Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Extension of the Exchange's Penny Pilot Program and Replacement of Penny Pilot Issues That Have Been Delisted, 39979-39981 [2016-14444]

Download as PDF Federal Register / Vol. 81, No. 118 / Monday, June 20, 2016 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78060; File No. SR–Phlx– 2016–47] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Extension of the Exchange’s Penny Pilot Program and Replacement of Penny Pilot Issues That Have Been Delisted June 14, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 2 thereunder, notice is hereby given that on June 10, 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 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 is filing with the Commission a proposal to amend Phlx Rule 1034 (Minimum Increments) 3 to extend through December 31, 2016 or the date of permanent approval, if earlier, the Penny Pilot Program in options classes in certain issues (‘‘Penny Pilot’’ or ‘‘Pilot’’), and to change the date when delisted classes may be replaced in the Penny Pilot.4 The text of the amended Exchange rule is set forth immediately below. Proposed new language is in italics and proposed deleted language is [bracketed]. NASDAQ PHLX Rules Options Rules * * * * * II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Rule 1034. Minimum Increments (a) Except as provided in subparagraphs (i)(B) and (iii) below, all options on stocks, index options, and asabaliauskas on DSK3SPTVN1PROD with NOTICES 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 References herein to rules refer to rules of Phlx, unless otherwise noted. 4 The Penny Pilot was established in January 2007 and was last extended in 2014. See Securities Exchange Act Release Nos. 55153 (January 23, 2007), 72 FR 4553 (January 31, 2007) (SR–Phlx– 2006–74) (notice of filing and approval order establishing Penny Pilot); and 75286 (June 24, 2015), 80 FR 37333 (June 30, 2015) (SR–Phlx–2015– 54) (notice of filing and immediate effectiveness extending the Penny Pilot through June 30, 2016). VerDate Sep<11>2014 17:05 Jun 17, 2016 Jkt 238001 Exchange Traded Fund Shares quoting in decimals at $3.00 or higher shall have a minimum increment of $.10, and all options on stocks and index options quoting in decimals under $3.00 shall have a minimum increment of $.05. (i)(A) No Change. (B) For a pilot period scheduled to expire [June 30] December 31, 2016 or the date of permanent approval, if earlier (the ‘‘pilot’’), certain options shall be quoted and traded on the Exchange in minimum increments of $0.01 for all series in such options with a price of less than $3.00, and in minimum increments of $0.05 for all series in such options with a price of $3.00 or higher, except that options overlying the PowerShares QQQ Trust (‘‘QQQQ’’)®, SPDR S&P 500 Exchange Traded Funds (‘‘SPY’’), and iShares Russell 2000 Index Funds (‘‘IWM’’) shall be quoted and traded in minimum increments of $0.01 for all series regardless of the price. A list of such options shall be communicated to membership via an Options Trader Alert (‘‘OTA’’) posted on the Exchange’s Web site. The Exchange may replace any pilot issues that have been delisted with the next most actively traded multiply listed options classes that are not yet included in the pilot, based on trading activity in the previous six months. The replacement issues may be added to the pilot on the second trading day following July 1, [2015] 2016 [and January 1, 2016]. (C) No Change. (ii)–(v) No Change. * * * * * 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. 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. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 39979 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to amend Phlx Rule 1034 to extend the Penny Pilot through December 31, 2016 or the date of permanent approval, if earlier,5 and to change the date when delisted classes may be replaced in the Penny Pilot. The Exchange believes that extending the Penny Pilot will allow for further analysis of the Penny Pilot and a determination of how the program should be structured in the future. Under the Penny Pilot, the minimum price variation for all participating options classes, except for the Nasdaq100 Index Tracking Stock (‘‘QQQQ’’), the SPDR S&P 500 Exchange Traded Fund (‘‘SPY’’) and the iShares Russell 2000 Index Fund (‘‘IWM’’), is $0.01 for all quotations in options series that are quoted at less than $3 per contract and $0.05 for all quotations in options series that are quoted at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 increments for all options series. The Penny Pilot is currently scheduled to expire on June 30, 2016. The Exchange proposes to extend the time period of the Penny Pilot through December 31, 2016 or the date of permanent approval, if earlier, and to provide a revised date for adding replacement issues to the Penny Pilot. The Exchange proposes that any Penny Pilot Program issues that have been delisted may be replaced on the second trading day following July 1, 2016. The replacement issues will be selected based on trading activity in the previous six months.6 This filing does not propose any substantive changes to the Penny Pilot Program; all classes currently participating in the Penny Pilot will remain the same and all minimum increments will remain unchanged. The 5 The options exchanges in the U.S. that have pilot programs similar to the Penny Pilot (together ‘‘pilot programs’’) are currently working on a proposal for permanent approval of the respective pilot programs. 6 The replacement issues will be announced to the Exchange’s membership via an Options Trader Alert (OTA) posted on the Exchange’s Web site. The Exchange proposes in its Penny Pilot rule that replacement issues will be selected based on trading activity in the previous six months. The replacement issues would be identified based on The Options Clearing Corporation’s trading volume data. For example, for the July replacement, trading volume from December 1, 2015 through May 30, 2016 would be analyzed. The month immediately preceding the replacement issues’ addition to the Pilot Program (i.e., June) would not be used for purposes of the six-month analysis. E:\FR\FM\20JNN1.SGM 20JNN1 39980 Federal Register / Vol. 81, No. 118 / Monday, June 20, 2016 / Notices Exchange believes the benefits to public customers and other market participants who will be able to express their true prices to buy and sell options have been demonstrated to outweigh the potential increase in quote traffic. asabaliauskas on DSK3SPTVN1PROD with NOTICES 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Section 6(b)(5) of the Act,8 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and 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. In particular, the proposed rule change, which extends the Penny Pilot for an additional six months through December 31, 2016 or the date of permanent approval, if earlier, and changes the date for replacing Penny Pilot issues that were delisted to the second trading day following July 1, 2016, will enable public customers and other market participants to express their true prices to buy and sell options for the benefit of all market participants. This is consistent with the Act. 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. To the contrary, this proposal is procompetitive because it allows Penny Pilot issues to continue trading on the Exchange. Moreover, the Exchange believes that the proposed rule change will allow for further analysis of the Pilot and a determination of how the Pilot should be structured in the future; and will serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. The Pilot is an industry-wide initiative supported by all other option exchanges. The Exchange believes that extending the Pilot will allow for continued competition between market participants on the Exchange trading similar products as their counterparts on other exchanges, while at the same 7 15 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:05 Jun 17, 2016 Jkt 238001 time allowing the Exchange to continue to compete for order flow with other exchanges in option issues trading as part of the Pilot. 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 The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 9 and Rule 19b–4(f)(6) thereunder.10 Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 11 normally does not become operative prior to 30 days after the date of the filing.12 However, pursuant to Rule 19b–4(f)(6)(iii),13 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because doing so will allow the Pilot Program to continue without interruption in a manner that is consistent with the Commission’s prior approval of the extension and expansion of the Pilot Program and will allow the Exchange and the Commission additional time to analyze the impact of 9 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 11 17 CFR 240.19b–4(f)(6). 12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change along with a brief description and the text of 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 pre-filing requirement. 13 17 CFR 240.19b–4(f)(6)(iii). 10 17 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 the Pilot Program. Accordingly, the Commission designates the proposed rule change as operative upon filing with the Commission.14 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 under Section 19(b)(2)(B) 15 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2016–47 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549–9303. All submissions should refer to File Number SR–Phlx–2016–47. 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 14 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 15 15 U.S.C. 78s(b)(2)(B). E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 81, No. 118 / Monday, June 20, 2016 / Notices 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 Phlx. 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–2016–47 and should be submitted on or before July 11, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–14444 Filed 6–17–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78062; File No. SR– BatsEDGX–2016–21] solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend the fee schedule applicable to Members 5 and non-members of the Exchange pursuant to EDGX Rules 15.1(a) and (c). The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.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 parts of such statements. (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change June 14, 2016. asabaliauskas on DSK3SPTVN1PROD with NOTICES Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees as They Apply to the Equity Options Platform The Exchange proposes to amend its fee schedule for its equity options platform (‘‘EDGX Options’’) to: (1) Increase the Exchange’s standard rates for Customer 6 orders executed on the EDGX Options and to make related changes; (2) modify the criteria to qualify for a tier under the Exchange’s existing tiered pricing structure; and (3) modify the Exchange’s routing fees, as further described below. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 1, 2016, Bats EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 1 15 VerDate Sep<11>2014 17:05 Jun 17, 2016 Jkt 238001 1. Purpose Customer Orders Fee codes PC and NC are currently appended to all Customer orders in Penny Pilot Securities 7 and Non-Penny 5 The term ‘‘Member’’ is defined as ‘‘any registered broker or dealer that has been admitted to membership in the Exchange.’’ See Exchange Rule 1.5(n). 6 The term ‘‘Customer’’ applies to any transaction identified by a Member for clearing in the Customer range at the Options Clearing Corporation (‘‘OCC’’), excluding any transaction for a Broker Dealer or a ‘‘Professional’’ as defined in Exchange Rule 16.1. 7 The term ‘‘Penny Pilot Security’’ applies to those issues that are quoted pursuant to Exchange Rule 21.5, Interpretation and Policy .01. PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 39981 Pilot Securities,8 respectively, and result in a standard rebate of $0.01 per contract. The Exchange proposes to increase the standard rate for all Customer orders in Penny Pilot Securities and Non-Penny Pilot Securities to a standard rebate of $0.05 per contract. In addition to reflecting the increase in the Fee Codes and Associated Fees portion of the Exchange’s fee schedule for fee codes PC and NC, the Exchange proposes to delete the reference to the $0.01 rebate on the Standard Rates table with respect to fee codes PC and NC. The Standard Rates table provides a range of rebates and fees applicable to executions on the Exchange in summary form. In addition to the standard rebate provided to all Customer orders, the Exchange offers several Customer Volume Tiers pursuant to footnote 1. The Customer Volume Tiers currently consist of six separate tiers, each providing an enhanced rebate to a Member’s Customer orders that yield fee codes PC or NC upon satisfying monthly volume criteria required by the respective tier. Pursuant to Customer Volume Tier 1, the lowest volume tier, a Member currently receives a rebate of $0.05 per contract where the Member has an ADV 9 in Customer orders equal to or greater than 0.10% of average TCV.10 Because the Exchange is increasing its standard rebate to $0.05 per share, the Exchange proposes to delete current Tier 1 and to re-number Tiers 2 through 6 as Tiers 1 through 5. Tiered Pricing Changes In addition to the Customer Volume Tiers described above and in footnote 1 of the fee schedule, the Exchange also provides reduced fees or enhanced rebates under the Market Maker Volume Tiers described in footnote 2. Fee codes PM and NM are currently appended to all Market Maker 11 orders in Penny Pilot Securities and Non-Penny Pilot Securities, respectively, and result in a standard fee of $0.19 per contract. The 8 The term ‘‘Non-Penny Pilot Security’’ applies to those issues that are not Penny Pilot Securities quoted pursuant to Exchange Rule 21.5, Interpretation and Policy .01. 9 ‘‘ADV’’ means average daily volume calculated as the number of contracts added or removed, combined, per day. 10 ‘‘TCV’’ means total consolidated volume calculated as the volume reported by all exchanges to the consolidated transaction reporting plan for the month for which the fees apply, excluding volume on any day that the Exchange experiences an Exchange System Disruption and on any day with a scheduled early market close. 11 The term ‘‘Market Maker’’ applies to any transaction identified by a Member for clearing in the Market Maker range at the OCC, where such Member is registered with the Exchange as a Market Maker as defined in Rule 16.1(a)(37). E:\FR\FM\20JNN1.SGM 20JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 118 (Monday, June 20, 2016)]
[Notices]
[Pages 39979-39981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14444]



[[Page 39979]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78060; File No. SR-Phlx-2016-47]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Relating to 
Extension of the Exchange's Penny Pilot Program and Replacement of 
Penny Pilot Issues That Have Been Delisted

June 14, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 10, 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 comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposal to amend Phlx 
Rule 1034 (Minimum Increments) \3\ to extend through December 31, 2016 
or the date of permanent approval, if earlier, the Penny Pilot Program 
in options classes in certain issues (``Penny Pilot'' or ``Pilot''), 
and to change the date when delisted classes may be replaced in the 
Penny Pilot.\4\
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    \3\ References herein to rules refer to rules of Phlx, unless 
otherwise noted.
    \4\ The Penny Pilot was established in January 2007 and was last 
extended in 2014. See Securities Exchange Act Release Nos. 55153 
(January 23, 2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-2006-74) 
(notice of filing and approval order establishing Penny Pilot); and 
75286 (June 24, 2015), 80 FR 37333 (June 30, 2015) (SR-Phlx-2015-54) 
(notice of filing and immediate effectiveness extending the Penny 
Pilot through June 30, 2016).
---------------------------------------------------------------------------

    The text of the amended Exchange rule is set forth immediately 
below.
    Proposed new language is in italics and proposed deleted language 
is [bracketed].

NASDAQ PHLX Rules

Options Rules

* * * * *

Rule 1034. Minimum Increments

    (a) Except as provided in sub-paragraphs (i)(B) and (iii) below, 
all options on stocks, index options, and Exchange Traded Fund Shares 
quoting in decimals at $3.00 or higher shall have a minimum increment 
of $.10, and all options on stocks and index options quoting in 
decimals under $3.00 shall have a minimum increment of $.05.
    (i)(A) No Change.
    (B) For a pilot period scheduled to expire [June 30] December 31, 
2016 or the date of permanent approval, if earlier (the ``pilot''), 
certain options shall be quoted and traded on the Exchange in minimum 
increments of $0.01 for all series in such options with a price of less 
than $3.00, and in minimum increments of $0.05 for all series in such 
options with a price of $3.00 or higher, except that options overlying 
the PowerShares QQQ Trust (``QQQQ'')[supreg], SPDR S&P 500 Exchange 
Traded Funds (``SPY''), and iShares Russell 2000 Index Funds (``IWM'') 
shall be quoted and traded in minimum increments of $0.01 for all 
series regardless of the price. A list of such options shall be 
communicated to membership via an Options Trader Alert (``OTA'') posted 
on the Exchange's Web site.
    The Exchange may replace any pilot issues that have been delisted 
with the next most actively traded multiply listed options classes that 
are not yet included in the pilot, based on trading activity in the 
previous six months. The replacement issues may be added to the pilot 
on the second trading day following July 1, [2015] 2016 [and January 1, 
2016].
    (C) No Change.
    (ii)-(v) No Change.
* * * * *
    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 purpose of this filing is to amend Phlx Rule 1034 to extend the 
Penny Pilot through December 31, 2016 or the date of permanent 
approval, if earlier,\5\ and to change the date when delisted classes 
may be replaced in the Penny Pilot. The Exchange believes that 
extending the Penny Pilot will allow for further analysis of the Penny 
Pilot and a determination of how the program should be structured in 
the future.
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    \5\ The options exchanges in the U.S. that have pilot programs 
similar to the Penny Pilot (together ``pilot programs'') are 
currently working on a proposal for permanent approval of the 
respective pilot programs.
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    Under the Penny Pilot, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index Tracking 
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and 
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series. The Penny Pilot is currently 
scheduled to expire on June 30, 2016.
    The Exchange proposes to extend the time period of the Penny Pilot 
through December 31, 2016 or the date of permanent approval, if 
earlier, and to provide a revised date for adding replacement issues to 
the Penny Pilot. The Exchange proposes that any Penny Pilot Program 
issues that have been delisted may be replaced on the second trading 
day following July 1, 2016. The replacement issues will be selected 
based on trading activity in the previous six months.\6\
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    \6\ The replacement issues will be announced to the Exchange's 
membership via an Options Trader Alert (OTA) posted on the 
Exchange's Web site. The Exchange proposes in its Penny Pilot rule 
that replacement issues will be selected based on trading activity 
in the previous six months. The replacement issues would be 
identified based on The Options Clearing Corporation's trading 
volume data. For example, for the July replacement, trading volume 
from December 1, 2015 through May 30, 2016 would be analyzed. The 
month immediately preceding the replacement issues' addition to the 
Pilot Program (i.e., June) would not be used for purposes of the 
six-month analysis.
---------------------------------------------------------------------------

    This filing does not propose any substantive changes to the Penny 
Pilot Program; all classes currently participating in the Penny Pilot 
will remain the same and all minimum increments will remain unchanged. 
The

[[Page 39980]]

Exchange believes the benefits to public customers and other market 
participants who will be able to express their true prices to buy and 
sell options have been demonstrated to outweigh the potential increase 
in quote traffic.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the proposed rule change, which extends the Penny 
Pilot for an additional six months through December 31, 2016 or the 
date of permanent approval, if earlier, and changes the date for 
replacing Penny Pilot issues that were delisted to the second trading 
day following July 1, 2016, will enable public customers and other 
market participants to express their true prices to buy and sell 
options for the benefit of all market participants. This is consistent 
with the Act.

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. To the contrary, this proposal 
is pro-competitive because it allows Penny Pilot issues to continue 
trading on the Exchange.
    Moreover, the Exchange believes that the proposed rule change will 
allow for further analysis of the Pilot and a determination of how the 
Pilot should be structured in the future; and will serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.
    The Pilot is an industry-wide initiative supported by all other 
option exchanges. The Exchange believes that extending the Pilot will 
allow for continued competition between market participants on the 
Exchange trading similar products as their counterparts on other 
exchanges, while at the same time allowing the Exchange to continue to 
compete for order flow with other exchanges in option issues trading as 
part of the Pilot.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing.\12\ However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the 
Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because doing so will allow the Pilot Program to continue without 
interruption in a manner that is consistent with the Commission's prior 
approval of the extension and expansion of the Pilot Program and will 
allow the Exchange and the Commission additional time to analyze the 
impact of the Pilot Program. Accordingly, the Commission designates the 
proposed rule change as operative upon filing with the Commission.\14\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and the text of 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 pre-filing requirement.
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2016-47 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-Phlx-2016-47. 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

[[Page 39981]]

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 Phlx. 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-2016-47 and 
should be submitted on or before July 11, 2016.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14444 Filed 6-17-16; 8:45 am]
 BILLING CODE 8011-01-P

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