Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Openings in Options Rule, 26171-26175 [2017-11604]
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Federal Register / Vol. 82, No. 107 / Tuesday, June 6, 2017 / Notices
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–MRX–2017–06 and should
be submitted on or before June 27, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–11607 Filed 6–5–17; 8:45 am]
published for comment in the Federal
Register on March 28, 2017.5 The
Commission received eleven comment
letters 6 on the Amendments and a
response letter filed by the
Participants.7
The Commission is publishing this
notice to reflect that on April 27, 2017,
prior to the end of the 60-day period
provided for in Exchange Act Rule
608(b)(iii), the Participants withdrew
the Amendments.8
By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[FR Doc. 2017–11580 Filed 6–5–17; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–80819; File No. SR–CTA/
CQ–2017–02]
Consolidated Tape Association; Notice
of Withdrawal of the Twenty-Second
Charges Amendment to the Second
Restatement of the CTA Plan and the
Thirteenth Charges Amendment to the
Restated CQ Plan
May 31, 2017.
I. Introduction
On March 2, 2017, the participants
(‘‘Participants’’) 1 of the Second
Restatement of the Consolidated Tape
Association (‘‘CTA’’) Plan and the
Restated Consolidated Quotation (‘‘CQ’’)
Plan (collectively, ‘‘Plans’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) pursuant
to Section 11A of the of the Securities
Exchange Act of 1934 2 and Rule 608
thereunder,3 amendments to the Plans
(‘‘Amendments’’) to modify and clarify
certain fees.4 The Amendments were
9 17
CFR 200.30–3(a)(12).
Participants are: BATS Exchange, Inc.,
BATS–Y Exchange, Inc., Chicago Board Options
Exchange, Inc., Chicago Stock Exchange, Inc.,
EDGA Exchange, Inc., EDGX Exchange, Inc.,
Financial Industry Regulatory Authority, Inc.,
International Securities Exchange, LLC, Investors’
Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ
OMX PHLX, Inc., Nasdaq Stock Market LLC,
National Stock Exchange, New York Stock
Exchange LLC, NYSE MKT LLC, and NYSE Arca,
Inc.
2 15 U.S.C. 78k–1.
3 17 CFR 242.608.
4 See Securities Exchange Act Release Nos. 10787
(May 10, 1974), 39 FR 17799 (May 20, 1974)
(declaring the CTA Plan effective); 15009 (July 28,
1978), 43 FR 34851 (August 7, 1978) (temporarily
authorizing the CQ Plan); and 16518 (January 22,
1980), 45 FR 6521 (January 28, 1980) (permanently
authorizing the CQ Plan). The most recent
restatement of both Plans was in 1995. The CTA
Plan, pursuant to which markets collect and
disseminate last sale price information for nonNASDAQ listed securities, is a ‘‘transaction
reporting plan’’ under Rule 601 under the Act, 17
CFR 242.601, and a ‘‘national market system plan’’
under Rule 608 under the Act, 17 CFR 242.608. The
CQ Plan, pursuant to which markets collect and
disseminate bid/ask quotation information for listed
securities, is a national market system plan.
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1 The
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80820; File No. SR–Phlx–
2017–40]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend
Openings in Options Rule
May 31, 2017.
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 May 22,
2017, NASDAQ PHLX LLC (‘‘Phlx’’ or
5 See Securities Exchange Act Release No. 80300
(March 23, 2017), 82 FR 15404 (March 28, 2017)
(SR–CTA/CQ–2017–02) (Notice of Filing and
Immediate Effectiveness for the Amendments).
6 See Letter to Brent J. Fields, Secretary,
Commission, from Brad Ward, dated April 17, 2017;
Letter to Brent J. Fields, Secretary, Commission,
from Marcus Mitchell, dated April 17, 2017; Letter
to Brent J. Fields, Secretary, Commission, from
Melissa MacGregor, Managing Director and
Associate General Counsel, SIFMA, dated April 18,
2017; Letter to Brent J. Fields, Secretary,
Commission, from Greg Babyak, Global Regulatory
and Policy Group, Bloomberg LP, dated April 18,
2017; Letter to Brent J. Fields, Secretary,
Commission, from Jay Froscheiser, Vice President,
DTN/Schneider Electric, dated April 18, 2017;
Letter to Brent J. Fields, Secretary, Commission,
from Edward Foda, dated April 19, 2017; Letter to
Brent J. Fields, Secretary Commission, from
Anonymous, dated April 20, 2017; Letter to Brent
J. Fields, Secretary, Commission, from David Craig,
President, Thompson Reuters, dated April 21, 2017;
Letter to Brent J. Fields, Secretary, Commission,
from Sefano Durdic, Managing Director, R2G, dated
April 24, 2017; Letter to Brent J. Fields, Secretary,
Commission, from David Jenkins, received April 26,
2017; and, Letter to Brent J. Fields, Secretary,
Commission, from Sihyang Lee dated April 27,
2017.
7 Letter to Brent J. Fields, Secretary, Commission,
from Emily Kasparov, Chairman, CTA/CQ
Operating Committee, dated April 24, 2017.
8 Letter to Brent J. Fields, Secretary, Commission,
from Emily Kasparov, Chairman, CTA/CQ
Operating Committee, dated April 27, 2017.
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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‘‘Exchange’’) 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
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
Rule 1017, Openings in Options, to
conform this rule to recently filed
Nasdaq ISE, LLC (‘‘ISE’’) Rule 701.
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.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
its rules relating to its opening process
to conform the rule to a recently filed
ISE rule change.3
Conform Rule Text to ISE Rule
ISE recently filed to adopt Phlx’s
Opening Process.4 In adopting this rule,
certain non-substantive modifications
were made to the ISE rule text to further
clarify the manner in which the
Opening Process occurs. At this time,
the Exchange proposes to amend Phlx
Rule 1017 to conform certain rule text
to ISE Rule 701.
With respect to the definitions at Rule
1017(a), ISE alphabetized the
definitions. Phlx proposes to reorder the
3 See Securities Exchange Act Release No. 80225
(March 13, 2017), 82 FR 14243 (March 17,
2017)(SR–ISE–2017–02).
4 See note 3 above.
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definitions to alphabetize them as well,
so they are ordered in the same manner
as ISE Rule 701, where applicable.5
Please note that the Phlx definitions
remain the same referring to Phlx
specific definitions and the applicable
cross-references except for the changes
noted hereafter. The definition of
Quality Opening Market at proposed
Rule 1017(a)(viii) is being expanded to
conform to ISE’s Rule. The Exchange
proposes to add more information in
this definition about what the
calculation for Quality Opening Market
is based on, namely the best bid and
offer of Valid Width Quotes. Also, the
Exchange notes that the differential
between the best bid and offer are
compared to reach this determination.
The Exchange makes clear that the
allowable differential, as determined by
the Exchange, takes into account the
type of security (for example, Penny
Pilot versus non-Penny Pilot issue),
volatility, option premium, and
liquidity. The Exchange notes that the
Quality Opening Market differential is
intended to ensure the price at which
the Exchange opens reflects current
market conditions. This proposal does
not change the calculation of Quality
Opening Market, but provides more
context to market participants to
understand the manner in which the
Exchange arrives at a Quality Opening
Market for further clarity.
Rule 1017(b) proposes to amend text
explaining what interest is included in
the Opening Process. The rule today
specifies what may be submitted, the
elimination of redundant text simply
makes clear what will not be included
in the Opening Process. Quotes other
than Valid Width Quotes will not be
included in the Opening Process. The
purpose of this change was to make the
rule text simple and clear. The rule
continues to make clear what interest
will be included within the Opening
Process. Phlx Rule 1017(b)(ii) is adding
a reference to Rule 1014 for allocation
purposes similar to ISE Rule 713.
Rule 1017(d)(i) proposes to amend the
rule text to clarify that any of the
options for opening with a Valid Width
Quote in Rule 1017(d)(i)(A)–(C) may
apply. The word ‘‘either’’ was not as
clear that there were three choices for
opening the market. In addition, the
Exchange proposes to add the words
‘‘for the underlying currency’’ to
describe that for U.S. dollar-settled
foreign currency options it would be
within two minutes of the market
opening for the underlying currency.
The reference should help readers
5 Phlx market makers have different titles as
compared to ISE market makers.
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understand which security is being
discussed for the opening. Finally
within this paragraph the Exchange is
removing the capitalization from
‘‘Opening Price’’ because the opening
price being referenced is the opening
price for the undelying [sic] index, not
the Opening Price as defined in Rule
1017.
Rule 1017(d)(ii) proposes to rearrange
the rule text for clarity to make clear
that for all options, for the Opening
Process to commence the underlying
security must be open on the primary
market. The Exchange is not proposing
to substantively amend the process. The
proposed text changes make clear the
purpose of the paragraph by explaining
that the text explains a prerequisite for
the Opening Process.
Rule 1017(d)(iv) proposes to add a
‘‘this’’ before Rule 1017 for emphasis.
The Exchange proposes to segregate
Rule 1017(d)(v) rule text to explain
when an ABBO becomes crossed. Other
minor changes are proposed to this
section to simply clarify the rule text.
Rule 1017(f) proposes to amend the
rule text to account for three conditions
that must all exist to open with a PBBO.
The change emphasizes the conditions,
three of them, that must be met to open
with a PBBO.
Rule 1017(h) proposes to amend the
rule text to clarify that orders include
Opening Sweeps. Opening Sweeps is
already mentioned in the rule text, the
placement of its mention is changed so
that it is subcategorized in thinking
about orders. The rule text also crossreferences to Potential Opening Price to
provide a roadmap within the rule.
Rule 1017(h)(C) proposes to add
clarifying text to specify the Potential
Opening Price is bounded by the better
away market. The word ‘‘limited’’ was
previously used and is being replaced
by another word ‘‘bounded’’ to describe
the same process. The ‘‘better’’ is added
to clarify that it is the away market that
is being considered.
Rule 1017(i) proposes to clarify the
rule text with respect to the manner in
which Opening with a Trade will occur.
The proposed rule text simplifies the
language in the rule. Rule 1017(i)(B)(2)
proposes to insert the words ‘‘would
cross’’ in place of ‘‘that crosses.’’ Also,
additional language is proposed to be
added to Rule 1017(i)(B)(2)(b) regarding
the mid-point calculation. The current
text simply notes that Exchange would
open the option series for trading with
an execution and use the best price
which the Potential Opening Price
crosses as a boundary price for the
purposes of the mid-point calculation.
The new text is more explicit, and
makes clear that in order to calculate the
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midpoint, the Exchange will use the
better of the Pre-Market BBO or ABBO
as a boundary price, which is more
specific than simply ‘‘best price.’’
Instead of stating the Exchange will
open the option series for trading with
an execution, the amendment adds ‘‘at
the resulting Potential Opening Price,’’
which makes clear what price it would
open with when opening with a trade.
The current text does not explain what
happens if the conditions described in
Rule 1017(i)(B)(2) are not met. The
proposed text once again provides a
guidepost within the rule to make clear
that if the conditions are not met, the
text leads to paragraph (j) which
describes the Opening Quote Range and
thereafter, the Price Discovery
Mechanism in paragraph (k).
Rule 1017(j) proposes to amend to
clarify that the system will calculate an
Opening Quote Range if the Exchange
has not opened under any of the
provisions from 1017(a)–(i). The word
‘‘sub’’ is proposed to be removed before
the word ‘‘paragraph’’ in certain places
throughout Rule 1017 because it is
unnecessary.
Rule 1017(j)(3) proposes to amend the
rule text to add more context to this
paragraph. Currently, the rule text
provides that if one or more away
markets have disseminated opening
quotes that are not crossed and there are
Valid Width Quotes on the Exchange
that cross each other or that cross away
market quotes then the information in
subparagraph (a) and (b) below would
apply. The proposed new text uses the
word ‘‘disseminating’’ for accuracy,
because quotes are disseminated and
instead of ‘‘opening quotes’’ the more
precise ‘‘BBO’’ is utilized. A
parenthetical is added to note that the
Opening Process stops, because the
market is crossed, and the series will
not open if the ABBO becomes crossed
as previously noted in Rule 1017(d)(v).
This is another guidepost, in this case
to emphasize again that the Exchange
will not open with an ABBO that is
crossed. The BBO cannot be crossed
because it is indicative of uncertainty in
the marketplace of where the option
series should be valued. In this case, the
Exchange will wait for the ABBO to
become uncrossed before initiating the
Opening Process to ensure that there is
stability in the marketplace in order to
assist the Exchange in determining the
Opening Price. Rule 1017(j) indicates
that the existence of all three conditions
in Rule 1017(j)(1)–(3) warrant further
price discovery to validate or perhaps
update the Potential Opening Price and
to attract additional interest to perhaps
render an opening trade possible,
because in the case of paragraph (2)
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specifically, the lack of an ABBO means
there is no external check on the
Exchange’s market for that options
series. If there are Valid Width Quotes
on the Exchange that are executable
against (which language replaces the
word ‘‘cross’’ which the Exchange
believes has the same meaning as
‘‘executable against’’) each other or the
ABBO (the ABBO is added for clarity in
place of ‘‘that cross away market
quotes’’) then subparagraphs (a) and (b)
apply to determine an Opening Quote
Range for a particular options series.
These additions are intended to provide
additional detail to the rule that the
Exchange believes will be helpful to the
reader.
Furthermore, the words ‘‘away bid’’
and ‘‘away offer’’ are replacements for
the concepts of quote bid/offer among
quotes on away markets in Rules
1017(j)(3)(a) and (b). The Exchange does
not believe there is any difference in
those words, simply a more efficient
word usage choice.
Rule 1017(j)(4) proposes to replace the
word ‘‘opening quotes’’ with the more
specific defined term ‘‘Valid Width
Quotes.’’ The Exchange recognizes that
opening quotes was intended to have
the meaning that is intended in Valid
Width Quotes and incorrectly did not
utilize the definition in the initial filing.
The term Valid Width Quote is what
was intended when the Exchange
utilized the more general term ‘‘opening
quote.’’ The word cross is being
replaced with ‘‘are executable against.’’
The Exchange used the term cross in the
Phlx original filing and is now
conforming these words to the approved
words in the ISE rule change ‘‘are
executable against’’ to signify that no
difference was intended. The Exchange
believes that this is an example of
different word choice. The words
‘‘disseminating a BBO’’ are being added
in this paragraph to more clearly
express that each exchange disseminates
a BBO. An exchange broadcasts its
market’s best bid or offer by
disseminating it publically so that other
exchanges are aware of what is the away
market BBO. This more specific
language simply provides more context
to the sentence.
Rule 1017(j)(5) proposes to replace
certain language in that rule text with
more clarifying language. The new rule
text replaces the words ‘‘through the’’
OQR with ‘‘wider than the’’ OQR. The
words were intended to mean that the
OQR must be exceeded. The word
choice was amended to ‘‘wider than’’ in
the ISE filing to make this point. The
same language is being amended in this
rule for consistency. Also, the Exchange
notes in this paragraph that ‘‘If there is
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more than one Potential Opening Price
possible where no contracts would be
left unexecuted, any price used for the
mid-point calculation (which is
described in subparagraph (h) above)
that is wider than the OQR will be
restricted to the OQR price on that side
of the market for the purposes of the
mid-point calculation.’’ The calculation
is now being more specifically defined
as the ‘‘mid-point’’ calculation to be
clear at this point in the rule the midpoint is the calculation being discussed.
Rule 1017(j)(6) is being amended to
add clarifying language. Currently the
paragraph states ‘‘[i]f there is more than
one Potential Opening Price possible
where no contracts would be left
unexecuted and any price used for the
mid-point calculation (which is
described in subparagraph (h) above) an
away market price when contracts will
be routed, the system will use the away
market price as the Potential Opening
Price.’’ The Exchange proposes to
instead remove the reference ‘‘and any
price used for the mid-point calculation
(which is described in subparagraph (h)
above)’’ and instead simply state
‘‘pursuant to paragraph (h)(C)’’ which
describes the Potential Opening Price.
The Exchange believes that the
replacement language avoids confusion
to the reader because as proposed it
would reference the specific language in
the rule.
Rule 1017(j)(7) is being amended to
add clarifying language. Currently the
paragraph states, ‘‘If non-routable
interest can be maximum executable
against Exchange interest after routable
interest has been determined by the
system to satisfy the away market . . .’’
The purpose of this sentence was
intended to convey that the Exchange
will attempt to execute as much interest
as possible at the opening. It was
suggested in the ISE filing that another
way to state this concept was ‘‘If the
Exchange determines that non-routable
interest can execute the maximum
number of contracts against Exchange
interest, after routable interest has been
determined by the system to satisfy the
away market . . .’’ The Exchange
amended the language in the ISE filing
to be clear. The Exchange proposes the
same revision in the Phlx rule text. This
is not a substantive change. The current
sentence goes on to state, ‘‘then the
Potential Opening Price is the price at
which the maximum volume, excluding
the volume which will be routed to an
away market . . .’’ The ISE rule change
removed the references to ‘‘volume’’ and
instead replaced the concept of volume
as follows, ‘‘then the Potential Opening
Price is the price at which the maximum
number of contacts can execute,
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26173
excluding the interest which will be
routed to an away market . . .’’ The
Exchange notes that the new language is
more specific because instead of volume
in the first instance, the concept is
expanded to the number of contracts
executed and instead of volume in the
second instance, the concept of interest
is more accurate.
Rule 1017(k)(A) proposes to add
language for clarity. The paragraph
starts, ‘‘First, the system will broadcast
an Imbalance Message.’’ It was noted in
the ISE filing that adding ‘‘for the
affected series’’ would be more specific,
because the message concerns a certain
series. The sentence then states,
‘‘(which includes the symbol, side of the
imbalance (unmatched contracts), size
of matched contracts, size of the
imbalance, and price of the affected
series which must be within the PreMarket BBO) . . .’’ Instead of just
stating price, the revision includes the
more specific reference to the defined
term ‘‘Potential Opening Price,’’ which
is the actual price being discussed in the
paragraph. Because ‘‘the affected series’’
was added to the beginning of the
sentence, where it was relocated, it is no
longer needed at this point in the
sentence. Finally, a sentence is being
added to the end of the paragraph to
simply make clear in the rule text, as
was explained in the 19b–4, that each
Imbalance Message is subject to an
Imbalance Timer.
Rule 1017(k)(B) proposes to replace
certain language in that rule text with
more clarifying language. The current
rule text states, ‘‘If during or at the end
of the Imbalance Timer, the Opening
Price is at or within the OQR, the
Imbalance Timer will execute at the
Opening Price . . .’’ The ISE filing
replaces the words ‘‘execute at’’ with
more explicit language ‘‘open with a
trade at’’ to convey that the trade is the
manner in which the Phlx opens the
market. This is not a substantive change,
but different word usage. The current
rule text continues later, ‘‘If no new
interest comes in during the Imbalance
Timer and the Opening Price is at or
within OQR, the Exchange will open at
the end of the Imbalance Timer.’’ The
‘‘Opening Price’’ is again being more
specifically changed to the defined term
‘‘Potential Opening Price’’ here and the
concept is again added to the end of the
sentence to make clear that the
Exchange will open with a trade at the
end of the Imbalance Timer at the
Potential Opening Price. The new
language makes clear again that the
trade is the manner in which the Phlx
opens the market at the Potential
Opening Price.
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Rule 1017(k)(C)(1) proposes to replace
the words ‘‘without trading’’ with ‘‘and
would not trade’’ for clarity. This is
simply a change in word choice and is
not a substantive change.
Rule 1017(k)(C)(2) replaces the word
‘‘other’’ with ‘‘away’’ to describe a
market other than Phlx. The word
‘‘simultaneously’’ is added to describe
the order in which the trade will occur
and the timer will end. The word
‘‘Potential Opening Price’’ was added to
demonstrate the effect on this price
more clearly as described herein in Rule
1017(k)(B). The Exchange also proposes
to amend language that references ‘‘will
trade’’ to instead more accurately states
‘‘will open with trades’’ to more
precisely express that the system will
open with the trade.
Rule 1017(k)(C)(3) proposes to add a
clause at the beginning of the text ‘‘If no
trade occurred pursuant to (2) above’’ as
a roadmap to connect the rule. The
words ‘‘without trading’’ are proposed
to be replaced with ‘‘and would not
trade’’ for clarity. Also, the word
‘‘series’’ is being added after the word
‘‘options’’ for more specificity.
Rule 1017(k)(C)(3)(i) proposes to add
the words ‘‘better priced away’’ to the
beginning of the sentence. Currently, the
sentence reads, ‘‘If the total number of
displayed contracts at better prices than
the Exchange’s Potential Opening Price
on away markets (‘‘better priced away
contracts’’) . . .’’ The ISE filings just
noted ‘‘better priced away contracts’’
rather than the more in depth
explanation of displayed at better prices
than the Exchange’s Potential Opening
Price on away markets (‘‘better priced
away contracts’’), for simplicity. The
language is being relocated to modify
the term contract at the beginning of the
sentence rather than at the end of the
sentence. Finally, the language in the
last sentence of this paragraph is being
amended to replace ‘‘routed to other
away markets’’ to ‘‘routed to away
markets.’’ This is simply a verbiage
change to match the ISE rule.
Rule 1017(k)(C)(3)(ii) proposes to
amend the rule text to add a clause
‘‘based on price/time priority of routable
interest’’ for clarity as to the allocation
method being utilized in this instance to
route the orders. By adding the
allocation method to the rule text, it
makes it clear to market participants the
order in which the Exchange will route
orders. Further, the term ‘‘other’’ is
proposed to be replaced by ‘‘away’’ to
describe markets other than ‘‘Phlx’’.
References to ‘‘Phlx’’ and ‘‘at the
Exchange Opening Price’’ is proposed to
be removed as unnecessary and
superfluous.
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Rule 1017(k)(C)(3)(iii) proposes to
amend the rule text to add a clause
‘‘based on price/time priority of routable
interest’’ for clarity, as described in Rule
1017(k)(C)(3)(ii). Further, the term
‘‘other’’ is proposed to be replaced by
‘‘away’’ to describe markets other than
‘‘Phlx’’.
Rule 1017(k)(C)(5) proposes to add a
term ‘‘paragraph’’ to provide more
context to the reference to ‘‘(4) above.’’
Also, the words ‘‘the series by
executing’’ is proposed to be added to
the rule text to refer to what is being
opened, which is the open series and
the manner in which that will happen
is with an execution. The language is
more explicit. The term ‘‘other’’ is
proposed to be replaced by ‘‘away’’ to
describe markets other than ‘‘Phlx’’. A
sentence is proposed to be added to the
end of this rule text, ‘‘All other interest
will be eligible for trading after
opening’’ to provide context to the
manner in which interest will be
handled by the system.
Rule 1017(k)(D) proposes to remove
the numbering as unnecessary and
superfluous.
Rule 1017(k)(E) proposes to reword
this rule text to add more clarity by
adding the phrase, ‘‘During the opening
of the option series, where there is an
execution possible,’’ to give context to
what follows, which is the manner in
which the system will allocate order.
The rule states the system will give
priority to market orders first, in time
priority. The words ‘‘in time priority’’
were removed as unnecessary because
the Exchange references the specific
allocation provision in Rule 1014(g)(vii).
Quotes are added to the rule text
because only limit orders were
mentioned and quotes should have also
been included to complete the interest
that is available to trade.
Finally, Rule 1017(k)(F) proposes to
reword the text to state, ‘‘Upon opening
of an option series’’, instead of ‘‘When
the open series opens’’ to provide a
more accurate representation of the
timing of that process. Also, the
Exchange proposes to insert the phrase
‘‘regardless of an execution’’ to explain
that an opening can occur with or
without a trade. This language matches
the ISE language.
As noted, the Exchange believes that
these proposed amendments add clarity
to the rule text, but the proposed
amendments do not substantively
amend the manner in which the
Opening Process occurs.
of the Act,6 in general, and furthers the
objectives of Section 6(b)(5) of the Act,7
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest by
conforming Phlx Rule 1017 to ISE Rule
701. The proposed language is nonsubstantive in nature and does not
amend the manner in which Phlx’s
Opening Process occurs. Rather, the
proposed language clarifies the existing
language and provides more context to
the manner in which the rule operates
which amendments provide investors
and the public interest with greater
clarity as to the operation of the
Opening Process.
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. Conforming
Phlx’s Rule to that of ISE is not a
substantive amendment, the Phlx
Opening Process will continue to
operate in the same manner as today.
The proposal does not change the
intense competition that exists among
the options markets for options business
including on the opening. Nor does the
Exchange believe that the proposal will
impose any burden on intra-market
competition; the Opening Process
involves many types of participants and
interest.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 8 and
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
8 15 U.S.C. 78s(b)(3)(A)(iii).
7 15
E:\FR\FM\06JNN1.SGM
06JNN1
Federal Register / Vol. 82, No. 107 / Tuesday, June 6, 2017 / Notices
subparagraph (f)(6) of Rule 19b–4
thereunder.9
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2017–40 on the subject line.
mstockstill on DSK30JT082PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2017–40. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
9 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
VerDate Sep<11>2014
20:52 Jun 05, 2017
Jkt 241001
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–
2017–40 and should be submitted on or
before June 27, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–11604 Filed 6–5–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80828; File No. SR–BOX–
2017–18]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
Rule 7260 by Extending the Penny
Pilot Program Through December 31,
2017
May 31, 2017.
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 May 23,
2017, BOX Options Exchange LLC (the
‘‘Exchange’’) 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 self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7260 by extending the Penny Pilot
Program through December 31, 2017.
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
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00134
Fmt 4703
Sfmt 4703
26175
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
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to extend the
effective time period of the Penny Pilot
Program that is currently scheduled to
expire on June 30, 2017, until December
31, 2017.3 The Penny Pilot Program
permits certain classes to be quoted in
penny increments. The minimum price
variation for all classes included in the
Penny Pilot Program, except for
PowerShares QQQ Trust (‘‘QQQQ’’)®,
SPDR S&P 500 Exchange Traded Funds
(‘‘SPY’’), and iShares Russell 2000 Index
Funds (‘‘IWM’’), will continue to be
$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 will continue to be quoted in $0.01
increments for all options series.
The Exchange may replace, on a semiannual basis, any Pilot Program classes
3 The Penny Pilot Program has been in effect on
the Exchange since its inception in May 2012. See
Securities Exchange Act Release Nos. 66871 (April
27, 2012), 77 FR 26323 (May 3, 2012) (File No.10–
206, In the Matter of the Application of BOX
Options Exchange LLC for Registration as a
National Securities Exchange Findings, Opinion,
and Order of the Commission), 67328 (June 29,
2012), 77 FR 40123 (July 6, 2012) (SR–BOX–2012–
007), 68425 (December 13, 2012), 77 FR 75234
(December 19, 2013) (SR–BOX–2012–021), 69789
(June 18, 2013), 78 FR 37854 (June 24, 2013) (SR–
BOX–2013–31), 71056 (December 12, 2013), 78 FR
76691 (December 18, 2013) (SR–BOX–2013–56),
72348 (June 9, 2014), 79 FR 33976 (June 13, 2014)
(SR–BOX–2014–17), 73822 (December 11, 2014), 79
FR 75606 (December 18, 2014) (SR–BOX–2014–29),
75295 (June 25, 2015), 80 FR 37690 (July 1,
2015)(SR–BOX–2015–23), 78172 (June 28, 2016), 81
FR 43325 (July 1, 2016)(SR–BOX–2016–24) and
79429 (November 30, 2016), 81 FR 87991
(December 6, 2016)(SR–BOX–2016–55). The
extension of the effective date and the revision of
the date to replace issues that have been delisted
are the only changes to the Penny Pilot Program
being proposed at this time.
E:\FR\FM\06JNN1.SGM
06JNN1
]]>Agencies
[Federal Register Volume 82, Number 107 (Tuesday, June 6, 2017)]
[Notices]
[Pages 26171-26175]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11604]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80820; File No. SR-Phlx-2017-40]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Openings
in Options Rule
May 31, 2017.
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 May 22, 2017, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') 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 Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 1017, Openings in Options, to
conform this rule to recently filed Nasdaq ISE, LLC (``ISE'') Rule 701.
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.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend its rules relating to its
opening process to conform the rule to a recently filed ISE rule
change.\3\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 80225 (March 13,
2017), 82 FR 14243 (March 17, 2017)(SR-ISE-2017-02).
---------------------------------------------------------------------------
Conform Rule Text to ISE Rule
ISE recently filed to adopt Phlx's Opening Process.\4\ In adopting
this rule, certain non-substantive modifications were made to the ISE
rule text to further clarify the manner in which the Opening Process
occurs. At this time, the Exchange proposes to amend Phlx Rule 1017 to
conform certain rule text to ISE Rule 701.
---------------------------------------------------------------------------
\4\ See note 3 above.
---------------------------------------------------------------------------
With respect to the definitions at Rule 1017(a), ISE alphabetized
the definitions. Phlx proposes to reorder the
[[Page 26172]]
definitions to alphabetize them as well, so they are ordered in the
same manner as ISE Rule 701, where applicable.\5\ Please note that the
Phlx definitions remain the same referring to Phlx specific definitions
and the applicable cross-references except for the changes noted
hereafter. The definition of Quality Opening Market at proposed Rule
1017(a)(viii) is being expanded to conform to ISE's Rule. The Exchange
proposes to add more information in this definition about what the
calculation for Quality Opening Market is based on, namely the best bid
and offer of Valid Width Quotes. Also, the Exchange notes that the
differential between the best bid and offer are compared to reach this
determination. The Exchange makes clear that the allowable
differential, as determined by the Exchange, takes into account the
type of security (for example, Penny Pilot versus non-Penny Pilot
issue), volatility, option premium, and liquidity. The Exchange notes
that the Quality Opening Market differential is intended to ensure the
price at which the Exchange opens reflects current market conditions.
This proposal does not change the calculation of Quality Opening
Market, but provides more context to market participants to understand
the manner in which the Exchange arrives at a Quality Opening Market
for further clarity.
---------------------------------------------------------------------------
\5\ Phlx market makers have different titles as compared to ISE
market makers.
---------------------------------------------------------------------------
Rule 1017(b) proposes to amend text explaining what interest is
included in the Opening Process. The rule today specifies what may be
submitted, the elimination of redundant text simply makes clear what
will not be included in the Opening Process. Quotes other than Valid
Width Quotes will not be included in the Opening Process. The purpose
of this change was to make the rule text simple and clear. The rule
continues to make clear what interest will be included within the
Opening Process. Phlx Rule 1017(b)(ii) is adding a reference to Rule
1014 for allocation purposes similar to ISE Rule 713.
Rule 1017(d)(i) proposes to amend the rule text to clarify that any
of the options for opening with a Valid Width Quote in Rule
1017(d)(i)(A)-(C) may apply. The word ``either'' was not as clear that
there were three choices for opening the market. In addition, the
Exchange proposes to add the words ``for the underlying currency'' to
describe that for U.S. dollar-settled foreign currency options it would
be within two minutes of the market opening for the underlying
currency. The reference should help readers understand which security
is being discussed for the opening. Finally within this paragraph the
Exchange is removing the capitalization from ``Opening Price'' because
the opening price being referenced is the opening price for the
undelying [sic] index, not the Opening Price as defined in Rule 1017.
Rule 1017(d)(ii) proposes to rearrange the rule text for clarity to
make clear that for all options, for the Opening Process to commence
the underlying security must be open on the primary market. The
Exchange is not proposing to substantively amend the process. The
proposed text changes make clear the purpose of the paragraph by
explaining that the text explains a prerequisite for the Opening
Process.
Rule 1017(d)(iv) proposes to add a ``this'' before Rule 1017 for
emphasis. The Exchange proposes to segregate Rule 1017(d)(v) rule text
to explain when an ABBO becomes crossed. Other minor changes are
proposed to this section to simply clarify the rule text.
Rule 1017(f) proposes to amend the rule text to account for three
conditions that must all exist to open with a PBBO. The change
emphasizes the conditions, three of them, that must be met to open with
a PBBO.
Rule 1017(h) proposes to amend the rule text to clarify that orders
include Opening Sweeps. Opening Sweeps is already mentioned in the rule
text, the placement of its mention is changed so that it is
subcategorized in thinking about orders. The rule text also cross-
references to Potential Opening Price to provide a roadmap within the
rule.
Rule 1017(h)(C) proposes to add clarifying text to specify the
Potential Opening Price is bounded by the better away market. The word
``limited'' was previously used and is being replaced by another word
``bounded'' to describe the same process. The ``better'' is added to
clarify that it is the away market that is being considered.
Rule 1017(i) proposes to clarify the rule text with respect to the
manner in which Opening with a Trade will occur. The proposed rule text
simplifies the language in the rule. Rule 1017(i)(B)(2) proposes to
insert the words ``would cross'' in place of ``that crosses.'' Also,
additional language is proposed to be added to Rule 1017(i)(B)(2)(b)
regarding the mid-point calculation. The current text simply notes that
Exchange would open the option series for trading with an execution and
use the best price which the Potential Opening Price crosses as a
boundary price for the purposes of the mid-point calculation. The new
text is more explicit, and makes clear that in order to calculate the
midpoint, the Exchange will use the better of the Pre-Market BBO or
ABBO as a boundary price, which is more specific than simply ``best
price.'' Instead of stating the Exchange will open the option series
for trading with an execution, the amendment adds ``at the resulting
Potential Opening Price,'' which makes clear what price it would open
with when opening with a trade. The current text does not explain what
happens if the conditions described in Rule 1017(i)(B)(2) are not met.
The proposed text once again provides a guidepost within the rule to
make clear that if the conditions are not met, the text leads to
paragraph (j) which describes the Opening Quote Range and thereafter,
the Price Discovery Mechanism in paragraph (k).
Rule 1017(j) proposes to amend to clarify that the system will
calculate an Opening Quote Range if the Exchange has not opened under
any of the provisions from 1017(a)-(i). The word ``sub'' is proposed to
be removed before the word ``paragraph'' in certain places throughout
Rule 1017 because it is unnecessary.
Rule 1017(j)(3) proposes to amend the rule text to add more context
to this paragraph. Currently, the rule text provides that if one or
more away markets have disseminated opening quotes that are not crossed
and there are Valid Width Quotes on the Exchange that cross each other
or that cross away market quotes then the information in subparagraph
(a) and (b) below would apply. The proposed new text uses the word
``disseminating'' for accuracy, because quotes are disseminated and
instead of ``opening quotes'' the more precise ``BBO'' is utilized. A
parenthetical is added to note that the Opening Process stops, because
the market is crossed, and the series will not open if the ABBO becomes
crossed as previously noted in Rule 1017(d)(v). This is another
guidepost, in this case to emphasize again that the Exchange will not
open with an ABBO that is crossed. The BBO cannot be crossed because it
is indicative of uncertainty in the marketplace of where the option
series should be valued. In this case, the Exchange will wait for the
ABBO to become uncrossed before initiating the Opening Process to
ensure that there is stability in the marketplace in order to assist
the Exchange in determining the Opening Price. Rule 1017(j) indicates
that the existence of all three conditions in Rule 1017(j)(1)-(3)
warrant further price discovery to validate or perhaps update the
Potential Opening Price and to attract additional interest to perhaps
render an opening trade possible, because in the case of paragraph (2)
[[Page 26173]]
specifically, the lack of an ABBO means there is no external check on
the Exchange's market for that options series. If there are Valid Width
Quotes on the Exchange that are executable against (which language
replaces the word ``cross'' which the Exchange believes has the same
meaning as ``executable against'') each other or the ABBO (the ABBO is
added for clarity in place of ``that cross away market quotes'') then
subparagraphs (a) and (b) apply to determine an Opening Quote Range for
a particular options series. These additions are intended to provide
additional detail to the rule that the Exchange believes will be
helpful to the reader.
Furthermore, the words ``away bid'' and ``away offer'' are
replacements for the concepts of quote bid/offer among quotes on away
markets in Rules 1017(j)(3)(a) and (b). The Exchange does not believe
there is any difference in those words, simply a more efficient word
usage choice.
Rule 1017(j)(4) proposes to replace the word ``opening quotes''
with the more specific defined term ``Valid Width Quotes.'' The
Exchange recognizes that opening quotes was intended to have the
meaning that is intended in Valid Width Quotes and incorrectly did not
utilize the definition in the initial filing. The term Valid Width
Quote is what was intended when the Exchange utilized the more general
term ``opening quote.'' The word cross is being replaced with ``are
executable against.'' The Exchange used the term cross in the Phlx
original filing and is now conforming these words to the approved words
in the ISE rule change ``are executable against'' to signify that no
difference was intended. The Exchange believes that this is an example
of different word choice. The words ``disseminating a BBO'' are being
added in this paragraph to more clearly express that each exchange
disseminates a BBO. An exchange broadcasts its market's best bid or
offer by disseminating it publically so that other exchanges are aware
of what is the away market BBO. This more specific language simply
provides more context to the sentence.
Rule 1017(j)(5) proposes to replace certain language in that rule
text with more clarifying language. The new rule text replaces the
words ``through the'' OQR with ``wider than the'' OQR. The words were
intended to mean that the OQR must be exceeded. The word choice was
amended to ``wider than'' in the ISE filing to make this point. The
same language is being amended in this rule for consistency. Also, the
Exchange notes in this paragraph that ``If there is more than one
Potential Opening Price possible where no contracts would be left
unexecuted, any price used for the mid-point calculation (which is
described in subparagraph (h) above) that is wider than the OQR will be
restricted to the OQR price on that side of the market for the purposes
of the mid-point calculation.'' The calculation is now being more
specifically defined as the ``mid-point'' calculation to be clear at
this point in the rule the mid-point is the calculation being
discussed.
Rule 1017(j)(6) is being amended to add clarifying language.
Currently the paragraph states ``[i]f there is more than one Potential
Opening Price possible where no contracts would be left unexecuted and
any price used for the mid-point calculation (which is described in
subparagraph (h) above) an away market price when contracts will be
routed, the system will use the away market price as the Potential
Opening Price.'' The Exchange proposes to instead remove the reference
``and any price used for the mid-point calculation (which is described
in subparagraph (h) above)'' and instead simply state ``pursuant to
paragraph (h)(C)'' which describes the Potential Opening Price. The
Exchange believes that the replacement language avoids confusion to the
reader because as proposed it would reference the specific language in
the rule.
Rule 1017(j)(7) is being amended to add clarifying language.
Currently the paragraph states, ``If non-routable interest can be
maximum executable against Exchange interest after routable interest
has been determined by the system to satisfy the away market . . .''
The purpose of this sentence was intended to convey that the Exchange
will attempt to execute as much interest as possible at the opening. It
was suggested in the ISE filing that another way to state this concept
was ``If the Exchange determines that non-routable interest can execute
the maximum number of contracts against Exchange interest, after
routable interest has been determined by the system to satisfy the away
market . . .'' The Exchange amended the language in the ISE filing to
be clear. The Exchange proposes the same revision in the Phlx rule
text. This is not a substantive change. The current sentence goes on to
state, ``then the Potential Opening Price is the price at which the
maximum volume, excluding the volume which will be routed to an away
market . . .'' The ISE rule change removed the references to ``volume''
and instead replaced the concept of volume as follows, ``then the
Potential Opening Price is the price at which the maximum number of
contacts can execute, excluding the interest which will be routed to an
away market . . .'' The Exchange notes that the new language is more
specific because instead of volume in the first instance, the concept
is expanded to the number of contracts executed and instead of volume
in the second instance, the concept of interest is more accurate.
Rule 1017(k)(A) proposes to add language for clarity. The paragraph
starts, ``First, the system will broadcast an Imbalance Message.'' It
was noted in the ISE filing that adding ``for the affected series''
would be more specific, because the message concerns a certain series.
The sentence then states, ``(which includes the symbol, side of the
imbalance (unmatched contracts), size of matched contracts, size of the
imbalance, and price of the affected series which must be within the
Pre-Market BBO) . . .'' Instead of just stating price, the revision
includes the more specific reference to the defined term ``Potential
Opening Price,'' which is the actual price being discussed in the
paragraph. Because ``the affected series'' was added to the beginning
of the sentence, where it was relocated, it is no longer needed at this
point in the sentence. Finally, a sentence is being added to the end of
the paragraph to simply make clear in the rule text, as was explained
in the 19b-4, that each Imbalance Message is subject to an Imbalance
Timer.
Rule 1017(k)(B) proposes to replace certain language in that rule
text with more clarifying language. The current rule text states, ``If
during or at the end of the Imbalance Timer, the Opening Price is at or
within the OQR, the Imbalance Timer will execute at the Opening Price .
. .'' The ISE filing replaces the words ``execute at'' with more
explicit language ``open with a trade at'' to convey that the trade is
the manner in which the Phlx opens the market. This is not a
substantive change, but different word usage. The current rule text
continues later, ``If no new interest comes in during the Imbalance
Timer and the Opening Price is at or within OQR, the Exchange will open
at the end of the Imbalance Timer.'' The ``Opening Price'' is again
being more specifically changed to the defined term ``Potential Opening
Price'' here and the concept is again added to the end of the sentence
to make clear that the Exchange will open with a trade at the end of
the Imbalance Timer at the Potential Opening Price. The new language
makes clear again that the trade is the manner in which the Phlx opens
the market at the Potential Opening Price.
[[Page 26174]]
Rule 1017(k)(C)(1) proposes to replace the words ``without
trading'' with ``and would not trade'' for clarity. This is simply a
change in word choice and is not a substantive change.
Rule 1017(k)(C)(2) replaces the word ``other'' with ``away'' to
describe a market other than Phlx. The word ``simultaneously'' is added
to describe the order in which the trade will occur and the timer will
end. The word ``Potential Opening Price'' was added to demonstrate the
effect on this price more clearly as described herein in Rule
1017(k)(B). The Exchange also proposes to amend language that
references ``will trade'' to instead more accurately states ``will open
with trades'' to more precisely express that the system will open with
the trade.
Rule 1017(k)(C)(3) proposes to add a clause at the beginning of the
text ``If no trade occurred pursuant to (2) above'' as a roadmap to
connect the rule. The words ``without trading'' are proposed to be
replaced with ``and would not trade'' for clarity. Also, the word
``series'' is being added after the word ``options'' for more
specificity.
Rule 1017(k)(C)(3)(i) proposes to add the words ``better priced
away'' to the beginning of the sentence. Currently, the sentence reads,
``If the total number of displayed contracts at better prices than the
Exchange's Potential Opening Price on away markets (``better priced
away contracts'') . . .'' The ISE filings just noted ``better priced
away contracts'' rather than the more in depth explanation of displayed
at better prices than the Exchange's Potential Opening Price on away
markets (``better priced away contracts''), for simplicity. The
language is being relocated to modify the term contract at the
beginning of the sentence rather than at the end of the sentence.
Finally, the language in the last sentence of this paragraph is being
amended to replace ``routed to other away markets'' to ``routed to away
markets.'' This is simply a verbiage change to match the ISE rule.
Rule 1017(k)(C)(3)(ii) proposes to amend the rule text to add a
clause ``based on price/time priority of routable interest'' for
clarity as to the allocation method being utilized in this instance to
route the orders. By adding the allocation method to the rule text, it
makes it clear to market participants the order in which the Exchange
will route orders. Further, the term ``other'' is proposed to be
replaced by ``away'' to describe markets other than ``Phlx''.
References to ``Phlx'' and ``at the Exchange Opening Price'' is
proposed to be removed as unnecessary and superfluous.
Rule 1017(k)(C)(3)(iii) proposes to amend the rule text to add a
clause ``based on price/time priority of routable interest'' for
clarity, as described in Rule 1017(k)(C)(3)(ii). Further, the term
``other'' is proposed to be replaced by ``away'' to describe markets
other than ``Phlx''.
Rule 1017(k)(C)(5) proposes to add a term ``paragraph'' to provide
more context to the reference to ``(4) above.'' Also, the words ``the
series by executing'' is proposed to be added to the rule text to refer
to what is being opened, which is the open series and the manner in
which that will happen is with an execution. The language is more
explicit. The term ``other'' is proposed to be replaced by ``away'' to
describe markets other than ``Phlx''. A sentence is proposed to be
added to the end of this rule text, ``All other interest will be
eligible for trading after opening'' to provide context to the manner
in which interest will be handled by the system.
Rule 1017(k)(D) proposes to remove the numbering as unnecessary and
superfluous.
Rule 1017(k)(E) proposes to reword this rule text to add more
clarity by adding the phrase, ``During the opening of the option
series, where there is an execution possible,'' to give context to what
follows, which is the manner in which the system will allocate order.
The rule states the system will give priority to market orders first,
in time priority. The words ``in time priority'' were removed as
unnecessary because the Exchange references the specific allocation
provision in Rule 1014(g)(vii). Quotes are added to the rule text
because only limit orders were mentioned and quotes should have also
been included to complete the interest that is available to trade.
Finally, Rule 1017(k)(F) proposes to reword the text to state,
``Upon opening of an option series'', instead of ``When the open series
opens'' to provide a more accurate representation of the timing of that
process. Also, the Exchange proposes to insert the phrase ``regardless
of an execution'' to explain that an opening can occur with or without
a trade. This language matches the ISE language.
As noted, the Exchange believes that these proposed amendments add
clarity to the rule text, but the proposed amendments do not
substantively amend the manner in which the Opening Process occurs.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\7\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest by
conforming Phlx Rule 1017 to ISE Rule 701. The proposed language is
non-substantive in nature and does not amend the manner in which Phlx's
Opening Process occurs. Rather, the proposed language clarifies the
existing language and provides more context to the manner in which the
rule operates which amendments provide investors and the public
interest with greater clarity as to the operation of the Opening
Process.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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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. Conforming Phlx's Rule to that
of ISE is not a substantive amendment, the Phlx Opening Process will
continue to operate in the same manner as today. The proposal does not
change the intense competition that exists among the options markets
for options business including on the opening. Nor does the Exchange
believe that the proposal will impose any burden on intra-market
competition; the Opening Process involves many types of participants
and interest.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \8\ and
[[Page 26175]]
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2017-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2017-40. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2017-40 and should be
submitted on or before June 27, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11604 Filed 6-5-17; 8:45 am]
BILLING CODE 8011-01-P
