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]

Download as PDF 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. mstockstill on DSK30JT082PROD with NOTICES 1 The VerDate Sep<11>2014 20:52 Jun 05, 2017 Jkt 241001 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. PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 26171 ‘‘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 http://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. E:\FR\FM\06JNN1.SGM 06JNN1 mstockstill on DSK30JT082PROD with NOTICES 26172 Federal Register / Vol. 82, No. 107 / Tuesday, June 6, 2017 / Notices 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. VerDate Sep<11>2014 20:52 Jun 05, 2017 Jkt 241001 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 PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 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) E:\FR\FM\06JNN1.SGM 06JNN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 107 / Tuesday, June 6, 2017 / Notices 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 VerDate Sep<11>2014 20:52 Jun 05, 2017 Jkt 241001 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, PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 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. E:\FR\FM\06JNN1.SGM 06JNN1 mstockstill on DSK30JT082PROD with NOTICES 26174 Federal Register / Vol. 82, No. 107 / Tuesday, June 6, 2017 / Notices 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. VerDate Sep<11>2014 20:52 Jun 05, 2017 Jkt 241001 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 (http://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 (http://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 http:// 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]


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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 ``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 http://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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    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 (http://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 (http://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