Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a Kill Switch, 11307-11309 [2016-04636]
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Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
proposal should be approved or
disapproved by March 24, 2016. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by April 7, 2016. In light
of the concerns raised by the proposed
rule change, as discussed above, the
Commission invites additional comment
on the proposed rule change as the
Commission continues its analysis of
the proposed rule change’s consistency
with Sections 6(b)(5) and 6(b)(8),26 or
any other provision of the Act, or the
rules and regulations thereunder. The
Commission asks that commenters
address the sufficiency and merit of the
Exchange’s statements in support of the
proposed rule change, in addition to any
other comments they may wish to
submit about the proposed rule change.
Comments may be submitted by any
of the following methods:
mstockstill on DSK4VPTVN1PROD with NOTICES
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–
ISE–2015–30 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–ISE–2015–30. 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–ISE–
2015–30 and should be submitted by
March 24, 2016. Rebuttal comments
should be submitted by April 7, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04637 Filed 3–2–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77245; File No. SR–Phlx–
2016–23]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt a Kill
Switch
February 26, 2016.
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 February
16, 2016, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to relocate
language in current Rule 1035, entitled
‘‘Acceptable of Bid or Offer’’ [sic] to
Phlx Rule 1019 and adopt an optional
Kill Switch protection. The Kill Switch
will allow Phlx members to remove
quotes and cancel open orders and
prevent new order submission.
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.
27 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
26 15
U.S.C. 78f(b)(5), (b)(8).
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11307
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to adopt a
new risk protection, a Kill Switch,
applicable to all Phlx members and
member organizations (hereinafter
‘‘member(s)’’). The Kill Switch will
allow Phlx members to remove quotes
and cancel open orders and prevent new
order submission. This feature provides
firms with a powerful risk management
tool for immediate control of their quote
and order activity.
The Exchange proposes to relocate
current Rule 1035, entitled ‘‘Acceptable
of Bid or Offer’’ [sic] to currently
reserved Rule 1019, title revised Rule
1019 ‘‘Acceptance of Bid or Offer,’’ and
add a new section (b) to Rule 1019. The
Phlx Options Kill Switch will be an
optional tool that enables Phlx members
to initiate a message(s) 3 to the Phlx XL
system (‘‘System’’) to: (i) Promptly
remove quotes; and/or (ii) promptly
cancel orders. Phlx members may
submit a request to the System to
remove/cancel quotes and/or orders
based on certain identifiers on either a
user or group level. Phlx members may
elect to remove quotes and cancel orders
by Exchange account, port, and/or badge
or mnemonic (‘‘Identifier’’) or by a
group (one or more Identifier
combinations),4 which are provided by
such Phlx member to the Exchange.
Phlx members may not remove quotes/
orders by symbol. The System will send
an automated message to the Phlx
member when a Kill Switch request has
3 Phlx members will be able to utilize an interface
to send a message to the Exchange to initiate the
Kill Switch or they may contact the Exchange
directly.
4 The type of group permissible would be within
a broker-dealer. For example, this could be
including but not limited to all market maker
accounts or all order entry ports.
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Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
been processed by the Exchange’s
System.
If the Phlx member selects quotes to
be cancelled utilizing the Kill Switch,
the Phlx member must send a message
to the Exchange to request the removal
of all quotes requested for the specified
Identifier(s).5 The Phlx member will be
unable to enter any additional quotes for
the affected Identifier(s) until re-entry
has been enabled pursuant to proposed
section (b)(iii).6
If the Phlx member selects orders to
be cancelled utilizing the Kill Switch,
the Phlx member must send a message
to the Exchange to request the
cancellation of all orders requested for
the certain specified Identifier(s).7 The
Phlx member will be unable to enter
additional orders for the affected
Identifier(s) until re-entry has been
enabled pursuant to section (b)(iii).
Proposed section (b)(iii) stipulates
that after quotes and/or orders are
removed/cancelled by the Phlx member
utilizing the Kill Switch, the Phlx
member will be unable to enter
additional quotes and/or orders for the
affected Identifier(s) until the Phlx
member has made a request to the
Exchange and Exchange staff has set a
re-entry indicator to enable re-entry.8
Once enabled for re-entry, the System
will send a Re-entry Notification
Message to the Phlx member. The
applicable Clearing member for that
Phlx member also will be notified of the
re-entry into the System after quotes
and/or orders are removed/cancelled as
a result of the Kill Switch, provided the
Clearing member has requested to
receive such notification.
The Exchange offers many risk
mitigation and management tools today
including, but not limited to, certain
rapid fire risk controls,9 Rule 15c3–5
risk controls,10 Order Price
Protections,11 and cancel on disconnect
and purge functionality for Specialized
Quote Feed (SQF). The Kill Switch
offers members a means to control their
exposure, through an interface which is
not dependent on the integrity of the
member’s own systems, should the
member experience a failure.
5 See
note 3.
Orders will not be cancelled. PIXLSM is the
Exchange’s price improvement mechanism known
as Price Improvement XL or PIXL. See Rule 1080(n).
Of note, sweeps will be cancelled. A sweep is a onesided electronic quote submitted over the
Specialized Quote Feed, which is the market
making quoting interface.
7 See note 3.
8 The Phlx member must directly and verbally
contact the Exchange to request the re-set.
9 See Phlx Rule 1095.
10 See § 240.15c3–5.
11 See Phlx Rule 1084.
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6 PIXL
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The Exchange proposes to implement
this rule within ninety (90) days of the
implementation date. The Exchange will
issue an Options Trader Alert in
advance to inform market participants
of such date.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 12 in general, and furthers the
objectives of Section 6(b)(5) of the Act 13
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
enhancing the risk protections available
to Exchange members. The proposal
promotes policy goals of the
Commission which has encouraged
execution venues, exchange and nonexchange alike, to enhance risk
protection tools and other mechanisms
to decrease risk and increase stability.
The individual firm benefits of
enhanced risk protections flow
downstream to counter-parties both at
the Exchange and at other options
exchanges, thereby increasing systemic
protections as well. Additionally,
because the Exchange offers this risk
tool to all Phlx members, the Exchange
believes this will allow Phlx members to
enter quotes and orders without fear of
inadvertent exposure to excessive risk,
which in turn will benefit investors
through increased liquidity for the
execution of their orders, thereby
protecting investors and the public
interest.
This optional risk tool as noted above
will be offered to all Phlx members. The
Exchange further represents that its
proposal will operate consistently with
the firm quote obligations of a brokerdealer pursuant to Rule 602 of
Regulation NMS and that the
functionality is not mandatory.
Specifically, any interest that is
executable against a Phlx member’s
quotes and orders that are received 14 by
the Exchange prior to the time the Kill
Switch is processed by the System will
automatically execute at the price up to
the Phlx member’s size. The Kill Switch
message will be accepted by the System
in the order of receipt in the queue and
will be processed in that order so that
interest that is already accepted into the
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
14 The time of receipt for an order or quote is the
time such message is processed by the Exchange
Order Book.
13 15
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System will be processed prior to the
Kill Switch message.
A Market Makers’ obligation to
provide continuous two-sided quotes on
a daily basis is not diminished by the
removal of such quotes and/or orders by
utilizing the Kill Switch. Market Makers
will be required to provide continuous
two-sided quotes on a daily basis.
Market Makers that utilize the Kill
Switch will not be relieved of the
obligation to provide continuous twosided quotes on a daily basis, nor will
it prohibit the Exchange from taking
disciplinary action against a Market
Maker for failing to meet the continuous
quoting obligation each trading day.
With respect to providing information
regarding the removal of quotes and/or
cancellation of orders as a result of the
Kill Switch to the Clearing Member,
each Member that transacts through a
Clearing Member on the Exchange
executes a Letter of Guarantee wherein
the Clearing Member accepts financial
responsibility for all Exchange
transactions made by the Phlx member
on whose behalf the Clearing Member
submits the Letter of Guarantee. The
Exchange believes that because Clearing
Members guarantee all transactions on
behalf of a member, and therefore bear
the risk associated with those
transactions, it is appropriate for
Clearing members to have knowledge of
the utilization by the member of the Kill
Switch, should the Clearing member
request such notification.
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 proposal
does not impose an undue burden on
intra-market competition because all
Phlx members may avail themselves of
the Kill Switch. The Kill Switch
functionality is optional. The proposed
rule change is meant to protect Phlx
members in the event the Phlx member
is suffering from a systems issue or from
the occurrence of unusual or
unexpected market activity that would
require them to withdraw from the
market in order to protect investors. The
ability to control risk at either the user
or group level will permit the Phlx
member to protect itself from
inadvertent exposure to excessive risk at
each level. Reducing such risk will
enable Phlx members to enter quotes
and orders without fear of inadvertent
exposure to excessive risk, which in
turn will benefit investors through
increased liquidity for the execution of
their orders. Such increased liquidity
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Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Notices
benefits investors because they receive
better prices and because it lowers
volatility in the options market. For
these reasons, the Exchange does not
believe this proposal imposes an undue
burden on inter-market competition
because other exchanges offer the same
functionality.
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 15 and
subparagraph (f)(6) of Rule 19b–4
thereunder.16
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (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:
mstockstill on DSK4VPTVN1PROD with NOTICES
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–2016–23 on the subject line.
15 15
U.S.C. 78s(b)(3)(a)(iii).
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.
16 17
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19:17 Mar 02, 2016
Jkt 238001
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–2016–23. 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Phlx–
2016–23, and should be submitted on or
before March 24, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–04636 Filed 3–2–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold an Open Meeting
on Monday, March 7, 2016, at 3:30 p.m.,
in the Auditorium (L–002) at the
Commission’s headquarters building, to
PO 00000
CFR 200.30–3(a)(12).
Frm 00137
Fmt 4703
Sfmt 4703
hear oral argument in an appeal from an
initial decision of an administrative law
judge by respondents J.S. Oliver Capital
Management, L.P. (‘‘J.S. Oliver’’), and
Ian O. Mausner (‘‘Mausner’’).
On August 5, 2014, the law judge
found that, beginning in 2008, J.S.
Oliver, a registered investment adviser,
and Mausner, its principal, violated
antifraud provisions of the securities
laws by cherry picking profitable trades
for favored accounts and by failing to
disclose uses of soft dollar commissions
to their clients. The initial decision also
found related compliance and
recordkeeping violations. For their
violations, the law judge barred
Mausner from the securities industry,
revoked J.S. Oliver’s investment adviser
registration, issued cease-and-desist
orders against them, and ordered
respondents to disgorge $1,376,440. The
law judge also imposed civil money
penalties of $3,040,000 on Mauser and
$14,975,000 on J.S. Oliver.
Respondents appealed the civil
money penalties imposed in the initial
decision. The oral argument is likely to
address what penalties, if any, are
appropriate in the public interest. Also
likely to be considered at oral argument
is whether these administrative
proceedings violate the U.S.
Constitution.
For further information, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: February 29, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016–04792 Filed 3–1–16; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77247; File No. SR–ISE
Gemini–2015–17]
Self-Regulatory Organizations; ISE
Gemini, LLC; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To Amend Rule 804(g)
February 26, 2016.
Sunshine Act Meeting
17 17
11309
I. Introduction
On November 12, 2015, the ISE
Gemini, LLC (‘‘ISE Gemini’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Act’’) 1 and Rule 19b–4
1 15
U.S.C. 78s(b)(1).
E:\FR\FM\03MRN1.SGM
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Agencies
[Federal Register Volume 81, Number 42 (Thursday, March 3, 2016)]
[Notices]
[Pages 11307-11309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04636]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77245; File No. SR-Phlx-2016-23]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a
Kill Switch
February 26, 2016.
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 February 16, 2016, 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 the
Substance of the Proposed Rule Change
The Exchange proposes to relocate language in current Rule 1035,
entitled ``Acceptable of Bid or Offer'' [sic] to Phlx Rule 1019 and
adopt an optional Kill Switch protection. The Kill Switch will allow
Phlx members to remove quotes and cancel open orders and prevent new
order submission.
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt a new risk protection, a Kill
Switch, applicable to all Phlx members and member organizations
(hereinafter ``member(s)''). The Kill Switch will allow Phlx members to
remove quotes and cancel open orders and prevent new order submission.
This feature provides firms with a powerful risk management tool for
immediate control of their quote and order activity.
The Exchange proposes to relocate current Rule 1035, entitled
``Acceptable of Bid or Offer'' [sic] to currently reserved Rule 1019,
title revised Rule 1019 ``Acceptance of Bid or Offer,'' and add a new
section (b) to Rule 1019. The Phlx Options Kill Switch will be an
optional tool that enables Phlx members to initiate a message(s) \3\ to
the Phlx XL system (``System'') to: (i) Promptly remove quotes; and/or
(ii) promptly cancel orders. Phlx members may submit a request to the
System to remove/cancel quotes and/or orders based on certain
identifiers on either a user or group level. Phlx members may elect to
remove quotes and cancel orders by Exchange account, port, and/or badge
or mnemonic (``Identifier'') or by a group (one or more Identifier
combinations),\4\ which are provided by such Phlx member to the
Exchange. Phlx members may not remove quotes/orders by symbol. The
System will send an automated message to the Phlx member when a Kill
Switch request has
[[Page 11308]]
been processed by the Exchange's System.
---------------------------------------------------------------------------
\3\ Phlx members will be able to utilize an interface to send a
message to the Exchange to initiate the Kill Switch or they may
contact the Exchange directly.
\4\ The type of group permissible would be within a broker-
dealer. For example, this could be including but not limited to all
market maker accounts or all order entry ports.
---------------------------------------------------------------------------
If the Phlx member selects quotes to be cancelled utilizing the
Kill Switch, the Phlx member must send a message to the Exchange to
request the removal of all quotes requested for the specified
Identifier(s).\5\ The Phlx member will be unable to enter any
additional quotes for the affected Identifier(s) until re-entry has
been enabled pursuant to proposed section (b)(iii).\6\
---------------------------------------------------------------------------
\5\ See note 3.
\6\ PIXL Orders will not be cancelled. PIXL\SM\ is the
Exchange's price improvement mechanism known as Price Improvement XL
or PIXL. See Rule 1080(n). Of note, sweeps will be cancelled. A
sweep is a one-sided electronic quote submitted over the Specialized
Quote Feed, which is the market making quoting interface.
---------------------------------------------------------------------------
If the Phlx member selects orders to be cancelled utilizing the
Kill Switch, the Phlx member must send a message to the Exchange to
request the cancellation of all orders requested for the certain
specified Identifier(s).\7\ The Phlx member will be unable to enter
additional orders for the affected Identifier(s) until re-entry has
been enabled pursuant to section (b)(iii).
---------------------------------------------------------------------------
\7\ See note 3.
---------------------------------------------------------------------------
Proposed section (b)(iii) stipulates that after quotes and/or
orders are removed/cancelled by the Phlx member utilizing the Kill
Switch, the Phlx member will be unable to enter additional quotes and/
or orders for the affected Identifier(s) until the Phlx member has made
a request to the Exchange and Exchange staff has set a re-entry
indicator to enable re-entry.\8\ Once enabled for re-entry, the System
will send a Re-entry Notification Message to the Phlx member. The
applicable Clearing member for that Phlx member also will be notified
of the re-entry into the System after quotes and/or orders are removed/
cancelled as a result of the Kill Switch, provided the Clearing member
has requested to receive such notification.
---------------------------------------------------------------------------
\8\ The Phlx member must directly and verbally contact the
Exchange to request the re-set.
---------------------------------------------------------------------------
The Exchange offers many risk mitigation and management tools today
including, but not limited to, certain rapid fire risk controls,\9\
Rule 15c3-5 risk controls,\10\ Order Price Protections,\11\ and cancel
on disconnect and purge functionality for Specialized Quote Feed (SQF).
The Kill Switch offers members a means to control their exposure,
through an interface which is not dependent on the integrity of the
member's own systems, should the member experience a failure.
---------------------------------------------------------------------------
\9\ See Phlx Rule 1095.
\10\ See Sec. 240.15c3-5.
\11\ See Phlx Rule 1084.
---------------------------------------------------------------------------
The Exchange proposes to implement this rule within ninety (90)
days of the implementation date. The Exchange will issue an Options
Trader Alert in advance to inform market participants of such date.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \12\ in general, and furthers the objectives of Section
6(b)(5) of the Act \13\ 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 enhancing the risk protections available to Exchange
members. The proposal promotes policy goals of the Commission which has
encouraged execution venues, exchange and non-exchange alike, to
enhance risk protection tools and other mechanisms to decrease risk and
increase stability.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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The individual firm benefits of enhanced risk protections flow
downstream to counter-parties both at the Exchange and at other options
exchanges, thereby increasing systemic protections as well.
Additionally, because the Exchange offers this risk tool to all Phlx
members, the Exchange believes this will allow Phlx members to enter
quotes and orders without fear of inadvertent exposure to excessive
risk, which in turn will benefit investors through increased liquidity
for the execution of their orders, thereby protecting investors and the
public interest.
This optional risk tool as noted above will be offered to all Phlx
members. The Exchange further represents that its proposal will operate
consistently with the firm quote obligations of a broker-dealer
pursuant to Rule 602 of Regulation NMS and that the functionality is
not mandatory. Specifically, any interest that is executable against a
Phlx member's quotes and orders that are received \14\ by the Exchange
prior to the time the Kill Switch is processed by the System will
automatically execute at the price up to the Phlx member's size. The
Kill Switch message will be accepted by the System in the order of
receipt in the queue and will be processed in that order so that
interest that is already accepted into the System will be processed
prior to the Kill Switch message.
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\14\ The time of receipt for an order or quote is the time such
message is processed by the Exchange Order Book.
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A Market Makers' obligation to provide continuous two-sided quotes
on a daily basis is not diminished by the removal of such quotes and/or
orders by utilizing the Kill Switch. Market Makers will be required to
provide continuous two-sided quotes on a daily basis. Market Makers
that utilize the Kill Switch will not be relieved of the obligation to
provide continuous two-sided quotes on a daily basis, nor will it
prohibit the Exchange from taking disciplinary action against a Market
Maker for failing to meet the continuous quoting obligation each
trading day.
With respect to providing information regarding the removal of
quotes and/or cancellation of orders as a result of the Kill Switch to
the Clearing Member, each Member that transacts through a Clearing
Member on the Exchange executes a Letter of Guarantee wherein the
Clearing Member accepts financial responsibility for all Exchange
transactions made by the Phlx member on whose behalf the Clearing
Member submits the Letter of Guarantee. The Exchange believes that
because Clearing Members guarantee all transactions on behalf of a
member, and therefore bear the risk associated with those transactions,
it is appropriate for Clearing members to have knowledge of the
utilization by the member of the Kill Switch, should the Clearing
member request such notification.
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 proposal does not impose an
undue burden on intra-market competition because all Phlx members may
avail themselves of the Kill Switch. The Kill Switch functionality is
optional. The proposed rule change is meant to protect Phlx members in
the event the Phlx member is suffering from a systems issue or from the
occurrence of unusual or unexpected market activity that would require
them to withdraw from the market in order to protect investors. The
ability to control risk at either the user or group level will permit
the Phlx member to protect itself from inadvertent exposure to
excessive risk at each level. Reducing such risk will enable Phlx
members to enter quotes and orders without fear of inadvertent exposure
to excessive risk, which in turn will benefit investors through
increased liquidity for the execution of their orders. Such increased
liquidity
[[Page 11309]]
benefits investors because they receive better prices and because it
lowers volatility in the options market. For these reasons, the
Exchange does not believe this proposal imposes an undue burden on
inter-market competition because other exchanges offer the same
functionality.
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 \15\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(a)(iii).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (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-2016-23 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-2016-23. 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2016-23, and should be
submitted on or before March 24, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04636 Filed 3-2-16; 8:45 am]
BILLING CODE 8011-01-P