Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Proposed Rule Change to a Proposal To Amend Rule 1027, Discretionary Accounts, To Conform It More Closely to a Comparable Rule of the Chicago Board Options Exchange (“CBOE”) and To Make Minor Corrections and Clarifications, 36469-36471 [2017-16405]
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Federal Register / Vol. 82, No. 149 / Friday, August 4, 2017 / Notices
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed rule
change will protect investors and the
public interest by reducing potential
confusing regarding CBOE’s trading
hours for options on ETPs and aligning
CBOE’s Rules regarding trading orders
for options on ETPs with industry
practice. The Exchange notes that the
proposed rule is based on C2 Rule 6.1
and NYSE MKT Rule 901NY
Commentary .02.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change will not impose
any burden on intermarket or
intramarket competition as the proposed
rule change will align CBOE’s Rules
regarding trading orders for options on
ETPs with industry practice. In
addition, the proposed rule change does
not modify the construct for trading
hours but simply identifies the products
that may close at 3:00 p.m. (CT) or 3:15
p.m. (CT), which is consistent with the
industry.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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 9 and
subparagraph (f)(6) Rule 19b-4
thereunder.10
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
10 17
VerDate Sep<11>2014
15:13 Aug 03, 2017
Jkt 241001
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
36469
available publicly. All submissions
should refer to File Number SR–CBOE–
2017–056 and should be submitted on
or before August 25, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–16397 Filed 8–3–17; 8:45 am]
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:
BILLING CODE 8011–01–P
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–
CBOE–2017–056 on the subject line.
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing of
Proposed Rule Change to a Proposal
To Amend Rule 1027, Discretionary
Accounts, To Conform It More Closely
to a Comparable Rule of the Chicago
Board Options Exchange (‘‘CBOE’’)
and To Make Minor Corrections and
Clarifications
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–CBOE–2017–056. 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
PO 00000
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Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81270; File No. SR–Phlx–
2017–56]
July 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 July 20,
2017, NASDAQ PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, 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 1027, Discretionary Accounts, to
conform it more closely to a comparable
rule of the Chicago Board Options
Exchange (‘‘CBOE’’) and to make minor
corrections and clarifications.
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.
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\04AUN1.SGM
04AUN1
36470
Federal Register / Vol. 82, No. 149 / Friday, August 4, 2017 / Notices
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
Rule 1027 generally imposes
restrictions and various requirements on
members 3 and partners and employees
of member organizations 4 regarding the
exercise of discretionary power with
respect to trading in options in a
customer’s accounts. The Exchange
proposes to amend Rule 1027 in a
number of respects to eliminate
redundant rule text, clarify certain rule
text, and conform parts of the rule more
closely to CBOE Rule 9.10,
Discretionary Account.5
3 Exchange
Rule 1(n) defines ‘‘member’’ as a
permit holder which has not been terminated in
accordance with the By-Laws and Rules of the
Exchange. The Exchange has issued ‘‘Series A–1’’
permits, which confer on the holder rights and
privileges, and impose on the holder the
obligations, set forth in Exchange Rule 908. Under
Exchange Rule 908(b) a Series A–1 permit may only
be issued to an individual who is a natural person
of at least twenty-one (21) years of age, or to a
corporation meeting the eligibility and application
requirements set forth in the By-Laws and Rules.
4 Rule 1(o) defines ‘‘member organization’’ as ‘‘a
corporation, partnership (general or limited),
limited liability partnership, limited liability
company, business trust or similar organization,
transacting business as a broker or a dealer in
securities and which has the status of a member
organization by virtue of (i) admission to
membership given to it by the Membership
Department pursuant to the provisions of Rules
900.1 or 900.2 or the By-Laws or (ii) the transitional
rules adopted by the Exchange pursuant to Section
6–4 of the By-Laws.’’ Rule 901(a) provides in part
that ‘‘[t]he Membership Department shall have
jurisdiction over the issuance of memberships (in
respect of members and member organizations) and
permits and over applications by non-members for
admission as members.’’ Rule 901(c) provides that
‘‘[a]ll applications to qualify and register a
corporation or other entity as a member
organization and all applications for reinstatement
of any qualification or registration of a member
organization shall be referred to the Membership
Department which shall investigate and act
thereon.’’
5 CBOE Rule 9.10 was substantially amended in
Securities Exchange Act Release No. 56492
(September 21, 2007), 72 FR 54952 (September 27,
VerDate Sep<11>2014
15:13 Aug 03, 2017
Jkt 241001
Rule 1027(a)
Rules 1027(a)(i) and (ii) apply to stock
or exchange-traded fund share options
and foreign currency options
respectively. These provisions prohibit
the exercise of any discretionary power
with respect to trading in options
contracts in a customer’s account unless
such customer has given prior written
authorization with respect to such
trading and the account has been
accepted in writing by a designated
Registered Options Principal or, in the
case of foreign currency options, a
Foreign Currency Options Principal.
Rule 1027(a)(i) is proposed to be
amended to include index options, as
their current exclusion from the rule is
without a rational basis and was likely
an oversight. References to Registered
Options Principal ‘‘qualified persons’’
or ‘‘qualified individuals’’ in Rule
1027(a)(i) are proposed to be amended
in order to refer only to ‘‘Registered
Options Principals,’’ in order to
eliminate needless ambiguity and lack
of clarity as to who is a Registered
Options Principal ‘‘qualified person’’ or
‘‘qualified individual.’’ Additionally,
the last two sentences of Section (a)(i)
currently provide that every
discretionary order shall be identified as
discretionary at the time of entry, and
that discretionary accounts shall receive
frequent review by a Registered Options
Principal qualified person specifically
delegated such responsibilities under
Rule 1025, who is not exercising the
discretionary authority. These sentences
are largely duplicative of existing Rule
1027(a)(iii) and are therefore proposed
to be deleted. The rule would be
expanded to cover member
organizations, to be more consistent
with the comparable CBOE rule which
applies to CBOE Trading Permit Holder
(‘‘TPH’’) organizations.6
The Exchange proposes to delete from
Section (a)(iii) a reference to
‘‘Compliance Registered Option
Principal,’’ a term which the Exchange
2007) (SR–CBOE–2007–106) to create a supervisory
structure for options that is similar to that required
by New York Stock Exchange (‘‘NYSE’’) and
National Association of Securities Dealers
(‘‘NASD’’) rules. On July 26, 2007, the Commission
approved a proposed rule change filed by NASD to
amend NASD’s Certificate of Incorporation to
reflect its name change to Financial Industry
Regulatory Authority Inc., or FINRA, in connection
with the consolidation of the member firm
regulatory functions of NASD and NYSE
Regulation, Inc. See Securities Exchange Act
Release No. 56146 (July 26, 2007).
6 Rule 1027(a)(ii) deals with foreign currency
options and has no counterpart in CBOE Rule
9.10(a). The Exchange is nevertheless proposing to
revise Rule 1027(a)(ii) by expanding its scope to
include member organizations for consistency with
Rule 1027(a)(i) in terms of extent of coverage of the
rule.
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
no longer uses, and proposes to
substitute the term ‘‘Registered Options
Principal.’’ It also proposes to amend
that section by adding language
requiring the Registered Options
Principal providing appropriate
supervisory review to be specifically
delegated such responsibilities under
Rule 1025 and not be the Registered
Options Principal exercising the
discretionary review. These changes
would conform Section (a)(iii) to the
duplicative language deleted from
Section (a)(i) as described above. The
Exchange also proposes to delete the
last sentence of Section (a)(iii), which
provides that the provisions of
paragraph (a) shall not apply to
discretion as to the price at which or the
time when an order given by a customer
for the purchase or sale of a definite
number of option contracts in a
specified security or foreign currency
shall be executed. This sentence is
largely duplicative of existing language
in Rule 1027(e), Discretion as to Time or
Price Excepted. Rule 1027(e), however,
is proposed to be amended by the
addition of a reference to ‘‘foreign
currency’’ which was present in the
deleted sentence of Section (a)(iii).
The Exchange is proposing no
changes to section (a)(iv) which extends
the provisions of Rule 1027 to index
warrants, as no changes are required.
Rule 1027(c) Prohibited Transactions
Currently, Rule 1027(c) prohibits
members as well as partners, officers
and employees of a member
organization having discretionary power
over a customer’s account from, in the
exercise of such discretion, executing or
causing to be executed therein any
purchases or sales of option contracts
which are excessive in size or frequency
in view of the financial resources in
such account. The prohibition is
proposed to be reworded, to conform
Phlx Rule 1027(c) more closely to CBOE
Rule 9.10, Discretionary Accounts,
section (c). Additionally, the rule would
be expanded to cover member
organizations as well as members and
partners and employees of member
organizations.
Rule 1027(d) Record of Transactions
Rule 1027(d) currently requires a
record to be made of every transaction
in option contracts in respect to which
a member or a partner, officer or
employee of a member organization has
exercised discretionary authority,
clearly reflecting such fact and
indicating the name of the customer, the
designation and number of the option
contracts, the premium and the date and
time when such transaction was
E:\FR\FM\04AUN1.SGM
04AUN1
Federal Register / Vol. 82, No. 149 / Friday, August 4, 2017 / Notices
effected. The Exchange proposes to
reword the rule so that it applies to
option transactions for an account in
respect to which a member or member
organization or a partner, officer or
employee of a member organization is
vested with any discretionary authority,
and to detail the required content of the
record. The revision proposed for Rule
1027(d) would conform the rule more
closely to CBOE Rule 9.10,
Discretionary Accounts, section (b),
which extends to CBOE TPH
organizations, except that the Exchange
proposes to retain the existing
requirement that the transaction record
clearly reflect that the member (or, as
the rule is proposed to be amended,
member organization) or a partner,
officer or employee of a member
organization has exercised discretionary
authority, as the Exchange believes this
to be important information with
respect to a transaction.
Rule 1027(e)
As discussed above the Exchange
proposes to amend Rule 1027(e), which
generally excludes price and time
discretion from the requirements of Rule
1027, to cover foreign currency options.
The Exchange also proposes to correct
an internal cross reference to ‘‘this
paragraph (d)’’ which should read ‘‘this
paragraph (e)’’.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Section 6(b)(5) of the Act,8
in particular, in that it is designed to
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. The
amendment of the requirements
associated with discretionary accounts
should remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, by eliminating redundant rule
text, clarifying certain rule text, and
conforming parts of the rule more
closely to CBOE Rule 9.10,
Discretionary Accounts which should
create greater regulatory parity among
options exchanges regarding obligations
toward customers’ discretionary
accounts—reducing a source of
potential regulatory arbitrage—and by
creating more efficient regulatory
compliance by members of both
exchanges due to reduction of
7 15
8 15
15:13 Aug 03, 2017
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.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be 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:
Jkt 241001
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2017–56. 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–2017–56 and should
be submitted on or before August 25,
2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–16405 Filed 8–3–17; 8:45 am]
BILLING CODE 8011–01–P
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–2017–56 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Sep<11>2014
differences in wording and consequent
potential for inadvertent regulatory
noncompliance. The Exchange believes
it is in the public interest for a more
consistently worded regulatory policy
and standard regarding discretionary
accounts to be in effect across options
exchanges, for the benefit of customers.
The harmonized rules are designed to
further the goal of harmonized
examinations and enforcement of
similar rules, thus reducing duplicative
regulatory efforts, thus lowering
regulatory cost passed on to member
organizations and the general public.
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9 17
E:\FR\FM\04AUN1.SGM
CFR 200.30–3(a)(12).
04AUN1
]]>Agencies
[Federal Register Volume 82, Number 149 (Friday, August 4, 2017)]
[Notices]
[Pages 36469-36471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16405]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81270; File No. SR-Phlx-2017-56]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
of Proposed Rule Change to a Proposal To Amend Rule 1027, Discretionary
Accounts, To Conform It More Closely to a Comparable Rule of the
Chicago Board Options Exchange (``CBOE'') and To Make Minor Corrections
and Clarifications
July 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 July 20, 2017, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, 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 1027, Discretionary Accounts,
to conform it more closely to a comparable rule of the Chicago Board
Options Exchange (``CBOE'') and to make minor corrections and
clarifications.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqphlx.cchwallstreet.com/ com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
[[Page 36470]]
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
Rule 1027 generally imposes restrictions and various requirements
on members \3\ and partners and employees of member organizations \4\
regarding the exercise of discretionary power with respect to trading
in options in a customer's accounts. The Exchange proposes to amend
Rule 1027 in a number of respects to eliminate redundant rule text,
clarify certain rule text, and conform parts of the rule more closely
to CBOE Rule 9.10, Discretionary Account.\5\
---------------------------------------------------------------------------
\3\ Exchange Rule 1(n) defines ``member'' as a permit holder
which has not been terminated in accordance with the By-Laws and
Rules of the Exchange. The Exchange has issued ``Series A-1''
permits, which confer on the holder rights and privileges, and
impose on the holder the obligations, set forth in Exchange Rule
908. Under Exchange Rule 908(b) a Series A-1 permit may only be
issued to an individual who is a natural person of at least twenty-
one (21) years of age, or to a corporation meeting the eligibility
and application requirements set forth in the By-Laws and Rules.
\4\ Rule 1(o) defines ``member organization'' as ``a
corporation, partnership (general or limited), limited liability
partnership, limited liability company, business trust or similar
organization, transacting business as a broker or a dealer in
securities and which has the status of a member organization by
virtue of (i) admission to membership given to it by the Membership
Department pursuant to the provisions of Rules 900.1 or 900.2 or the
By-Laws or (ii) the transitional rules adopted by the Exchange
pursuant to Section 6-4 of the By-Laws.'' Rule 901(a) provides in
part that ``[t]he Membership Department shall have jurisdiction over
the issuance of memberships (in respect of members and member
organizations) and permits and over applications by non-members for
admission as members.'' Rule 901(c) provides that ``[a]ll
applications to qualify and register a corporation or other entity
as a member organization and all applications for reinstatement of
any qualification or registration of a member organization shall be
referred to the Membership Department which shall investigate and
act thereon.''
\5\ CBOE Rule 9.10 was substantially amended in Securities
Exchange Act Release No. 56492 (September 21, 2007), 72 FR 54952
(September 27, 2007) (SR-CBOE-2007-106) to create a supervisory
structure for options that is similar to that required by New York
Stock Exchange (``NYSE'') and National Association of Securities
Dealers (``NASD'') rules. On July 26, 2007, the Commission approved
a proposed rule change filed by NASD to amend NASD's Certificate of
Incorporation to reflect its name change to Financial Industry
Regulatory Authority Inc., or FINRA, in connection with the
consolidation of the member firm regulatory functions of NASD and
NYSE Regulation, Inc. See Securities Exchange Act Release No. 56146
(July 26, 2007).
---------------------------------------------------------------------------
Rule 1027(a)
Rules 1027(a)(i) and (ii) apply to stock or exchange-traded fund
share options and foreign currency options respectively. These
provisions prohibit the exercise of any discretionary power with
respect to trading in options contracts in a customer's account unless
such customer has given prior written authorization with respect to
such trading and the account has been accepted in writing by a
designated Registered Options Principal or, in the case of foreign
currency options, a Foreign Currency Options Principal.
Rule 1027(a)(i) is proposed to be amended to include index options,
as their current exclusion from the rule is without a rational basis
and was likely an oversight. References to Registered Options Principal
``qualified persons'' or ``qualified individuals'' in Rule 1027(a)(i)
are proposed to be amended in order to refer only to ``Registered
Options Principals,'' in order to eliminate needless ambiguity and lack
of clarity as to who is a Registered Options Principal ``qualified
person'' or ``qualified individual.'' Additionally, the last two
sentences of Section (a)(i) currently provide that every discretionary
order shall be identified as discretionary at the time of entry, and
that discretionary accounts shall receive frequent review by a
Registered Options Principal qualified person specifically delegated
such responsibilities under Rule 1025, who is not exercising the
discretionary authority. These sentences are largely duplicative of
existing Rule 1027(a)(iii) and are therefore proposed to be deleted.
The rule would be expanded to cover member organizations, to be more
consistent with the comparable CBOE rule which applies to CBOE Trading
Permit Holder (``TPH'') organizations.\6\
---------------------------------------------------------------------------
\6\ Rule 1027(a)(ii) deals with foreign currency options and has
no counterpart in CBOE Rule 9.10(a). The Exchange is nevertheless
proposing to revise Rule 1027(a)(ii) by expanding its scope to
include member organizations for consistency with Rule 1027(a)(i) in
terms of extent of coverage of the rule.
---------------------------------------------------------------------------
The Exchange proposes to delete from Section (a)(iii) a reference
to ``Compliance Registered Option Principal,'' a term which the
Exchange no longer uses, and proposes to substitute the term
``Registered Options Principal.'' It also proposes to amend that
section by adding language requiring the Registered Options Principal
providing appropriate supervisory review to be specifically delegated
such responsibilities under Rule 1025 and not be the Registered Options
Principal exercising the discretionary review. These changes would
conform Section (a)(iii) to the duplicative language deleted from
Section (a)(i) as described above. The Exchange also proposes to delete
the last sentence of Section (a)(iii), which provides that the
provisions of paragraph (a) shall not apply to discretion as to the
price at which or the time when an order given by a customer for the
purchase or sale of a definite number of option contracts in a
specified security or foreign currency shall be executed. This sentence
is largely duplicative of existing language in Rule 1027(e), Discretion
as to Time or Price Excepted. Rule 1027(e), however, is proposed to be
amended by the addition of a reference to ``foreign currency'' which
was present in the deleted sentence of Section (a)(iii).
The Exchange is proposing no changes to section (a)(iv) which
extends the provisions of Rule 1027 to index warrants, as no changes
are required.
Rule 1027(c) Prohibited Transactions
Currently, Rule 1027(c) prohibits members as well as partners,
officers and employees of a member organization having discretionary
power over a customer's account from, in the exercise of such
discretion, executing or causing to be executed therein any purchases
or sales of option contracts which are excessive in size or frequency
in view of the financial resources in such account. The prohibition is
proposed to be reworded, to conform Phlx Rule 1027(c) more closely to
CBOE Rule 9.10, Discretionary Accounts, section (c). Additionally, the
rule would be expanded to cover member organizations as well as members
and partners and employees of member organizations.
Rule 1027(d) Record of Transactions
Rule 1027(d) currently requires a record to be made of every
transaction in option contracts in respect to which a member or a
partner, officer or employee of a member organization has exercised
discretionary authority, clearly reflecting such fact and indicating
the name of the customer, the designation and number of the option
contracts, the premium and the date and time when such transaction was
[[Page 36471]]
effected. The Exchange proposes to reword the rule so that it applies
to option transactions for an account in respect to which a member or
member organization or a partner, officer or employee of a member
organization is vested with any discretionary authority, and to detail
the required content of the record. The revision proposed for Rule
1027(d) would conform the rule more closely to CBOE Rule 9.10,
Discretionary Accounts, section (b), which extends to CBOE TPH
organizations, except that the Exchange proposes to retain the existing
requirement that the transaction record clearly reflect that the member
(or, as the rule is proposed to be amended, member organization) or a
partner, officer or employee of a member organization has exercised
discretionary authority, as the Exchange believes this to be important
information with respect to a transaction.
Rule 1027(e)
As discussed above the Exchange proposes to amend Rule 1027(e),
which generally excludes price and time discretion from the
requirements of Rule 1027, to cover foreign currency options. The
Exchange also proposes to correct an internal cross reference to ``this
paragraph (d)'' which should read ``this paragraph (e)''.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ in particular, in that it is designed to 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.
The amendment of the requirements associated with discretionary
accounts should remove impediments to and perfect the mechanism of a
free and open market and a national market system, by eliminating
redundant rule text, clarifying certain rule text, and conforming parts
of the rule more closely to CBOE Rule 9.10, Discretionary Accounts
which should create greater regulatory parity among options exchanges
regarding obligations toward customers' discretionary accounts--
reducing a source of potential regulatory arbitrage--and by creating
more efficient regulatory compliance by members of both exchanges due
to reduction of differences in wording and consequent potential for
inadvertent regulatory noncompliance. The Exchange believes it is in
the public interest for a more consistently worded regulatory policy
and standard regarding discretionary accounts to be in effect across
options exchanges, for the benefit of customers. The harmonized rules
are designed to further the goal of harmonized examinations and
enforcement of similar rules, thus reducing duplicative regulatory
efforts, thus lowering regulatory cost passed on to member
organizations and the general public.
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\7\ 15 U.S.C. 78f(b).
\8\ 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.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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-2017-56 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-2017-56. 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-2017-56 and
should be submitted on or before August 25, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16405 Filed 8-3-17; 8:45 am]
BILLING CODE 8011-01-P
