Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to PIXL, 21935-21943 [2016-08429]
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Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
The Exchange believes the proposed
rule revision is consistent with the
Exchange Act because it complies with
Regulation SCI’s requirements. ISE
Mercury’s proposed rule designates only
those PMMs it determines are necessary
for the maintenance of a fair and orderly
market if the Exchange’s DR Plans are
activated. Additionally, the proposal
will ensure that the PMMs necessary to
ensure the maintenance of a fair and
orderly market are properly designated
consistent with Rule 1004 of Regulation
SCI. Specifically, as proposed, the
Exchange will adopt clear and objective
criteria with respect to the designation
of PMMs that are required to participate
in the testing of the Exchange’s DR
Plans, as well as appropriate
notification regarding such designation.
As set forth in the SCI Adopting
Release, ‘‘SROs have the authority, and
legal responsibility, under section 6 of
the Exchange Act, to adopt and enforce
rules (including rules to comply with
Regulation SCI’s requirements relating
to [business continuity and disaster
recovery] testing) applicable to their
members or participants that are
designed to, among other things, foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.’’ 14
The Exchange believes that this
proposal is consistent with such
authority and legal responsibility.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not 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) of the Act 15 and Rule 19b–
4(f)(6) thereunder.16 The Exchange
provided the Commission with written
notice of its intent to file the proposed
rule change, along with a brief
description and text of the proposed
rule change, at least five business days
prior to the date of filing the proposed
rule change, or such shorter time as
designated by the Commission, as
required by Rule 19b–4(f)(6).
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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only one method. The Commission will
post all comments on the Commissions
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 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–ISE Mercury–2016–08 and
should be submitted by May 4, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Robert W. Errett,
Deputy Secretary.
This proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the
Exchange Act because ISE Mercury is
implementing the requirements of
Regulation SCI.
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 No. SR–ISE
Mercury–2016–08 on the subject line.
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
PIXL
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
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[FR Doc. 2016–08428 Filed 4–12–16; 8:45 am]
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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:
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE Mercury–2016–08. 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
The Exchange has neither solicited
nor received written comments on this
proposed rule change. The Exchange
has not received any written comments
from members or other interested
parties.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77557; File No. SR–Phlx–
2016–40]
April 7, 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 March 24,
2016, NASDAQ 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
17 17
14 See
SCI Adopting Release, supra note 4 at
72350.
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15 15
U.S.C. 78s(b)(3)(A).
16 17 CFR 240.19b–4(f)(6).
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
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 amend the length of time
of a Price Improvement XL or PIXLSM
Auction and make other rule changes.
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.
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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(n) to amend the length
of time of a PIXLSM Auction and make
other clarifying rule changes. PIXL is a
component of the Exchange’s fully
automated options trading system,
PHLX XL, that allows a member 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’). The
Exchange adopted PIXL in October 2010
as a price-improvement mechanism on
the Exchange.3 The Exchange proposes
the below changes.
3 See Securities Exchange Act Release Nos. 63027
(October 1, 2010), 75 FR 62160 (October 7, 2010)
(SR–Phlx–2010–108) (Order Granting Approval to a
Proposed Rule Change Relating to a Proposed Price
Improvement System, Price Improvement XL);
65043 (August 5, 2011), 76 FR 49824 (August 11,
2011) (SR–Phlx–2011–104) (Extending Pilot for
Price Improvement System, Price Improvement XL);
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PIXL Timer
Today, a PIXL Auction lasts for one
second, unless it is concluded early.4
The Exchange proposes to amend Rule
1080(n)(ii)(A)(4) to state, ‘‘the Auction
will last for a period of time, as
determined by the Exchange and
announced on the Nasdaq Trader Web
site. The Auction period will be no less
than one hundred milliseconds and no
more than one second.’’ This timer is
similar to the current timer length in the
newly adopted BX PRISM.5 The
selected timer would be the same length
of time for all auctions in all options
pursuant to Phlx Rule 1080(n).
The Exchange believes that a shorter
duration of time for the Auction will
reduce market risk for all members
executing trades in PIXL. Initiating
Participants are required to guarantee an
execution at the NBBO 6 or at a better
price, and are subject to market risk
while their PIXL Order is exposed to
other Phlx members. While other
Participants are also subject to market
risk, those providing responses in PIXL
may cancel or modify their orders. Phlx
believes that the Initiating Participant
acts in a critical role within the PIXL
Auction. Their willingness to guarantee
the orders entered into PIXL an
execution at NBBO or a better price is
the keystone to an order gaining the
opportunity for price improvement.
Phlx believes that allowing for an
Auction period of no less than one
hundred milliseconds and no more than
one second will benefit members
trading in PIXL. Phlx believes it is in
these members’ best interests to
minimize the auction time while
continuing to allow members adequate
time to electronically respond. Both the
67399 (July 11, 2012), 77 FR 42048 (July 17, 2012)
(SR–Phlx–2012–94) (Extending Pilot for Price
Improvement System, Price Improvement XL);
69845 (June 25, 2013), 78 FR 39429 (July 1, 2013)
(SR–Phlx–2013–46) (Order Granting Approval To
Proposed Rule Change, as Modified by Amendment
No. 1, Regarding Complex Order PIXL); 69989 (July
16, 2013), 78 FR 43950 (July 22, 2013) (SR–Phlx–
2013–74) (Extending Pilot for Price Improvement
System, Price Improvement XL); and 72619 (July
16, 2014), 79 FR 42613 (July 22, 2014) (Extending
Pilot for Price Improvement System, Price
Improvement XL).
4 The PIXL Auction shall conclude at the earlier
to occur of (1) The end of the Auction period; (2)
For a PIXL Auction (except if it is a Complex
Order), any time the PBBO crosses the PIXL Order
stop price on the same side of the market as the
PIXL Order; (3) For a Complex Order PIXL Auction,
any time the cPBBO or the Complex Order book
crosses the PIXL Order stop price on the same side
of the market as the PIXL Order; or (4) Any time
there is a trading halt on the Exchange in the
affected series.
5 See NASDAQ BX, Inc. (‘‘BX’’) Rules at Chapter
VI, Section 9(ii)(A)(3).
6 For Complex Orders, Initiating Members are
required to guarantee an execution at the cPBBO or
better.
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order being exposed and the responding
orders are subject to market risk during
the Auction.
Immediate or Cancel
The Exchange is amending the Phlx
Rule 1080(n) to remove certain uses of
the term ‘‘rejected’’ to instead refer to
the term ‘‘immediately cancelled.’’
Specifically, the Exchange is amending
Phlx Rule 1080(n)(ii)(A)(8)–(10). These
orders are not rejected, rather they are
immediately cancelled because
technically they are accepted into the
trading system. The Exchange believes
this non-substantive change adds more
clarity to the rule text. This distinction
is made throughout the newly adopted
BX PRISM rule, where applicable.7
The Exchange notes that its proposed
rule text at Rule 1080(n)(ii)(A)(9) states
that a PAN or Complex Order PAN
response which is inferior to the stop
price of the PIXL order will be
cancelled. In this particular instance,
the order is not immediately cancelled
to prevent information leakage as to
possible stop price. The order is
cancelled at the end of the Auction
instead.
Allocations
The Exchange is amending Phlx Rule
1080(n)(ii)(A)(1) to first make clear that
under no circumstances will the
Initiating Participant receive an
allocation percentage, at the final price
point, of more than 50% with one
competing quote, order or PAN response
or 40% with multiple competing quotes,
orders or PAN responses, when
competing quotes, orders or PAN
responses have contracts available for
execution. This change adds more
clarity to the rule text as this limitation
is present today. The Exchange recently
included this clarifying rule text in the
newly adopted BX PRISM rule 8 and
seeks to conform the PIXL rule text to
that of BX PRISM.
The Exchange is also amending Phlx
Rule 1080(n)(ii)(E)(2)(b) and
1080(n)(ii)(E)(2)(c)(ii) to provide more
specificity concerning the allocation to
which an Initiating Participant is
entitled. The amendments make clear
that the allocations can be either 40% or
50% depending on whether there are
one or more competing quotes, orders or
PAN responses. Also, the rule text notes
that public customer interest must be
satisfied first. This change adds more
clarity to the rule text as this allocation
method is present today. The Exchange
recently included this clarifying rule
text in the newly adopted BX PRISM
7 See
8 See
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BX Rules at Chapter VI, Section 9.
BX Rules at Chapter VI, Section 9(ii)(A)(1).
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rule 9 and seeks to conform the PIXL
rule text to that of BX PRISM.
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Stop Price
The Exchange is amending Phlx Rule
1080(n)(ii)(C) to revise language where
the entire PIXL Order will be executed
at, including, in the case of the internal
BBO (‘‘Reference BBO’’) crossing the
PIXL Order stop price, the best response
price(s) or, if the stop price is the best
price in the Auction, at the stop price,
unless the best response price is equal
to or better than the price of a limit
order resting on the PHLX book on the
same side of the market as the PIXL
Order, in which case the PIXL Order
will be executed against that response,
but at a price that is at least one
minimum price improvement increment
better than the price of such limit order
at the time of the conclusion of the
Auction. This new ‘‘better than’’
language is currently also utilized in the
newly adopted BX PRISM rule.10 The
Auction would look for the best price,
which is this instance may be through
a limit order on the same side as the
PIXL Order.
For example, assume the Reference
BBO and NBBO are both .97–1.03. A
PIXL Order to buy 100 contracts is
submitted with a contra-side Initiating
Order to stop the PIXL Order at 1.01.
Assume a PAN response is submitted to
sell 10 contracts at .97 and another to
sell 10 contracts at 1.00. Then assume
an unrelated buy order is received to
pay .98 for 10 contracts. The order is
placed on the PHLX book and the
Reference BBO becomes .98–1.03. Then
assume, a participant submits a quote of
1.02–1.05, crossing the 1.01 stop price
on the same side of the PIXL Order and
concluding the PIXL Auction prior to
the expiration of one second. Therefore,
10 contracts from the PIXL Order will be
executed at .99 against the best response
price of .97 which is ‘better than’ the
price of the .98 limit order resting on the
PHLX book on the same side of the
market as the PIXL Order. Also, 10
contracts will be executed at 1.00 (the
next best response price after the
execution at .98) and the remaining 80
contracts will be executed at 1.01 (the
stop price) against the Initiating Order.
The Exchange believes that this
language clarifies the current rule text
by providing the ‘‘better than’’ language,
which accounts for responses that are
priced more aggressively than a later
arriving resting limit order on the book.
9 See BX Rules at Chapter VI, Section
9(ii)(E)(2)(b), (ii)(E)(2)(c)(ii), (ii)(F)(2)(b) and
(ii)(F)(2)(c)(ii).
10 See BX Rules at Chapter VI, Section 9(ii)(C).
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Professional Order
The Exchange is amending Phlx Rule
1080(n) in the first paragraph and also
1080(n)(ii)(E)(1) to make clear that a
public customer order does not include
a professional 11 order. Professionals are
not entitled to priority as described
within the Phlx Rule 1080(n). This nonsubstantive change adds more clarity to
the rule text. The Exchange recently
included this clarifying rule text in the
newly adopted BX PRISM rule 12 and
seeks to conform the PIXL rule text to
that of BX PRISM.
Rounding
The Exchange is amending Phlx Rule
1080(n)(ii)(E)(2)(f) to add clarifying rule
text concerning the manner in which
the Exchange will round shares and
allocate remaining contracts, commonly
known in the industry as odd lots.13
Rule 1014 provides for the manner in
which the Phlx XL electronic match
engine (hereinafter ‘‘System’’) allocates
simple interest. Within Rule 1014, the
Exchange allocates shares in Price-Time
priority 14 first to public customers.
Thereafter, the Exchange allocates
interest to Specialists 15 and Registered
Options Traders 16 (hereinafter
collectively ‘‘ROTs’’) utilizing a pro-rata
allocation model.17 Finally, the
Exchange allocates remaining interest to
off-floor broker dealers 18 also utilizing a
pro-rata allocation model.
11 Phlx Rule 1000(b)(14) currently states that the
term ‘‘professional’’ means any person or entity that
(i) is not a broker or dealer in securities, and (ii)
places more than 390 orders in listed options per
day on average during a calendar month for its own
beneficial account(s).
12 See BX Rules at Chapter VI, Section 9 in the
first paragraph and also at Section 9(ii)(E)(1).
13 The Exchange rounds shares and allocates
remaining shares in the manner described herein.
This rule change memorializes this practice within
its rules.
14 Price-Time allocations are filled among
Customer Orders in time priority.
15 A Specialist is an Exchange member who is
registered as an options specialist. See Phlx Rule
1020(a).
16 A Registered Options Trader (‘‘ROT’’) includes
a Streaming Quote Trader or ‘‘SQT,’’ a Remote
Streaming Quote Trader or ‘‘RSQT’’ and a NonSQT, which by definition is neither a SQT nor a
RSQT. A ROT is defined in Exchange Rule 1014(b)
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).
17 Pro-rata allocations may result in remaining
shares as orders are allocated based on the size of
the orders as a percentage of the total size among
all interest at that price level.
18 The term ‘‘off-floor broker-dealer order’’ means
an order delivered from off the floor of the
Exchange by or on behalf of a broker-dealer for the
proprietary account(s) of such broker-dealer,
including an order for a market maker located on
an exchange or trading floor other than the
Exchange’s trading floor delivered for the
proprietary account(s) of such market maker.
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The Exchange proposes to precisely
describe that, with respect to pro-rata
allocations, the Exchange will round
shares down to the nearest integer when
determining the amount of the
allocation in Rule 1080(n)(ii)(E)(2)(f).
The Exchange believes that this detail
will provide market participants with
information to determine the method in
which the Exchange shall allocate
remaining shares.
The Exchange proposes to amend
Rule 1080(n)(ii)(E)(2)(f) to add rule text
to describe the manner in which
remaining shares will be allocated for
ROTs and also for off-floor broker
dealers. If remaining shares result, from
the allocation of simple interest among
equally priced ROTs, remaining shares
are allocated by daily random
assignments of ROTs. Each ROT is
assigned an order of allocation, each
trading day. Trading interest, which
includes orders, quotes and sweeps, are
allocated in accordance with the trading
day’s order assignment, provided the
ROT is at the best price at which the
order, quote or sweep is being traded.
The assignment continues throughout
the trading for each allocation, picking
up where it dropped off from the last
allocation, provided the ROT is entitled
to an allocation. If odd lots arise when
allocating interest among equally priced
off-floor broker-dealers, such odd lots
are allocated in time priority, provided
the off-floor broker-dealers is at the best
price at which the order is being traded.
Finally, with respect to Complex
Orders, the Exchange notes in Rule
1080(n)(ii)(E)(2)(f) that residual odd lots
will be allocated in time priority for
Complex Orders.
The Exchange believes that these
amendments will provide market
participants with more information on
the allocation of these odd lots.
Below are two examples, representing
consecutive executions and allocations
within the Order Book which
demonstrates rounding and the
allocation of remaining shares.
Example #1
Presume an order of 200 contracts is
being allocated in the Exchange’s Order
Book. Allocation will first occur with
public customer orders at the best price
filled in time priority, since public
customers always have priority on the
Exchange. Presume there are 63
contracts remaining after public
customer orders are filled. ROTS would
be allocated next pursuant to Rule 1014
in pro-rata fashion. Presume 5 ROTs are
at the best price and the allocation of
the remaining 63 contracts, after public
customer orders have been satisfied, is
as follows:
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ROT A 1.10(30) × 1.20(30)—25.2
rounded down to 25 contracts
ROT B 1.10(15) × 1.20(15)—12.6
rounded down to 12 contracts
ROT C 1.10(10) × 1.20(10)—8.4 rounded
down to 8 contracts
ROT D 1.10 (10) × 1.20(10)—8.4
rounded down to 8 contracts
ROT E 1.10 (10) × 1.20 (10)—8.4
rounded down to 8 contracts
After this pro-rata allocation, 2
contracts remain to be allocated.
Presume for this trading day these ROTs
are assigned the following order of
assignment: First is ROT A, second is
ROT B, third is ROT C, fourth is ROT
D and fifth is ROT E. The 2 remaining
contracts would be allocated as follows:
ROT A 1.10(30) × 1.20(30)—1 contract
ROT B 1.10(15) × 1.20(15)—1 contract
ROT C 1.10(10) × 1.20(10)—zero
ROT D 1.10 (10) × 1.20(10)—zero
ROT E 1.10 (10) × 1.20 (10)—zero
The next order which results in
contracts remaining after the pro-rata
allocation to ROTs will have such
remaining contracts allocated one at a
time beginning with ROT C since he
was next in line based on that trading
day’s order of assignment, provided
ROT C is at the best price with
remaining interest.
Example #2
Presume an order of 200 contracts is
being allocated in the Exchange’s Order
Book. Presume all public customer
orders and ROT interest that was at the
best price have been filled and there
remains 9 contracts to be executed.
Off-floor broker-dealers would be
allocated next pursuant to Rule 1014 in
a pro-rata fashion. Presume 3 off-floor
broker-dealers are at the best price and
their interest had arrived in the
following order. The allocation of the
remaining 9 contracts is as follows:
Off-floor broker-dealer C 1.10 (5) × 1.20
(5)—4.09 contracts rounded down to
4
Off-floor broker-dealer B 1.10 (3) ×
1.20(3)—2.45 contracts rounded down
to 2
Off-floor broker-dealer A 1.10 (3) ×
1.20(3)—2.45 contracts rounded down
to 2
After this pro-rata allocation, there
remains one contract to be allocated.
This residual contract will be
allocated in time priority as follows:
Off-floor broker-dealer C 1.10 (5) × 1.20
(5)—1 contract
Off-floor broker-dealer B 1.10 (3) ×
1.20(3)—zero
Off-floor broker-dealer A 1.10 (3) ×
1.20(3)—zero
Public Customers
The Exchange is amending Phlx Rule
1080(n)(vi) to add more specificity
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concerning public customer orders. An
Initiating Participant may enter a PIXL
Order for the account of a public
customer paired with an order for the
account of another Public Customer and
such paired orders will be automatically
executed without a PIXL Auction,
provided there is not currently an
Auction in progress in the same series
or the same strategy, in which case the
orders will be rejected. This rule text
makes clear that with respect to
Customer-to-Customer 19 PIXL Orders,
those orders will be rejected when an
Auction is in progress. This nonsubstantive change adds more clarity to
the rule text. The Exchange recently
included this clarifying rule text in the
newly adopted BX PRISM rule 20 and
seeks to conform the PIXL rule text to
that of BX PRISM. Conforming changes
are also made in Phlx Rule 1080(n)(ii).
The words ‘‘or strategy’’ in this
context are not included in the BX
PRISM rule because this language
specifically relates to Complex Orders,21
which are not transacted on BX, but
may be transacted on Phlx within
PIXL.22 A Complex Order Strategy
means a particular combination of
components of a Complex Order and
their ratios to one another. The
Exchange will calculate both a bid price
and an offer price for each Complex
Order Strategy based on the current
PBBO (as defined below) for each
component of the Complex Order. Each
Complex Order Strategy is assigned a
strategy identifier by the System. With
respect to Complex Order Strategies, the
Exchange will permit an Initiating
Participant to enter a PIXL Order for the
account of a public customer paired
with an order for the account of another
public customer and such paired orders
will be automatically executed without
a PIXL Auction as long as there is not
currently an Auction in progress in the
same strategy. If there is an Auction in
progress in the same strategy, the
Customer-to Customer cross will be
rejected.
To further explain same strategy,
where a PIXL Order creates a second
Auction where there was already an a
19 These
orders are customer retail orders.
BX Rules at Chapter VI, Section 9(vi).
21 A Complex Order is any order involving the
simultaneous purchase and/or sale of two or more
different options series in the same underlying
security, priced at a net debit or credit based on the
relative prices of the individual components, for the
same account, for the purpose of executing a
particular investment strategy. Furthermore, a
Complex Order can also be a stock-option order,
which is an order to buy or sell a stated number
of units of an underlying stock or ETF coupled with
the purchase or sale of options contract(s). See
Exchange Rule 1080, Commentary .08(a)(i).
22 See Phlx Rule 1080(n).
20 See
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Complex Order Strategy Auction in
progress with the same combination of
components and the same ratios, that
PIXL Order would be rejected. If the
combination of components and ratios
were not the same, the PIXL Order
would not be rejected. Also, a simple
and Complex Order Strategy Auction
may occur at the same time. The
Exchange believes that this approach is
consistent with the general caveat in the
PIXL Auction Rule 1080(n)(ii) that only
one Auction may be conducted at a time
in any given series or strategy.23
Non-Displayed Prices
In certain instances, a resting order or
quote may be internally priced at a nondisplayed price and would differ from
the PBBO. The Internal BBO or
‘‘Reference BBO’’ would differ from the
PBBO in a situation where the System
prevents trade-throughs and locked and
crossed markets. Interest will not be
executed at a price that trades through
another market or is displayed at a price
that would lock or cross another market.
If, at the time of entry, an order or quote
would cause a locked or crossed market
violation or would cause a tradethrough violation, it will be re-priced to
the current national best offer (for bids)
or the current national best bid (for
offers) and displayed at one minimum
price variance above (for offers) or
below (for bids) the national best price.
The Exchange is proposing more
precise rule text to account for these
situations where there is an automatic
repricing in order to prevent tradethroughs and locked and crossed
markets. The Exchange proposes to
change the rule text in relevant
instances to acknowledge that repricing
would result in the better of the NBBO
(or PBBO) or the Reference BBO.
Conforming Change
The Exchange proposes a change to
Rule 1080(n)(ii)(G). The Exchange
proposes to amend the sentence which
states, ‘‘[i]f the PIXL Auction price
(except if it is a Complex Order) is the
same as that of an order on the limit
order book represented in the PBBO on
the same side of the market as the PIXL
Order, the PIXL Order may only be
executed at a price that is at least one
minimum price improvement increment
better than the resting order’s limit price
or, if such resting order’s limit price is
equal to or crosses the stop price, then
the entire PIXL Order will trade at the
stop price with all better priced interest
23 Rule 1080(n)(2) is being amended to conform
to newly added rule text. While this section is being
amended, the Exchange notes that the amendment
is not material and the general caveat continues to
apply.
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being considered for execution at the
stop price,’’ to include the ‘‘represented
in the PBBO text. The Exchange believes
that this clarifying rule text conforms
the sentence to the remainder of the rule
text by referencing the relation to the
PBBO. This is not a substantive rule
change.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 24 in general, and furthers the
objectives of Section 6(b)(5) of the Act 25
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
allowing for an Auction period of no
less than one hundred (100)
milliseconds and no more than one (1)
second and providing a meaningful
opportunity for Phlx members to
respond to the PIXL Auction while at
the same time facilitating the prompt
execution of orders.
PIXL Timer
Phlx believes the proposed rule
change could provide orders within
PIXL an opportunity for price
improvement. Also, the shorter duration
of time for the Auction reduce the
market risk for all members executing
trades in PIXL. Initiating Participants
are required to guarantee an execution
at the NBBO or at a better price, and are
subject to market risk while their PIXL
Order is exposed to other Phlx
members. While other participants are
also subject to market risk, those
providing responses in PIXL may cancel
or modify their orders. Phlx believes
that the Initiating Participant acts in a
critical role within the PIXL Auction.
Their willingness to guarantee the
orders entered into PIXL an execution at
NBBO or a better price is the keystone
to an order gaining the opportunity for
price improvement. Phlx believes that
allowing for an auction period of no less
than one hundred milliseconds and no
more than one second will benefit
members trading in PIXL. Phlx believes
it is in these members’ best interests to
minimize the Auction time while
continuing to allow members adequate
time to electronically respond. Both the
order being exposed and the responding
orders are subject to market risk during
the Auction.
While some members may wait to
respond until later in the Auction,
24 15
25 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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presumably to minimize their market
risk, the Exchange believes that a
majority of the orders would respond
earlier in the Auction. Based on the
Exchange’s experience with the PIXL
mechanism,26 Phlx believes that an
Auction of no less than one hundred
milliseconds and no more than one
second will continue to provide all
market participants with sufficient time
to respond, compete, and provide price
improvement for orders and will
provide investors and other market
participants with more timely
executions, thereby reducing their
market risk. The proposed rule allows
people to respond quickly at the most
favorable price while reducing the risk
that the market will move against the
response.
Phlx believes that its members operate
electronic systems that enable them to
react and respond to orders in a
meaningful way in fractions of a second.
Phlx believes that its members will be
able to compete within no less than one
hundred milliseconds and no more than
one second and this is a sufficient
amount of time to respond to, compete
for, and provide price improvement for
orders, and will provide investors and
other market participants with more
timely executions, and reduce their
market risk.
Finally, with respect to system
capacity, Phlx has analyzed its capacity
and represents that it and the Options
Price Reporting Authority (‘‘OPRA’’)
have the necessary systems capacity to
handle the potential additional traffic
associated with auction transactions
resulting specifically from the
implementation of the Auction period of
no less than one hundred milliseconds
and no more than one second.
Immediate or Cancel
The Exchange’s amendment to
remove certain uses of the term
‘‘rejected’’ to instead refer to the term
‘‘immediately cancelled’’ complies with
the Exchange Act because the
replacement words provide more
specificity to the rule text. Today, PAN
Responses that do not comply with
26 Phlx staff distributed a survey to all Phlx
market maker firms inquiring as to the timeframe
within which these market participants respond to
an auction with a duration time ranging from less
than fifty (50) milliseconds to more than one (1)
second. An overwhelming number of the market
maker firms that responded to the survey indicated
that they were capable of responding to auctions
with a duration time of at least 50 milliseconds. Of
the thirty five (35) Phlx market maker firms that
were surveyed, twenty (20) of these market makers
responded to the survey and of those respondents
100% indicated that that their firm could respond
to auctions with a duration time of at least 50
milliseconds. This survey was conducted in May
2014.
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21939
PIXL requirements are not eligible to
participant in an Auction and will be
immediately cancelled, after being
reviewed by the trading system. The
Exchange believes that system enforced
criteria will promote just and equitable
principles of trade and protect investors
and the public interest. The Exchange
believes this change adds more clarity to
the rule text to differentiate rejections
and cancellations.
Allocations
The Exchange’s amendment to make
clear that under no circumstances will
the Initiating Participant receive an
allocation percentage, at the final price
point, of more than 50% with one
competing quote, order or PAN response
or 40% with multiple competing quotes,
orders or PAN responses, when
competing quotes, orders or PAN
responses have contracts available for
execution is a rule change that makes
clear that limitation to allocation in
PIXL. This rule change adds more
clarity to the rule text. This amendment
is consistent with the Act in that it
identifies the limitation in the PIXL
allocation more specifically and
memorializes that limitation.
The Exchange’s amendment to
provide more specificity concerning the
allocation to which an Initiating
Participant is entitled, either 40% or
50% depending on whether there are
one or more competing quotes, orders or
PAN responses, is a change which adds
more clarity to the rule text. This
amendment is consistent with the Act in
that it identifies with specificity the
manner in which PIXL will allocate to
an Initiating Participant.
The Exchange believes that the new
language of ‘‘or 50%’’ is consistent with
the Act because the value added from
Initiating Participants guaranteeing
execution of Agency Orders at a price
equal to or better than the NBBO
warrants (to the extent that the Initiating
Participants is on the final Auction
price), an Auction allocation priority of
at least the same percentage of the order
as any competing Auction response,
quote, or order when there is only one
such response, quote, or order. The
Exchange also believes that the
proposed rule change, like other price
improvement allocation programs
currently offered by competitor
exchanges, will benefit investors by
attracting more order flow as well as
increasing the frequency that
Participants initiate Auctions, which
may result in greater opportunities for
customer order price improvement.
These percentages remain competitive
with the percentage of allocations
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currently available on other options
markets.27
Stop Price
The Exchange’s amendment to revise
language where the entire PIXL Order
will be executed at, including, in the
case of the PBBO crossing the PIXL
Order stop price, the best response
price(s) or, if the stop price is the best
price in the Auction, at the stop price,
unless the best response price is equal
to or better than the price of a limit
order resting on the PHLX book on the
same side of the market as the PIXL
Order, in which case the PIXL Order
will be executed against that response
. . .’’ adds more specificity to the
current rule text and accounts for
responses at the best price, not just
equal to other prices. The Exchange
believes that the ability to price improve
is consistent with the Act because it
removes impediments to and perfects
the mechanism of a free and open
market and a national market system.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Professional Order
The Exchange’s amendment to make
clear that a public customer order does
not include a professional order is a
non-substantive change which adds
more clarity to the rule text. This
amendment is consistent with the Act
and other rule changes which make
clear the distinction between
professional and public customer
orders.28
Rounding
With respect to rounding, all
rounding is down to the nearest integer.
If rounding of the Initiating Participant’s
allocation results in an allocation of less
than one contract, then one contract will
be allocated to the Initiating Participant,
only if the Initiating Participant did not
otherwise receive an allocation. The
Exchange is permitting the Initiating
Participant to receive the benefit of the
rounding in an allocation of less than
one contract, only if the Initiating
Participant did not otherwise receive an
allocation, because the Initiating
Participant is not eligible to receive
residual contracts. The Exchange
believes that rounding differently for the
Initiating Participant as compared to all
other market participants is not unfairly
discriminatory since the Initiating
Participant is not eligible to receive
residual contracts as are other market
participants, unless no other interest is
available to trade. The Exchange
27 See
BX Rules at Chapter VI, Section 9.
Securities Exchange Act Release No. 61426
(January 26, 2010), 75 FR 5360 (February 2, 2010)
(SR–Phlx–2010–05) (Notice of Filing of Proposed
Rule Change Relating to Professional Orders).
28 See
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currently provides that rounding shall
occur in a fair and equitable manner.
The Exchange proposes to amend this
rule to provide that rounding shall be
down to the nearest integer. The
Exchange believes that rounding down
uniformly is consistent with the
Exchange Act because it provides for the
equitable allocation of shares among the
Exchange’s market participants. Also,
this rule change will provide market
participants with transparency as to the
number of shares that they are entitled
to receive as the result of rounding.
The Exchange’s amendment to
indicate the manner in which odd lots
are allocated among market participants
for simple interest specifies that for
ROTS, odd lots allocated among equally
priced ROTs are by random assignment
of ROTs each trading day in accordance
with the trading day’s order assignment,
provided the ROT is at the best price at
which the order is being traded. For offfloor broker-dealers, odd lots are
allocated in time priority, provided the
off-floor broker-dealers are at the best
price at which the order is being traded.
The Exchange believes that the
allocation of odd lots uniformly for all
ROTs, and separately for all off-floor
broker-dealers, is consistent with the
Exchange Act because it provides for the
equitable allocation of shares among the
Exchange’s market participants. With
respect to off-floor broker-dealers, the
method is consistent with the Act
because it relies simply on time priority,
an accepted method of allocation
utilized by many options exchange to
prioritize orders.
Specifically, with respect to the
allocation method for odd lots for ROTs,
this random assignment is basically a
round robin approach to the allocation.
The Exchange believes that this method
results in a fair and equitable allocation
of shares of these market participants
because each trading day the Exchange
creates a new order of assignment to
allocate ROTs and that order provided
an independent method to assign evenly
among ROTs. Also, each trading day
that assignment changes so that no one
ROT would have the ability to receive
a greater allocation than another ROT.
The Exchange believes that its
assignment method is not subject to
gaming since it is random and therefore
complies with the Act because it is
aimed at the protection of investors.
Also, this rule change will provide
market participants will transparency as
to the number of shares that they are
entitled to receive as the result of
allocation odd lots.
With respect to the allocation of odd
lots for Complex Orders, the Exchange
will allocate in time priority. The
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Exchange believes that allocating
Complex Orders in time priority
uniformly is consistent with the
Exchange Act because it provides for the
equitable allocation of shares among the
Exchange’s market participants. Also,
this rule change will provide market
participants will transparency as to the
number of shares that they are entitled
to receive as the result of allocating odd
lots.
Public Customers
The Exchange’s amendment to add
more specificity concerning public
customer orders to indicate that a public
customer paired with an order for the
account of another public customer will
be automatically executed without a
PIXL Auction, provided there is not
currently an Auction in progress in the
same series or same strategy, in which
case the orders will be rejected. This
amendment makes clear that only one
Auction may be conducted at a time in
any given series is consistent with the
Act and the PIXL approval order.29 This
rule text makes clear that with respect
to Customer-to-Customer PIXL Orders,
those orders will be rejected when an
Auction is in progress in the same
series. This non-substantive change
adds more clarity to the rule text.
With respect to the words ‘‘or
strategy,’’ the BX PRISM rule does not
contain similar language because this
language specifically relates to Complex
Orders, which are not transacted on BX,
but may be transacted on Phlx within
PIXL. Similar to the manner in which
the Exchange would treat two Auctions
in the same series, the Exchange will
permit an Initiating Participant to enter
a PIXL Order for the account of a public
customer paired with an order for the
account of another public customer and
such paired orders will be automatically
executed without a PIXL Auction as
long as there is not currently an Auction
in progress in the same strategy. With
respect to Complex Order Strategies, the
Exchange will permit an Initiating
Participant to enter a PIXL Order for the
account of a public customer paired
with an order for the account of another
public customer and such paired orders
will be automatically executed without
a PIXL Auction as long as there is not
currently an Auction in progress in the
same strategy. If there is an Auction in
progress in the same strategy, the
Customer-to-Customer cross will be
rejected. To further explain same
strategy, where a PIXL Order would
create a second Auction where there
29 See Securities Exchange Act 63027 (October 1,
2010), 75 FR 62160 (October 7, 2010) (SR–Phlx–
2010–108).
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was already an a Complex Order
Strategy Auction in progress with the
same combination of components and
the same ratios, that PIXL Order would
be rejected. If the combination of
components and ratios were not the
same, the PIXL Order would not be
rejected. Also, a simple and Complex
Order Strategy Auction may occur at the
same time. The Exchange believes that
this approach is consistent with the
general caveat in the PIXL Auction that
only one Auction may be conducted at
a time in any given series or strategy.30
The Exchange does not permit more
than one Auction to be conducted at a
time in any given series and in this case
also in a given strategy because the
Exchange does not desire to have
competing Auctions for the same series
or strategy.
Non-Displayed Prices
The Exchange’s proposal to amend
Rule 1080(n) for the addition of
language to include the ‘‘Reference
BBO’’ to clarify where the price is equal
to or better than the NBBO or PBBO and
the Reference BBO (internal market
BBO), due to repricing for tradethroughs or locked and crossed markets,
adds clarity and precision to the current
rule text. The Exchange believes that it
is consistent with the Act and does not
otherwise create an impediment to a
free and open market because today
investors are subject to this repricing
and have the opportunity to trade at a
better price, which could result in better
executions for investors. Also, by
reflecting the proper rule text to account
for these order types the Exchange is
providing Participants with additional
information with which to anticipate
the manner in which the Exchange’s
trading system reprices interest to
prevent a trade-through or locked and
crossed market.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Conforming Change
The Exchange’s proposal to clarify
Rule 1080(n)(ii)(G) to include a
reference to the PBBO will conform the
Exchange’s PIXL rule text. This is not a
substantive amendment. The Exchange
believes that this amendment will
provide further clarity to the PIXL rules.
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
30 See Securities Exchange Act 63027 (October 1,
2010), 75 FR 62160 (October 7, 2010) (SR–Phlx–
2010–108). See also Phlx Rule 1080(n)(ii) which
states, in part, ‘‘Auction Process. Only one Auction
may be conducted at a time in any given series or
strategy.’’
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necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change will conform the
PIXL rule with the PRISM rule. The
Exchange does not believe that the
proposed changes produce an undue
burden on inter-market competition
because these changes will afford Phlx
the opportunity to compete for order
flow by offering an auction mechanism
similar to that of other exchanges,
specifically BX.
PIXL Timer
Phlx’s amendment to the timer to a
shorter duration of time for the Auction
does not impose an undue burden on
intra-market competition because Phlx
believes that allowing for an auction
period of no less than one hundred
milliseconds and no more than one
second will benefit members trading in
PIXL. Phlx believes it is in these
members’ best interests to minimize the
Auction time while continuing to allow
members adequate time to electronically
respond. The proposed rule allows
people to respond quickly at the most
favorable price while reducing the risk
that the market will move against the
response. Phlx believes that its members
will be able to compete in no less than
one hundred milliseconds and no more
than one second and this is a sufficient
amount of time to respond to, compete
for, and provide price improvement for
orders, and will provide investors and
other market participants with more
timely executions, and reduce their
market risk.
Immediate or Cancel
The Exchange’s amendment to
remove certain uses of the term
‘‘rejected’’ to instead refer to the term
‘‘immediately cancelled’’ does not
impose an undue burden on intramarket competition because PAN
Responses that do not comply with
PIXL requirements are not eligible to
participate in an Auction and will be
immediately cancelled after being
reviewed by the trading system. The
system enforced criteria will be applied
uniformly to all Phlx members. The
Exchange believes this non-substantive
change adds more clarity to the rule
text.
Allocations
The Exchange’s amendment to make
clear that under no circumstances will
the Initiating Participant receive an
allocation percentage, at the final price
point, of more than 50% with one
competing quote, order or PAN response
or 40% with multiple competing quotes,
orders or PAN responses, when
competing quotes, orders or PAN
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21941
responses have contracts available for
execution does not impose an undue
burden on intra-market competition.
This rule change adds more clarity to
the rule text. This amendment is
consistent with the Act in that it
identifies an existing limitation in the
PIXL allocation more specifically and
memorializes that limitation. The
Exchange believes that the new
language of ‘‘or 50%’’ does not create an
undue burden on competition because
this language is similar to language in
BX PRISM and applies to all market
participants utilizing Phlx.31 The
Exchange’s amendment to provide more
specificity concerning the allocation to
which an Initiating Participant is
entitled, either 40% or 50% depending
on whether there are one or more
competing quotes, orders or PAN
responses does not impose an undue
burden on intra-market competition.
This is a rule change adds more clarity
to the rule text. This amendment does
not impose an undue burden on intramarket competition, rather, it identifies
with specificity the manner in which
PIXL will allocate to an Initiating
Participant.
Stop Price
The Exchange’s amendment to revise
language where the entire PIXL Order
will be executed at, including, in the
case of the PBBO crossing the PIXL
Order stop price, the best response
price(s) or, if the stop price is the best
price in the Auction, at the stop price,
unless the best response price is equal
to or better than the price of a limit
order resting on the PHLX book on the
same side of the market as the PIXL
Order, in which case the PIXL Order
will be executed against that response
. . .’’ does not impose an undue burden
on intra-market competition. Rather,
this language adds more specificity to
the current rule text and accounts for
better priced orders.
Professional Order
The Exchange’s amendment to make
clear that a public customer order does
not include a professional order does
not impose an undue burden on intramarket competition this rule change is
consistent with the distinction between
professional and public customer
orders.
Rounding
With respect to rounding, all
rounding is down to the nearest integer.
If rounding of the Initiating Participant’s
allocation results in an allocation of less
31 See NASDAQ BX, Inc. (‘‘BX’’) Rules at Chapter
VI, Section 9.
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than one contract, then one contract will
be allocated to the Initiating Participant,
only if the Initiating Participant did not
otherwise receive an allocation. The
Exchange is permitting the Initiating
Participant to receive the benefit of the
rounding in an allocation of less than
one contract, only if the Initiating
Participant did not otherwise receive an
allocation, because the Initiating
Participant is not eligible to receive
residual contracts. The Exchange does
not believe that the proposal to round
all remaining shares down to the nearest
integer imposes an undue burden on
competition because the Exchange will
uniformly round in this matter.
If there are contracts remaining, such
contracts shall be allocated for simple
interest after rounding by randomly
assigning all ROTs an order of allocation
each trading day, and allocating orders,
quotes and sweeps in accordance with
the trading day’s order assignment,
provided the ROT is at the best price at
which the order, quote or sweep is being
traded, except with respect to Complex
Orders, which allocation is described in
Rule 1080, Commentary .07. In the
event that there are remaining contracts
to be allocated for interest after
rounding, such remaining contacts will
be allocated in time priority, provided
the off-floor broker-dealers are at the
best price at which the order is being
traded. Residual remaining shares will
be allocated in time priority for
Complex Orders.
With respect to allocating remaining
contracts, the Exchange does not believe
that the proposal to allocate remaining
contracts for ROTs by random
assignment creates an undue burden on
competition because the method, which
is basically round robin, results in a fair
and equitable allocation of shares of
these market participants. The Exchange
does not believe that allocating
remaining contracts to off-floor brokerdealers in time priority creates an undue
burden on competition because the
method will be applied uniformly
among these participants. Finally, the
Exchange does not believe that
allocating remaining contracts to
Complex Orders in time priority creates
an undue burden on competition
because the method will be applied
uniformly to all transactions involving
Complex Orders.
Public Customers
The Exchange’s amendment to add
more specificity concerning public
customer orders to indicate that a public
customer paired with an order for the
account of another public customer will
be automatically executed without a
PIXL Auction, provided there is not
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currently an Auction in progress in the
same series or same strategy, in which
case the orders will be rejected, does not
impose an undue burden on intramarket competition. This nonsubstantive change adds more clarity to
the rule text. Also, the Exchange’s
amendment to add more specificity
concerning public customer orders to
indicate that a public customer paired
with an order for the account of another
public customer will be automatically
executed without a PIXL Auction,
provided there is not currently an
Auction in progress in the same
strategy, does not impose an undue
burden on intra-market competition
because this is consistent with the
general caveat in the PIXL Auction that
only one Auction may be conducted at
a time in any given series or strategy.
Non-Displayed Prices
The Exchange’s proposal to amend
Rule 1080(n) for the addition of
language to include the ‘‘Reference
BBO’’ to clarify where the price is equal
to or better than the NBBO or PBBO and
the Reference BBO (internal market
BBO), due to repricing for tradethroughs or locked and crossed markets,
does not impose an udue burden on
intra-market competition, rather the
more precise language adds clarity and
precision to the current rule text. This
additional information will provide all
market participants with information to
anticipate the manner in which the
Exchange’s trading system operates in
PIXL Auctions.
Conforming Change
The Exchange’s proposal to clarify
Rule 1080(n)(ii)(G) to include a
reference to the PBBO to conform the
Exchange’s PIXL rule text does not
impose an undue burden on intramarket competition because the
amendment is non-substantive.
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
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
19(b)(3)(A)(iii) of the Act 32 and
subparagraph (f)(6) of Rule 19b–4
thereunder.33
A proposed rule change filed under
Rule 19b-4(f)(6) normally does not
become operative prior to 30 days after
the date of filing. Rule 19b-4(f)(6)(iii),
however, permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day pre-operative waiting
period contained in Rule 19b-4(f)(6)(iii)
so that Phlx make conform its current
rule text to that of BX PRISM to compete
effectively against this market. The
Commission has determined to waive
the 30-day operative delay in order to
permit Phlx to implement without delay
its proposed rule changes to incorporate
recently-approved provisions in the
substantially similar rules of BX. The
Commission believes that such waiver is
consistent with the protection of
investors and the public interest as the
proposed changes do not raise any
material new issues that have not been
previously considered by the
Commission.34
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
32 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.
34 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
33 17
E:\FR\FM\13APN1.SGM
13APN1
Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2016–40 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2016–40. 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–
2016–40 and should be submitted on or
before May 4, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08429 Filed 4–12–16; 8:45 am]
This is an amendment of the
Presidential declaration of a major
disaster for the State of Mississippi
(FEMA–4268–DR), dated 03/25/2016.
Incident: Severe Storms and Flooding.
Incident Period: 03/09/2016 and
continuing.
Effective Date: 04/05/2016.
Physical Loan Application Deadline
Date: 05/24/2016.
EIDL Loan Application Deadline Date:
12/27/2016.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: The notice
of the Presidential disaster declaration
for the State of MISSISSIPPI, dated 03/
25/2016 is hereby amended to include
the following areas as adversely affected
by the disaster:
Primary Counties: (Physical Damage and
Economic Injury Loans):
George, Pearl River.
Contiguous Counties: (Economic Injury
Loans Only):
Mississippi: Hancock, Harrison,
Jackson.
Louisiana: Saint Tammany.
All other information in the original
declaration remains unchanged.
SUMMARY:
(Catalog of Federal Domestic Assistance
Numbers 59008)
Lisa Lopez-Suarez,
Acting Associate Administrator for Disaster
Assistance.
[FR Doc. 2016–08406 Filed 4–12–16; 8:45 am]
[Disaster Declaration #14675 and #14676]
Texas Disaster Number TX–00465
SMALL BUSINESS ADMINISTRATION
SUMMARY:
asabaliauskas on DSK3SPTVN1PROD with NOTICES
U.S. Small Business
Administration.
ACTION: Amendment 2.
AGENCY:
35 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:41 Apr 12, 2016
Jkt 238001
(Catalog of Federal Domestic Assistance
Numbers 59008)
Lisa Lopez-Suarez,
Acting Associate Administrator for Disaster
Assistance.
[FR Doc. 2016–08407 Filed 4–12–16; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14667 and #14668]
U.S. Small Business
Administration.
ACTION: Amendment 4.
AGENCY:
SMALL BUSINESS ADMINISTRATION
U.S. Small Business
Administration.
ACTION: Amendment 3.
Mississippi Disaster Number MS–
00084
EIDL Loan Application Deadline Date:
12/19/2016.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: The notice
of the Presidential disaster declaration
for the State of TEXAS, dated 03/19/
2016 is hereby amended to include the
following areas as adversely affected by
the disaster:
Primary Counties: (Physical Damage
and Economic Injury Loans):
Henderson, Limestone, Shelby,
Tyler.
Contiguous Counties: (Economic Injury
Loans Only):
Texas: Anderson, Cherokee, Ellis,
Falls, Freestone, Hill, Kaufman,
Leon, Mclennan, Nacogdoches,
Navarro, Polk, Robertson, Van
Zandt.
Louisiana: De Soto.
All other information in the original
declaration remains unchanged.
Louisiana Disaster Number LA–00062
BILLING CODE 8025–01–P
BILLING CODE 8011–01–P
AGENCY:
[Disaster Declaration #14685 and #14686]
21943
This is an amendment of the
Presidential declaration of a major
disaster for the State of TEXAS (FEMA–
4266–DR), dated 03/19/2016.
Incident: Severe Storms, Tornadoes,
and Flooding.
Incident Period: 03/07/2016 through
03/29/2016.
DATES: Effective Date: 04/04/2016.
Physical Loan Application Deadline
Date: 05/18/2016.
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
This is an amendment of the
Presidential declaration of a major
disaster for the State of LOUISIANA
(FEMA–4263–DR), dated 03/13/2016.
Incident: Severe Storms and Flooding.
Incident Period: 03/08/2016 and
continuing.
DATES: Effective Date: 04/04/2016.
Physical Loan Application Deadline
Date: 05/12/2016.
EIDL Loan Application Deadline Date:
12/13/2016.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
SUMMARY:
E:\FR\FM\13APN1.SGM
13APN1
]]>Agencies
[Federal Register Volume 81, Number 71 (Wednesday, April 13, 2016)]
[Notices]
[Pages 21935-21943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08429]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77557; File No. SR-Phlx-2016-40]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to PIXL
April 7, 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 March 24, 2016, NASDAQ 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
[[Page 21936]]
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 amend the length of time of a Price Improvement XL
or PIXL\SM\ Auction and make other rule changes.
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 amend Phlx Rule 1080(n) to amend the
length of time of a PIXL\SM\ Auction and make other clarifying rule
changes. PIXL is a component of the Exchange's fully automated options
trading system, PHLX XL, that allows a member 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'). The Exchange
adopted PIXL in October 2010 as a price-improvement mechanism on the
Exchange.\3\ The Exchange proposes the below changes.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release Nos. 63027 (October 1,
2010), 75 FR 62160 (October 7, 2010) (SR-Phlx-2010-108) (Order
Granting Approval to a Proposed Rule Change Relating to a Proposed
Price Improvement System, Price Improvement XL); 65043 (August 5,
2011), 76 FR 49824 (August 11, 2011) (SR-Phlx-2011-104) (Extending
Pilot for Price Improvement System, Price Improvement XL); 67399
(July 11, 2012), 77 FR 42048 (July 17, 2012) (SR-Phlx-2012-94)
(Extending Pilot for Price Improvement System, Price Improvement
XL); 69845 (June 25, 2013), 78 FR 39429 (July 1, 2013) (SR-Phlx-
2013-46) (Order Granting Approval To Proposed Rule Change, as
Modified by Amendment No. 1, Regarding Complex Order PIXL); 69989
(July 16, 2013), 78 FR 43950 (July 22, 2013) (SR-Phlx-2013-74)
(Extending Pilot for Price Improvement System, Price Improvement
XL); and 72619 (July 16, 2014), 79 FR 42613 (July 22, 2014)
(Extending Pilot for Price Improvement System, Price Improvement
XL).
---------------------------------------------------------------------------
PIXL Timer
Today, a PIXL Auction lasts for one second, unless it is concluded
early.\4\ The Exchange proposes to amend Rule 1080(n)(ii)(A)(4) to
state, ``the Auction will last for a period of time, as determined by
the Exchange and announced on the Nasdaq Trader Web site. The Auction
period will be no less than one hundred milliseconds and no more than
one second.'' This timer is similar to the current timer length in the
newly adopted BX PRISM.\5\ The selected timer would be the same length
of time for all auctions in all options pursuant to Phlx Rule 1080(n).
---------------------------------------------------------------------------
\4\ The PIXL Auction shall conclude at the earlier to occur of
(1) The end of the Auction period; (2) For a PIXL Auction (except if
it is a Complex Order), any time the PBBO crosses the PIXL Order
stop price on the same side of the market as the PIXL Order; (3) For
a Complex Order PIXL Auction, any time the cPBBO or the Complex
Order book crosses the PIXL Order stop price on the same side of the
market as the PIXL Order; or (4) Any time there is a trading halt on
the Exchange in the affected series.
\5\ See NASDAQ BX, Inc. (``BX'') Rules at Chapter VI, Section
9(ii)(A)(3).
---------------------------------------------------------------------------
The Exchange believes that a shorter duration of time for the
Auction will reduce market risk for all members executing trades in
PIXL. Initiating Participants are required to guarantee an execution at
the NBBO \6\ or at a better price, and are subject to market risk while
their PIXL Order is exposed to other Phlx members. While other
Participants are also subject to market risk, those providing responses
in PIXL may cancel or modify their orders. Phlx believes that the
Initiating Participant acts in a critical role within the PIXL Auction.
Their willingness to guarantee the orders entered into PIXL an
execution at NBBO or a better price is the keystone to an order gaining
the opportunity for price improvement. Phlx believes that allowing for
an Auction period of no less than one hundred milliseconds and no more
than one second will benefit members trading in PIXL. Phlx believes it
is in these members' best interests to minimize the auction time while
continuing to allow members adequate time to electronically respond.
Both the order being exposed and the responding orders are subject to
market risk during the Auction.
---------------------------------------------------------------------------
\6\ For Complex Orders, Initiating Members are required to
guarantee an execution at the cPBBO or better.
---------------------------------------------------------------------------
Immediate or Cancel
The Exchange is amending the Phlx Rule 1080(n) to remove certain
uses of the term ``rejected'' to instead refer to the term
``immediately cancelled.'' Specifically, the Exchange is amending Phlx
Rule 1080(n)(ii)(A)(8)-(10). These orders are not rejected, rather they
are immediately cancelled because technically they are accepted into
the trading system. The Exchange believes this non-substantive change
adds more clarity to the rule text. This distinction is made throughout
the newly adopted BX PRISM rule, where applicable.\7\
---------------------------------------------------------------------------
\7\ See BX Rules at Chapter VI, Section 9.
---------------------------------------------------------------------------
The Exchange notes that its proposed rule text at Rule
1080(n)(ii)(A)(9) states that a PAN or Complex Order PAN response which
is inferior to the stop price of the PIXL order will be cancelled. In
this particular instance, the order is not immediately cancelled to
prevent information leakage as to possible stop price. The order is
cancelled at the end of the Auction instead.
Allocations
The Exchange is amending Phlx Rule 1080(n)(ii)(A)(1) to first make
clear that under no circumstances will the Initiating Participant
receive an allocation percentage, at the final price point, of more
than 50% with one competing quote, order or PAN response or 40% with
multiple competing quotes, orders or PAN responses, when competing
quotes, orders or PAN responses have contracts available for execution.
This change adds more clarity to the rule text as this limitation is
present today. The Exchange recently included this clarifying rule text
in the newly adopted BX PRISM rule \8\ and seeks to conform the PIXL
rule text to that of BX PRISM.
---------------------------------------------------------------------------
\8\ See BX Rules at Chapter VI, Section 9(ii)(A)(1).
---------------------------------------------------------------------------
The Exchange is also amending Phlx Rule 1080(n)(ii)(E)(2)(b) and
1080(n)(ii)(E)(2)(c)(ii) to provide more specificity concerning the
allocation to which an Initiating Participant is entitled. The
amendments make clear that the allocations can be either 40% or 50%
depending on whether there are one or more competing quotes, orders or
PAN responses. Also, the rule text notes that public customer interest
must be satisfied first. This change adds more clarity to the rule text
as this allocation method is present today. The Exchange recently
included this clarifying rule text in the newly adopted BX PRISM
[[Page 21937]]
rule \9\ and seeks to conform the PIXL rule text to that of BX PRISM.
---------------------------------------------------------------------------
\9\ See BX Rules at Chapter VI, Section 9(ii)(E)(2)(b),
(ii)(E)(2)(c)(ii), (ii)(F)(2)(b) and (ii)(F)(2)(c)(ii).
---------------------------------------------------------------------------
Stop Price
The Exchange is amending Phlx Rule 1080(n)(ii)(C) to revise
language where the entire PIXL Order will be executed at, including, in
the case of the internal BBO (``Reference BBO'') crossing the PIXL
Order stop price, the best response price(s) or, if the stop price is
the best price in the Auction, at the stop price, unless the best
response price is equal to or better than the price of a limit order
resting on the PHLX book on the same side of the market as the PIXL
Order, in which case the PIXL Order will be executed against that
response, but at a price that is at least one minimum price improvement
increment better than the price of such limit order at the time of the
conclusion of the Auction. This new ``better than'' language is
currently also utilized in the newly adopted BX PRISM rule.\10\ The
Auction would look for the best price, which is this instance may be
through a limit order on the same side as the PIXL Order.
---------------------------------------------------------------------------
\10\ See BX Rules at Chapter VI, Section 9(ii)(C).
---------------------------------------------------------------------------
For example, assume the Reference BBO and NBBO are both .97-1.03. A
PIXL Order to buy 100 contracts is submitted with a contra-side
Initiating Order to stop the PIXL Order at 1.01. Assume a PAN response
is submitted to sell 10 contracts at .97 and another to sell 10
contracts at 1.00. Then assume an unrelated buy order is received to
pay .98 for 10 contracts. The order is placed on the PHLX book and the
Reference BBO becomes .98-1.03. Then assume, a participant submits a
quote of 1.02-1.05, crossing the 1.01 stop price on the same side of
the PIXL Order and concluding the PIXL Auction prior to the expiration
of one second. Therefore, 10 contracts from the PIXL Order will be
executed at .99 against the best response price of .97 which is `better
than' the price of the .98 limit order resting on the PHLX book on the
same side of the market as the PIXL Order. Also, 10 contracts will be
executed at 1.00 (the next best response price after the execution at
.98) and the remaining 80 contracts will be executed at 1.01 (the stop
price) against the Initiating Order. The Exchange believes that this
language clarifies the current rule text by providing the ``better
than'' language, which accounts for responses that are priced more
aggressively than a later arriving resting limit order on the book.
Professional Order
The Exchange is amending Phlx Rule 1080(n) in the first paragraph
and also 1080(n)(ii)(E)(1) to make clear that a public customer order
does not include a professional \11\ order. Professionals are not
entitled to priority as described within the Phlx Rule 1080(n). This
non-substantive change adds more clarity to the rule text. The Exchange
recently included this clarifying rule text in the newly adopted BX
PRISM rule \12\ and seeks to conform the PIXL rule text to that of BX
PRISM.
---------------------------------------------------------------------------
\11\ Phlx Rule 1000(b)(14) currently states that the term
``professional'' means any person or entity that (i) is not a broker
or dealer in securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s).
\12\ See BX Rules at Chapter VI, Section 9 in the first
paragraph and also at Section 9(ii)(E)(1).
---------------------------------------------------------------------------
Rounding
The Exchange is amending Phlx Rule 1080(n)(ii)(E)(2)(f) to add
clarifying rule text concerning the manner in which the Exchange will
round shares and allocate remaining contracts, commonly known in the
industry as odd lots.\13\ Rule 1014 provides for the manner in which
the Phlx XL electronic match engine (hereinafter ``System'') allocates
simple interest. Within Rule 1014, the Exchange allocates shares in
Price-Time priority \14\ first to public customers. Thereafter, the
Exchange allocates interest to Specialists \15\ and Registered Options
Traders \16\ (hereinafter collectively ``ROTs'') utilizing a pro-rata
allocation model.\17\ Finally, the Exchange allocates remaining
interest to off-floor broker dealers \18\ also utilizing a pro-rata
allocation model.
---------------------------------------------------------------------------
\13\ The Exchange rounds shares and allocates remaining shares
in the manner described herein. This rule change memorializes this
practice within its rules.
\14\ Price-Time allocations are filled among Customer Orders in
time priority.
\15\ A Specialist is an Exchange member who is registered as an
options specialist. See Phlx Rule 1020(a).
\16\ A Registered Options Trader (``ROT'') includes a Streaming
Quote Trader or ``SQT,'' a Remote Streaming Quote Trader or ``RSQT''
and a Non-SQT, which by definition is neither a SQT nor a RSQT. A
ROT is defined in Exchange Rule 1014(b) 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).
\17\ Pro-rata allocations may result in remaining shares as
orders are allocated based on the size of the orders as a percentage
of the total size among all interest at that price level.
\18\ The term ``off-floor broker-dealer order'' means an order
delivered from off the floor of the Exchange by or on behalf of a
broker-dealer for the proprietary account(s) of such broker-dealer,
including an order for a market maker located on an exchange or
trading floor other than the Exchange's trading floor delivered for
the proprietary account(s) of such market maker.
---------------------------------------------------------------------------
The Exchange proposes to precisely describe that, with respect to
pro-rata allocations, the Exchange will round shares down to the
nearest integer when determining the amount of the allocation in Rule
1080(n)(ii)(E)(2)(f). The Exchange believes that this detail will
provide market participants with information to determine the method in
which the Exchange shall allocate remaining shares.
The Exchange proposes to amend Rule 1080(n)(ii)(E)(2)(f) to add
rule text to describe the manner in which remaining shares will be
allocated for ROTs and also for off-floor broker dealers. If remaining
shares result, from the allocation of simple interest among equally
priced ROTs, remaining shares are allocated by daily random assignments
of ROTs. Each ROT is assigned an order of allocation, each trading day.
Trading interest, which includes orders, quotes and sweeps, are
allocated in accordance with the trading day's order assignment,
provided the ROT is at the best price at which the order, quote or
sweep is being traded. The assignment continues throughout the trading
for each allocation, picking up where it dropped off from the last
allocation, provided the ROT is entitled to an allocation. If odd lots
arise when allocating interest among equally priced off-floor broker-
dealers, such odd lots are allocated in time priority, provided the
off-floor broker-dealers is at the best price at which the order is
being traded. Finally, with respect to Complex Orders, the Exchange
notes in Rule 1080(n)(ii)(E)(2)(f) that residual odd lots will be
allocated in time priority for Complex Orders.
The Exchange believes that these amendments will provide market
participants with more information on the allocation of these odd lots.
Below are two examples, representing consecutive executions and
allocations within the Order Book which demonstrates rounding and the
allocation of remaining shares.
Example #1
Presume an order of 200 contracts is being allocated in the
Exchange's Order Book. Allocation will first occur with public customer
orders at the best price filled in time priority, since public
customers always have priority on the Exchange. Presume there are 63
contracts remaining after public customer orders are filled. ROTS would
be allocated next pursuant to Rule 1014 in pro-rata fashion. Presume 5
ROTs are at the best price and the allocation of the remaining 63
contracts, after public customer orders have been satisfied, is as
follows:
[[Page 21938]]
ROT A 1.10(30) x 1.20(30)--25.2 rounded down to 25 contracts
ROT B 1.10(15) x 1.20(15)--12.6 rounded down to 12 contracts
ROT C 1.10(10) x 1.20(10)--8.4 rounded down to 8 contracts
ROT D 1.10 (10) x 1.20(10)--8.4 rounded down to 8 contracts
ROT E 1.10 (10) x 1.20 (10)--8.4 rounded down to 8 contracts
After this pro-rata allocation, 2 contracts remain to be allocated.
Presume for this trading day these ROTs are assigned the following
order of assignment: First is ROT A, second is ROT B, third is ROT C,
fourth is ROT D and fifth is ROT E. The 2 remaining contracts would be
allocated as follows:
ROT A 1.10(30) x 1.20(30)--1 contract
ROT B 1.10(15) x 1.20(15)--1 contract
ROT C 1.10(10) x 1.20(10)--zero
ROT D 1.10 (10) x 1.20(10)--zero
ROT E 1.10 (10) x 1.20 (10)--zero
The next order which results in contracts remaining after the pro-
rata allocation to ROTs will have such remaining contracts allocated
one at a time beginning with ROT C since he was next in line based on
that trading day's order of assignment, provided ROT C is at the best
price with remaining interest.
Example #2
Presume an order of 200 contracts is being allocated in the
Exchange's Order Book. Presume all public customer orders and ROT
interest that was at the best price have been filled and there remains
9 contracts to be executed.
Off-floor broker-dealers would be allocated next pursuant to Rule
1014 in a pro-rata fashion. Presume 3 off-floor broker-dealers are at
the best price and their interest had arrived in the following order.
The allocation of the remaining 9 contracts is as follows:
Off-floor broker-dealer C 1.10 (5) x 1.20 (5)--4.09 contracts rounded
down to 4
Off-floor broker-dealer B 1.10 (3) x 1.20(3)--2.45 contracts rounded
down to 2
Off-floor broker-dealer A 1.10 (3) x 1.20(3)--2.45 contracts rounded
down to 2
After this pro-rata allocation, there remains one contract to be
allocated. This residual contract will be allocated in time priority as
follows:
Off-floor broker-dealer C 1.10 (5) x 1.20 (5)--1 contract
Off-floor broker-dealer B 1.10 (3) x 1.20(3)--zero
Off-floor broker-dealer A 1.10 (3) x 1.20(3)--zero
Public Customers
The Exchange is amending Phlx Rule 1080(n)(vi) to add more
specificity concerning public customer orders. An Initiating
Participant may enter a PIXL Order for the account of a public customer
paired with an order for the account of another Public Customer and
such paired orders will be automatically executed without a PIXL
Auction, provided there is not currently an Auction in progress in the
same series or the same strategy, in which case the orders will be
rejected. This rule text makes clear that with respect to Customer-to-
Customer \19\ PIXL Orders, those orders will be rejected when an
Auction is in progress. This non-substantive change adds more clarity
to the rule text. The Exchange recently included this clarifying rule
text in the newly adopted BX PRISM rule \20\ and seeks to conform the
PIXL rule text to that of BX PRISM. Conforming changes are also made in
Phlx Rule 1080(n)(ii).
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\19\ These orders are customer retail orders.
\20\ See BX Rules at Chapter VI, Section 9(vi).
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The words ``or strategy'' in this context are not included in the
BX PRISM rule because this language specifically relates to Complex
Orders,\21\ which are not transacted on BX, but may be transacted on
Phlx within PIXL.\22\ A Complex Order Strategy means a particular
combination of components of a Complex Order and their ratios to one
another. The Exchange will calculate both a bid price and an offer
price for each Complex Order Strategy based on the current PBBO (as
defined below) for each component of the Complex Order. Each Complex
Order Strategy is assigned a strategy identifier by the System. With
respect to Complex Order Strategies, the Exchange will permit an
Initiating Participant to enter a PIXL Order for the account of a
public customer paired with an order for the account of another public
customer and such paired orders will be automatically executed without
a PIXL Auction as long as there is not currently an Auction in progress
in the same strategy. If there is an Auction in progress in the same
strategy, the Customer-to Customer cross will be rejected.
---------------------------------------------------------------------------
\21\ A Complex Order is any order involving the simultaneous
purchase and/or sale of two or more different options series in the
same underlying security, priced at a net debit or credit based on
the relative prices of the individual components, for the same
account, for the purpose of executing a particular investment
strategy. Furthermore, a Complex Order can also be a stock-option
order, which is an order to buy or sell a stated number of units of
an underlying stock or ETF coupled with the purchase or sale of
options contract(s). See Exchange Rule 1080, Commentary .08(a)(i).
\22\ See Phlx Rule 1080(n).
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To further explain same strategy, where a PIXL Order creates a
second Auction where there was already an a Complex Order Strategy
Auction in progress with the same combination of components and the
same ratios, that PIXL Order would be rejected. If the combination of
components and ratios were not the same, the PIXL Order would not be
rejected. Also, a simple and Complex Order Strategy Auction may occur
at the same time. The Exchange believes that this approach is
consistent with the general caveat in the PIXL Auction Rule 1080(n)(ii)
that only one Auction may be conducted at a time in any given series or
strategy.\23\
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\23\ Rule 1080(n)(2) is being amended to conform to newly added
rule text. While this section is being amended, the Exchange notes
that the amendment is not material and the general caveat continues
to apply.
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Non-Displayed Prices
In certain instances, a resting order or quote may be internally
priced at a non-displayed price and would differ from the PBBO. The
Internal BBO or ``Reference BBO'' would differ from the PBBO in a
situation where the System prevents trade-throughs and locked and
crossed markets. Interest will not be executed at a price that trades
through another market or is displayed at a price that would lock or
cross another market. If, at the time of entry, an order or quote would
cause a locked or crossed market violation or would cause a trade-
through violation, it will be re-priced to the current national best
offer (for bids) or the current national best bid (for offers) and
displayed at one minimum price variance above (for offers) or below
(for bids) the national best price.
The Exchange is proposing more precise rule text to account for
these situations where there is an automatic repricing in order to
prevent trade-throughs and locked and crossed markets. The Exchange
proposes to change the rule text in relevant instances to acknowledge
that repricing would result in the better of the NBBO (or PBBO) or the
Reference BBO.
Conforming Change
The Exchange proposes a change to Rule 1080(n)(ii)(G). The Exchange
proposes to amend the sentence which states, ``[i]f the PIXL Auction
price (except if it is a Complex Order) is the same as that of an order
on the limit order book represented in the PBBO on the same side of the
market as the PIXL Order, the PIXL Order may only be executed at a
price that is at least one minimum price improvement increment better
than the resting order's limit price or, if such resting order's limit
price is equal to or crosses the stop price, then the entire PIXL Order
will trade at the stop price with all better priced interest
[[Page 21939]]
being considered for execution at the stop price,'' to include the
``represented in the PBBO text. The Exchange believes that this
clarifying rule text conforms the sentence to the remainder of the rule
text by referencing the relation to the PBBO. This is not a substantive
rule change.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \24\ in general, and furthers the objectives of Section
6(b)(5) of the Act \25\ 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 allowing for an Auction period of no less than one hundred
(100) milliseconds and no more than one (1) second and providing a
meaningful opportunity for Phlx members to respond to the PIXL Auction
while at the same time facilitating the prompt execution of orders.
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\24\ 15 U.S.C. 78f(b).
\25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
PIXL Timer
Phlx believes the proposed rule change could provide orders within
PIXL an opportunity for price improvement. Also, the shorter duration
of time for the Auction reduce the market risk for all members
executing trades in PIXL. Initiating Participants are required to
guarantee an execution at the NBBO or at a better price, and are
subject to market risk while their PIXL Order is exposed to other Phlx
members. While other participants are also subject to market risk,
those providing responses in PIXL may cancel or modify their orders.
Phlx believes that the Initiating Participant acts in a critical role
within the PIXL Auction. Their willingness to guarantee the orders
entered into PIXL an execution at NBBO or a better price is the
keystone to an order gaining the opportunity for price improvement.
Phlx believes that allowing for an auction period of no less than one
hundred milliseconds and no more than one second will benefit members
trading in PIXL. Phlx believes it is in these members' best interests
to minimize the Auction time while continuing to allow members adequate
time to electronically respond. Both the order being exposed and the
responding orders are subject to market risk during the Auction.
While some members may wait to respond until later in the Auction,
presumably to minimize their market risk, the Exchange believes that a
majority of the orders would respond earlier in the Auction. Based on
the Exchange's experience with the PIXL mechanism,\26\ Phlx believes
that an Auction of no less than one hundred milliseconds and no more
than one second will continue to provide all market participants with
sufficient time to respond, compete, and provide price improvement for
orders and will provide investors and other market participants with
more timely executions, thereby reducing their market risk. The
proposed rule allows people to respond quickly at the most favorable
price while reducing the risk that the market will move against the
response.
---------------------------------------------------------------------------
\26\ Phlx staff distributed a survey to all Phlx market maker
firms inquiring as to the timeframe within which these market
participants respond to an auction with a duration time ranging from
less than fifty (50) milliseconds to more than one (1) second. An
overwhelming number of the market maker firms that responded to the
survey indicated that they were capable of responding to auctions
with a duration time of at least 50 milliseconds. Of the thirty five
(35) Phlx market maker firms that were surveyed, twenty (20) of
these market makers responded to the survey and of those respondents
100% indicated that that their firm could respond to auctions with a
duration time of at least 50 milliseconds. This survey was conducted
in May 2014.
---------------------------------------------------------------------------
Phlx believes that its members operate electronic systems that
enable them to react and respond to orders in a meaningful way in
fractions of a second. Phlx believes that its members will be able to
compete within no less than one hundred milliseconds and no more than
one second and this is a sufficient amount of time to respond to,
compete for, and provide price improvement for orders, and will provide
investors and other market participants with more timely executions,
and reduce their market risk.
Finally, with respect to system capacity, Phlx has analyzed its
capacity and represents that it and the Options Price Reporting
Authority (``OPRA'') have the necessary systems capacity to handle the
potential additional traffic associated with auction transactions
resulting specifically from the implementation of the Auction period of
no less than one hundred milliseconds and no more than one second.
Immediate or Cancel
The Exchange's amendment to remove certain uses of the term
``rejected'' to instead refer to the term ``immediately cancelled''
complies with the Exchange Act because the replacement words provide
more specificity to the rule text. Today, PAN Responses that do not
comply with PIXL requirements are not eligible to participant in an
Auction and will be immediately cancelled, after being reviewed by the
trading system. The Exchange believes that system enforced criteria
will promote just and equitable principles of trade and protect
investors and the public interest. The Exchange believes this change
adds more clarity to the rule text to differentiate rejections and
cancellations.
Allocations
The Exchange's amendment to make clear that under no circumstances
will the Initiating Participant receive an allocation percentage, at
the final price point, of more than 50% with one competing quote, order
or PAN response or 40% with multiple competing quotes, orders or PAN
responses, when competing quotes, orders or PAN responses have
contracts available for execution is a rule change that makes clear
that limitation to allocation in PIXL. This rule change adds more
clarity to the rule text. This amendment is consistent with the Act in
that it identifies the limitation in the PIXL allocation more
specifically and memorializes that limitation.
The Exchange's amendment to provide more specificity concerning the
allocation to which an Initiating Participant is entitled, either 40%
or 50% depending on whether there are one or more competing quotes,
orders or PAN responses, is a change which adds more clarity to the
rule text. This amendment is consistent with the Act in that it
identifies with specificity the manner in which PIXL will allocate to
an Initiating Participant.
The Exchange believes that the new language of ``or 50%'' is
consistent with the Act because the value added from Initiating
Participants guaranteeing execution of Agency Orders at a price equal
to or better than the NBBO warrants (to the extent that the Initiating
Participants is on the final Auction price), an Auction allocation
priority of at least the same percentage of the order as any competing
Auction response, quote, or order when there is only one such response,
quote, or order. The Exchange also believes that the proposed rule
change, like other price improvement allocation programs currently
offered by competitor exchanges, will benefit investors by attracting
more order flow as well as increasing the frequency that Participants
initiate Auctions, which may result in greater opportunities for
customer order price improvement. These percentages remain competitive
with the percentage of allocations
[[Page 21940]]
currently available on other options markets.\27\
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\27\ See BX Rules at Chapter VI, Section 9.
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Stop Price
The Exchange's amendment to revise language where the entire PIXL
Order will be executed at, including, in the case of the PBBO crossing
the PIXL Order stop price, the best response price(s) or, if the stop
price is the best price in the Auction, at the stop price, unless the
best response price is equal to or better than the price of a limit
order resting on the PHLX book on the same side of the market as the
PIXL Order, in which case the PIXL Order will be executed against that
response . . .'' adds more specificity to the current rule text and
accounts for responses at the best price, not just equal to other
prices. The Exchange believes that the ability to price improve is
consistent with the Act because it removes impediments to and perfects
the mechanism of a free and open market and a national market system.
Professional Order
The Exchange's amendment to make clear that a public customer order
does not include a professional order is a non-substantive change which
adds more clarity to the rule text. This amendment is consistent with
the Act and other rule changes which make clear the distinction between
professional and public customer orders.\28\
---------------------------------------------------------------------------
\28\ See Securities Exchange Act Release No. 61426 (January 26,
2010), 75 FR 5360 (February 2, 2010) (SR-Phlx-2010-05) (Notice of
Filing of Proposed Rule Change Relating to Professional Orders).
---------------------------------------------------------------------------
Rounding
With respect to rounding, all rounding is down to the nearest
integer. If rounding of the Initiating Participant's allocation results
in an allocation of less than one contract, then one contract will be
allocated to the Initiating Participant, only if the Initiating
Participant did not otherwise receive an allocation. The Exchange is
permitting the Initiating Participant to receive the benefit of the
rounding in an allocation of less than one contract, only if the
Initiating Participant did not otherwise receive an allocation, because
the Initiating Participant is not eligible to receive residual
contracts. The Exchange believes that rounding differently for the
Initiating Participant as compared to all other market participants is
not unfairly discriminatory since the Initiating Participant is not
eligible to receive residual contracts as are other market
participants, unless no other interest is available to trade. The
Exchange currently provides that rounding shall occur in a fair and
equitable manner. The Exchange proposes to amend this rule to provide
that rounding shall be down to the nearest integer. The Exchange
believes that rounding down uniformly is consistent with the Exchange
Act because it provides for the equitable allocation of shares among
the Exchange's market participants. Also, this rule change will provide
market participants with transparency as to the number of shares that
they are entitled to receive as the result of rounding.
The Exchange's amendment to indicate the manner in which odd lots
are allocated among market participants for simple interest specifies
that for ROTS, odd lots allocated among equally priced ROTs are by
random assignment of ROTs each trading day in accordance with the
trading day's order assignment, provided the ROT is at the best price
at which the order is being traded. For off-floor broker-dealers, odd
lots are allocated in time priority, provided the off-floor broker-
dealers are at the best price at which the order is being traded. The
Exchange believes that the allocation of odd lots uniformly for all
ROTs, and separately for all off-floor broker-dealers, is consistent
with the Exchange Act because it provides for the equitable allocation
of shares among the Exchange's market participants. With respect to
off-floor broker-dealers, the method is consistent with the Act because
it relies simply on time priority, an accepted method of allocation
utilized by many options exchange to prioritize orders.
Specifically, with respect to the allocation method for odd lots
for ROTs, this random assignment is basically a round robin approach to
the allocation. The Exchange believes that this method results in a
fair and equitable allocation of shares of these market participants
because each trading day the Exchange creates a new order of assignment
to allocate ROTs and that order provided an independent method to
assign evenly among ROTs. Also, each trading day that assignment
changes so that no one ROT would have the ability to receive a greater
allocation than another ROT. The Exchange believes that its assignment
method is not subject to gaming since it is random and therefore
complies with the Act because it is aimed at the protection of
investors. Also, this rule change will provide market participants will
transparency as to the number of shares that they are entitled to
receive as the result of allocation odd lots.
With respect to the allocation of odd lots for Complex Orders, the
Exchange will allocate in time priority. The Exchange believes that
allocating Complex Orders in time priority uniformly is consistent with
the Exchange Act because it provides for the equitable allocation of
shares among the Exchange's market participants. Also, this rule change
will provide market participants will transparency as to the number of
shares that they are entitled to receive as the result of allocating
odd lots.
Public Customers
The Exchange's amendment to add more specificity concerning public
customer orders to indicate that a public customer paired with an order
for the account of another public customer will be automatically
executed without a PIXL Auction, provided there is not currently an
Auction in progress in the same series or same strategy, in which case
the orders will be rejected. This amendment makes clear that only one
Auction may be conducted at a time in any given series is consistent
with the Act and the PIXL approval order.\29\ This rule text makes
clear that with respect to Customer-to-Customer PIXL Orders, those
orders will be rejected when an Auction is in progress in the same
series. This non-substantive change adds more clarity to the rule text.
---------------------------------------------------------------------------
\29\ See Securities Exchange Act 63027 (October 1, 2010), 75 FR
62160 (October 7, 2010) (SR-Phlx-2010-108).
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With respect to the words ``or strategy,'' the BX PRISM rule does
not contain similar language because this language specifically relates
to Complex Orders, which are not transacted on BX, but may be
transacted on Phlx within PIXL. Similar to the manner in which the
Exchange would treat two Auctions in the same series, the Exchange will
permit an Initiating Participant to enter a PIXL Order for the account
of a public customer paired with an order for the account of another
public customer and such paired orders will be automatically executed
without a PIXL Auction as long as there is not currently an Auction in
progress in the same strategy. With respect to Complex Order
Strategies, the Exchange will permit an Initiating Participant to enter
a PIXL Order for the account of a public customer paired with an order
for the account of another public customer and such paired orders will
be automatically executed without a PIXL Auction as long as there is
not currently an Auction in progress in the same strategy. If there is
an Auction in progress in the same strategy, the Customer-to-Customer
cross will be rejected. To further explain same strategy, where a PIXL
Order would create a second Auction where there
[[Page 21941]]
was already an a Complex Order Strategy Auction in progress with the
same combination of components and the same ratios, that PIXL Order
would be rejected. If the combination of components and ratios were not
the same, the PIXL Order would not be rejected. Also, a simple and
Complex Order Strategy Auction may occur at the same time. The Exchange
believes that this approach is consistent with the general caveat in
the PIXL Auction that only one Auction may be conducted at a time in
any given series or strategy.\30\ The Exchange does not permit more
than one Auction to be conducted at a time in any given series and in
this case also in a given strategy because the Exchange does not desire
to have competing Auctions for the same series or strategy.
---------------------------------------------------------------------------
\30\ See Securities Exchange Act 63027 (October 1, 2010), 75 FR
62160 (October 7, 2010) (SR-Phlx-2010-108). See also Phlx Rule
1080(n)(ii) which states, in part, ``Auction Process. Only one
Auction may be conducted at a time in any given series or
strategy.''
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Non-Displayed Prices
The Exchange's proposal to amend Rule 1080(n) for the addition of
language to include the ``Reference BBO'' to clarify where the price is
equal to or better than the NBBO or PBBO and the Reference BBO
(internal market BBO), due to repricing for trade-throughs or locked
and crossed markets, adds clarity and precision to the current rule
text. The Exchange believes that it is consistent with the Act and does
not otherwise create an impediment to a free and open market because
today investors are subject to this repricing and have the opportunity
to trade at a better price, which could result in better executions for
investors. Also, by reflecting the proper rule text to account for
these order types the Exchange is providing Participants with
additional information with which to anticipate the manner in which the
Exchange's trading system reprices interest to prevent a trade-through
or locked and crossed market.
Conforming Change
The Exchange's proposal to clarify Rule 1080(n)(ii)(G) to include a
reference to the PBBO will conform the Exchange's PIXL rule text. This
is not a substantive amendment. The Exchange believes that this
amendment will provide further clarity to the PIXL rules.
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 rule change will
conform the PIXL rule with the PRISM rule. The Exchange does not
believe that the proposed changes produce an undue burden on inter-
market competition because these changes will afford Phlx the
opportunity to compete for order flow by offering an auction mechanism
similar to that of other exchanges, specifically BX.
PIXL Timer
Phlx's amendment to the timer to a shorter duration of time for the
Auction does not impose an undue burden on intra-market competition
because Phlx believes that allowing for an auction period of no less
than one hundred milliseconds and no more than one second will benefit
members trading in PIXL. Phlx believes it is in these members' best
interests to minimize the Auction time while continuing to allow
members adequate time to electronically respond. The proposed rule
allows people to respond quickly at the most favorable price while
reducing the risk that the market will move against the response. Phlx
believes that its members will be able to compete in no less than one
hundred milliseconds and no more than one second and this is a
sufficient amount of time to respond to, compete for, and provide price
improvement for orders, and will provide investors and other market
participants with more timely executions, and reduce their market risk.
Immediate or Cancel
The Exchange's amendment to remove certain uses of the term
``rejected'' to instead refer to the term ``immediately cancelled''
does not impose an undue burden on intra-market competition because PAN
Responses that do not comply with PIXL requirements are not eligible to
participate in an Auction and will be immediately cancelled after being
reviewed by the trading system. The system enforced criteria will be
applied uniformly to all Phlx members. The Exchange believes this non-
substantive change adds more clarity to the rule text.
Allocations
The Exchange's amendment to make clear that under no circumstances
will the Initiating Participant receive an allocation percentage, at
the final price point, of more than 50% with one competing quote, order
or PAN response or 40% with multiple competing quotes, orders or PAN
responses, when competing quotes, orders or PAN responses have
contracts available for execution does not impose an undue burden on
intra-market competition. This rule change adds more clarity to the
rule text. This amendment is consistent with the Act in that it
identifies an existing limitation in the PIXL allocation more
specifically and memorializes that limitation. The Exchange believes
that the new language of ``or 50%'' does not create an undue burden on
competition because this language is similar to language in BX PRISM
and applies to all market participants utilizing Phlx.\31\ The
Exchange's amendment to provide more specificity concerning the
allocation to which an Initiating Participant is entitled, either 40%
or 50% depending on whether there are one or more competing quotes,
orders or PAN responses does not impose an undue burden on intra-market
competition. This is a rule change adds more clarity to the rule text.
This amendment does not impose an undue burden on intra-market
competition, rather, it identifies with specificity the manner in which
PIXL will allocate to an Initiating Participant.
---------------------------------------------------------------------------
\31\ See NASDAQ BX, Inc. (``BX'') Rules at Chapter VI, Section
9.
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Stop Price
The Exchange's amendment to revise language where the entire PIXL
Order will be executed at, including, in the case of the PBBO crossing
the PIXL Order stop price, the best response price(s) or, if the stop
price is the best price in the Auction, at the stop price, unless the
best response price is equal to or better than the price of a limit
order resting on the PHLX book on the same side of the market as the
PIXL Order, in which case the PIXL Order will be executed against that
response . . .'' does not impose an undue burden on intra-market
competition. Rather, this language adds more specificity to the current
rule text and accounts for better priced orders.
Professional Order
The Exchange's amendment to make clear that a public customer order
does not include a professional order does not impose an undue burden
on intra-market competition this rule change is consistent with the
distinction between professional and public customer orders.
Rounding
With respect to rounding, all rounding is down to the nearest
integer. If rounding of the Initiating Participant's allocation results
in an allocation of less
[[Page 21942]]
than one contract, then one contract will be allocated to the
Initiating Participant, only if the Initiating Participant did not
otherwise receive an allocation. The Exchange is permitting the
Initiating Participant to receive the benefit of the rounding in an
allocation of less than one contract, only if the Initiating
Participant did not otherwise receive an allocation, because the
Initiating Participant is not eligible to receive residual contracts.
The Exchange does not believe that the proposal to round all remaining
shares down to the nearest integer imposes an undue burden on
competition because the Exchange will uniformly round in this matter.
If there are contracts remaining, such contracts shall be allocated
for simple interest after rounding by randomly assigning all ROTs an
order of allocation each trading day, and allocating orders, quotes and
sweeps in accordance with the trading day's order assignment, provided
the ROT is at the best price at which the order, quote or sweep is
being traded, except with respect to Complex Orders, which allocation
is described in Rule 1080, Commentary .07. In the event that there are
remaining contracts to be allocated for interest after rounding, such
remaining contacts will be allocated in time priority, provided the
off-floor broker-dealers are at the best price at which the order is
being traded. Residual remaining shares will be allocated in time
priority for Complex Orders.
With respect to allocating remaining contracts, the Exchange does
not believe that the proposal to allocate remaining contracts for ROTs
by random assignment creates an undue burden on competition because the
method, which is basically round robin, results in a fair and equitable
allocation of shares of these market participants. The Exchange does
not believe that allocating remaining contracts to off-floor broker-
dealers in time priority creates an undue burden on competition because
the method will be applied uniformly among these participants. Finally,
the Exchange does not believe that allocating remaining contracts to
Complex Orders in time priority creates an undue burden on competition
because the method will be applied uniformly to all transactions
involving Complex Orders.
Public Customers
The Exchange's amendment to add more specificity concerning public
customer orders to indicate that a public customer paired with an order
for the account of another public customer will be automatically
executed without a PIXL Auction, provided there is not currently an
Auction in progress in the same series or same strategy, in which case
the orders will be rejected, does not impose an undue burden on intra-
market competition. This non-substantive change adds more clarity to
the rule text. Also, the Exchange's amendment to add more specificity
concerning public customer orders to indicate that a public customer
paired with an order for the account of another public customer will be
automatically executed without a PIXL Auction, provided there is not
currently an Auction in progress in the same strategy, does not impose
an undue burden on intra-market competition because this is consistent
with the general caveat in the PIXL Auction that only one Auction may
be conducted at a time in any given series or strategy.
Non-Displayed Prices
The Exchange's proposal to amend Rule 1080(n) for the addition of
language to include the ``Reference BBO'' to clarify where the price is
equal to or better than the NBBO or PBBO and the Reference BBO
(internal market BBO), due to repricing for trade-throughs or locked
and crossed markets, does not impose an udue burden on intra-market
competition, rather the more precise language adds clarity and
precision to the current rule text. This additional information will
provide all market participants with information to anticipate the
manner in which the Exchange's trading system operates in PIXL
Auctions.
Conforming Change
The Exchange's proposal to clarify Rule 1080(n)(ii)(G) to include a
reference to the PBBO to conform the Exchange's PIXL rule text does not
impose an undue burden on intra-market competition because the
amendment is non-substantive.
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 \32\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\33\
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\32\ 15 U.S.C. 78s(b)(3)(a)(iii).
\33\ 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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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of filing. Rule
19b-4(f)(6)(iii), however, permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange requests that the
Commission waive the 30-day pre-operative waiting period contained in
Rule 19b-4(f)(6)(iii) so that Phlx make conform its current rule text
to that of BX PRISM to compete effectively against this market. The
Commission has determined to waive the 30-day operative delay in order
to permit Phlx to implement without delay its proposed rule changes to
incorporate recently-approved provisions in the substantially similar
rules of BX. The Commission believes that such waiver is consistent
with the protection of investors and the public interest as the
proposed changes do not raise any material new issues that have not
been previously considered by the Commission.\34\
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\34\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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
[[Page 21943]]
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2016-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2016-40. 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-2016-40 and should be
submitted on or before May 4, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08429 Filed 4-12-16; 8:45 am]
BILLING CODE 8011-01-P
