NBBO with no order size distinction). E:\FR\FM\19MRN1.SGM 19MRN1 16110 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Notices 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 Section 19(b)(3)(A) of the Act 13 and Rule 19b– 4(f)(6) 14 thereunder. 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 rulecomments@sec.gov. Please include File Number SR–Phlx–2012–32 on the subject line. emcdonald on DSK29S0YB1PROD with NOTICES 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–2012–32. This file 13 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. 14 17 VerDate Mar<15>2010 13:40 Mar 16, 2012 Jkt 226001 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 information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx–2012–32, and should be submitted on or before April 9, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–6498 Filed 3–16–12; 8:45 am] BILLING CODE 8011–01–P (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing with the Commission a proposal to amend Rule 14.3, entitled ‘‘General Procedures and Prerequisites for Initial and Continued Listing on the Exchange’’ to include additional requirements for the listing of securities that are issued by the Exchange or any of its affiliates. The text of the proposed rule change is available at the Exchange’s Web site at https://www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [Release No. 34–66580; File No. SR–BATS– 2012–012] 1. Purpose Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify Exchange Rule 14.3, Entitled ‘‘General Procedures and Prerequisites for Initial and Continued Listing on the Exchange’’ March 13, 2012. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 8, 2012, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed with the Securities and Exchange Commission 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 The Exchange is proposing a rule change to adopt a new Rule 14.3(e) that would impose additional reporting requirements on the Exchange should the Exchange or an affiliate of the Exchange list a security on the Exchange (collectively, the ‘‘BATS Affiliates’’). In the event that a BATS Affiliate seeks to list a security on the Exchange (the ‘‘Affiliate Security’’), the proposed rule change would require that prior to the initial listing of the Affiliate Security on the Exchange, Exchange personnel determine that such security satisfies the Exchange’s rules for listing, and such finding must be approved by the Regulatory Oversight Committee of the Exchange’s Board of Directors. The proposed rule change would also require the Exchange to prepare a E:\FR\FM\19MRN1.SGM 19MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 53 (Monday, March 19, 2012)]
[Notices]
[Pages 16108-16110]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6498]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66583; File No. SR-Phlx-2012-32]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Price Improvement XL (``PIXL\SM\'')

March 13, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on March 9, 2012, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 1080(n), Price Improvement XL 
(``PIXL\SM\''), to correct Rule 1080(n)(i)(A)(2) pertaining to PIXL 
Orders (described below) for the account of a public customer with a 
size of less than 50 contracts. The amended rule would reflect the 
correct price at which an Initiating Member (described below) must 
guarantee the execution of a PIXL Order (described below) that the 
Initiating Member submits into a PIXL Auction (described below).
    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 correct Exchange Rule 
1080(n), which governs the Exchange's price improvement auction 
mechanism, PIXL.\3\ In the PIXL mechanism, a member (an ``Initiating 
Member'') must guarantee the execution of (i.e., ``stop'') an order it 
represents as agent (``PIXL Order'') against principal interest or 
against any other order it represents as agent (an ``Initiating 
Order'') in the PIXL Auction (``Auction''), in which other participants 
may compete with the Initiating Member's order to execute against the 
PIXL Order. The correction concerns rule text respecting public 
customer PIXL Orders for less than 50 contracts that are entered into 
the Auction.
---------------------------------------------------------------------------

    \3\ For a complete description of PIXL, see Securities Exchange 
Act Release No. 63027 (October 1, 2010), 75 FR 62160 (October 7, 
2010) (SR-Phlx-2010-108).
---------------------------------------------------------------------------

    Exchange Rule 1080(n)(i) describes the circumstances under which an 
Initiating Member may initiate an Auction. Rule 1080(n)(i)(A)(1) states 
that if the PIXL Order is for the account of a public customer and is 
for a size of 50 contracts or more, the Initiating Member must stop the 
entire PIXL Order at a price that is equal to or better than the 
National Best Bid/Offer (``NBBO'') on the opposite side of the market 
from the PIXL Order, provided that such price must be at least one 
minimum price improvement increment (as determined by the Exchange but 
not smaller than one cent) better than any limit order on the limit 
order book on the same side of the market as the PIXL Order. The 
purpose of this provision is to ensure that public customer PIXL Orders 
for 50 contracts or more are guaranteed at least the NBBO but do not 
trade ahead of other limit orders already on the Exchange's limit order 
book at the existing limit price.
    Currently, Exchange Rule 1080(n)(i)(A)(2) states that if the PIXL 
Order is for the account of a public customer and is for a size of less 
than 50 contracts, the Initiating Member must stop the entire PIXL 
Order at a price that is the better of: (i) the PHLX Best Bid/Offer 
(``PBBO'') price on the opposite side of the market from the PIXL Order 
improved by at least one minimum price improvement increment, or (ii) 
the PIXL Order's limit price (if the order is a limit order), provided 
in either case that such price is better than the NBBO (emphasis 
added), and at least one minimum price improvement increment better 
than any limit order on the book on the same side of the market as the 
PIXL Order.
    In its filing to adopt the rules governing PIXL, and in the Notice 
of Filing of Proposed Rule Change published in the Federal Register,\4\ 
the Exchange described its intent concerning the price at which an 
Initiating Member must stop a PIXL Order for the account of a public 
customer for a size of less than 50 contracts:
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    \4\ See Securities Exchange Act Release No. 62678 (August 10, 
2010), 75 FR 50021 (August 16, 2010) (SR-Phlx-2010-108) (Notice of 
Filing of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to 
a Proposed Price Improvement System, Price Improvement XL 
(PIXL\SM\)).

    ``[i]f the PIXL Order is for the account of a public customer 
and is for a size of less than 50 contracts, the Initiating Member 
must stop the entire PIXL Order at a price that is the better of: 
(i) The PBBO price on the opposite side of the market from the PIXL 
Order improved by at least one minimum price improvement increment, 
or (ii) the PIXL Order's limit price (if the order is a limit 
order), provided in either case that such price is at or better than 
the NBBO.'' (emphasis added).\5\
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    \5\ Id. at p. 50021.

    Despite this representation in the Notice of Filing, current Rule 
1080(n)(i)(A)(2) states, in relevant part, ``[p]rovided in either case 
that such price is better than the NBBO'' (emphasis added). By way of 
the omission of the words ``at or'' from Rule 1080(n)(i)(A)(2), the 
current rule does not accurately describe the operation of PIXL, and 
does not reflect Exchange's intent to permit Initiating Members to

[[Page 16109]]

submit contra-side interest on the opposite side of the market from its 
public customer PIXL Order with a size of less than 50 contracts at a 
price that is at or better than the NBBO.
Stop Price
    Respecting contra-side interest on the opposite side of the market 
from its public customer PIXL Order with a size of less than 50 
contracts, an Initiating Member must stop such PIXL Order at a price 
that is (i) improved over the PBBO, and (ii) at or better than the 
NBBO. The following scenarios illustrate this requirement:
     If the PBBO is inferior to the NBBO, the Initiating Member 
must improve the PBBO and stop the PIXL Order at a price that is at the 
NBBO price or better than the NBBO price.
     If the PBBO is equal to the NBBO, the Initiating Member 
must improve the PBBO and stop the PIXL Order at a price that is better 
than the NBBO price, since the only way to improve the PBBO price is to 
improve the NBBO price.
    The effect of this is that the PIXL Order will be guaranteed 
execution at a price that is better than the PBBO and at least as good 
as (``at'') the NBBO while providing the opportunity for execution at a 
price better than the NBBO. This is consistent with current Exchange 
rules describing the requirements for an Initiating Member to initiate 
an Auction respecting both public customer and non-public customer 
orders.\6\
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    \6\ To initiate the Auction, the Initiating Member must mark the 
PIXL Order for Auction processing, and specify either: (a) A single 
price at which it seeks to execute the PIXL Order (a ``stop 
price''); (b) that it is willing to automatically match as principal 
or as agent on behalf of an Initiating Order the price and size of 
all PAN responses, and trading interest (``auto-match'') in which 
case the PIXL Order will be stopped at the NBBO on the Initiating 
Order side (if 50 contracts or greater) or, if less than 50 
contracts, the better of: (i) the PBBO price on the opposite side of 
the market from the PIXL Order improved by one minimum price 
improvement increment, or (ii) the PIXL Order's limit price (if the 
order is a limit order), provided in either case that such price is 
at or better than the NBBO. See Exchange Rule 1080(n)(i)(A)(2).
---------------------------------------------------------------------------

    Limit orders on the same side of the market as the PIXL Order will 
have priority at all prices in the PIXL Auction. The PIXL Order must, 
in order to initiate an Auction, be submitted with a better price than 
resting limit orders on the limit order book.
    The Notice of Filing illustrates the Exchange's intent in 
establishing the price at which an Initiating Member must stop a PIXL 
Order for less than 50 contracts. The Exchange therefore proposes 
simply to add the words ``at or'' to Rule 1080(n)(i)(A)(2) to reflect 
the actual price at which Initiating Members must stop public customer 
PIXL Orders with a size of less than 50 contracts.
    Rule 1080(n)(i)(A)(2) is part of a pilot that is effective for a 
period scheduled to expire July 18, 2012.\7\
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    \7\ See Securities Exchange Act Release No. 65043 (August 5, 
2011), 76 FR 49824 (August 11, 2011) (SR-Phlx-2011-104).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general and with 
Section 6(b)(5) of the Act,\9\ in that it is designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers, or to regulate by virtue of any authority conferred by the Act 
matters not related to the purposes of the Act or the administration of 
the Exchange.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is also 
consistent with Section 6(b)(8) of the Act \10\ in that it does not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes this proposal will increase the likelihood 
that participants will initiate Auctions for public customer PIXL 
Orders with a size of fewer than 50 contracts because the Initiating 
Member can guarantee such public customer orders price improvement over 
the PBBO while providing an opportunity for price improvement over the 
NBBO. The Exchange believes the proposal will also encourage increased 
participation in PIXL by participants willing to trade with orders of 
fewer than 50 contracts at prices better than PBBO and at least equal 
to the NBBO. This increased participation should result in a greater 
number of opportunities for price improvement.
    The Exchange notes that both the Boston Options Exchange Group LLC 
(``BOX'') and the International Securities Exchange, LLC (``ISE'') 
allow entry of orders into Price Improvement Period (``PIP'') \11\ and 
Price Improvement Mechanism (``PIM''),\12\ respectively, at the NBBO 
without distinguishing between orders of more than or fewer than 50 
contracts. Because BOX and ISE are currently able to offer their 
customers price improvement at the NBBO for orders of fewer than 50 
contracts at the NBBO in PIP and PIM, respectively, the Exchange 
believes that it is important for competitive purposes that it be able 
to offer the same opportunities to its customers for price improvement 
via PIXL.
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    \11\ See Securities Exchange Act Release No. 34-59654 (March 30, 
2009), 74 FR 15551 (April 6, 2009) (SR-BX-2009-08) (order approving 
proposed rule change allowing entry of orders into PIP at the NBBO 
when BOX's best bid or offer is inferior to the NBBO with no order 
size distinction).
    \12\ See Securities Exchange Act Release No. 34-57847 (May 21, 
2008), 73 FR 30987 (May 29, 2008) (SR-ISE-2008-29) (order approving 
proposed rule change allowing entry of orders into PIM at the NBBO 
when ISE's best bid or offer is inferior to the NBBO with no order 
size distinction).
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    Additionally, an Initiating Member must always improve the PBBO--a 
PIXL Order may not be stopped at a price that is the same as that of a 
limit order resting on the limit order book, thus protecting investors 
who have submitted such resting limit orders, and thereby protecting 
the public interest.
    This correction also protects investors and the public interest by 
accurately representing the price at which customer orders entered into 
the Auction are guaranteed an execution, making the process transparent 
in the marketplace as a whole. In particular, the Exchange believes 
this proposed rule change provides additional flexibility for 
Initiating Members to obtain executions on behalf of their customers 
while continuing to provide price improvement through meaningful, 
competitive PIXL Auctions. The Exchange also believes that that 
proposed rule change will ultimately enhance competition in the PIXL 
Auctions and provide customers with additional opportunities for price 
improvement. These changes are consistent with changes made by other 
exchanges and they serve to remove impediments to and to perfect the 
mechanism of a free and open market and a national market system.

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.

[[Page 16110]]

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 Section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) 
\14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-2012-32 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-2012-32. 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 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2012-32, and should be submitted on or before April 
9, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6498 Filed 3-16-12; 8:45 am]
BILLING CODE 8011-01-P

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