Self-Regulatory Organizations; NASDAQ PHLX LLC; Order Granting Approval of Proposed Rule Change To Delete Outdated or Unnecessary Rule Language in Phlx Rule 1020, 83886-83888 [2016-28030]

Download as PDF 83886 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 18 and subparagraph (f)(6) of Rule 19b–4 thereunder.19 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. However, Rule 19b– 4(f)(6)(iii) 20 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing with the Commission, the Exchange requests that the Commission waive the 30-day operative delay. The Exchange asserts that waiver of the operative delay is consistent with the protection of investors and the public interest because the proposed rule change makes non-substantive, technical changes to the Exchange’s rules. The Exchange also believes that the proposed rule change increases the clarity of ISE Mercury rules to the benefit of members and investors that trade on the Exchange. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposed rule change to be operative upon filing. 21 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. 18 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. 20 17 CFR 240.19b–4(f)(6)(iii). 21 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). sradovich on DSK3GMQ082PROD with NOTICES 19 17 VerDate Sep<11>2014 16:52 Nov 21, 2016 Jkt 241001 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 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Brent J. Fields, Secretary. [FR Doc. 2016–28031 Filed 11–21–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION • 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– ISEMercury–2016–20 on the subject line. [Release No. 34–79322; File No. SR–Phlx– 2016–97) Paper Comments November 16, 2016. • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. I. Introduction On September 27, 2016, NASDAQ PHLX LLC (‘‘Exchange’’ or ‘‘Phlx’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to delete or amend its rules relating to specialists. The proposed rule change was published for comment in the Federal Register on October 14, 2016.3 The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change. All submissions should refer to File Number SR–ISEMercury-2016–20. 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– ISEMercury–2016–20 and should be submitted on or before December 13, 2016. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; NASDAQ PHLX LLC; Order Granting Approval of Proposed Rule Change To Delete Outdated or Unnecessary Rule Language in Phlx Rule 1020 II. Description of the Proposal Phlx Rule 1020 contains provisions relating to the registration and functions of options specialists.4 Section (b) provides that a member registered as a specialist in one or more options has an obligation to assist in the maintenance of a fair and orderly market, ‘‘in addition to the execution of orders entrusted to him in such options.’’ The Exchange proposes to delete the language in section (b) regarding execution of entrusted orders. The Exchange represents that today, specialists on the Exchange trade only for their own account and ‘‘no longer handle any agency orders whatsoever in their role as specialists.’’ 5 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 79073 (October 11, 2016), 81 FR 71153 (October 14, 2016) (‘‘Notice’’). 4 A ‘‘specialist’’ is an Exchange member who is registered as an options specialist pursuant to Phlx Rule 1020(a). Specialists are subject to quoting and registration obligations set forth in Phlx Rules 1014(b), 1020 and 1080.02. 5 See Notice, supra note 3, at 71154. 1 15 E:\FR\FM\22NON1.SGM 22NON1 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices sradovich on DSK3GMQ082PROD with NOTICES Commentary .01 of Phlx Rule 1020 provides that in ‘‘effecting transactions’’ for a specialist’s own account for the purpose of establishing or increasing a position, a specialist is to effect such transactions in a reasonable and orderly manner in relation to the condition of the general market, the market in the particular option, and the adequacy of his position to the immediate and reasonably anticipated needs of the options market. Commentary .01 sections (a) through (d) provide that certain types of transactions to establish or increase a position are not to be effected except when they are reasonably necessary to render the specialist’s position adequate to such needs.6 The Exchange proposes to delete the last sentence of Commentary .01 and sections (a) through (d). The Exchange represents that today, specialists do not ‘‘effect transactions’’ in the sense of matching bids and offers to cause a transaction execution, except in rare cases.7 Instead, specialists submit bids and offers to be matched by the PHLX XL trading system.8 Therefore, the Exchange believes that the specialist may be unable to determine the price of the last sale, which would be required for a specialist to comply with the language Phlx proposes to be deleted. Commentary .02 of Phlx Rule 1020 provides that, for transactions of a specialist for his own account that 6 Specifically, Commentary .01 sections (a) through (d) provide that the following types of transactions to establish or increase a position are not to be effected except when they are reasonably necessary to render the specialist’s position adequate to such needs: (a) A purchase at a price above the last sale in the same trading session; (b) the purchase of all or substantially all the options offered on the book at a price equal to the last sale, when the option so offered represents all or substantially all the options offered in the market; and when a substantial amount of an option is offered at a price equal to the last sale price, the purchase of more than 50% of all the options offered at the last sale price; (c) the supplying of all or substantially all the options bid for on the book at a price equal to the last sale, when the option so bid for represents all or substantially all the options bid for in the market; and when a substantial amount of the options bid for at a price equal to the last sale price, the supplying of more than 50% of all the options bid for at the last sale price; (d) failing to re-offer or re-bid where necessary after effecting transactions described in (a), (b), or (c). The rule permits transactions of these types to be effected, however, with the approval of an Options Exchange Official or in relatively inactive markets where they are an essential part of a proper course of dealings and where the amount of an option involved and the price change, if any, are normal in relation to the market. 7 See Notice, supra note 3, at 71154. The Exchange represents that although a specialist may ‘‘effect transactions’’ with a market maker on the Exchange’s trading floor, the vast majority of transactions are executed electronically by the trading system. 8 See id. VerDate Sep<11>2014 16:52 Nov 21, 2016 Jkt 241001 liquidate or decrease his position in an option in which he is registered, such transactions are to be ‘‘effected’’ in a reasonable and orderly manner in relation to the condition of the general market, the market in the particular option, and the adequacy of the specialist’s positions to the immediate and reasonably anticipated needs of the options market. Commentary .02 sections (a) through (c) describe certain restrictions on specialists when liquidating or decreasing such positions.9 The Exchange proposes to delete part of the last sentence of Commentary .02 and sections (a) through (c). The Exchange represents that, as discussed above, a specialist may be unable to determine the ‘‘last different price’’ as required to comply with sections (a) and (c).10 The Exchange believes also that section (b) is redundant to Rule 1020(b), which already contains the ‘‘fair and orderly’’ requirement.11 Commentary .03 of Phlx Rule 1020 provides that a specialist’s quotation, made for his own account, should be such that a transaction effected at his quoted price or within the quoted spread, whether having the effect of reducing or increasing the specialist’s position, would bear a proper relation to preceding transactions and anticipated succeeding transactions. The Exchange proposes to delete Commentary .03. The Exchange represents that, due to the speed of trading that occurs today on the Phlx XL trading system, specialists may not have knowledge of preceding transactions and would not be able to adjust quotes as needed to comply with Commentary .03 before the quotes are accessed.12 Commentary .04 of Phlx Rule 1020 provides that a specialist should avoid participating as a dealer in opening or reopening an option in such a manner as to reverse the balance of public supply and demand as reflected by market and limited price orders at or near the price of the previous close or halt, unless the condition of the general market or the specialist’s position in 9 Commentary .02 sections (a) through (c) also provide that, unless he has the prior approval of an Options Exchange Official, he should avoid: (a) Liquidation of all or substantially all of a position by selling options at prices below the last different price or by purchasing options at prices above the last different price unless such transactions are reasonably necessary in relation to the specialist’s overall position in the options in which he is registered; (b) failing to maintain a fair and orderly market during liquidations; or (c) failing to re-enter the market where necessary, after effecting transactions described in (a) above. 10 See Notice, supra note 3, at 71155. 11 See id. 12 See id. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 83887 light of the reasonably anticipated needs of the market make it advisable to do so, or unless the specialist has obtained the prior approval of an Options Exchange Official to do so. The commentary provides that he may, however, buy or sell an option as a dealer to minimize the disparity between supply and demand at an opening or reopening. The Exchange proposes to delete Commentary .04. The Exchange represents that a specialist no longer manually opens options classes; the PHLX XL trading system handles the opening and reopening of options.13 Commentary .05 of Phlx Rule 1020 prohibits a member acting as a specialist from effecting transactions for the purpose of adjusting a LIFO inventory in an option in which he is acting except as is reasonably necessary to assist in the maintenance of a fair and orderly market. The Exchange believes that Commentary .05 is no longer necessary and proposes to delete it.14 Commentary .06 of Phlx Rule 1020 restricts a specialist from assigning options in which he is registered to an investment account. The Commentary states that a specialist may not add to a position in an investment account unless reasonably necessary to permit the specialist to assist in the maintenance of a fair and orderly market. Furthermore, a specialist may not effect a transfer of options in which he is registered from his dealer account to an investment account if the transfer would result in a short position in the dealer account. The Commentary also provides that in the maintenance of price continuity with reasonable depth, it is commonly desirable for a specialist to supply options to the market, even though he may have to sell short to do so, to the extent reasonably necessary to meet the needs of the market. The Exchange proposes to delete Commentary .06 because investment accounts are no longer used by specialists.15 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to a national securities exchange.16 In particular, the Commission finds that the proposed rule change is consistent with Section 13 See id. id. 15 See id. 16 In approving the proposed rule changes, the Commission has considered their impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 14 See E:\FR\FM\22NON1.SGM 22NON1 83888 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices 6(b)(5) of the Act,17 which requires, among other things, that the rules of a national securities exchange be 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; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission believes that the deletion of Phlx Rules 1020(b), Commentary .01, Commentary .02 (a) and (c), Commentary .03, Commentary .04, and Commentary .06 should protect investors by helping to ensure that the Phlx rules accurately describe the current operations of the Exchange and obligations of its members. In addition, the Commission notes that the deletion of Commentary .02 (b) to remove redundant rule language should add clarity to Phlx’s rules and that the deletion of Commentary .05 and Commentary .06 should provide more clarity regarding the obligations of specialists on the Exchange. Accordingly, for the reasons discussed above, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act. V. Conclusion It is therefore ordered pursuant to Section 19(b)(2) of the Act 18 that the proposed rule change (SR–PHLX–2016– 97) be and hereby is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Brent J. Fields, Secretary. [FR Doc. 2016–28030 Filed 11–21–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release Nos. 33–10257; 34–79336; File No. 265–28] Investor Advisory Committee Meeting Securities and Exchange Commission. ACTION: Notice of meeting of Securities and Exchange Commission Dodd-Frank Investor Advisory Committee. sradovich on DSK3GMQ082PROD with NOTICES AGENCY: The Securities and Exchange Commission Investor Advisory Committee, established pursuant to SUMMARY: 17 15 U.S.C. 78f(b)(5). U.S.C. 78s(b)(2). 19 17 CFR 200.30–3(a)(12). 18 15 VerDate Sep<11>2014 16:52 Nov 21, 2016 Jkt 241001 Section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, is providing notice that it will hold a public meeting. The public is invited to submit written statements to the Committee. DATES: The meeting will be held on Thursday, December 8, 2016 from 9:30 a.m. until 3:00 p.m. (ET). Written statements should be received on or before December 8, 2016. ADDRESSES: The meeting will be held in Multi-Purpose Room LL–006 at the Commission’s headquarters, 100 F Street NE., Washington, DC 20549. The meeting will be webcast on the Commission’s Web site at www.sec.gov. Written statements may be submitted by any of the following methods: Electronic Statements D Use the Commission’s Internet submission form (https://www.sec.gov/ rules/other.shtml); or D Send an email message to rulescomments@sec.gov. Please include File No. 265–28 on the subject line; or Paper Statements D Send paper statements to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File No. 265–28. This file number should be included on the subject line if email is used. To help us process and review your statement more efficiently, please use only one method. Statements also will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Room 1580, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. All statements received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: Marc Oorloff Sharma, Senior Special Counsel, Office of the Investor Advocate, at (202) 551–3302, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: The meeting will be open to the public, except during that portion of the meeting reserved for an administrative work session during lunch. Persons needing special accommodations to take part because of a disability should notify the contact person listed in the section above entitled FOR FURTHER INFORMATION CONTACT. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 The agenda for the meeting includes: remarks from Commissioners; a discussion regarding investor protection priorities for the New Year; the announcement of election results for open officer positions; an update on the Commission’s response to the rulemaking mandate of the Fixing America’s Surface Transportation Act concerning public company disclosure requirements; and a nonpublic administrative work session during lunch. Dated: November 17, 2016. Brent J. Fields, Secretary. [FR Doc. 2016–28077 Filed 11–21–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79328; File No. SR– NYSEMKT–2016–102] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Introducing NYSE OptX November 16, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on November 3, 2016, NYSE MKT LLC, on behalf of NYSE Amex Options (‘‘NYSE Amex Options’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. On November 15, 2016, the Exchange filed Amendment No. 1 to the proposal.4 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to introduce NYSE OptX, an order entry platform that would allow for the submission of Qualified Contingent Cross (‘‘QCC’’) Orders and orders executed in the 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 4 In Amendment No. 1, the Exchange proposed to amend note 10, infra, to clarify that QCC Orders sent through NYSE OptX to the Exchange for execution would comply with the order format and EOC entry requirements established by the Exchange, which are set forth in Rule 955NY. 2 15 E:\FR\FM\22NON1.SGM 22NON1

Agencies

[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Notices]
[Pages 83886-83888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28030]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79322; File No. SR-Phlx-2016-97)


Self-Regulatory Organizations; NASDAQ PHLX LLC; Order Granting 
Approval of Proposed Rule Change To Delete Outdated or Unnecessary Rule 
Language in Phlx Rule 1020

November 16, 2016.

I. Introduction

    On September 27, 2016, NASDAQ PHLX LLC (``Exchange'' or ``Phlx'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to delete or amend its rules relating to 
specialists. The proposed rule change was published for comment in the 
Federal Register on October 14, 2016.\3\ The Commission received no 
comment letters on the proposed rule change. This order approves the 
proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 79073 (October 11, 
2016), 81 FR 71153 (October 14, 2016) (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    Phlx Rule 1020 contains provisions relating to the registration and 
functions of options specialists.\4\ Section (b) provides that a member 
registered as a specialist in one or more options has an obligation to 
assist in the maintenance of a fair and orderly market, ``in addition 
to the execution of orders entrusted to him in such options.'' The 
Exchange proposes to delete the language in section (b) regarding 
execution of entrusted orders. The Exchange represents that today, 
specialists on the Exchange trade only for their own account and ``no 
longer handle any agency orders whatsoever in their role as 
specialists.'' \5\
---------------------------------------------------------------------------

    \4\ A ``specialist'' is an Exchange member who is registered as 
an options specialist pursuant to Phlx Rule 1020(a). Specialists are 
subject to quoting and registration obligations set forth in Phlx 
Rules 1014(b), 1020 and 1080.02.
    \5\ See Notice, supra note 3, at 71154.

---------------------------------------------------------------------------

[[Page 83887]]

    Commentary .01 of Phlx Rule 1020 provides that in ``effecting 
transactions'' for a specialist's own account for the purpose of 
establishing or increasing a position, a specialist is to effect such 
transactions in a reasonable and orderly manner in relation to the 
condition of the general market, the market in the particular option, 
and the adequacy of his position to the immediate and reasonably 
anticipated needs of the options market. Commentary .01 sections (a) 
through (d) provide that certain types of transactions to establish or 
increase a position are not to be effected except when they are 
reasonably necessary to render the specialist's position adequate to 
such needs.\6\ The Exchange proposes to delete the last sentence of 
Commentary .01 and sections (a) through (d). The Exchange represents 
that today, specialists do not ``effect transactions'' in the sense of 
matching bids and offers to cause a transaction execution, except in 
rare cases.\7\ Instead, specialists submit bids and offers to be 
matched by the PHLX XL trading system.\8\ Therefore, the Exchange 
believes that the specialist may be unable to determine the price of 
the last sale, which would be required for a specialist to comply with 
the language Phlx proposes to be deleted.
---------------------------------------------------------------------------

    \6\ Specifically, Commentary .01 sections (a) through (d) 
provide that the following types of transactions to establish or 
increase a position are not to be effected except when they are 
reasonably necessary to render the specialist's position adequate to 
such needs: (a) A purchase at a price above the last sale in the 
same trading session; (b) the purchase of all or substantially all 
the options offered on the book at a price equal to the last sale, 
when the option so offered represents all or substantially all the 
options offered in the market; and when a substantial amount of an 
option is offered at a price equal to the last sale price, the 
purchase of more than 50% of all the options offered at the last 
sale price; (c) the supplying of all or substantially all the 
options bid for on the book at a price equal to the last sale, when 
the option so bid for represents all or substantially all the 
options bid for in the market; and when a substantial amount of the 
options bid for at a price equal to the last sale price, the 
supplying of more than 50% of all the options bid for at the last 
sale price; (d) failing to re-offer or re-bid where necessary after 
effecting transactions described in (a), (b), or (c). The rule 
permits transactions of these types to be effected, however, with 
the approval of an Options Exchange Official or in relatively 
inactive markets where they are an essential part of a proper course 
of dealings and where the amount of an option involved and the price 
change, if any, are normal in relation to the market.
    \7\ See Notice, supra note 3, at 71154. The Exchange represents 
that although a specialist may ``effect transactions'' with a market 
maker on the Exchange's trading floor, the vast majority of 
transactions are executed electronically by the trading system.
    \8\ See id.
---------------------------------------------------------------------------

    Commentary .02 of Phlx Rule 1020 provides that, for transactions of 
a specialist for his own account that liquidate or decrease his 
position in an option in which he is registered, such transactions are 
to be ``effected'' in a reasonable and orderly manner in relation to 
the condition of the general market, the market in the particular 
option, and the adequacy of the specialist's positions to the immediate 
and reasonably anticipated needs of the options market. Commentary .02 
sections (a) through (c) describe certain restrictions on specialists 
when liquidating or decreasing such positions.\9\ The Exchange proposes 
to delete part of the last sentence of Commentary .02 and sections (a) 
through (c). The Exchange represents that, as discussed above, a 
specialist may be unable to determine the ``last different price'' as 
required to comply with sections (a) and (c).\10\ The Exchange believes 
also that section (b) is redundant to Rule 1020(b), which already 
contains the ``fair and orderly'' requirement.\11\
---------------------------------------------------------------------------

    \9\ Commentary .02 sections (a) through (c) also provide that, 
unless he has the prior approval of an Options Exchange Official, he 
should avoid: (a) Liquidation of all or substantially all of a 
position by selling options at prices below the last different price 
or by purchasing options at prices above the last different price 
unless such transactions are reasonably necessary in relation to the 
specialist's overall position in the options in which he is 
registered; (b) failing to maintain a fair and orderly market during 
liquidations; or (c) failing to re-enter the market where necessary, 
after effecting transactions described in (a) above.
    \10\ See Notice, supra note 3, at 71155.
    \11\ See id.
---------------------------------------------------------------------------

    Commentary .03 of Phlx Rule 1020 provides that a specialist's 
quotation, made for his own account, should be such that a transaction 
effected at his quoted price or within the quoted spread, whether 
having the effect of reducing or increasing the specialist's position, 
would bear a proper relation to preceding transactions and anticipated 
succeeding transactions. The Exchange proposes to delete Commentary 
.03. The Exchange represents that, due to the speed of trading that 
occurs today on the Phlx XL trading system, specialists may not have 
knowledge of preceding transactions and would not be able to adjust 
quotes as needed to comply with Commentary .03 before the quotes are 
accessed.\12\
---------------------------------------------------------------------------

    \12\ See id.
---------------------------------------------------------------------------

    Commentary .04 of Phlx Rule 1020 provides that a specialist should 
avoid participating as a dealer in opening or reopening an option in 
such a manner as to reverse the balance of public supply and demand as 
reflected by market and limited price orders at or near the price of 
the previous close or halt, unless the condition of the general market 
or the specialist's position in light of the reasonably anticipated 
needs of the market make it advisable to do so, or unless the 
specialist has obtained the prior approval of an Options Exchange 
Official to do so. The commentary provides that he may, however, buy or 
sell an option as a dealer to minimize the disparity between supply and 
demand at an opening or reopening. The Exchange proposes to delete 
Commentary .04. The Exchange represents that a specialist no longer 
manually opens options classes; the PHLX XL trading system handles the 
opening and reopening of options.\13\
---------------------------------------------------------------------------

    \13\ See id.
---------------------------------------------------------------------------

    Commentary .05 of Phlx Rule 1020 prohibits a member acting as a 
specialist from effecting transactions for the purpose of adjusting a 
LIFO inventory in an option in which he is acting except as is 
reasonably necessary to assist in the maintenance of a fair and orderly 
market. The Exchange believes that Commentary .05 is no longer 
necessary and proposes to delete it.\14\
---------------------------------------------------------------------------

    \14\ See id.
---------------------------------------------------------------------------

    Commentary .06 of Phlx Rule 1020 restricts a specialist from 
assigning options in which he is registered to an investment account. 
The Commentary states that a specialist may not add to a position in an 
investment account unless reasonably necessary to permit the specialist 
to assist in the maintenance of a fair and orderly market. Furthermore, 
a specialist may not effect a transfer of options in which he is 
registered from his dealer account to an investment account if the 
transfer would result in a short position in the dealer account. The 
Commentary also provides that in the maintenance of price continuity 
with reasonable depth, it is commonly desirable for a specialist to 
supply options to the market, even though he may have to sell short to 
do so, to the extent reasonably necessary to meet the needs of the 
market. The Exchange proposes to delete Commentary .06 because 
investment accounts are no longer used by specialists.\15\
---------------------------------------------------------------------------

    \15\ See id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and rules and 
regulations thereunder applicable to a national securities 
exchange.\16\ In particular, the Commission finds that the proposed 
rule change is consistent with Section

[[Page 83888]]

6(b)(5) of the Act,\17\ which requires, among other things, that the 
rules of a national securities exchange be 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; and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Commission believes that the deletion of Phlx 
Rules 1020(b), Commentary .01, Commentary .02 (a) and (c), Commentary 
.03, Commentary .04, and Commentary .06 should protect investors by 
helping to ensure that the Phlx rules accurately describe the current 
operations of the Exchange and obligations of its members. In addition, 
the Commission notes that the deletion of Commentary .02 (b) to remove 
redundant rule language should add clarity to Phlx's rules and that the 
deletion of Commentary .05 and Commentary .06 should provide more 
clarity regarding the obligations of specialists on the Exchange.
---------------------------------------------------------------------------

    \16\ In approving the proposed rule changes, the Commission has 
considered their impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Accordingly, for the reasons discussed above, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act.

V. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\18\ that the proposed rule change (SR-PHLX-2016-97) be and hereby is 
approved.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-28030 Filed 11-21-16; 8:45 am]
 BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.