Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing of Proposed Rule Change Related to the Priority Afforded to In-Crowd Participants Respecting Crossing, Facilitation and Solicited Orders in Open Outcry Trading, 27351-27354 [2014-10900]
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Federal Register / Vol. 79, No. 92 / Tuesday, May 13, 2014 / Notices
Date of issuance: April 29, 2014.
Effective date: As of its date of
issuance and shall be implemented by
12 months from the date of issuance.
Amendment No.: 248. A publiclyavailable version is in ADAMS under
Accession No. ML14055A023;
documents related to this amendment
are listed in the Safety Evaluation
enclosed with the amendment.
Renewed Facility Operating License
No. DPR–46: The amendment revised
the Operating License and Technical
Specifications.
Date of initial notice in Federal
Register: November 26, 2012 (78 FR
70593). The supplements dated
December 12, 2013; and January 17,
February 18, and April 11, 2014,
provided additional information that
clarified the application, did not expand
the scope of the application as originally
noticed, and did not change the staff’s
original proposed no significant hazards
consideration determination as
published in the Federal Register.
The Commission’s related evaluation
of the amendment is contained in a
Safety Evaluation dated April 29, 2014.
No significant hazards consideration
comments received: No.
mstockstill on DSK4VPTVN1PROD with NOTICES
Virginia Electric and Power Company,
et al., Docket Nos. 50–280 and 50–281,
Surry Power Station, Units 1 and 2,
Surry County, Virginia
Date of application for amendments:
May 13, 2013, as supplemented by
letters dated September 9, 2013, and
March 13, 2014.
Brief Description of amendments: The
amendments revise Surry, Units 1 and
2, Technical Specifications 4.17, ‘‘Shock
Suppressors (Snubbers),’’ to delete
detailed surveillance requirements for
snubbers and add TS 6.4.T, ‘‘Inservice
Examination, Testing, and Service Life
Monitoring Program for Snubbers,’’
which requires the surveillance
requirements for snubbers be in
accordance with the ASME OM Code,
Subsection ISTD, as provided in NRC
regulations. The amendments also
relocate the detailed surveillance
requirements to the Surry, Units 1 and
2, Inservice Examination, Testing and
Service Life Monitoring Program Plans
for Snubbers.
Date of issuance: April 24, 2014.
Effective date: As of the date of
issuance and shall be implemented
within 60 days.
Amendment Nos.: 281, 281. A
publicly-available version is in ADAMS
under Accession No. ML14073A405;
documents related to this amendment
are listed in the Safety Evaluation
enclosed with the amendment.
VerDate Mar<15>2010
19:27 May 12, 2014
Jkt 232001
Renewed Facility Operating License
Nos. DPR–32 and DPR–37: Amendments
change the licenses and the technical
specifications.
Date of initial notice in Federal
Register: July 9, 2013 (78 FR 41122).
The supplements dated September 9,
2013 and March 13, 2014, provided
additional information that clarified the
application, did not expand the scope of
the application as originally noticed,
and did not change the staff’s original
proposed no significant hazards
consideration determination.
The Commission’s related evaluation
of the amendments is contained in a
Safety Evaluation dated April 24, 2014.
No significant hazards consideration
comments received: No.
Dated at Rockville, Maryland, this 5th day
of May 2014.
For the Nuclear Regulatory Commission.
27351
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: May 9, 2014.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–11057 Filed 5–9–14; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72119; File No. SR–Phlx–
2014–23]
[FR Doc. 2014–10718 Filed 5–12–14; 8:45 am]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing of Proposed Rule Change
Related to the Priority Afforded to InCrowd Participants Respecting
Crossing, Facilitation and Solicited
Orders in Open Outcry Trading
BILLING CODE 7590–01–P
May 7, 2014.
Michele G. Evans,
Director, Division of Operating Reactor
Licensing, Office of Nuclear Reactor
Regulation.
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 a Closed Meeting
on Thursday, May 15, 2014 at 2:00 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or her designee, has
certified that, in her opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matter at the Closed Meeting.
Commissioner Gallagher, as duty
officer, voted to consider the items
listed for the Closed Meeting in closed
session, and determined that no earlier
notice thereof was possible.
The subject matter of the Closed
Meeting will be:
Institution and settlement of
injunctive actions; institution and
settlement of administrative
proceedings; a civil litigation matter; an
adjudicatory matter; and other matters
relating to enforcement proceedings.
PO 00000
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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 April 23,
2014, 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 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 proposes to revise the
priority afforded to in-crowd
participants respecting crossing,
facilitation and solicited orders in open
outcry trading.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxphlx.cchwallstreet.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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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27352
Federal Register / Vol. 79, No. 92 / Tuesday, May 13, 2014 / Notices
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
mstockstill on DSK4VPTVN1PROD with NOTICES
The Exchange proposes to amend
Rule 1014, Commentary .05(c)(ii), to
afford priority in open outcry trading to
in-crowd participants over out-of-crowd
Streaming Quote Traders (‘‘SQTs’’) 3,
Remote Specialists 4, and Remote
Streaming Quote Traders (‘‘RSQTs’’) 5
and over out-of-crowd broker-dealer
limit orders on the limit order book (but
not over public customer orders) in
3 An SQT is defined in Exchange Rule
1014(b)(ii)(A) as a Registered Options Trader
(‘‘ROT’’) who has received permission from the
Exchange to generate and submit option quotations
electronically in options to which such SQT is
assigned. A ROT includes a SQT, a RSQT and a
Non-SQT [sic], which by definition is neither a SQT
or a RSQT. A Registered Options Trader is defined
in Exchange Rule 1014(b) [sic] as a regular member
of the Exchange located on the trading floor who
has received permission from the Exchange to trade
in options for his own account. See Exchange Rule
1014(b)(i) and (ii).
4 A Remote Specialist is a qualified RSQT
approved by the Exchange to function as a
specialist in one or more options if the Exchange
determines that it cannot allocate such options to
a floor based specialist. A Remote Specialist has all
the rights and obligations of a specialist, unless
Exchange rules provide otherwise. See Exchange
Rules 501 and 1020. See also, Securities Exchange
Act Release No. 63717 (January 14, 2011), 76 FR
4141 (January 24, 2011) (SR–Phlx–2010–145).
5 A RSQT is defined in Exchange Rule
1014(b)(ii)(B) as an ROT that is a member affiliated
with a Remote Streaming Quote Trader
Organization (‘‘RSQTO’’) with no physical trading
floor presence who has received permission from
the Exchange to generate and submit option
quotations electronically in options to which such
RSQT has been assigned. A qualified RSQT may
function as a Remote Specialist upon Exchange
approval. An RSQT may only submit such
quotations electronically from off the floor of the
Exchange. An RSQT may not submit option
quotations in eligible options to which such RSQT
is assigned to the extent that the RSQT is also
approved as a Remote Specialist in the same
options. An RSQT may only trade in a market
making capacity in classes of options in which he
is assigned or approved as a Remote Specialist. An
RSQTO is a member organization in good standing
that satisfies the RSQTO readiness requirements in
Rule 507(a) [sic].
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19:27 May 12, 2014
Jkt 232001
crossing 6, facilitation 7 and solicited 8
orders, regardless of order size.
Deletion of 500 Contract Minimum Size
Currently, Commentary .05(c)(i) to
Phlx Rule 1014 provides that, in the
event that a Floor Broker or specialist 9
presents a non-electronic order in which
an RSQT is assigned or which is
allocated to a Remote Specialist, and/or
in which an SQT assigned in such
option is not a crowd participant
(collectively, ‘‘Non-Crowd
Participants’’), such Non-Crowd
Participant may not participate in trades
stemming from such a non-electronic
order unless the non-electronic order is
executed at the price quoted by the NonCrowd Participant at the time of
execution.
However, if the non-electronic order
is executed at the price quoted by the
Non-Crowd Participant, the Non-Crowd
Participant may participate in the trade
unless the order was a crossing,
facilitation or solicited order with a size
of at least 500 contracts on each side.10
If the order is a crossing, facilitation or
solicited order with a size of at least 500
contracts on each side, Commentary
.05(c)(ii) gives priority to in-crowd
participants (including, for purposes of
Commentary .05(c)(ii) only, Floor
Brokers) over Non-Crowd Participants
and over out-of-crowd broker-dealer
limit orders on the limit order book, but
not over public customer orders.11 Such
6 A crossing order occurs when an options Floor
Broker holds orders to buy and sell the same option
series. Such a Floor Broker may cross such orders,
provided that the trading crowd is given an
opportunity to bid and offer for such option series
in accordance with Exchange rules. See Phlx Rule
1064(a).
7 A facilitation order occurs when an options
Floor Broker holds an options order for a public
customer and a contraside order. Such a Floor
Broker may execute such orders as a facilitation
order, provided that such Floor Broker proceeds in
accordance with Exchange rules concerning
facilitation orders. See Phlx Rule 1064(b).
8 A solicitation occurs whenever an order, other
than a cross, is presented for execution in the
trading crowd resulting from an away-from-thecrowd expression of interests to trade by one broker
dealer to another. See Phlx Rule 1064(c).
9 A ‘‘Specialist’’ is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a).
10 This in-crowd priority applies only to crossing,
facilitation and solicited orders represented in open
outcry, and does not apply to orders submitted
electronically via the Exchange’s electronic options
trading platform, to which other priority rules
apply. See, e.g., Phlx Rules 1014(g)(vii) and (viii).
11 In keeping with current Exchange practices and
rules, public customer limit orders represented in
the trading crowd and resting on the limit order
book have, and will continue to have, priority over
all other participants and accordingly must be
executed up to the aggregate size of such orders
before any in-crowd participant is entitled to
priority. Public customer orders on the limit order
book that are eligible for execution are required to
be executed before a Floor Broker may execute its
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
orders are allocated in accordance with
Exchange rules. By affording priority to
in-crowd participants over Non-Crowd
Participants and out-of-crowd brokerdealer limit orders in crossing,
facilitation and solicited orders with a
size of at least 500 contracts represented
and executed in open outcry, the
Exchange encourages order flow
providers to send such orders to the
Exchange.
The Exchange now proposes to
further encourage order flow providers
to send such orders to the Exchange by
eliminating the 500 contract minimum
order size from Commentary .05(c)(ii).
As amended, the rule would afford
priority to in-crowd participants over
Non-Crowd Participants and out-ofcrowd broker-dealer limit orders in
crossing, facilitation and solicited
orders regardless of the size of those
orders. The current 500 contract
minimum size requirement presents the
possibility that one of the two sides of
a Floor Brokered cross will not be fully
executed on the trading floor. The size
requirement was initially adopted by
the Exchange in 2006 to foster the new
electronic trading of options, by limiting
participation of in-crowd participants in
order to permit Non-Crowd Participants
to participate in smaller (under five
hundred contracts) Floor Broker
crosses.12 Today, electronic options
trading is well-established and no
longer requires such special rules and
incentives to develop further.
The Exchange believes that by
extending priority to in-crowd
participants over Non-Crowd
Participants and out-of-crowd brokerdealer limit orders in all crossing,
facilitation and solicited orders
represented and executed in open
outcry, regardless of size, in-crowd
participants such as Floor Brokers will
be enabled to provide full service to
their clients as they seek to execute such
orders. By way of explanation, the size
of orders given to Floor Brokers by
member participants varies throughout
the trading day, and generally those
participants expect the same experience
regardless of order size when evaluating
priority of electronic quotes with
respect to cross orders executed on the
trading floor. Another options exchange
does not have the same differentiation
order in the crowd and/or with a contra-side order
it holds.
12 See Securities Exchange Act Release No. 54267
(August 3, 2006), 71 FR 45888 (August 10, 2006).
See also Securities Exchange Act Release No. 64401
(May 4, 2011), 76 FR 27105 (May 10, 2011)
(amending the rule to state that in-crowd
participants in such orders also have priority over
out-of-crowd broker-dealer limit orders on the limit
order book).
E:\FR\FM\13MYN1.SGM
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Federal Register / Vol. 79, No. 92 / Tuesday, May 13, 2014 / Notices
of priority for orders of fewer than 500
contracts 13, and the different priority
for orders with a size under 500
contracts has become an impediment to
Phlx members soliciting orders. By
removing the 500 contract minimum
size distinction, the Exchange would
permit Floor Brokers to access in-crowd
liquidity for all order sizes, thereby
providing full order execution service to
their clients.
To illustrate the application of the
revised rule, assume the following
ranking of bids on Phlx:
mstockstill on DSK4VPTVN1PROD with NOTICES
RSQT market 1.00 bid x 1000
Out of crowd SQT market 1.00 bid x 200
In-crowd participants 1.00 bid x 100
Public customer order on the book 1.00 bid
x 100
Broker-dealer order on the book 1.00 bid x
100
Assume a Floor Broker enters the
trading crowd with a cross order. This
cross order is an order to sell 10,000
contracts and a contra order to buy
10,000 contracts at 1.00. Under the
current rule, after selling to all 1.00
public customer interest on the book
(100 contracts) and to all 1.00 interest in
the trading crowd (100 contracts), the
Floor Broker is allowed to cross the
remaining interest (9,800 contracts) at
1.00, with priority over RSQTs, out-ofcrowd SQTs and broker-dealer limit
orders on the book.14
If in this example, however, the Floor
Broker’s order to sell and contra order
to buy at 1.00 were only for 400
contracts, the Floor Broker would be
unable to cross the 200 contracts
remaining interest after selling to all
1.00 public customer interest on the
book (100) and to all 1.00 interest in the
trading crowd (100 contracts) because
the current rule gives the Floor Broker
no priority over RSQTs, out-of-crowd
SQTs and broker-dealer orders on the
book respecting orders less than 500
contracts. The rule as revised would
remove the limitation of the 500
contract minimum. Thus, under the
revised rule, the Floor Broker in the
example could enter the trading crowd
with an order to sell 400 contracts and
a contra order to buy 400 contracts at
1.00. After selling to all 1.00 public
customer interest on the book (100) and
to all 1.00 interest in the trading crowd
(100 contracts), the Floor Broker would
be allowed to cross the remaining
interest (200 contracts) at 1.00, with
13 See Chicago Board Options Exchange (‘‘CBOE’’)
Rule 6.74, Crossing Orders.
14 If the order in this paragraph’s example were
a facilitation order or a solicitation order, the
resulting allocation of contracts would be no
different.
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19:27 May 12, 2014
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27353
priority over RSQTs, out-of-crowd SQTs
and broker-dealer orders on the book.15
public customer limit orders up to their
aggregate size at a particular price point.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
provisions of Section 6 of the Act,16 in
general, and with Section 6(b)(5) of the
Act,17 in particular, which requires that
the rules of an exchange be designed to
prevent fraudulent and manipulative
acts and practices, promote just and
equitable principles of trade, foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, protect
investors and the public interest,
because it would encourage order flow
providers to send additional crossing,
facilitation and solicited orders to the
Exchange, free of concerns that the
order may not be completely executed
by the trading crowd. As noted above,
the size of orders given to Floor Brokers
by member participants varies
throughout the trading day, and
generally those participants expect the
same experience regardless of order size
when evaluating priority of electronic
quotes with respect to cross orders
executed on the trading floor. By
removing the 500 contract minimum
size distinction, the Exchange would
permit Floor Brokers to access in-crowd
liquidity for all order sizes thereby
enabling them to provide full service to
member participants no matter the order
size.
The Exchange believes that treating
crossing, facilitation and solicitation
orders of under 500 contracts on each
side no differently from such orders of
greater size creates no unfair
disadvantage to investors. Elimination
of the 500 contract minimum threshold
size is just and equitable, because NonCrowd Participants are not required to
respond to a Floor Broker entering the
crowd and requesting a market, whereas
in-crowd participants are required to
verbalize a market in response to such
a request. The Exchange also believes
that the proposal promotes just and
equitable principles of trade by
retaining public customer priority in all
cases. The instant proposal will not
affect public customer priority and the
Exchange will continue to execute
B. Self-Regulatory Organization’s
Statement on Burden on Competition
15 As
above, if the crossing order in this
paragraph’s example were a facilitation order or a
solicited order, the resulting allocation of contracts
would be no different.
16 15 U.S.C. 78f.
17 15 U.S.C. 78f(b)(5).
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Frm 00077
Fmt 4703
Sfmt 4703
The Exchange 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.
To the contrary, it should provide
greater incentive for order flow
providers to submit crossing, facilitation
and solicited orders to the Exchange,
thus enabling the Exchange to compete
with another exchange that has similar
rules in effect.18 Further, with respect to
intra-market competition between
crowd participants and Non-Crowd
Participants, the proposed rule change
will not result in any burden on
competition. The proposed rule change
should actually bolster competition. For
example, assume the following market:
RSQT market 2.00 bid x 200
Out-of-crowd SQT market 2.00 bid x 200
In-crowd participants 1.70 bid x 100
Public customer order no bid on the book
Assume that a Floor Broker walks into
the crowd with a cross order to buy 400
contracts at 2.00 and to sell 400
contracts at 2.00. Under the current rule,
the Floor Broker would not have
priority at 2.00 to allow the buy order
of 400 contracts at 2.00 to participate.
The seller would forego the liquidity of
the 2.00 bid the Floor Broker was
handling and would need to sell 400 to
the RSQT and out-of-crowd SQT
utilizing their posted liquidity, and
likely moving the market of the 2.00 bid
lower after the trade. The rule as
proposed would, instead, permit
utilization of the liquidity of the Floor
Broker’s 2.00 bid by giving the 2.00 bid
priority over the RSQT and out of crowd
SQT thus keeping the posted liquidity
intact at the existing bid of 2.00. The
Exchange believes the residual 2.00
bidders would have extra incentive to
compete by either maintaining their bid
hoping to trade with additional selling
interest or to increase their bid in order
to vie for participation in the next sell
order. The Exchange also believes that
affording priority in to in-crowd
participants regardless of size will
attract additional smaller cross orders to
the Exchange, creating an opportunity
18 See CBOE Rule 6.74 (which affords priority to
in-crowd participants over out-of-crowd
participants, including non-public customer orders
on the limit order book, in all open outcry
situations after public customers on the limit order
book have been executed) and Securities Exchange
Act Release No. 54726 (November 8, 2006), 71 FR
66810 (November 16, 2006) (SR–CBOE–2006–89).
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Federal Register / Vol. 79, No. 92 / Tuesday, May 13, 2014 / Notices
for in crowd market makers to compete
for the smaller crosses as well.19
Comments may be submitted by any
of the following methods:
SECURITIES AND EXCHANGE
COMMISSION
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
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–2014–23 on the subject line.
[Release No. 34–72116; File No. SR–ICC–
2014–02]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change To Update
ICC’s Liquidity Thresholds for Euro
Denominated Products
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will: (A) By order approve or disapprove
such proposed rule change, or (B)
institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
mstockstill on DSK4VPTVN1PROD with NOTICES
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. The
Commission requests comments, in
particular, on the following aspects of
the proposed rule change:
1. What are commenters’ views on
how, if at all, the proposed rule change
would affect: (1) Incentives to submit
limit orders; (2) quoted spreads and
quoted depth; and/or (3) transaction
costs for orders below 500 contracts?
Please elaborate.
2. What are commenters’ views on
how, if at all, orders for more than 500
contracts differ from orders for less than
500 contracts? Please elaborate. Are the
underlying investors/traders or the
investing/trading strategies different?
Please explain. What types of investor
or market participant, if any, would
likely be significantly affected by the
proposed rule change? Please explain.
3. Commenters are requested to
provide empirical data and other factual
support for their views.
19 The Exchange notes that it is not proposing to
eliminate the 500 contract minimum eligible order
size in Rule 1064, Commentary .02. This provision
entitles a Floor Broker to cross (after all public
customer orders that were (1) on the limit order
book and then (2) represented in the trading crowd
at the time the market was established have been
satisfied) 40% of the remaining contracts in an
order of the eligible size, if the order traded at or
between the best bid or offer given by the crowd
in response to the Floor Broker’s initial request for
a market. See Rule 1064, Commentary .02(iii). This
aspect of intra-market competition in the context of
orders under 500 contracts is being maintained.
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19:27 May 12, 2014
Jkt 232001
May 7, 2014.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2014–23. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml).
Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
rule change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–Phlx–2014–23 and should
be submitted on or before June 3, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–10900 Filed 5–12–14; 8:45 am]
PO 00000
CFR 200.30–3(a)(12).
Frm 00078
Fmt 4703
II. Description
ICC is proposing to update its
liquidity thresholds for Euro
denominated products. Under the
proposed changes, ICC will require the
first 65% of Clearing Participant NonClient Initial Margin and Guaranty Fund
Liquidity Requirements (‘‘Non-Client
Liquidity Requirements’’) to be satisfied
with collateral in the currency of the
underlying instrument. ICC notes that
for United States Dollar (‘‘USD’’)
denominated products, its rules already
state that the first 65% of Non-Client
Liquidity Requirements must be
satisfied with USD denominated
collateral, the first 45% of which must
be posted in USD cash and the next
20% of which may be posted in USD
denominated assets (USD cash and/or
US Treasury securities). Currently, for
Euro denominated products, 45% of
Non-Client Liquidity Requirements
must be posted in Euro cash and the
next 20% may be posted in Euro cash,
USD cash, and/or US Treasury
securities.
Accordingly, ICC proposes updating
the liquidity thresholds for Euro
denominated products, listed in
Schedule 401 of the ICC Rules, to
require the first 65% of Non-Client
Liquidity Requirements for Euro
denominated products to be satisfied
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–71810
(March 26, 2014), 79 FR 18377 (April 1, 2014) (SR–
ICC–2014–02).
2 17
BILLING CODE 8011–01–P
20 17
I. Introduction
On March 12, 2014, ICE Clear Credit
LLC (‘‘ICC’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change SR–ICC–2014–02 pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The proposed rule
change was published for comment in
the Federal Register on April 1, 2014.3
The Commission received no comment
letters regarding the proposed change.
For the reasons discussed below, the
Commission is granting approval of the
proposed rule change.
Sfmt 4703
E:\FR\FM\13MYN1.SGM
13MYN1
]]>Agencies
[Federal Register Volume 79, Number 92 (Tuesday, May 13, 2014)]
[Notices]
[Pages 27351-27354]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10900]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72119; File No. SR-Phlx-2014-23]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing of Proposed Rule Change Related to the Priority Afforded to In-
Crowd Participants Respecting Crossing, Facilitation and Solicited
Orders in Open Outcry Trading
May 7, 2014.
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 April 23, 2014, 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 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to revise the priority afforded to in-crowd
participants respecting crossing, facilitation and solicited orders in
open outcry trading.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxphlx.cchwallstreet.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
[[Page 27352]]
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
The Exchange proposes to amend Rule 1014, Commentary .05(c)(ii), to
afford priority in open outcry trading to in-crowd participants over
out-of-crowd Streaming Quote Traders (``SQTs'') \3\, Remote Specialists
\4\, and Remote Streaming Quote Traders (``RSQTs'') \5\ and over out-
of-crowd broker-dealer limit orders on the limit order book (but not
over public customer orders) in crossing \6\, facilitation \7\ and
solicited \8\ orders, regardless of order size.
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\3\ An SQT is defined in Exchange Rule 1014(b)(ii)(A) as a
Registered Options Trader (``ROT'') who has received permission from
the Exchange to generate and submit option quotations electronically
in options to which such SQT is assigned. A ROT includes a SQT, a
RSQT and a Non-SQT [sic], which by definition is neither a SQT or a
RSQT. A Registered Options Trader is defined in Exchange Rule
1014(b) [sic] as a regular member of the Exchange located on the
trading floor who has received permission from the Exchange to trade
in options for his own account. See Exchange Rule 1014(b)(i) and
(ii).
\4\ A Remote Specialist is a qualified RSQT approved by the
Exchange to function as a specialist in one or more options if the
Exchange determines that it cannot allocate such options to a floor
based specialist. A Remote Specialist has all the rights and
obligations of a specialist, unless Exchange rules provide
otherwise. See Exchange Rules 501 and 1020. See also, Securities
Exchange Act Release No. 63717 (January 14, 2011), 76 FR 4141
(January 24, 2011) (SR-Phlx-2010-145).
\5\ A RSQT is defined in Exchange Rule 1014(b)(ii)(B) as an ROT
that is a member affiliated with a Remote Streaming Quote Trader
Organization (``RSQTO'') with no physical trading floor presence who
has received permission from the Exchange to generate and submit
option quotations electronically in options to which such RSQT has
been assigned. A qualified RSQT may function as a Remote Specialist
upon Exchange approval. An RSQT may only submit such quotations
electronically from off the floor of the Exchange. An RSQT may not
submit option quotations in eligible options to which such RSQT is
assigned to the extent that the RSQT is also approved as a Remote
Specialist in the same options. An RSQT may only trade in a market
making capacity in classes of options in which he is assigned or
approved as a Remote Specialist. An RSQTO is a member organization
in good standing that satisfies the RSQTO readiness requirements in
Rule 507(a) [sic].
\6\ A crossing order occurs when an options Floor Broker holds
orders to buy and sell the same option series. Such a Floor Broker
may cross such orders, provided that the trading crowd is given an
opportunity to bid and offer for such option series in accordance
with Exchange rules. See Phlx Rule 1064(a).
\7\ A facilitation order occurs when an options Floor Broker
holds an options order for a public customer and a contraside order.
Such a Floor Broker may execute such orders as a facilitation order,
provided that such Floor Broker proceeds in accordance with Exchange
rules concerning facilitation orders. See Phlx Rule 1064(b).
\8\ A solicitation occurs whenever an order, other than a cross,
is presented for execution in the trading crowd resulting from an
away-from-the-crowd expression of interests to trade by one broker
dealer to another. See Phlx Rule 1064(c).
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Deletion of 500 Contract Minimum Size
Currently, Commentary .05(c)(i) to Phlx Rule 1014 provides that, in
the event that a Floor Broker or specialist \9\ presents a non-
electronic order in which an RSQT is assigned or which is allocated to
a Remote Specialist, and/or in which an SQT assigned in such option is
not a crowd participant (collectively, ``Non-Crowd Participants''),
such Non-Crowd Participant may not participate in trades stemming from
such a non-electronic order unless the non-electronic order is executed
at the price quoted by the Non-Crowd Participant at the time of
execution.
---------------------------------------------------------------------------
\9\ A ``Specialist'' is an Exchange member who is registered as
an options specialist pursuant to Rule 1020(a).
---------------------------------------------------------------------------
However, if the non-electronic order is executed at the price
quoted by the Non-Crowd Participant, the Non-Crowd Participant may
participate in the trade unless the order was a crossing, facilitation
or solicited order with a size of at least 500 contracts on each
side.\10\ If the order is a crossing, facilitation or solicited order
with a size of at least 500 contracts on each side, Commentary
.05(c)(ii) gives priority to in-crowd participants (including, for
purposes of Commentary .05(c)(ii) only, Floor Brokers) over Non-Crowd
Participants and over out-of-crowd broker-dealer limit orders on the
limit order book, but not over public customer orders.\11\ Such orders
are allocated in accordance with Exchange rules. By affording priority
to in-crowd participants over Non-Crowd Participants and out-of-crowd
broker-dealer limit orders in crossing, facilitation and solicited
orders with a size of at least 500 contracts represented and executed
in open outcry, the Exchange encourages order flow providers to send
such orders to the Exchange.
---------------------------------------------------------------------------
\10\ This in-crowd priority applies only to crossing,
facilitation and solicited orders represented in open outcry, and
does not apply to orders submitted electronically via the Exchange's
electronic options trading platform, to which other priority rules
apply. See, e.g., Phlx Rules 1014(g)(vii) and (viii).
\11\ In keeping with current Exchange practices and rules,
public customer limit orders represented in the trading crowd and
resting on the limit order book have, and will continue to have,
priority over all other participants and accordingly must be
executed up to the aggregate size of such orders before any in-crowd
participant is entitled to priority. Public customer orders on the
limit order book that are eligible for execution are required to be
executed before a Floor Broker may execute its order in the crowd
and/or with a contra-side order it holds.
---------------------------------------------------------------------------
The Exchange now proposes to further encourage order flow providers
to send such orders to the Exchange by eliminating the 500 contract
minimum order size from Commentary .05(c)(ii). As amended, the rule
would afford priority to in-crowd participants over Non-Crowd
Participants and out-of-crowd broker-dealer limit orders in crossing,
facilitation and solicited orders regardless of the size of those
orders. The current 500 contract minimum size requirement presents the
possibility that one of the two sides of a Floor Brokered cross will
not be fully executed on the trading floor. The size requirement was
initially adopted by the Exchange in 2006 to foster the new electronic
trading of options, by limiting participation of in-crowd participants
in order to permit Non-Crowd Participants to participate in smaller
(under five hundred contracts) Floor Broker crosses.\12\ Today,
electronic options trading is well-established and no longer requires
such special rules and incentives to develop further.
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 54267 (August 3,
2006), 71 FR 45888 (August 10, 2006). See also Securities Exchange
Act Release No. 64401 (May 4, 2011), 76 FR 27105 (May 10, 2011)
(amending the rule to state that in-crowd participants in such
orders also have priority over out-of-crowd broker-dealer limit
orders on the limit order book).
---------------------------------------------------------------------------
The Exchange believes that by extending priority to in-crowd
participants over Non-Crowd Participants and out-of-crowd broker-dealer
limit orders in all crossing, facilitation and solicited orders
represented and executed in open outcry, regardless of size, in-crowd
participants such as Floor Brokers will be enabled to provide full
service to their clients as they seek to execute such orders. By way of
explanation, the size of orders given to Floor Brokers by member
participants varies throughout the trading day, and generally those
participants expect the same experience regardless of order size when
evaluating priority of electronic quotes with respect to cross orders
executed on the trading floor. Another options exchange does not have
the same differentiation
[[Page 27353]]
of priority for orders of fewer than 500 contracts \13\, and the
different priority for orders with a size under 500 contracts has
become an impediment to Phlx members soliciting orders. By removing the
500 contract minimum size distinction, the Exchange would permit Floor
Brokers to access in-crowd liquidity for all order sizes, thereby
providing full order execution service to their clients.
---------------------------------------------------------------------------
\13\ See Chicago Board Options Exchange (``CBOE'') Rule 6.74,
Crossing Orders.
---------------------------------------------------------------------------
To illustrate the application of the revised rule, assume the
following ranking of bids on Phlx:
RSQT market 1.00 bid x 1000
Out of crowd SQT market 1.00 bid x 200
In-crowd participants 1.00 bid x 100
Public customer order on the book 1.00 bid x 100
Broker-dealer order on the book 1.00 bid x 100
Assume a Floor Broker enters the trading crowd with a cross order. This
cross order is an order to sell 10,000 contracts and a contra order to
buy 10,000 contracts at 1.00. Under the current rule, after selling to
all 1.00 public customer interest on the book (100 contracts) and to
all 1.00 interest in the trading crowd (100 contracts), the Floor
Broker is allowed to cross the remaining interest (9,800 contracts) at
1.00, with priority over RSQTs, out-of-crowd SQTs and broker-dealer
limit orders on the book.\14\
---------------------------------------------------------------------------
\14\ If the order in this paragraph's example were a
facilitation order or a solicitation order, the resulting allocation
of contracts would be no different.
---------------------------------------------------------------------------
If in this example, however, the Floor Broker's order to sell and
contra order to buy at 1.00 were only for 400 contracts, the Floor
Broker would be unable to cross the 200 contracts remaining interest
after selling to all 1.00 public customer interest on the book (100)
and to all 1.00 interest in the trading crowd (100 contracts) because
the current rule gives the Floor Broker no priority over RSQTs, out-of-
crowd SQTs and broker-dealer orders on the book respecting orders less
than 500 contracts. The rule as revised would remove the limitation of
the 500 contract minimum. Thus, under the revised rule, the Floor
Broker in the example could enter the trading crowd with an order to
sell 400 contracts and a contra order to buy 400 contracts at 1.00.
After selling to all 1.00 public customer interest on the book (100)
and to all 1.00 interest in the trading crowd (100 contracts), the
Floor Broker would be allowed to cross the remaining interest (200
contracts) at 1.00, with priority over RSQTs, out-of-crowd SQTs and
broker-dealer orders on the book.\15\
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\15\ As above, if the crossing order in this paragraph's example
were a facilitation order or a solicited order, the resulting
allocation of contracts would be no different.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the provisions of Section 6 of the Act,\16\ in general, and with
Section 6(b)(5) of the Act,\17\ in particular, which requires that the
rules of an exchange be designed to prevent fraudulent and manipulative
acts and practices, promote just and equitable principles of trade,
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest,
because it would encourage order flow providers to send additional
crossing, facilitation and solicited orders to the Exchange, free of
concerns that the order may not be completely executed by the trading
crowd. As noted above, the size of orders given to Floor Brokers by
member participants varies throughout the trading day, and generally
those participants expect the same experience regardless of order size
when evaluating priority of electronic quotes with respect to cross
orders executed on the trading floor. By removing the 500 contract
minimum size distinction, the Exchange would permit Floor Brokers to
access in-crowd liquidity for all order sizes thereby enabling them to
provide full service to member participants no matter the order size.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f.
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that treating crossing, facilitation and
solicitation orders of under 500 contracts on each side no differently
from such orders of greater size creates no unfair disadvantage to
investors. Elimination of the 500 contract minimum threshold size is
just and equitable, because Non-Crowd Participants are not required to
respond to a Floor Broker entering the crowd and requesting a market,
whereas in-crowd participants are required to verbalize a market in
response to such a request. The Exchange also believes that the
proposal promotes just and equitable principles of trade by retaining
public customer priority in all cases. The instant proposal will not
affect public customer priority and the Exchange will continue to
execute public customer limit orders up to their aggregate size at a
particular price point.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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. To
the contrary, it should provide greater incentive for order flow
providers to submit crossing, facilitation and solicited orders to the
Exchange, thus enabling the Exchange to compete with another exchange
that has similar rules in effect.\18\ Further, with respect to intra-
market competition between crowd participants and Non-Crowd
Participants, the proposed rule change will not result in any burden on
competition. The proposed rule change should actually bolster
competition. For example, assume the following market:
---------------------------------------------------------------------------
\18\ See CBOE Rule 6.74 (which affords priority to in-crowd
participants over out-of-crowd participants, including non-public
customer orders on the limit order book, in all open outcry
situations after public customers on the limit order book have been
executed) and Securities Exchange Act Release No. 54726 (November 8,
2006), 71 FR 66810 (November 16, 2006) (SR-CBOE-2006-89).
RSQT market 2.00 bid x 200
Out-of-crowd SQT market 2.00 bid x 200
In-crowd participants 1.70 bid x 100
Public customer order no bid on the book
Assume that a Floor Broker walks into the crowd with a cross order to
buy 400 contracts at 2.00 and to sell 400 contracts at 2.00. Under the
current rule, the Floor Broker would not have priority at 2.00 to allow
the buy order of 400 contracts at 2.00 to participate. The seller would
forego the liquidity of the 2.00 bid the Floor Broker was handling and
would need to sell 400 to the RSQT and out-of-crowd SQT utilizing their
posted liquidity, and likely moving the market of the 2.00 bid lower
after the trade. The rule as proposed would, instead, permit
utilization of the liquidity of the Floor Broker's 2.00 bid by giving
the 2.00 bid priority over the RSQT and out of crowd SQT thus keeping
the posted liquidity intact at the existing bid of 2.00. The Exchange
believes the residual 2.00 bidders would have extra incentive to
compete by either maintaining their bid hoping to trade with additional
selling interest or to increase their bid in order to vie for
participation in the next sell order. The Exchange also believes that
affording priority in to in-crowd participants regardless of size will
attract additional smaller cross orders to the Exchange, creating an
opportunity
[[Page 27354]]
for in crowd market makers to compete for the smaller crosses as
well.\19\
---------------------------------------------------------------------------
\19\ The Exchange notes that it is not proposing to eliminate
the 500 contract minimum eligible order size in Rule 1064,
Commentary .02. This provision entitles a Floor Broker to cross
(after all public customer orders that were (1) on the limit order
book and then (2) represented in the trading crowd at the time the
market was established have been satisfied) 40% of the remaining
contracts in an order of the eligible size, if the order traded at
or between the best bid or offer given by the crowd in response to
the Floor Broker's initial request for a market. See Rule 1064,
Commentary .02(iii). This aspect of intra-market competition in the
context of orders under 500 contracts is being maintained.
---------------------------------------------------------------------------
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (A) By order approve
or disapprove such proposed rule change, or (B) institute proceedings
to determine whether the proposed rule change should be 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. The Commission requests comments, in
particular, on the following aspects of the proposed rule change:
1. What are commenters' views on how, if at all, the proposed rule
change would affect: (1) Incentives to submit limit orders; (2) quoted
spreads and quoted depth; and/or (3) transaction costs for orders below
500 contracts? Please elaborate.
2. What are commenters' views on how, if at all, orders for more
than 500 contracts differ from orders for less than 500 contracts?
Please elaborate. Are the underlying investors/traders or the
investing/trading strategies different? Please explain. What types of
investor or market participant, if any, would likely be significantly
affected by the proposed rule change? Please explain.
3. Commenters are requested to provide empirical data and other
factual support for their views.
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-2014-23 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2014-23. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
All submissions should refer to File Number SR-Phlx-2014-23 and
should be submitted on or before June 3, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10900 Filed 5-12-14; 8:45 am]
BILLING CODE 8011-01-P
