Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to PSX Rule 3301(f)(8) Concerning the Processing of the Price To Comply Order, 42022-42024 [2012-17334]

Download as PDF 42022 Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67412; File No. SR–Phlx– 2012–91] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to PSX Rule 3301(f)(8) Concerning the Processing of the Price To Comply Order July 11, 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 July 2, 2012, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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. tkelley on DSK3SPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to clarify how the processing of a Price to Comply Order under PSX Rule 3301(f)(8) operates based on the method of entry. The text of the proposed rule change is below. Proposed new language is italicized; proposed deletions are in [brackets]. * * * * * 3301. Definitions The following definitions apply to the Rule 3200 and 3300 Series for the trading of securities on PSX. (a)–(e) (f) The term ‘‘Order Type’’ shall mean the unique processing prescribed for designated orders that are eligible for entry into the System, and shall include: (1)–(7) No change. (8) ‘‘Price to Comply Order’’ are orders that, if, at the time of entry, a Price to Comply Order would lock or cross the quotation of an external market, the order will be priced to the current low offer (for bids) or to the current best bid (for offers) and displayed at a price one minimum price increment lower than the offer (for bids) or higher than the bid (for offers). The displayed and undisplayed prices of a Price to Comply order entered through an OUCH port that crosses the market will [may] be adjusted once and, depending on the election of the 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 16:53 Jul 16, 2012 Jkt 226001 member firm, either rest on the book or [multiple times depending upon the election of the member firm and changes to the prevailing NBBO] be canceled if the previously-locking price becomes available. The displayed and undisplayed prices of a Price to Comply order entered through an OUCH port that locks the market will be adjusted once and, depending on the election of the member firm, either rest on the book, be canceled, or adjusted a second time if the previously-locking price becomes available.The displayed and undisplayed prices of a Price to Comply order entered through a RASH port may be adjusted multiple times, depending upon changes to the prevailing NBBO. (9)–(11) No change. (g)–(i) No change. * * * * * II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Phlx is proposing to modify how OUCH port-entered Price to Comply Orders 3 will operate. Price to Comply Orders, as described in PSX Rule 3301(f)(8), allow member firms to quote aggressively and still comply with the locked and crossed markets provisions of Regulation NMS.4 Phlx recently amended PSX Rule 3301(f)(8) to clarify the effect that the methods of order entry have on the processing of Price to Comply Orders.5 The rule change clarified that OUCH port-entered Price to Comply Orders are now eligible for 3 ‘‘Price to Comply Order’’ is an order such that, if, at the time of entry, it would lock or cross the quotation of an external market, the order will be priced to the current low offer (for bids) or to the current best bid (for offers) and displayed at a price one minimum price increment lower than the offer (for bids) or higher than the bid (for offers). 4 17 CFR 242.610. 5 See Securities Exchange Act Release No. 66992 (May 15, 2012), 77 FR 30038 (May 21, 2012) (SR– Phlx–2012–62). PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 price adjustment either once or multiple times, depending on the election of the member firm.6 The Exchange noted in the rule change that offering OUCH port users the ability to have Phlx reprice a Price to Comply Order multiple times will serve to reduce the excessive volume of orders entered into the System 7 and ultimately canceled.8 Accordingly, a Price to Comply Order entered through an OUCH port that a member firm has designated for multiple price adjustment will be adjusted more than once in response to changes in the prevailing National Best Bid and Offer (‘‘NBBO’’) to move the displayed price closer to the original entered price and display the best possible price consistent with the provisions of Regulation NMS. Prior to the clarifying rule change, OUCH portentered Price to Comply Orders that would lock or cross the market would be adjusted once and thereafter rest on the book. The Exchange has not implemented the recently-adopted changes 9 so that it could subsequently modify how the OUCH port-entered Price to Comply Orders will operate under PSX Rule 3301(f)(8), as described below. The Exchange has determined to modify PSX Rule 3301(f)(8) so that a Price to Comply Order entered via an OUCH port designated for multiple price adjustment that would lock the market can be adjusted a maximum of two times—once upon entry and once again to move the displayed price to the original entered price when it becomes permissible under Regulation NMS to do so, thereby displaying the best possible price consistent with the provisions of Regulation NMS. Under the proposed rule change, such Price to Comply Orders that would cross the market upon entry would be price adjusted once upon entry to display at a permissible level and thereafter 6 Member firms must designate each OUCH protocol order port that it wishes to use with the multiple price adjustment functionality, and such ports will also be designated for automatic cancellation or ‘‘kick out’’ of other order types whose price was adjusted upon entry to prevent a violation of Rule 610(d) of Regulation NMS. In the absence of designation from a member firm, the Exchange will default the member’s OUCH port(s) to single price adjustment. 7 As defined by PSX Rule 3301(a). 8 The Exchange noted that the OUCH protocol is used by member firms that are able to submit a large volume of orders. Such member firm will often submit a Price to Comply Order at an aggressive price that it anticipates will be at the NBBO, but it is not submitted at the NBBO and is not executed after repricing because the market does not move to the adjusted order price. In such cases, the member firm will typically submit additional aggressive orders, which likewise are not executed. Supra note 5. 9 Supra note 5. E:\FR\FM\17JYN1.SGM 17JYN1 Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices tkelley on DSK3SPTVN1PROD with NOTICES cancelled when the previously locking level becomes available. This cancellation allows the member to resubmit its order at a price more aggressive than the previously locking price should the member still desire to do so.10 As such, and unlike as described in the recent rule change, the process applied to OUCH ports designated for multiple price adjustment will be similar to, yet different than, the process applied to RASH-entered Price to Comply Orders. Phlx is not changing how Price to Comply Orders entered via an OUCH port not designated for multiple price adjustment operate. Such orders will continue to be adjusted once and thereafter remain on the book. Likewise, Phlx is not proposing to change how price adjusted orders are treated in terms of priority. Like RASH-entered Price to Comply Orders, each time the OUCH-entered order is price adjusted it will receive a new timestamp for purposes of determining its price/ display/time priority.11 As such, an OUCH-entered Price to Comply Order that is repriced upon entry will initially be prioritized among non-displayed orders at the locking price based on its time of entry. Upon the second repricing of an OUCH-entered Price to Comply Order that is entered at a locking price, the order will be prioritized among displayed orders at the previously locking price based on its time of repricing and thus is treated as a new displayed order in terms of priority. There is no guarantee that the OUCHentered Price to Comply Order will receive priority amongst displayed orders when it becomes actionable after repricing, as other displayed orders may be entered before the Price to Comply Order is repriced. This priority treatment is identical to the treatment provided to RASH-entered Price to Comply Orders that are price adjusted. The Exchange will provide public notice five business days prior to the implementation date of the changes proposed herein, together with the changes proposed in the recent rule filing 12 not modified by this proposal, and such implementation date will be no later than thirty calendar days from the date of filing this proposal with the Commission. 10 Similarly, orders other than Price to Comply Orders that are re-priced on entry due to Regulation NMS and submitted via OUCH ports designated for multiple price adjustment of Price to Comply Orders will be cancelled when the previously locking price level becomes available. 11 As described in PSX Rule 3307(a)(1). 12 Supra note 5. VerDate Mar<15>2010 16:53 Jul 16, 2012 Jkt 226001 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,13 in general, and with Section 6(b)(5) of the Act 14 in particular, in that the proposal is 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 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. The Exchange believes this proposal is consistent with the Exchange Act and, specifically, Rules 610 and 611 of Regulation NMS in that it is designed to prevent orders from locking and crossing the market or trading through protected quotes, while also promoting a more efficient market. In this regard, the Exchange believes that the proposed rule change will promote the efficient use of the Exchange by reducing the number of orders entered into the market and ultimately canceled. The proposed rule change will accomplish this by providing the member firms that tend to enter the greatest number of such orders via OUCH ports an option to have the Exchange reprice two times a single order that would lock the market upon entry. The Exchange also believes that permitting a high volume user the option to continue to have the Exchange reprice its Price to Comply Order only upon order entry, when appropriate, will ensure member firms with internal systems that act in reliance on this function will continue to operate without disruption. B. Self-Regulatory Organization’s Statement on Burden on Competition Phlx does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. PO 00000 13 15 14 15 U.S.C. 78f. U.S.C. 78f(b)(5). Frm 00057 Fmt 4703 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 from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 15 and subparagraph (f)(6) of Rule 19b–4 thereunder.16 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. The Exchange has provided the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change. 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–2012–91 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–2012–91. 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 15 15 16 17 Sfmt 4703 42023 E:\FR\FM\17JYN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(6). 17JYN1 42024 Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR–Phlx– 2012–91 and should be submitted on or before August 7, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–17334 Filed 7–16–12; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–67408; File No. SR–NYSE– 2012–22] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Changes to the Transaction Fees and Credits Within Its Price List tkelley on DSK3SPTVN1PROD with NOTICES July 11, 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 June 29, 2012, New York Stock Exchange LLC (the ‘‘Exchange’’ or ‘‘NYSE’’) filed with the Securities and Exchange Commission (‘‘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 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 16:53 Jul 16, 2012 Jkt 226001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes certain changes to the transaction fees and credits within its Price List, which the Exchange proposes to become operative on July 1, 2012. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose SECURITIES AND EXCHANGE COMMISSION 17 17 proposed rule change from interested persons. The Exchange is proposing certain changes to the transaction fees and credits within its Price List, which the Exchange proposes to become operative on July 1, 2012. The Exchange recently amended Rule 107B, which currently operates on a pilot basis,3 to add a class of Supplemental Liquidity Providers (‘‘SLPs’’) that are registered as market makers at the Exchange (‘‘SLMMs’’).4 SLPs in the original class (‘‘SLP-Props’’) are eligible for credits when adding liquidity on the Exchange. The amount of the credit is determined by the ‘‘tier’’ for which the SLP-Prop qualifies, which is based on (i) whether the SLP-Prop meets the 10% average or more quoting requirement in all assigned securities 3 See Securities Exchange Act Release No. 58877 (October 29, 2008), 73 FR 65904 (November 5, 2008) (SR–NYSE–2008–108). The pilot is currently scheduled to end on July 31, 2012. 4 See Securities Exchange Act Release No. 67154 (June 7, 2012), 77 FR 35455 (June 13, 2012) (SR– NYSE–2012–10). The Exchange notes that pursuant to SR–NYSE–2012–10 the addition of the SLMM class would not be effective until the first day of the month following Commission approval, which is July 2, 2012. PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 pursuant to Rule 107B; and (ii) whether the SLP-Prop (a) adds liquidity of an average daily volume (‘‘ADV’’) of more than 10 million shares for all assigned SLP securities in the aggregate; and (b) for each assigned SLP security, adds liquidity within a specified range of percentages of consolidated ADV (‘‘CADV’’) for that security. The Exchange hereby proposes that transaction credits for SLMMs would be identical to those that are applicable to SLP-Props, both with respect to the rate of the credit and the qualification requirements for the tiers. The Exchange also proposes to specify that, for purposes of determining whether an SLP has added liquidity of an ADV of more than 10 million shares for all assigned SLP securities in the aggregate, shares of an SLP-Prop and an SLMM of the same member organization would be aggregated.5 The Exchange has proposed this aggregation because, as described in SR–NYSE–2012–10, if a member organization has more than one business unit, and the SLP-Prop business unit is walled off from the SLMM business unit, the member organization may engage in both an SLP-Prop and SLMM business from those different business units.6 Accordingly, because the 10 million share threshold applies to all of an SLP’s shares in the aggregate, the Exchange believes that the activity of an SLP-Prop and an SLMM of the same member organization should be aggregated.7 However, for purposes of determining whether an SLP has satisfied the 10% average or more quoting requirement pursuant to Rule 107B as well as the per-security percentage of added liquidity, shares of an SLP-Prop and an SLMM of the same member organization would not be aggregated. As described in SR–NYSE– 2012–10, provided there is no coordinated trading between the SLPProp and SLMM business units, they may be assigned the same securities.8 In 5 The Exchange proposes to add ‘‘in the aggregate’’ to the $0.0005 tier for securities with a per-share price of less than $1.00 to make this language consistent with the other tiers. This aspect of the proposed rule change would not be a substantive change. 6 See supra note 4 at 35456. 7 Additionally, this would be consistent with the manner in which the Exchange aggregates the activity of an SLP-Prop and an SLMM of the same member organization for purposes of determining whether the 10 million share requirement of Rule 107B(a) has been satisfied. 8 See supra note 4 at 35456. See also Rule 107B(i)(2)(B), which provides that an SLP-Prop shall not also act as an SLMM in the same securities in which it is registered as an SLP-Prop and vice versa, provided, however, that if a member organization maintains information barriers between an SLP-Prop unit and an SLMM unit, the SLP-Prop and SLMM units may be assigned the same securities. E:\FR\FM\17JYN1.SGM 17JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42022-42024]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17334]



[[Page 42022]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67412; File No. SR-Phlx-2012-91]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to PSX Rule 
3301(f)(8) Concerning the Processing of the Price To Comply Order

July 11, 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 July 2, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``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 Substance 
of the Proposed Rule Change

    The Exchange proposes to clarify how the processing of a Price to 
Comply Order under PSX Rule 3301(f)(8) operates based on the method of 
entry.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in [brackets].
* * * * *

3301. Definitions

    The following definitions apply to the Rule 3200 and 3300 Series 
for the trading of securities on PSX.
    (a)-(e)
    (f) The term ``Order Type'' shall mean the unique processing 
prescribed for designated orders that are eligible for entry into the 
System, and shall include:
    (1)-(7) No change.
    (8) ``Price to Comply Order'' are orders that, if, at the time of 
entry, a Price to Comply Order would lock or cross the quotation of an 
external market, the order will be priced to the current low offer (for 
bids) or to the current best bid (for offers) and displayed at a price 
one minimum price increment lower than the offer (for bids) or higher 
than the bid (for offers). The displayed and undisplayed prices of a 
Price to Comply order entered through an OUCH port that crosses the 
market will [may] be adjusted once and, depending on the election of 
the member firm, either rest on the book or [multiple times depending 
upon the election of the member firm and changes to the prevailing 
NBBO] be canceled if the previously-locking price becomes available. 
The displayed and undisplayed prices of a Price to Comply order entered 
through an OUCH port that locks the market will be adjusted once and, 
depending on the election of the member firm, either rest on the book, 
be canceled, or adjusted a second time if the previously-locking price 
becomes available.The displayed and undisplayed prices of a Price to 
Comply order entered through a RASH port may be adjusted multiple 
times, depending upon changes to the prevailing NBBO.
    (9)-(11) No change.
    (g)-(i) No change.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Phlx is proposing to modify how OUCH port-entered Price to Comply 
Orders \3\ will operate. Price to Comply Orders, as described in PSX 
Rule 3301(f)(8), allow member firms to quote aggressively and still 
comply with the locked and crossed markets provisions of Regulation 
NMS.\4\ Phlx recently amended PSX Rule 3301(f)(8) to clarify the effect 
that the methods of order entry have on the processing of Price to 
Comply Orders.\5\ The rule change clarified that OUCH port-entered 
Price to Comply Orders are now eligible for price adjustment either 
once or multiple times, depending on the election of the member 
firm.\6\ The Exchange noted in the rule change that offering OUCH port 
users the ability to have Phlx reprice a Price to Comply Order multiple 
times will serve to reduce the excessive volume of orders entered into 
the System \7\ and ultimately canceled.\8\ Accordingly, a Price to 
Comply Order entered through an OUCH port that a member firm has 
designated for multiple price adjustment will be adjusted more than 
once in response to changes in the prevailing National Best Bid and 
Offer (``NBBO'') to move the displayed price closer to the original 
entered price and display the best possible price consistent with the 
provisions of Regulation NMS. Prior to the clarifying rule change, OUCH 
port-entered Price to Comply Orders that would lock or cross the market 
would be adjusted once and thereafter rest on the book. The Exchange 
has not implemented the recently-adopted changes \9\ so that it could 
subsequently modify how the OUCH port-entered Price to Comply Orders 
will operate under PSX Rule 3301(f)(8), as described below.
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    \3\ ``Price to Comply Order'' is an order such that, if, at the 
time of entry, it would lock or cross the quotation of an external 
market, the order will be priced to the current low offer (for bids) 
or to the current best bid (for offers) and displayed at a price one 
minimum price increment lower than the offer (for bids) or higher 
than the bid (for offers).
    \4\ 17 CFR 242.610.
    \5\ See Securities Exchange Act Release No. 66992 (May 15, 
2012), 77 FR 30038 (May 21, 2012) (SR-Phlx-2012-62).
    \6\ Member firms must designate each OUCH protocol order port 
that it wishes to use with the multiple price adjustment 
functionality, and such ports will also be designated for automatic 
cancellation or ``kick out'' of other order types whose price was 
adjusted upon entry to prevent a violation of Rule 610(d) of 
Regulation NMS. In the absence of designation from a member firm, 
the Exchange will default the member's OUCH port(s) to single price 
adjustment.
    \7\ As defined by PSX Rule 3301(a).
    \8\ The Exchange noted that the OUCH protocol is used by member 
firms that are able to submit a large volume of orders. Such member 
firm will often submit a Price to Comply Order at an aggressive 
price that it anticipates will be at the NBBO, but it is not 
submitted at the NBBO and is not executed after repricing because 
the market does not move to the adjusted order price. In such cases, 
the member firm will typically submit additional aggressive orders, 
which likewise are not executed. Supra note 5.
    \9\ Supra note 5.
---------------------------------------------------------------------------

    The Exchange has determined to modify PSX Rule 3301(f)(8) so that a 
Price to Comply Order entered via an OUCH port designated for multiple 
price adjustment that would lock the market can be adjusted a maximum 
of two times--once upon entry and once again to move the displayed 
price to the original entered price when it becomes permissible under 
Regulation NMS to do so, thereby displaying the best possible price 
consistent with the provisions of Regulation NMS. Under the proposed 
rule change, such Price to Comply Orders that would cross the market 
upon entry would be price adjusted once upon entry to display at a 
permissible level and thereafter

[[Page 42023]]

cancelled when the previously locking level becomes available. This 
cancellation allows the member to resubmit its order at a price more 
aggressive than the previously locking price should the member still 
desire to do so.\10\ As such, and unlike as described in the recent 
rule change, the process applied to OUCH ports designated for multiple 
price adjustment will be similar to, yet different than, the process 
applied to RASH-entered Price to Comply Orders.
---------------------------------------------------------------------------

    \10\ Similarly, orders other than Price to Comply Orders that 
are re-priced on entry due to Regulation NMS and submitted via OUCH 
ports designated for multiple price adjustment of Price to Comply 
Orders will be cancelled when the previously locking price level 
becomes available.
---------------------------------------------------------------------------

    Phlx is not changing how Price to Comply Orders entered via an OUCH 
port not designated for multiple price adjustment operate. Such orders 
will continue to be adjusted once and thereafter remain on the book. 
Likewise, Phlx is not proposing to change how price adjusted orders are 
treated in terms of priority. Like RASH-entered Price to Comply Orders, 
each time the OUCH-entered order is price adjusted it will receive a 
new timestamp for purposes of determining its price/display/time 
priority.\11\ As such, an OUCH-entered Price to Comply Order that is 
repriced upon entry will initially be prioritized among non-displayed 
orders at the locking price based on its time of entry. Upon the second 
repricing of an OUCH-entered Price to Comply Order that is entered at a 
locking price, the order will be prioritized among displayed orders at 
the previously locking price based on its time of repricing and thus is 
treated as a new displayed order in terms of priority. There is no 
guarantee that the OUCH-entered Price to Comply Order will receive 
priority amongst displayed orders when it becomes actionable after 
repricing, as other displayed orders may be entered before the Price to 
Comply Order is repriced. This priority treatment is identical to the 
treatment provided to RASH-entered Price to Comply Orders that are 
price adjusted. The Exchange will provide public notice five business 
days prior to the implementation date of the changes proposed herein, 
together with the changes proposed in the recent rule filing \12\ not 
modified by this proposal, and such implementation date will be no 
later than thirty calendar days from the date of filing this proposal 
with the Commission.
---------------------------------------------------------------------------

    \11\ As described in PSX Rule 3307(a)(1).
    \12\ Supra note 5.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\13\ in general, and with 
Section 6(b)(5) of the Act \14\ in particular, in that the proposal is 
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 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. The Exchange 
believes this proposal is consistent with the Exchange Act and, 
specifically, Rules 610 and 611 of Regulation NMS in that it is 
designed to prevent orders from locking and crossing the market or 
trading through protected quotes, while also promoting a more efficient 
market. In this regard, the Exchange believes that the proposed rule 
change will promote the efficient use of the Exchange by reducing the 
number of orders entered into the market and ultimately canceled. The 
proposed rule change will accomplish this by providing the member firms 
that tend to enter the greatest number of such orders via OUCH ports an 
option to have the Exchange reprice two times a single order that would 
lock the market upon entry. The Exchange also believes that permitting 
a high volume user the option to continue to have the Exchange reprice 
its Price to Comply Order only upon order entry, when appropriate, will 
ensure member firms with internal systems that act in reliance on this 
function will continue to operate without disruption.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Phlx does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor 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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \15\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(6).
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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. The Exchange has 
provided the Commission written notice of its intent to file the 
proposed rule change, along with a brief description and text of the 
proposed rule change, at least five business days prior to the date of 
filing of the proposed rule change.

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-2012-91 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-2012-91. 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

[[Page 42024]]

submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make publicly available. All 
submissions should refer to File Number SR-Phlx-2012-91 and should be 
submitted on or before August 7, 2012.

    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. 2012-17334 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P

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