Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 3317 (Compliance With Regulation NMS Plan To Implement a Tick Size Pilot), 92916-92919 [2016-30551]

Download as PDF 92916 Federal Register / Vol. 81, No. 244 / Tuesday, December 20, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES granting MIAX PEARL’s request for exemption, pursuant to Section 36 of the Act, from the rule filing requirements of Section 19(b) of the Act with respect to the rules that MIAX PEARL proposes to incorporate by reference. The exemption is conditioned upon MIAX PEARL providing written notice to MIAX PEARL members whenever MIAX Exchange, CBOE, NYSE or FINRA proposes to change an incorporated by reference rule and when the Commission approves any such changes. The Commission believes that the exemption is appropriate in the public interest and consistent with the protection of investors because it will promote more efficient use of Commission’s and SROs’ resources by avoiding duplicative rule filings based on simultaneous changes to identical rule text sought to be implemented by more than one SRO. V. Conclusion It is ordered that the application of MIAX PEARL for registration as a national securities exchange be, and it hereby is, granted. It is furthered ordered that operation of MIAX PEARL is conditioned on the satisfaction of the requirements below: A. Participation in National Market System Plans Relating to Options Trading. MIAX PEARL must join: (1) The Plan for the Reporting of Consolidated Options Last Sale Reports and Quotation Information (Options Price Reporting Authority); (2) the OLPP; (3) the Linkage Plan; (4) the Plan of the Options Regulatory Surveillance Authority; and (5) the Plan Governing the Consolidated Audit Trail; B. Participation in Multiparty Rule 17d–2 Plans. MIAX PEARL must become a party to the multiparty Rule 17d–2 agreements concerning options sales practice regulation and market surveillance, and covered Regulation NMS rules; C. Participation in the Options Clearing Corporation. MIAX PEARL must become an Options Clearing Corporation participant exchange; and D. Participation in the Intermarket Surveillance Group. MIAX PEARL must join the Intermarket Surveillance Group. It is further ordered, pursuant to Section 36 of the Act,242 that MIAX PEARL shall be exempted from the rule filing requirements of Section 19(b) of the Act with respect to the MIAX Exchange, CBOE, NYSE and FINRA rules that MIAX PEARL proposes to incorporate by reference, subject to the Nasdaq Order, supra note 27, and NOM Approval Order, supra note 112. 242 15 U.S.C. 78mm. VerDate Sep<11>2014 19:36 Dec 19, 2016 Jkt 241001 conditions specified in this order that MIAX PEARL provide written notice to MIAX PEARL members whenever MIAX Exchange, CBOE, NYSE or FINRA proposes to change an incorporated by reference rule and when the Commission approves any such changes. By the Commission. Brent J. Fields, Secretary. [FR Doc. 2016–30538 Filed 12–19–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79545; File No. SR–Phlx– 2016–118] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 3317 (Compliance With Regulation NMS Plan To Implement a Tick Size Pilot) December 14, 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 November 30, 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 proposes to amend Phlx Rule 3317 to modify the Web site data publication requirements relating to the Regulation NMS Plan to Implement a Tick Size Pilot Program (‘‘Plan’’) and to clarify a provision related to the reporting of certain Market Maker profitability data. Phlx also proposes to amend Rule 3317(b)(5) to clarify the timing and format of publication of data related to Market Maker registration. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaqphlx.cchwallstreet. com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00147 Fmt 4703 Sfmt 4703 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 On August 25, 2014, Phlx and several other self-regulatory organizations (the ‘‘Participants’’) filed with the Commission, pursuant to Section 11A of the Act 3 and Rule 608 of Regulation NMS thereunder,4 the Plan to Implement a Tick Size Pilot Program.5 The Participants filed the Plan to comply with an order issued by the Commission on June 24, 2014.6 The Plan was published for comment in the Federal Register on November 7, 2014, and approved by the Commission, as modified, on May 6, 2015.7 The Commission approved the Pilot on a two-year basis, with implementation to begin no later than May 6, 2016.8 On November 6, 2015, the SEC exempted the Participants from implementing the Pilot until October 3, 2016.9 Under the revised Pilot implementation date, the Pre-Pilot data collection period commenced on April 4, 2016. On September 13, 2016, the SEC exempted the Participants from the requirement to fully implement the Pilot on October 3, 2016, to permit the Participants to implement the pilot on a phased-in basis, as described in the Participants’ exemptive request.10 3 15 U.S.C. 78k–1. CFR 242.608. 5 See Letter from Brendon J. Weiss, Vice President, Intercontinental Exchange, Inc., to Secretary, Commission, dated August 25, 2014. 6 See Securities Exchange Act Release No 72460 (June 24, 2014), 79 FR 36840 (June 30, 2014). 7 See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513 (May 13, 2015) (‘‘Approval Order’’). 8 See Approval Order at 27533 and 27545. 9 See Securities Exchange Act Release No. 76382 (November 6, 2015), 80 FR 70284 (November 13, 2015). 10 See Letter from David S. Shillman, Associate Director, Division of Trading and Markets, Commission, to Eric Swanson, EVP, General 4 17 E:\FR\FM\20DEN1.SGM 20DEN1 Federal Register / Vol. 81, No. 244 / Tuesday, December 20, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES The Plan is designed to allow the Commission, market participants, and the public to study and assess the impact of increment conventions on the liquidity and trading of the common stock of small-capitalization companies. Each Participant is required to comply, and to enforce compliance by its member organizations, as applicable, with the provisions of the Plan. Phlx adopted rule amendments to implement the requirements of the Plan, including relating to the Plan’s data collection requirements and requirements relating to Web site data publication.11 Specifically, with respect to the Web site data publication requirements pursuant to Section VII and Appendices B and C to the Plan, Phlx Rule 3317(b)(2)(B) provides, among other things, that Phlx shall make the data required by Items I and II of Appendix B to the Plan, and collected pursuant to paragraph (b)(2) of Rule 3317, publicly available on the Exchange Web site on a monthly basis at no charge and shall not identify the Trading Center that generated the data. Rule 3317(b)(3)(C), provides, among other things, that Phlx shall make the data required by Item IV of Appendix B to the Plan, and collected pursuant to paragraph (b)(3) of Rule 3317, publicly available on the Exchange Web site on a monthly basis at no charge and shall not identify the Trading Center that generated the data. Commentary .08 to Rule 3317 provides, among other things, that the requirement that Phlx make certain data publicly available on the Exchange Web site pursuant to Appendix B and C to the Plan shall commence at the beginning of the Pilot Period. Phlx is proposing amendments to Rule 3317(b)(2)(B) (regarding Appendix B.I and B.II data) and Rule 3317(b)(3)(C) (regarding Appendix B.IV data) to provide that data required to be made available on Phlx’s Web site be published within 120 calendar days following month end. In addition, the proposed amendments to Commentary .08 to Rule 3317 would provide that, notwithstanding the provisions of paragraphs (b)(2)(B), (b)(3)(C), and (b)(5), Phlx shall make data for the PrePilot period publicly available on the Counsel and Secretary, Bats Global Markets, Inc., dated September 13, 2016; see also Letter from Eric Swanson, EVP, General Counsel and Secretary, Bats Global Markets, Inc., to Brent J. Fields, Secretary, Commission, dated September 9, 2016. 11 See, e.g., Securities Exchange Act Release No. 77458 (March 28, 2016), 81 FR 18919 (April 1, 2016) (SR–Phlx–2016–39); see also Letter from David S. Shillman, Associate Director, Division of Trading and Markets, Commission, to Marcia E. Asquith, Senior Vice President and Corporate Secretary, FINRA, dated February 17, 2016. VerDate Sep<11>2014 19:36 Dec 19, 2016 Jkt 241001 Phlx Web site pursuant to Appendix B and C to the Plan by February 28, 2017.12 The purpose of delaying the publication of the Web site data is to address confidentiality concerns by providing for the passage of additional time between the market information reflected in the data and the public availability of such information. Phlx also proposes to amend Rule 3317(b)(4), which relates to the reporting of Market Maker profitability data for members for the Exchange is the Designated Examining Authority (‘‘DEA’’). Currently, Rule 3317(b)(4)(A) states that a Member that is a Market Maker shall collect and transmit to their DEA the data described in Item I of Appendix C of the Plan with respect to executions on any Trading Center that have settled or reached settlement date. Information related to Market Maker profitability will be collected by FINRA and transmitted to the SEC and, on an aggregate basis, also be made publicly available.13 The Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) recently submitted a proposed rule change amending FINRA Rule 6191(b), which sets forth FINRA’s obligations with respect to data collection and reporting under the Plan. With this rule change, FINRA proposes to publish (1) Market Maker profitability statistics for Market Makers for which FINRA is the DEA; (2) Market Maker profitability statistics collected from other Participants that are DEAs, and (iii) Market Maker profitability statistics for Market Makers whose DEA is not a Participant.14 As part of its rule change, FINRA also stated that it would make this data publicly available on the FINRA Web site within 120 calendar days following month end at no charge. In its proposal, FINRA noted that the publication by FINRA of Market Maker profitability data on the FINRA Web site, including Market Makers for which FINRA is not the DEA, is intended to address confidentiality concerns with respect to the Appendix C data required to be made publicly available by the Participants. Although the Participants that are DEAs also would not have identified the Market Makers when publishing required Appendix C data, 12 With respect to data for the Pilot Period, the requirement that Phlx make data publicly available on the Phlx Web site pursuant to Appendix B and C to the Plan shall continue to commence at the beginning of the Pilot Period. Thus, the first Web site publication date for Pilot Period data (covering October 2016) would be published on the Phlx Web site by February 28, 2017, which is 120 days following the end of October 2016. 13 See FINRA Rule 6191(b)(4)(B). 14 See SR–FINRA–2016–042. PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 92917 FINRA noted that some of the Participants are DEAs for a very small number of Market Makers, and the published data from these DEAs raised concerns regarding the potential for identifying the Market Makers that correspond to those statistics.15 Although the Exchange is currently a DEA for certain member firms, Rule 3317 does not currently require Phlx as DEA to report the information collected pursuant to paragraph (b)(4) to FINRA for publication. Given FINRA’s recent proposed rule change, the Exchange is therefore proposing to adopt Rule 3317(b)(4)(C) to address the reporting of Market Maker profitability data for members for which Phlx is the DEA. Rule 3317(b)(4)(C) states that the Exchange, as DEA, shall collect the data required by Item I of Appendix C to the Plan and paragraph (b)(4)(A) for those Members that are Market Makers for which the Exchange is DEA, and on a monthly basis transmit such data, categorized by the Control Group and each Test Group, to the SEC in a pipe delimited format. Rule 3317(b)(4)(C) also provides that the Exchange, as DEA, shall make the data collected pursuant to subparagraph (4) of Rule 3317(b) available to FINRA for aggregation and publication, categorized by the Control Group and each Test Group, on the FINRA Web site pursuant to FINRA Rules. Rule 3317(b)(4)(C) does not alter the information required to be submitted to the SEC. Finally, Phlx proposes to amend Rule 3317(b)(5), which relates to the collection and transmission of Market Maker registration statistics. Currently, Rule 3317(b)(5) provides that the Exchange shall collect and transmit to the SEC the data described in Item III of Appendix B of the Plan relating to daily Market Maker registration statistics in a pipe delimited format within 30 calendar days following month end for (1) transactions in each Pre-Pilot Data Collection Security for the period beginning six months prior to the Pilot Period through the trading day immediately preceding the Pilot Period; and (2) transactions in each Pilot Security for the period beginning on the first day of the Pilot Period through six months after the end of the Pilot Period. Although the Plan requires that such data be made publicly available,16 Rule 3317(b)(5) does not currently include a provision requiring the Exchange to publish such data to its Web site. The Exchange therefore proposes to amend Rule 3317(b)(5) to provide that the Exchange shall make Market Maker 15 Id. 16 See E:\FR\FM\20DEN1.SGM Section VII.A. 4 of the Plan. 20DEN1 92918 Federal Register / Vol. 81, No. 244 / Tuesday, December 20, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES registration data publicly available on the Exchange Web site within 120 calendar days following month end at no charge. Phlx has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the 30-day operative delay. If the Commission waives the 30-day operative delay, the operative date of the proposed rule change will be the date of filing. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,17 in general, and furthers the objectives of Section 6(b)(5) of the Act,18 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, because it is designed to assist the Participants in meeting their regulatory obligations pursuant to the Plan and is in furtherance of the objectives of the Plan, as identified by the SEC. In approving the Plan, the Commission recognized that requiring the publication of Market Maker data may raise confidentiality concerns, especially for Pilot Securities that may have a relatively small number of designated Market Makers.19 For this reason, the Commission modified the Plan so that the data that would be made publicly available would not contain profitability measures for each security, but would be aggregated by the Control Group and each Test Group. Phlx believes that this proposal is consistent with the Act in that it is designed to address confidentiality concerns by permitting Phlx to delay Web site publication to provide for passage of additional time between the market information reflected in the data and the public availability of such information. With respect to the change to Rule 3317(b)(5), the Exchange believes this change will clarify the timing and format of publication of data related to Market Maker registration. Phlx believes that the addition of Rule 3317(b)(4)(C) relating to the reporting of Market Maker profitability data to FINRA is consistent with the Act because it effectuates FINRA’s recent proposal, which itself is designed to further address confidentiality concerns by permitting FINRA to aggregate and publish Market Maker profitability data 17 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 19 See Approval Order at 27543—27544. 18 15 VerDate Sep<11>2014 19:36 Dec 19, 2016 Jkt 241001 for all Participant DEAs, including Market Makers for which FINRA is not the DEA.20 Phlx notes that this proposal also does not alter the information required to be submitted to the SEC. 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. Phlx notes that the proposed rule change implements the provisions of the Plan, and is designed to assist the Participants in meeting their regulatory obligations pursuant to the Plan. The proposal is intended to address confidentiality concerns that may adversely impact competition, especially for Pilot Securities that may have a relatively small number of designated Market Makers, by (1) permitting Phlx to delay Web site publication to provide for passage of additional time between the market information reflected in the data and the public availability of such information; and (2) making Market Maker profitability statistics that Phlx has gathered as DEA available to FINRA for aggregation and publication. The proposal also does not alter the information required to be submitted to the SEC. 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.21 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 22 and 20 See SR–FINRA–2016–042. notes that Financial Information Forum (FIF) submitted a letter to the staff of the Commission raising concerns regarding the publication of certain Appendix B statistics on a disaggregated basis using a unique masked market participant identifier. See Letter from Mary Lou Von Kaenel, Managing Director, FIF, to David S. Shillman, Associate Director, Division of Trading and Markets, Commission, dated August 16, 2016, available at https://www.fif.com/comment-letters. 22 15 U.S.C. 78s(b)(3)(A)(iii). 21 Phlx PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 subparagraph (f)(6) of Rule 19b–4 thereunder.23 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing so that it may become operative immediately. The Exchange notes that the proposed rule change implements the provisions of the Plan, and is designed to assist the Participants in meeting their regulatory obligations pursuant to the Plan. The proposal is intended to address confidentiality concerns by permitting the Exchange to (i) Delay Web site publication to provide for passage of additional time between the market information reflected in the data and the public availability of such information; and (ii) allow for FINRA to aggregate and publish Market Maker profitability data for all Participant DEAs. The Exchange notes that the proposed change will not affect the data reporting requirements for members for which PHLX is the DEA. The proposal also does not alter the information required to be submitted to the Commission. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to implement these proposed changes that are intended to address confidentiality concerns. The Commission notes that some Pilot data was scheduled to be published on November 30, 2016. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change to be operative on November 30, 2016.24 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 23 17 CFR 240.19b–4(f)(6). 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). 24 For E:\FR\FM\20DEN1.SGM 20DEN1 Federal Register / Vol. 81, No. 244 / Tuesday, December 20, 2016 / Notices to determine whether the proposed rule should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. Robert W. Errett, Deputy Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 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 rulecomments@sec.gov. Please include File Number SR–Phlx–2016–118 on the subject line. Paper Comments mstockstill on DSK3G9T082PROD with NOTICES • 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–2016–118. 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– 2016–118 and should be submitted on or before January 10, 2017. VerDate Sep<11>2014 19:36 Dec 19, 2016 Jkt 241001 92919 [FR Doc. 2016–30551 Filed 12–19–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79557; File No. SR–BOX– 2016–57] Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Detail How Complex Orders Will Execute Through the Solicitation Auction Mechanism December 14, 2016. 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 December 7, 2016, BOX Options Exchange LLC (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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 proposes to detail how Complex Orders will execute through the Solicitation Auction mechanism. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s Internet Web site at https:// boxexchange.com. 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 self-regulatory organization 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 self-regulatory organization has 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 1. Purpose The purpose of the proposed rule change is to detail how the Solicitation Auction mechanism will treat Complex Orders on the Exchange.3 Pursuant to BOX Rule 7270, the Exchange has two block-sized auction mechanisms, the Solicitation Auction Mechanism and the Facilitation Auction Mechanism whereby Order Flow Providers (OFPs) can provide price improvement opportunities for a transaction where the OFP seeks to facilitate an order it represents as agent, and/or a transaction where the OFP solicited interest to execute against an order it represents as agent. Transactions executed through the Solicitation or Facilitation auction mechanisms are comprised of the order the OFP represents as agent (the ‘‘Agency Order’’) and the contra order for the full size of the Agency Order (either the ‘‘Solicitation’’ or ‘‘Solicited’’ Order).4 The contra order may represent interest for the Participant’s own account or interest the Participant has solicited from one or more other parties, or a combination of both. This proposal only addresses how the Solicitation Auction mechanism will treat Complex Orders on the Exchange.5 Similar to the ISE’s Block-Trade rules,6 Complex Orders 7 executed through the Solicitation auction mechanism on BOX function in substantially the same manner as single-leg orders executed through this mechanism. To detail how the Solicitation mechanism treats 3 Complex Orders are not currently traded through the Solicitation Auction mechanism. Prior to implementation, BOX will issue an informational circular to inform Participants of the implementation date for Complex Orders to trade through the Solicitation Auction. 4 The Exchange notes that it does not trade stock option orders. 5 The Exchange recently adopted rules to allow Complex Orders to execute through the Facilitation Auction mechanism. See Securities Release No. 78444 (July 29, 2016), 81 FR 51533 (August 4, 2016)(Notice of Filing and Immediate Effectiveness of file Number SR–BOX–2016–37). 6 See International Securities Exchange Rule 716 and Supplementary Material .08 to Rule 716. 7 Under Rule 7240(a)(5) a ‘‘Complex Order’ is defined as ‘‘any order involving the simultaneous purchase and/or sale of two or more different options series in the same underlying security, for the same account, in a ratio that is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00) and for the purpose of executing a particular investment strategy.) A Complex Order that does not meet this definition will be automatically rejected. E:\FR\FM\20DEN1.SGM 20DEN1

Agencies

[Federal Register Volume 81, Number 244 (Tuesday, December 20, 2016)]
[Notices]
[Pages 92916-92919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30551]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79545; File No. SR-Phlx-2016-118]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 3317 
(Compliance With Regulation NMS Plan To Implement a Tick Size Pilot)

December 14, 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 November 30, 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 proposes to amend Phlx Rule 3317 to modify the Web 
site data publication requirements relating to the Regulation NMS Plan 
to Implement a Tick Size Pilot Program (``Plan'') and to clarify a 
provision related to the reporting of certain Market Maker 
profitability data. Phlx also proposes to amend Rule 3317(b)(5) to 
clarify the timing and format of publication of data related to Market 
Maker registration.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaqphlx.cchwallstreet.com/ 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
    On August 25, 2014, Phlx and several other self-regulatory 
organizations (the ``Participants'') filed with the Commission, 
pursuant to Section 11A of the Act \3\ and Rule 608 of Regulation NMS 
thereunder,\4\ the Plan to Implement a Tick Size Pilot Program.\5\ The 
Participants filed the Plan to comply with an order issued by the 
Commission on June 24, 2014.\6\ The Plan was published for comment in 
the Federal Register on November 7, 2014, and approved by the 
Commission, as modified, on May 6, 2015.\7\ The Commission approved the 
Pilot on a two-year basis, with implementation to begin no later than 
May 6, 2016.\8\ On November 6, 2015, the SEC exempted the Participants 
from implementing the Pilot until October 3, 2016.\9\ Under the revised 
Pilot implementation date, the Pre-Pilot data collection period 
commenced on April 4, 2016. On September 13, 2016, the SEC exempted the 
Participants from the requirement to fully implement the Pilot on 
October 3, 2016, to permit the Participants to implement the pilot on a 
phased-in basis, as described in the Participants' exemptive 
request.\10\
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    \3\ 15 U.S.C. 78k-1.
    \4\ 17 CFR 242.608.
    \5\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \6\ See Securities Exchange Act Release No 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \7\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 
80 FR 27513 (May 13, 2015) (``Approval Order'').
    \8\ See Approval Order at 27533 and 27545.
    \9\ See Securities Exchange Act Release No. 76382 (November 6, 
2015), 80 FR 70284 (November 13, 2015).
    \10\ See Letter from David S. Shillman, Associate Director, 
Division of Trading and Markets, Commission, to Eric Swanson, EVP, 
General Counsel and Secretary, Bats Global Markets, Inc., dated 
September 13, 2016; see also Letter from Eric Swanson, EVP, General 
Counsel and Secretary, Bats Global Markets, Inc., to Brent J. 
Fields, Secretary, Commission, dated September 9, 2016.

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[[Page 92917]]

    The Plan is designed to allow the Commission, market participants, 
and the public to study and assess the impact of increment conventions 
on the liquidity and trading of the common stock of small-
capitalization companies. Each Participant is required to comply, and 
to enforce compliance by its member organizations, as applicable, with 
the provisions of the Plan.
    Phlx adopted rule amendments to implement the requirements of the 
Plan, including relating to the Plan's data collection requirements and 
requirements relating to Web site data publication.\11\ Specifically, 
with respect to the Web site data publication requirements pursuant to 
Section VII and Appendices B and C to the Plan, Phlx Rule 3317(b)(2)(B) 
provides, among other things, that Phlx shall make the data required by 
Items I and II of Appendix B to the Plan, and collected pursuant to 
paragraph (b)(2) of Rule 3317, publicly available on the Exchange Web 
site on a monthly basis at no charge and shall not identify the Trading 
Center that generated the data. Rule 3317(b)(3)(C), provides, among 
other things, that Phlx shall make the data required by Item IV of 
Appendix B to the Plan, and collected pursuant to paragraph (b)(3) of 
Rule 3317, publicly available on the Exchange Web site on a monthly 
basis at no charge and shall not identify the Trading Center that 
generated the data. Commentary .08 to Rule 3317 provides, among other 
things, that the requirement that Phlx make certain data publicly 
available on the Exchange Web site pursuant to Appendix B and C to the 
Plan shall commence at the beginning of the Pilot Period.
---------------------------------------------------------------------------

    \11\ See, e.g., Securities Exchange Act Release No. 77458 (March 
28, 2016), 81 FR 18919 (April 1, 2016) (SR-Phlx-2016-39); see also 
Letter from David S. Shillman, Associate Director, Division of 
Trading and Markets, Commission, to Marcia E. Asquith, Senior Vice 
President and Corporate Secretary, FINRA, dated February 17, 2016.
---------------------------------------------------------------------------

    Phlx is proposing amendments to Rule 3317(b)(2)(B) (regarding 
Appendix B.I and B.II data) and Rule 3317(b)(3)(C) (regarding Appendix 
B.IV data) to provide that data required to be made available on Phlx's 
Web site be published within 120 calendar days following month end. In 
addition, the proposed amendments to Commentary .08 to Rule 3317 would 
provide that, notwithstanding the provisions of paragraphs (b)(2)(B), 
(b)(3)(C), and (b)(5), Phlx shall make data for the Pre-Pilot period 
publicly available on the Phlx Web site pursuant to Appendix B and C to 
the Plan by February 28, 2017.\12\
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    \12\ With respect to data for the Pilot Period, the requirement 
that Phlx make data publicly available on the Phlx Web site pursuant 
to Appendix B and C to the Plan shall continue to commence at the 
beginning of the Pilot Period. Thus, the first Web site publication 
date for Pilot Period data (covering October 2016) would be 
published on the Phlx Web site by February 28, 2017, which is 120 
days following the end of October 2016.
---------------------------------------------------------------------------

    The purpose of delaying the publication of the Web site data is to 
address confidentiality concerns by providing for the passage of 
additional time between the market information reflected in the data 
and the public availability of such information.
    Phlx also proposes to amend Rule 3317(b)(4), which relates to the 
reporting of Market Maker profitability data for members for the 
Exchange is the Designated Examining Authority (``DEA''). Currently, 
Rule 3317(b)(4)(A) states that a Member that is a Market Maker shall 
collect and transmit to their DEA the data described in Item I of 
Appendix C of the Plan with respect to executions on any Trading Center 
that have settled or reached settlement date. Information related to 
Market Maker profitability will be collected by FINRA and transmitted 
to the SEC and, on an aggregate basis, also be made publicly 
available.\13\
---------------------------------------------------------------------------

    \13\ See FINRA Rule 6191(b)(4)(B).
---------------------------------------------------------------------------

    The Financial Industry Regulatory Authority, Inc. (``FINRA'') 
recently submitted a proposed rule change amending FINRA Rule 6191(b), 
which sets forth FINRA's obligations with respect to data collection 
and reporting under the Plan. With this rule change, FINRA proposes to 
publish (1) Market Maker profitability statistics for Market Makers for 
which FINRA is the DEA; (2) Market Maker profitability statistics 
collected from other Participants that are DEAs, and (iii) Market Maker 
profitability statistics for Market Makers whose DEA is not a 
Participant.\14\ As part of its rule change, FINRA also stated that it 
would make this data publicly available on the FINRA Web site within 
120 calendar days following month end at no charge. In its proposal, 
FINRA noted that the publication by FINRA of Market Maker profitability 
data on the FINRA Web site, including Market Makers for which FINRA is 
not the DEA, is intended to address confidentiality concerns with 
respect to the Appendix C data required to be made publicly available 
by the Participants. Although the Participants that are DEAs also would 
not have identified the Market Makers when publishing required Appendix 
C data, FINRA noted that some of the Participants are DEAs for a very 
small number of Market Makers, and the published data from these DEAs 
raised concerns regarding the potential for identifying the Market 
Makers that correspond to those statistics.\15\
---------------------------------------------------------------------------

    \14\ See SR-FINRA-2016-042.
    \15\ Id.
---------------------------------------------------------------------------

    Although the Exchange is currently a DEA for certain member firms, 
Rule 3317 does not currently require Phlx as DEA to report the 
information collected pursuant to paragraph (b)(4) to FINRA for 
publication. Given FINRA's recent proposed rule change, the Exchange is 
therefore proposing to adopt Rule 3317(b)(4)(C) to address the 
reporting of Market Maker profitability data for members for which Phlx 
is the DEA. Rule 3317(b)(4)(C) states that the Exchange, as DEA, shall 
collect the data required by Item I of Appendix C to the Plan and 
paragraph (b)(4)(A) for those Members that are Market Makers for which 
the Exchange is DEA, and on a monthly basis transmit such data, 
categorized by the Control Group and each Test Group, to the SEC in a 
pipe delimited format. Rule 3317(b)(4)(C) also provides that the 
Exchange, as DEA, shall make the data collected pursuant to 
subparagraph (4) of Rule 3317(b) available to FINRA for aggregation and 
publication, categorized by the Control Group and each Test Group, on 
the FINRA Web site pursuant to FINRA Rules. Rule 3317(b)(4)(C) does not 
alter the information required to be submitted to the SEC.
    Finally, Phlx proposes to amend Rule 3317(b)(5), which relates to 
the collection and transmission of Market Maker registration 
statistics. Currently, Rule 3317(b)(5) provides that the Exchange shall 
collect and transmit to the SEC the data described in Item III of 
Appendix B of the Plan relating to daily Market Maker registration 
statistics in a pipe delimited format within 30 calendar days following 
month end for (1) transactions in each Pre-Pilot Data Collection 
Security for the period beginning six months prior to the Pilot Period 
through the trading day immediately preceding the Pilot Period; and (2) 
transactions in each Pilot Security for the period beginning on the 
first day of the Pilot Period through six months after the end of the 
Pilot Period. Although the Plan requires that such data be made 
publicly available,\16\ Rule 3317(b)(5) does not currently include a 
provision requiring the Exchange to publish such data to its Web site. 
The Exchange therefore proposes to amend Rule 3317(b)(5) to provide 
that the Exchange shall make Market Maker

[[Page 92918]]

registration data publicly available on the Exchange Web site within 
120 calendar days following month end at no charge.
---------------------------------------------------------------------------

    \16\ See Section VII.A. 4 of the Plan.
---------------------------------------------------------------------------

    Phlx has filed the proposed rule change for immediate effectiveness 
and has requested that the Commission waive the 30-day operative delay. 
If the Commission waives the 30-day operative delay, the operative date 
of the proposed rule change will be the date of filing.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\18\ 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, because it is designed to assist the Participants in meeting 
their regulatory obligations pursuant to the Plan and is in furtherance 
of the objectives of the Plan, as identified by the SEC.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In approving the Plan, the Commission recognized that requiring the 
publication of Market Maker data may raise confidentiality concerns, 
especially for Pilot Securities that may have a relatively small number 
of designated Market Makers.\19\ For this reason, the Commission 
modified the Plan so that the data that would be made publicly 
available would not contain profitability measures for each security, 
but would be aggregated by the Control Group and each Test Group. Phlx 
believes that this proposal is consistent with the Act in that it is 
designed to address confidentiality concerns by permitting Phlx to 
delay Web site publication to provide for passage of additional time 
between the market information reflected in the data and the public 
availability of such information. With respect to the change to Rule 
3317(b)(5), the Exchange believes this change will clarify the timing 
and format of publication of data related to Market Maker registration.
---------------------------------------------------------------------------

    \19\ See Approval Order at 27543--27544.
---------------------------------------------------------------------------

    Phlx believes that the addition of Rule 3317(b)(4)(C) relating to 
the reporting of Market Maker profitability data to FINRA is consistent 
with the Act because it effectuates FINRA's recent proposal, which 
itself is designed to further address confidentiality concerns by 
permitting FINRA to aggregate and publish Market Maker profitability 
data for all Participant DEAs, including Market Makers for which FINRA 
is not the DEA.\20\ Phlx notes that this proposal also does not alter 
the information required to be submitted to the SEC.
---------------------------------------------------------------------------

    \20\ See SR-FINRA-2016-042.
---------------------------------------------------------------------------

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. Phlx notes that the proposed 
rule change implements the provisions of the Plan, and is designed to 
assist the Participants in meeting their regulatory obligations 
pursuant to the Plan.
    The proposal is intended to address confidentiality concerns that 
may adversely impact competition, especially for Pilot Securities that 
may have a relatively small number of designated Market Makers, by (1) 
permitting Phlx to delay Web site publication to provide for passage of 
additional time between the market information reflected in the data 
and the public availability of such information; and (2) making Market 
Maker profitability statistics that Phlx has gathered as DEA available 
to FINRA for aggregation and publication. The proposal also does not 
alter the information required to be submitted to the SEC.

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.\21\
---------------------------------------------------------------------------

    \21\ Phlx notes that Financial Information Forum (FIF) submitted 
a letter to the staff of the Commission raising concerns regarding 
the publication of certain Appendix B statistics on a disaggregated 
basis using a unique masked market participant identifier. See 
Letter from Mary Lou Von Kaenel, Managing Director, FIF, to David S. 
Shillman, Associate Director, Division of Trading and Markets, 
Commission, dated August 16, 2016, available at https://www.fif.com/comment-letters.
---------------------------------------------------------------------------

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 \22\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\23\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has filed 
the proposed rule change for immediate effectiveness and has requested 
that the Commission waive the requirement that the proposed rule change 
not become operative for 30 days after the date of the filing so that 
it may become operative immediately.
    The Exchange notes that the proposed rule change implements the 
provisions of the Plan, and is designed to assist the Participants in 
meeting their regulatory obligations pursuant to the Plan. The proposal 
is intended to address confidentiality concerns by permitting the 
Exchange to (i) Delay Web site publication to provide for passage of 
additional time between the market information reflected in the data 
and the public availability of such information; and (ii) allow for 
FINRA to aggregate and publish Market Maker profitability data for all 
Participant DEAs. The Exchange notes that the proposed change will not 
affect the data reporting requirements for members for which PHLX is 
the DEA. The proposal also does not alter the information required to 
be submitted to the Commission.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the Exchange to implement these proposed changes 
that are intended to address confidentiality concerns. The Commission 
notes that some Pilot data was scheduled to be published on November 
30, 2016. Therefore, the Commission hereby waives the 30-day operative 
delay and designates the proposed rule change to be operative on 
November 30, 2016.\24\
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    \24\ 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).
---------------------------------------------------------------------------

    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

[[Page 92919]]

to determine whether the proposed rule should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2016-118 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-2016-118. 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-2016-118 and should be 
submitted on or before January 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-30551 Filed 12-19-16; 8:45 am]
 BILLING CODE 8011-01-P
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