Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Order Exposure, 541-544 [2015-33219]
Download as PDF
<![CDATA[
Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE., Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: December 30, 2015.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015–33211 Filed 1–5–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[OMB Control No. 3235–0585, SEC File No.
270–523]
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
mstockstill on DSK4VPTVN1PROD with NOTICES
Extension: Rule 206(4)–7.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
The title for the collection of
information is ‘‘Investment Advisers Act
rule 206(4)–7 (17 CFR 275.206(4)–7),
Compliance procedures and practices.’’
Rule 206(4)–7 requires each investment
adviser registered with the Commission
to (i) adopt and implement internal
compliance policies and procedures, (ii)
review those policies and procedures
annually, (iii) designate a chief
compliance officer, and (iv) maintain
certain compliance records. The rule is
designed to protect investors by
fostering better compliance with the
securities laws. The collection of
information under rule 206(4)–7 is
necessary to assure that investment
advisers maintain comprehensive
internal programs that promote the
advisers’ compliance with the
Investment Advisers Act of 1940. The
information collected under this rule
VerDate Sep<11>2014
17:32 Jan 05, 2016
Jkt 238001
may also assist Commission staff in
assessing investment advisers’
compliance programs.
This collection of information is
mandatory. The information collected
pursuant to the rule 206(4)–7 is
reviewed by the Commission’s
examination staff; it will be accorded
the same level of confidentiality
accorded to other responses provided to
the Commission in the context of its
examination and oversight program.
The respondents to this information
collection are investment advisers
registered with the Commission. Our
latest data indicate that there were
12,026 advisers registered with the
Commission as of November 1, 2015.
The Commission has estimated that
compliance with rule 206(4)–7 imposes
an annual burden of approximately 87
hours per respondent. Based on this
figure, the Commission estimates a total
annual burden of 1,046,262 hours for
this collection of information.
Written comments are invited on: (a)
Whether the collection of information is
necessary for the proper performance of
the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden of the
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication. An agency may not conduct
or sponsor a collection of information
unless it displays a currently valid OMB
control number. No person shall be
subject to any penalty for failing to
comply with a collection of information
subject to the PRA that does not display
a valid OMB control number.
Please direct your written comments
to Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Remi
Pavlik-Simon, 100 F Street NE.,
Washington, DC 20549; or send an email
to: PRA_Mailbox@sec.gov.
Dated: December 30, 2015.
Jill M. Peterson,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76801; File No. SR–Phlx–
2015–99]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Regarding
Order Exposure
December 30, 2015.
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 December
15, 2015, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx Rule 1080, entitled ‘‘Phlx XL and
Phlx XL II,’’ to account for potential
internal conflicts with other Exchange
Rules, which are exceptions to the order
exposure rule regarding principle orders
the Order Entry Firm represents as agent
from being exposed.
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
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.
[FR Doc. 2015–33210 Filed 1–5–16; 8:45 am]
1 15
BILLING CODE 8011–01–P
PO 00000
2 17
Frm 00083
Fmt 4703
Sfmt 4703
541
E:\FR\FM\06JAN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
06JAN1
542
Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices
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
Phlx Rule 1080(c)(ii)(C) to provide that
other Exchange Rules are exceptions to
rules requiring Order Entry Firms to
expose orders and to name those rules.
Today, Phlx Rule 1080(c)(ii)(C)(1)
provides that,
Principal Transactions: Order Entry Firms
may not execute as principal against orders
on the limit order book they represent as
agent unless: (a) Agency orders are first
exposed on the limit order book for at least
one (1) second, (b) the Order Entry Firm has
been bidding or offering on the Exchange for
at least one (1) second prior to receiving an
agency order that is executable against such
order, or (c) the Order Entry Firm proceeds
in accordance with the crossing rules
contained in Rule 1064.
Further, Phlx Rule 1080(c)(ii)(C)(2) and
(3) provide,
mstockstill on DSK4VPTVN1PROD with NOTICES
Solicitation Orders. Order Entry Firms
must expose orders they represent as agent
for at least one (1) second before such orders
may be automatically executed, in whole or
in part, against orders solicited from
members and non-member broker-dealers to
transact with such orders.
It shall be a violation of Rule 1080(c)(ii)(C)
for any Exchange member or member
organization to be a party to any arrangement
designed to circumvent Rule 1080(c)(ii)(C) by
providing an opportunity for a customer,
member, member organization, or nonmember broker-dealer to execute
immediately against agency orders delivered
to the Exchange, whether such orders are
delivered via AUTOM or represented in the
trading crowd by a member or a member
organization.
The Exchange notes that there are other
exceptions to the general rule regarding
the exposure of principal orders
represented as agent by the Order Entry
Firm. Also, other options exchanges
have similar order exposure
exceptions.3
The first proposed additional
exception to the order exposure rule is
Price Improvement XL or ‘‘PIXL.’’ 4
PIXL is a component of the Exchange’s
fully automated options trading system,
PHLX XL that allows a member or
member organization to electronically
submit for execution an order it
represents as agent on behalf of a public
customer, broker-dealer, or any other
entity (‘‘PIXL Order’’) against principal
interest or against any other order it
3 See International Securities Exchange LLC
(‘‘ISE’’) Rule 717(d) and BOX Options Exchange
LLC (‘‘BOX’’) Rule 7140.
4 See Phlx Rule 1080(n). Complex Orders may
also be placed into PIXL.
VerDate Sep<11>2014
17:32 Jan 05, 2016
Jkt 238001
represents as agent (an ‘‘Initiating
Order’’) provided it submits the PIXL
Order for electronic execution into the
PIXL Auction (‘‘Auction’’). This
mechanism is an exception to the
general rule in [sic], which requires
Phlx members and member
organizations to expose principal orders
they represent as agent for at least one
(1) second prior to receiving an agency
order that is executable against such bid
or offer. With PIXL, paired orders are
submitted simultaneously and would
not violate Phlx Rule 1080(c)(ii)(C).
The second proposed additional
exception to the order exposure rule is
the Complex Order Live Auction or
‘‘COLA.’’ 5 COLA is the automated
Complex Order Live Auction process. A
COLA may take place upon
identification of the existence of a
COLA-eligible order either: (1)
Following a COOP, or (2) during normal
trading if the Phlx XL system receives
a Complex Order that improves the
cPBBO. Phlx XL participants may bid
and/or offer on either or both side(s) of
the market during the COLA Timer by
submitting one or more bids or offers
that improve the cPBBO, known as a
‘‘COLA Sweep.’’ 6 COLA does not abide
by the one second order exposure
requirement.
The third proposed additional
exception to the order exposure rule is
the Qualified Contingent Cross or
‘‘QCC’’ mechanism.7 A QCC Order is
comprised of an originating order to buy
or sell at least 1,000 contracts, or 10,000
contracts in the case of Mini Options,
which is identified as being part of a
qualified contingent trade that is
coupled with a contra-side order or
orders totaling an equal number of
contracts.8 With QCC, coupled orders
are submitted simultaneously and
would not violate Phlx Rule
5 See Phlx Rule 1080, Commentary .02(c)(ii)(e)
[sic].
6 A single Phlx XL participant may submit
multiple COLA Sweeps at different prices (but not
multiple COLA Sweeps at the same price, except as
provided in sub-paragraph (B) below) in increments
of $0.01 in response to a COLA broadcast,
regardless of the minimum trading increment
applicable to the specific series. Phlx XL
participants may change the size of a previously
submitted COLA Sweep at the previously submitted
COLA price during the COLA Timer. The system
will use the Phlx XL participant’s most recently
submitted COLA Sweep at each price level as that
participant’s response at that price level, unless the
COLA Sweep has a size of zero. A COLA Sweep
with a size of zero will remove a Phlx XL
participant’s COLA Sweep from the COLA at that
price level. COLA Sweeps will not be visible to any
participant and will not be disseminated by the
Exchange. See Phlx Rule 1080, Commentary
.02(c)(ii)(e)(iv)(A)–(C) [sic].
7 See Phlx Rules 1080(o).
8 See Phlx Rule 1080(o).
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
1080(c)(ii)(C).9 A QCC transaction
consists of two or more component
orders, executed as agent or principal,
where: (a) At least one component is an
NMS Stock, as defined in Rule 600 of
Regulation NMS under the Exchange
Act; (b) all components are effected with
a product or price contingency that
either has been agreed to by all the
respective counterparties or arranged for
by a broker-dealer as principal or agent;
(c) the execution of one component is
contingent upon the execution of all
other components at or near the same
time; (d) the specific relationship
between the component orders (e.g., the
spread between the prices of the
component orders) is determined by the
time the contingent order is placed; (e)
the component orders bear a derivative
relationship to one another, represent
different classes of shares of the same
issuer, or involve the securities of
participants in mergers or with
intentions to merge that have been
announced or cancelled; and (f) the
transaction is fully hedged (without
regard to any prior existing position) as
a result of other components of the
contingent trade.10
The Exchange believes that amending
Phlx Rule 1080(c)(ii)(C) to add rule text
to include these additional exceptions
to this general rule regarding order
exposure will conform the rule text.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with section 6(b)
of the Act 11 in general, and furthers the
objectives of section 6(b)(5) of the Act 12
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
explicitly delineating all exceptions to
the general rule regarding the
requirements to expose certain principal
orders which the Order Entry firm
represents as agent. Specifically, the
Exchange’s proposal amends the order
exposure rule to list PIXL, COLA and
QCC as exceptions to the wait time to
expose such principal orders the Order
Entry Firm represents as agent for at
least one (1) second prior to receiving an
agency order that is executable against
such bid or offer.
The Exchange’s proposal will make
clear that PIXL is an exception to the
9 Complex Orders may also be placed into PIXL.
See Phlx Rule 1080(n).
10 See Phlx Rule 1080(o)(3).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
E:\FR\FM\06JAN1.SGM
06JAN1
Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices
general rule, which requires Phlx
members and member organizations to
expose principal orders they represent
as agent for at least one (1) second prior
to receiving an agency order that is
executable against such bid or offer.
PIXL permits Participants to enter
paired orders without first exposing
those orders for one second. The
Exchange believes that providing an
exception to the order exposure rule for
orders entered into PIXL is consistent
with the Act, because while PIXL’s
auction will last for one second, the
orders may be entered as paired
orders.13 A Phlx member or member
organization, known as the Initiating
Participant, must enter an order into the
PIXL Mechanism as specified by Phlx
Rule 1080(n).14 Complex Orders may
also be entered into PIXL and such
prices must be at the cPBBO or better.15
Initiating Participants entering orders
into PIXL are required to guarantee an
13 See
Phlx Rule 1080(o).
initiate the Auction (except if it is a
Complex Order), the Initiating Member must mark
the PIXL Order for Auction processing, and specify
either: (a) A single price at which it seeks to execute
the PIXL Order (a ‘‘stop price’’); (b) that it is willing
to automatically match as principal or as agent on
behalf of an Initiating Order the price and size of
all PAN responses, and trading interest (‘‘automatch’’) in which case the PIXL Order will be
stopped at the NBBO on the Initiating Order side;
or (c) that it is willing to either: (i) Stop the entire
order at a single stop price and auto-match PAN
responses and trading interest at a price or prices
that improve the stop price to a specified price (a
‘‘Not Worse Than’’ or ‘‘NWT’’ price); (ii) stop the
entire order at a single stop price and auto-match
all PAN responses and trading interest at or better
than the stop price; or (iii) stop the entire order at
the NBBO on the Initiating Order side, and automatch PAN responses and trading interest at a price
or prices that improve the stop price up to the NWT
price. In all cases, if the PBBO on the same side of
the market as the PIXL Order represents a limit
order on the book, the stop price must be at least
one minimum price improvement increment better
than the booked limit order’s limit price. Once the
Initiating Member has submitted a PIXL Order for
processing pursuant to this subparagraph, such
PIXL Order may not be modified or cancelled. The
stop price or NWT price may be improved to the
benefit of the PIXL Order during the Auction, but
may not be cancelled. See Phlx Rule
1080(n)(ii)(A)(1).
15 To initiate the PIXL Complex Order Auction,
the Initiating Member must mark the PIXL Order for
Auction processing, and specify either: (a) A single
price at which it seeks to execute the PIXL Order
(a ‘‘stop price’’); or (b) that it is willing to either:
(i) Stop the entire order at a single stop price and
auto-match PAN responses and trading interest at
a price or prices that improve the stop price to a
specified price (a ‘‘Not Worse Than’’ or ‘‘NWT’’
price); or (ii) stop the entire order at a single stop
price and auto-match all PAN responses and trading
interest at or better than the stop price. Once the
Initiating Member has submitted a PIXL Complex
Order for processing pursuant to this subparagraph,
such PIXL Order may not be modified or cancelled.
Under any of the circumstances described in subparagraphs (a)–(b) in note 14, the stop price or NWT
price may be improved to the benefit of the PIXL
Order during the Auction, but may not be
cancelled. See Phlx Rule 1080(n)(ii)(A)(2).
mstockstill on DSK4VPTVN1PROD with NOTICES
14 To
VerDate Sep<11>2014
17:32 Jan 05, 2016
Jkt 238001
execution at the NBBO (cPBBO for
Complex Orders) or at a better price,
and are subject to market risk while
their PIXL Order is exposed to other
market participants in this competitive
auction.
The Exchange’s proposal will make
clear that COLA is an exception to the
general order exposure rule. A ‘‘COLAeligible order’’ means a Complex Order
(a) identified by way of a COOP, or (b)
that, upon receipt, improves the cPBBO
respecting the specific Complex Order
Strategy that is the subject of the
Complex Order and is not for a market
maker, as specified in Phlx Rule 1080.07
(b)(ii).16 COLA-eligible orders are
executed without consideration of any
prices that might be available on other
exchanges trading the same options
contracts. The COLA will begin with a
timing mechanism (a ‘‘COLA Timer’’),
which is a counting period not to
exceed five (5) seconds during which
Phlx XL participants may submit bids or
offers that improve the cPBBO. Phlx XL
participants may bid and/or offer on
either or both side(s) of the market
during the COLA Timer by submitting
one or more bids or offers that improve
the cPBBO, known as a ‘‘COLA Sweep.’’
COLA Sweeps will not be visible to any
participant and will not be disseminated
by the Exchange. Upon the expiration of
the COLA Timer, COLA Sweeps and/or
any Complex Orders received during the
COLA Timer that improve the cPBBO
may be executed against the COLAeligible order.17 The Exchange believes
that providing an exception to the order
exposure rule for orders entered into
COLA is consistent with the Act,
because while COLA auction may
exceed one second, the COLA-eligible
order will receive the best price or
prices available for the Complex Order
Strategy represented by the COLAeligible order, and are subject to market
risk while their Complex Order is
exposed to other market participants in
this competitive auction.
The Exchange’s proposal will make
clear that QCC is an exception to the
general order exposure rule. QCC Orders
are immediately executed upon entry
into the System by an Order Entry Firm
provided that (i) no Customer Orders are
at the same price on the Exchange’s
limit order book and (ii) the price is at
or between the NBBO. The Exchange
16 If the Phlx XL system identifies the existence
of a COLA-eligible order following a COOP or by
way of receipt during normal trading of a Complex
Order that improves the cPBBO, such COLAeligible order will initiate a COLA, during which
Phlx XL participants may bid and offer against the
COLA-eligible order pursuant to this rule.
17 See Phlx Rule 1080, Commentary .02(c)(ii)(e)
[sic].
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
543
believes that providing an exception to
the order exposure rule for orders
entered into QCC is consistent with the
Act, because when entered into the
System QCC Orders are coupled with a
contra-side order or orders totaling an
equal number of contracts. These orders
must be executed at a price that is at or
between the NBBO, and are subject to
market risk while the QCC Order is
exposed to other market participants in
this competitive auction.
The proposed amendments provide
additional exceptions to the current
order exposure rule and will serve to
protect investors and the public interest
by providing additional information in
the Rules concerning exceptions.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed changes do not impose any
burden on competition, rather, the
amendment provides an exception to
the order exposure rule for orders
entered into PIXL, COLA and QCC for
all Phlx members and member
organizations. The Exchange believes
that this exception will further inform
Phlx members and member
organizations of their obligations with
respect to order exposure. Phlx
members and member organizations
entering orders into PILX [sic], COLA or
QCC are subject to market risk while
their order is exposed to other market
participants and member organizations
in these competitive auctions.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days 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)(iii) of the Act 18 and
18 15
E:\FR\FM\06JAN1.SGM
U.S.C. 78s(b)(3)(a)(iii).
06JAN1
544
Federal Register / Vol. 81, No. 3 / Wednesday, January 6, 2016 / Notices
subparagraph (f)(6) of Rule 19b–4
thereunder.19
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2015–99 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–2015–99. 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–
2015–99 and should be submitted on or
before January 27, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Jill M. Peterson,
Assistant Secretary.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
18, 2015, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’) 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 NASDAQ. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
NASDAQ proposes to modify the
charges to be paid for Managed Data
Solutions (‘‘MDS’’). While the changes
proposed herein are effective upon
filing, the Exchange has designated that
the amendments be operative on
January 1, 2016.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are
bracketed.
NASDAQ Stock Market Rules
Equity Rules
[FR Doc. 2015–33219 Filed 1–5–16; 8:45 am]
*
BILLING CODE 8011–01–P
7026. Distribution Models
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76797; File No. SR–
NASDAQ–2015–158]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify the
Fees for Managed Data Solutions
*
*
*
(a) No change.
(b) Managed Data Solutions
The charges to be paid by Distributors
and Subscribers of Managed Data
Solutions products containing Nasdaq
Depth data (non-display use only) shall
be:
December 30, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
Fee schedule for managed data solutions
Price
mstockstill on DSK4VPTVN1PROD with NOTICES
Managed Data Solution Administration Fee (for the right to offer Managed Data Solutions to client organizations).
Nasdaq Depth Data Professional Subscriber Fee (Internal Use Only and includes TotalView, Level 2,
OpenView).
Nasdaq Depth Data Non-Professional Subscriber (Internal Use Only and includes TotalView, Level 2,
OpenView).
(c) Hardware-Based Delivery of
Nasdaq Depth data
(1) The charges to be paid by
Distributors for processing Nasdaq
Depth data sourced from a Nasdaq
19 7 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
VerDate Sep<11>2014
17:32 Jan 05, 2016
Jkt 238001
*
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
$[1]2,500/mo Per Distributor.
3[00]75/mo Per Subscriber.
60/mo Per Subscriber.
hardware-based market data format
shall be:
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\06JAN1.SGM
06JAN1
]]>Agencies
[Federal Register Volume 81, Number 3 (Wednesday, January 6, 2016)]
[Notices]
[Pages 541-544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-33219]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76801; File No. SR-Phlx-2015-99]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
Order Exposure
December 30, 2015.
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 December 15, 2015, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III, below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx Rule 1080, entitled ``Phlx XL
and Phlx XL II,'' to account for potential internal conflicts with
other Exchange Rules, which are exceptions to the order exposure rule
regarding principle orders the Order Entry Firm represents as agent
from being exposed.
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
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.
[[Page 542]]
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 Phlx Rule 1080(c)(ii)(C) to provide
that other Exchange Rules are exceptions to rules requiring Order Entry
Firms to expose orders and to name those rules. Today, Phlx Rule
1080(c)(ii)(C)(1) provides that,
Principal Transactions: Order Entry Firms may not execute as
principal against orders on the limit order book they represent as
agent unless: (a) Agency orders are first exposed on the limit order
book for at least one (1) second, (b) the Order Entry Firm has been
bidding or offering on the Exchange for at least one (1) second
prior to receiving an agency order that is executable against such
order, or (c) the Order Entry Firm proceeds in accordance with the
crossing rules contained in Rule 1064.
Further, Phlx Rule 1080(c)(ii)(C)(2) and (3) provide,
Solicitation Orders. Order Entry Firms must expose orders they
represent as agent for at least one (1) second before such orders
may be automatically executed, in whole or in part, against orders
solicited from members and non-member broker-dealers to transact
with such orders.
It shall be a violation of Rule 1080(c)(ii)(C) for any Exchange
member or member organization to be a party to any arrangement
designed to circumvent Rule 1080(c)(ii)(C) by providing an
opportunity for a customer, member, member organization, or non-
member broker-dealer to execute immediately against agency orders
delivered to the Exchange, whether such orders are delivered via
AUTOM or represented in the trading crowd by a member or a member
organization.
The Exchange notes that there are other exceptions to the general rule
regarding the exposure of principal orders represented as agent by the
Order Entry Firm. Also, other options exchanges have similar order
exposure exceptions.\3\
---------------------------------------------------------------------------
\3\ See International Securities Exchange LLC (``ISE'') Rule
717(d) and BOX Options Exchange LLC (``BOX'') Rule 7140.
---------------------------------------------------------------------------
The first proposed additional exception to the order exposure rule
is Price Improvement XL or ``PIXL.'' \4\ PIXL is a component of the
Exchange's fully automated options trading system, PHLX XL that allows
a member or member organization to electronically submit for execution
an order it represents as agent on behalf of a public customer, broker-
dealer, or any other entity (``PIXL Order'') against principal interest
or against any other order it represents as agent (an ``Initiating
Order'') provided it submits the PIXL Order for electronic execution
into the PIXL Auction (``Auction''). This mechanism is an exception to
the general rule in [sic], which requires Phlx members and member
organizations to expose principal orders they represent as agent for at
least one (1) second prior to receiving an agency order that is
executable against such bid or offer. With PIXL, paired orders are
submitted simultaneously and would not violate Phlx Rule
1080(c)(ii)(C).
---------------------------------------------------------------------------
\4\ See Phlx Rule 1080(n). Complex Orders may also be placed
into PIXL.
---------------------------------------------------------------------------
The second proposed additional exception to the order exposure rule
is the Complex Order Live Auction or ``COLA.'' \5\ COLA is the
automated Complex Order Live Auction process. A COLA may take place
upon identification of the existence of a COLA-eligible order either:
(1) Following a COOP, or (2) during normal trading if the Phlx XL
system receives a Complex Order that improves the cPBBO. Phlx XL
participants may bid and/or offer on either or both side(s) of the
market during the COLA Timer by submitting one or more bids or offers
that improve the cPBBO, known as a ``COLA Sweep.'' \6\ COLA does not
abide by the one second order exposure requirement.
---------------------------------------------------------------------------
\5\ See Phlx Rule 1080, Commentary .02(c)(ii)(e) [sic].
\6\ A single Phlx XL participant may submit multiple COLA Sweeps
at different prices (but not multiple COLA Sweeps at the same price,
except as provided in sub-paragraph (B) below) in increments of
$0.01 in response to a COLA broadcast, regardless of the minimum
trading increment applicable to the specific series. Phlx XL
participants may change the size of a previously submitted COLA
Sweep at the previously submitted COLA price during the COLA Timer.
The system will use the Phlx XL participant's most recently
submitted COLA Sweep at each price level as that participant's
response at that price level, unless the COLA Sweep has a size of
zero. A COLA Sweep with a size of zero will remove a Phlx XL
participant's COLA Sweep from the COLA at that price level. COLA
Sweeps will not be visible to any participant and will not be
disseminated by the Exchange. See Phlx Rule 1080, Commentary
.02(c)(ii)(e)(iv)(A)-(C) [sic].
---------------------------------------------------------------------------
The third proposed additional exception to the order exposure rule
is the Qualified Contingent Cross or ``QCC'' mechanism.\7\ A QCC Order
is comprised of an originating order to buy or sell at least 1,000
contracts, or 10,000 contracts in the case of Mini Options, which is
identified as being part of a qualified contingent trade that is
coupled with a contra-side order or orders totaling an equal number of
contracts.\8\ With QCC, coupled orders are submitted simultaneously and
would not violate Phlx Rule 1080(c)(ii)(C).\9\ A QCC transaction
consists of two or more component orders, executed as agent or
principal, where: (a) At least one component is an NMS Stock, as
defined in Rule 600 of Regulation NMS under the Exchange Act; (b) all
components are effected with a product or price contingency that either
has been agreed to by all the respective counterparties or arranged for
by a broker-dealer as principal or agent; (c) the execution of one
component is contingent upon the execution of all other components at
or near the same time; (d) the specific relationship between the
component orders (e.g., the spread between the prices of the component
orders) is determined by the time the contingent order is placed; (e)
the component orders bear a derivative relationship to one another,
represent different classes of shares of the same issuer, or involve
the securities of participants in mergers or with intentions to merge
that have been announced or cancelled; and (f) the transaction is fully
hedged (without regard to any prior existing position) as a result of
other components of the contingent trade.\10\
---------------------------------------------------------------------------
\7\ See Phlx Rules 1080(o).
\8\ See Phlx Rule 1080(o).
\9\ Complex Orders may also be placed into PIXL. See Phlx Rule
1080(n).
\10\ See Phlx Rule 1080(o)(3).
---------------------------------------------------------------------------
The Exchange believes that amending Phlx Rule 1080(c)(ii)(C) to add
rule text to include these additional exceptions to this general rule
regarding order exposure will conform the rule text.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act \11\ in general, and furthers the objectives of section
6(b)(5) of the Act \12\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest, by explicitly delineating all exceptions to the general rule
regarding the requirements to expose certain principal orders which the
Order Entry firm represents as agent. Specifically, the Exchange's
proposal amends the order exposure rule to list PIXL, COLA and QCC as
exceptions to the wait time to expose such principal orders the Order
Entry Firm represents as agent for at least one (1) second prior to
receiving an agency order that is executable against such bid or offer.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange's proposal will make clear that PIXL is an exception
to the
[[Page 543]]
general rule, which requires Phlx members and member organizations to
expose principal orders they represent as agent for at least one (1)
second prior to receiving an agency order that is executable against
such bid or offer. PIXL permits Participants to enter paired orders
without first exposing those orders for one second. The Exchange
believes that providing an exception to the order exposure rule for
orders entered into PIXL is consistent with the Act, because while
PIXL's auction will last for one second, the orders may be entered as
paired orders.\13\ A Phlx member or member organization, known as the
Initiating Participant, must enter an order into the PIXL Mechanism as
specified by Phlx Rule 1080(n).\14\ Complex Orders may also be entered
into PIXL and such prices must be at the cPBBO or better.\15\
Initiating Participants entering orders into PIXL are required to
guarantee an execution at the NBBO (cPBBO for Complex Orders) or at a
better price, and are subject to market risk while their PIXL Order is
exposed to other market participants in this competitive auction.
---------------------------------------------------------------------------
\13\ See Phlx Rule 1080(o).
\14\ To initiate the Auction (except if it is a Complex Order),
the Initiating Member must mark the PIXL Order for Auction
processing, and specify either: (a) A single price at which it seeks
to execute the PIXL Order (a ``stop price''); (b) that it is willing
to automatically match as principal or as agent on behalf of an
Initiating Order the price and size of all PAN responses, and
trading interest (``auto-match'') in which case the PIXL Order will
be stopped at the NBBO on the Initiating Order side; or (c) that it
is willing to either: (i) Stop the entire order at a single stop
price and auto-match PAN responses and trading interest at a price
or prices that improve the stop price to a specified price (a ``Not
Worse Than'' or ``NWT'' price); (ii) stop the entire order at a
single stop price and auto-match all PAN responses and trading
interest at or better than the stop price; or (iii) stop the entire
order at the NBBO on the Initiating Order side, and auto-match PAN
responses and trading interest at a price or prices that improve the
stop price up to the NWT price. In all cases, if the PBBO on the
same side of the market as the PIXL Order represents a limit order
on the book, the stop price must be at least one minimum price
improvement increment better than the booked limit order's limit
price. Once the Initiating Member has submitted a PIXL Order for
processing pursuant to this subparagraph, such PIXL Order may not be
modified or cancelled. The stop price or NWT price may be improved
to the benefit of the PIXL Order during the Auction, but may not be
cancelled. See Phlx Rule 1080(n)(ii)(A)(1).
\15\ To initiate the PIXL Complex Order Auction, the Initiating
Member must mark the PIXL Order for Auction processing, and specify
either: (a) A single price at which it seeks to execute the PIXL
Order (a ``stop price''); or (b) that it is willing to either: (i)
Stop the entire order at a single stop price and auto-match PAN
responses and trading interest at a price or prices that improve the
stop price to a specified price (a ``Not Worse Than'' or ``NWT''
price); or (ii) stop the entire order at a single stop price and
auto-match all PAN responses and trading interest at or better than
the stop price. Once the Initiating Member has submitted a PIXL
Complex Order for processing pursuant to this subparagraph, such
PIXL Order may not be modified or cancelled. Under any of the
circumstances described in sub-paragraphs (a)-(b) in note 14, the
stop price or NWT price may be improved to the benefit of the PIXL
Order during the Auction, but may not be cancelled. See Phlx Rule
1080(n)(ii)(A)(2).
---------------------------------------------------------------------------
The Exchange's proposal will make clear that COLA is an exception
to the general order exposure rule. A ``COLA-eligible order'' means a
Complex Order (a) identified by way of a COOP, or (b) that, upon
receipt, improves the cPBBO respecting the specific Complex Order
Strategy that is the subject of the Complex Order and is not for a
market maker, as specified in Phlx Rule 1080.07 (b)(ii).\16\ COLA-
eligible orders are executed without consideration of any prices that
might be available on other exchanges trading the same options
contracts. The COLA will begin with a timing mechanism (a ``COLA
Timer''), which is a counting period not to exceed five (5) seconds
during which Phlx XL participants may submit bids or offers that
improve the cPBBO. Phlx XL participants may bid and/or offer on either
or both side(s) of the market during the COLA Timer by submitting one
or more bids or offers that improve the cPBBO, known as a ``COLA
Sweep.'' COLA Sweeps will not be visible to any participant and will
not be disseminated by the Exchange. Upon the expiration of the COLA
Timer, COLA Sweeps and/or any Complex Orders received during the COLA
Timer that improve the cPBBO may be executed against the COLA-eligible
order.\17\ The Exchange believes that providing an exception to the
order exposure rule for orders entered into COLA is consistent with the
Act, because while COLA auction may exceed one second, the COLA-
eligible order will receive the best price or prices available for the
Complex Order Strategy represented by the COLA-eligible order, and are
subject to market risk while their Complex Order is exposed to other
market participants in this competitive auction.
---------------------------------------------------------------------------
\16\ If the Phlx XL system identifies the existence of a COLA-
eligible order following a COOP or by way of receipt during normal
trading of a Complex Order that improves the cPBBO, such COLA-
eligible order will initiate a COLA, during which Phlx XL
participants may bid and offer against the COLA-eligible order
pursuant to this rule.
\17\ See Phlx Rule 1080, Commentary .02(c)(ii)(e) [sic].
---------------------------------------------------------------------------
The Exchange's proposal will make clear that QCC is an exception to
the general order exposure rule. QCC Orders are immediately executed
upon entry into the System by an Order Entry Firm provided that (i) no
Customer Orders are at the same price on the Exchange's limit order
book and (ii) the price is at or between the NBBO. The Exchange
believes that providing an exception to the order exposure rule for
orders entered into QCC is consistent with the Act, because when
entered into the System QCC Orders are coupled with a contra-side order
or orders totaling an equal number of contracts. These orders must be
executed at a price that is at or between the NBBO, and are subject to
market risk while the QCC Order is exposed to other market participants
in this competitive auction.
The proposed amendments provide additional exceptions to the
current order exposure rule and will serve to protect investors and the
public interest by providing additional information in the Rules
concerning exceptions.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed changes do not
impose any burden on competition, rather, the amendment provides an
exception to the order exposure rule for orders entered into PIXL, COLA
and QCC for all Phlx members and member organizations. The Exchange
believes that this exception will further inform Phlx members and
member organizations of their obligations with respect to order
exposure. Phlx members and member organizations entering orders into
PILX [sic], COLA or QCC are subject to market risk while their order is
exposed to other market participants and member organizations in these
competitive auctions.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days 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)(iii) of the Act \18\ and
[[Page 544]]
subparagraph (f)(6) of Rule 19b-4 thereunder.\19\
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(3)(a)(iii).
\19\ 7 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2015-99 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-2015-99. 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-2015-99 and should be
submitted on or before January 27, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-33219 Filed 1-5-16; 8:45 am]
BILLING CODE 8011-01-P
