Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Proposed Rule Change To Amend Certain Sections of Rules 1024, Conduct of Accounts for Options Trading, and of 1025, Supervision of Accounts, To Conform Them More Closely To Comparable Rules of the Chicago Board Options Exchange (“CBOE”) and To Make Minor Clarifications and Corrections to the Text, 44481-44483 [2017-20202]
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Federal Register / Vol. 82, No. 183 / Friday, September 22, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81642; File No. SR–Phlx–
2017–55)
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing of
Proposed Rule Change To Amend
Certain Sections of Rules 1024,
Conduct of Accounts for Options
Trading, and of 1025, Supervision of
Accounts, To Conform Them More
Closely To Comparable Rules of the
Chicago Board Options Exchange
(‘‘CBOE’’) and To Make Minor
Clarifications and Corrections to the
Text
September 18, 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
September 7, 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
certain sections of Rules 1024, Conduct
of Accounts for Options Trading, and of
1025, Supervision of Accounts, to
conform them more closely to
comparable rules of the Chicago Board
Options Exchange (‘‘CBOE’’) and to
make minor clarifications and
corrections to the text.
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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
18:11 Sep 21, 2017
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
Rules 1024 and 1025 contain a range
of regulatory requirements generally
applicable to Phlx members and
member organizations that conduct a
public customer options business. The
Exchange is proposing a number of
changes to certain sections of those
rules to clarify the language of those
rules and to correct inaccuracies. The
Exchange also proposes to change
certain rule language to conform the
rules more closely to CBOE rules
dealing with the same subject matter, in
order to more easily facilitate
compliance by dual members and to
prevent inadvertent misunderstandings
of the rules’ requirements that can arise
from slight wording differences. These
rule changes are generally intended to
promote more effective regulatory
compliance by Exchange members and
member organizations. The proposed
changes are detailed below.
Rule 1024(a)(i)
Rule 1024(a)(i) governs registration of
Options Principals.3 The rule currently
provides that no member or member
organization or individual associated
with a member organization shall be
approved to transact options business
with the public until such persons, who
are designated as Options Principals,
have been approved by and registered
with the Exchange. Additionally, it
provides that persons engaged in the
supervision of options sales practice or
a person to whom the designated
general partner or executive officer
(pursuant to Rule 1025) or another
Registered Options Principal 4 delegates
the authority to supervise options sales
practices shall be designated as Options
Principals. Finally, the rule states that
all members and member organizations
must use Web CRD to submit Form U4,
Uniform Application for Securities
Industry Registration or Transfer filings
on behalf of their Options Principals.
Members and member organizations are
required under the rule to amend Form
U4 filings not later than thirty (30) days
after the filer knew or should have
known of the facts which gave rise to
the amendment.
The Exchange is proposing to amend
Rule 1024(a)(i) by adopting language
3 See
Rule 612(d).
4 Id.
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44481
requiring Options Principals to
electronically file a Uniform
Application for Securities Industry
Registration or Transfer (Form U4) with
Web CRD, to successfully complete an
examination prescribed by the Exchange
and specified in Rule 1024 for the
purpose of demonstrating an adequate
knowledge of the options business and
of the Rules of the Exchange, and to
further agree in the U4 filing to abide by
the Bylaws and Rules of the Exchange
and the Rules of The Options Clearing
Corporation. The Exchange is proposing
to remove the sentence that requires
members and member organizations to
amend Form U4 filings not later than
thirty (30) days after the filer knew or
should have known of the facts which
gave rise to the amendment. However,
the Exchange proposes to add language
requiring members and member
organizations that are required to
complete Form U4 to promptly (but in
any event no later than 30 days after the
filer knew or should have known of the
facts which gave rise to the need for the
amendment) electronically file any
required amendments to Form U4 with
Web CRD. Additionally, new language
is proposed that would require
termination of employment or affiliation
of any Registered Options Principal in
such capacity to be promptly, but in any
event no later than 30 days following
the termination, electronically reported
to Web CRD together with a brief
statement of the reason for such
termination on Form U5. The
amendment would conform Rule
1024(a) more closely to CBOE Rule 9.2.
The proposal would also correct a
reference in the second sentence to
‘‘options sale practice,’’ substituting for
that term ‘‘options sales practices’’.
Rule 1024(b)(ii)
Rule 1024(b)(ii) generally provides
that, in approving a customer’s account
for options transactions, a member or
member organization shall exercise due
diligence to learn the essential facts as
to the customer and his investment
objectives and financial situation, and
shall make a record of such information.
It also provides for approval and for
confirmation of approval of the
customer’s account by a Registered
Options Principal qualified individual.
For purposes of clarity, the Exchange
proposes to eliminate references in Rule
1024(b)(ii) to a ‘‘specific’’ or ‘‘specified’’
Registered Options Principal. It also
proposes to delete the words ‘‘qualified
individual’’ as they appear following
references to Registered Options
Principals to eliminate any ambiguity,
as it is not clear what a Registered
Options Principal qualified individual
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Federal Register / Vol. 82, No. 183 / Friday, September 22, 2017 / Notices
Rule 1024(c)(v)
Rule 1024(c)(v) is proposed to be
amended by changing an inaccurate
internal cross reference, from Rule
1029(c) to Rule 1029(b).
Rule 1024 Commentary .01 Section 8
The Exchange is proposing to delete
the word ‘‘other’’ as unnecessary and to
correct the placement of a closing
parenthesis, moving it from after the
word ‘‘transactions’’ to after the word
‘‘commodities’’.
Rule 1024 Commentary .03
The Exchange is proposing to add the
inadvertently omitted word ‘‘an’’ before
the word ‘‘opportunity’’.
Rule 1024 Commentary .06
The Exchange is proposing to reword
the sentence for clarity, so that it states
that individuals engaged in the
supervision of options sales practices
are required to be designated as Options
Principals and are required to qualify as
an Options Principal by passing one of
the examinations referred to in the rule.
The Exchange also proposes to amend
the rule’s reference to the Series 9/10
examination, in order to use the same
name that the Financial Industry
Regulatory Authority (‘‘FINRA’’) uses
for that examination.
Rule 1024 Commentary .07
The Exchange proposes to add the
inadvertently dropped word
‘‘reviewing’’ to a sentence that requires
individuals who are delegated
responsibility for reviewing, among
other things, the acceptance of
discretionary accounts, to be designated
as Options Principals and pass the
Series 4 examination.
Rule 1025(a)(iii)A
The Exchange proposes to substitute
the word ‘‘responsibility’’ for the word
‘‘responsibilities’’ simply to conform the
rule more closely to CBOE Rule
9.8(a)(3)(i).
Rule 1025(b)(i)
The Exchange proposes to make
minor, nonsubstantive, clarifying
wording changes which would conform
the rule language more closely to that of
CBOE Rule 9.8(b)(1), by removing the
unnecessary words ‘‘above-noted’’, by
replacing the words ‘‘requirements
applicable to’’ with the words
VerDate Sep<11>2014
18:11 Sep 21, 2017
Jkt 241001
‘‘responsibility of’’, by deleting the
unnecessary words ‘‘however, the’’, and
by replacing the words ‘‘other than the
principal supervisory office if such
documents and information’’ with the
words ‘‘off premises so long as the
records’’.
cross references in Rules 1025(g)(v)(C)
and (D), as well as correct the placement
of a closing parenthesis in Rule
1025(g)(v)(C). Finally, it would replace
the awkward phrase ‘‘this requirement
of this Rule’’ with ‘‘the requirements of
this Rule’’.
Rule 1025(b)(iii)
The Exchange proposes to capitalize
the word ‘‘Rule’’ in a reference to SEC
rule 17a–4, to conform the language
more closely to CBOE Rule 9.8(b)(3).
means if not a Registered Options
Principal. Finally, the Exchange
proposes to relocate the phrase ‘‘within
a reasonable period of time’’ simply to
conform the rule in this respect more
closely to CBOE Rule 9.7.
Rule 1025(h)
Rule 1025(h) currently provides that
each member organization shall submit
the report required by Rule 1024(g) to its
one or more control persons or, if the
member organization has no control
person, to the audit committee of its
board of directors or its equivalent
committee or group. The Exchange
proposes to replace the inaccurate
reference to Rule 1024(g) with a correct
reference to Rule 1025(g). The Exchange
proposes to add language to the end of
the rule to establish the meaning of
‘‘control person,’’ proposed to be
defined as a person who controls the
member organization. The new language
would define the term ‘‘control’’ as
meaning the power to exercise a
controlling influence over the
management or policies of the member
organization, unless such power is
solely the result of an official position
with the member organization. Finally,
the new language would state that any
person who owns beneficially, directly
or indirectly, more than 20% of the
voting power in the election of directors
of the member organization, or more
than 25% of the voting power in the
election of directors of any other
corporation which directly or through
one or more affiliates owns beneficially
more than 25% of the voting power in
the election of directors of the member
organization, shall be presumed to
control the member organization. The
proposed new language is based on
CBOE Rules 9.8(h) and 1.1(k), which is
incorporated by reference into CBOE
Rule 9.8(h).
Rule 1025(b) Concluding Sentence
The words ‘‘any person’’ are proposed
to be substituted for the words ‘‘a
person’’, and an inaccurate reference to
‘‘this paragraph (b)(3)’’ is proposed to be
corrected to read ‘‘this paragraph
(b)(iii)’’.
Rule 1025(d)
An extraneous word ‘‘the’’ is
proposed to be deleted before the word
‘‘proximity’’ to conform more closely to
CBOE Rule 9.8(d)(1)(i), and an
inaccurate reference to Rule 1025(c) is
proposed to be corrected to read Rule
1025(e).
Rule 1025(e)
The Exchange proposes to remove an
extraneous comma to conform the rule
more closely to CBOE Rule 9.8(e)(1) and
to change an incorrect internal cross
reference from paragraph (e)(1) to
paragraph (e)(i).
Rule 1025(g)
Currently, Rule 1025(g) requires each
member organization that conducts a
non-member customer business to
submit each year to the Exchange a
written report on the member
organization’s supervision and
compliance effort during the preceding
year. The Exchange proposes to expand
the requirement to conform it more
closely to CBOE Rule 9.8(g), by
specifying that the report must also
detail the adequacy of the member
organization’s ongoing compliance
processes and procedures. The proposed
amendments to Rule 1025(g) would also
require the Chief Executive Officer (or
equivalent) to certify that the member
organization has in place processes to
test the effectiveness of policies and
procedures on a periodic, rather than on
a regular, basis. This change would
conform the Exchange’s requirement
more closely to the comparable CBOE
Rule 9.8(g)5(i)(C) requirement. The
proposal would also correct the spelling
of the word ‘‘preceding’’ in Rule
1025(g)(ii), add missing semicolons to
an itemized list found in Rule
1025(g)(iii), correct inaccurate internal
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Sfmt 4703
Rule 1025 Commentary .02 and .03
Rule 1025 Commentary .02 is
proposed to be amended by deleting the
introductory phrase ‘‘In meeting their
supervisory responsibilities’’ in order to
conform the language more closely to
CBOE Rule 9.8, Interpretations and
Policies .01. The rule currently requires
member organizations conducting a
non-member customer business to
enforce written procedures governing
the conduct of options accounts. As
revised, the written procedures would
be required to detail the specific
methods used to supervise all nonmember customer accounts and all
orders in such accounts. This
amendment would also provide greater
clarity regarding the required content of
E:\FR\FM\22SEN1.SGM
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Federal Register / Vol. 82, No. 183 / Friday, September 22, 2017 / Notices
the procedures and also would conform
the rule more closely to CBOE Rule 9.8
Interpretations and Policies .01. The last
sentence of Commentary .02 would be
revised by replacing the phrase ‘‘short
uncovered’’ options positions with the
phrase ‘‘uncovered short’’ options
positions. Finally, the Exchange
proposes to amend Rule 1025
Commentary .03 by adding the word
‘‘shall’’ to the first sentence, to conform
the language more closely to CBOE Rule
9.8, Interpretations and Policies .02.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,5 in general, and furthers the
objectives of Section 6(b)(5) of the Act,6
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
amendments should remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, by
correcting various aspects of the rules
and by adding additional clarity to the
rules. The minor corrections and
clarifications described above should
improve the accuracy of the rules and
should also improve their readability,
making them more understandable and
thereby facilitating easier compliance.
Additionally, where certain sections
of the Phlx rules are proposed to be
amended to conform more closely to
comparable rules of the CBOE, the
proposed rule change should create
greater regulatory parity among the two
options exchanges regarding members’
obligations in the areas of conduct of
accounts for options trading and
supervision of accounts. The proposed
amendments should create more
efficient regulatory compliance by
members of both exchanges due to
reduction of differences in wording and
consequent potential for inadvertent
regulatory noncompliance. In this
regard, the Exchange believes it is in the
public interest for a more consistently
worded regulatory policy and standard
regarding conduct of accounts for
options trading and supervision of
accounts to be in effect across options
exchanges, for the benefit of customers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
5 15
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Sep<11>2014
18:11 Sep 21, 2017
Jkt 241001
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. As stated
above the proposal is designed to
correct various aspects of the rules and
to add additional clarity to various
sections of the rules, which are equally
applicable to all similarly situated
members and member organizations.
Certain aspects of the proposed rule
change to amend various sections of
Rules 1024 and 1025 are also designed
to conform to Phlx rules more closely to
comparable rules of CBOE, thus
eliminating a potential source of
regulatory arbitrage and facilitating
compliance by dual members.
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 (http://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov.ase include File Number SR–
Phlx–2017–55 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–2017–55. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
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44483
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–2017–55 and should
be submitted on or before October 13,
2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–20202 Filed 9–21–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81641; File No. SR–NYSE–
2017–36]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Adopt New Equity
Trading Rules for Trading UTP
Securities on Pillar, Including Orders
and Modifiers, Order Ranking and
Display, and Order Execution and
Routing
September 18, 2017.
On July 28, 2017, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
7 17
E:\FR\FM\22SEN1.SGM
CFR 200.30–3(a)(12).
22SEN1
Agencies
[Federal Register Volume 82, Number 183 (Friday, September 22, 2017)]
[Notices]
[Pages 44481-44483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20202]
[[Page 44481]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81642; File No. SR-Phlx-2017-55)
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
of Proposed Rule Change To Amend Certain Sections of Rules 1024,
Conduct of Accounts for Options Trading, and of 1025, Supervision of
Accounts, To Conform Them More Closely To Comparable Rules of the
Chicago Board Options Exchange (``CBOE'') and To Make Minor
Clarifications and Corrections to the Text
September 18, 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 September 7, 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 certain sections of Rules 1024,
Conduct of Accounts for Options Trading, and of 1025, Supervision of
Accounts, to conform them more closely to comparable rules of the
Chicago Board Options Exchange (``CBOE'') and to make minor
clarifications and corrections to the text.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqphlx.cchwallstreet.com/ com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Rules 1024 and 1025 contain a range of regulatory requirements
generally applicable to Phlx members and member organizations that
conduct a public customer options business. The Exchange is proposing a
number of changes to certain sections of those rules to clarify the
language of those rules and to correct inaccuracies. The Exchange also
proposes to change certain rule language to conform the rules more
closely to CBOE rules dealing with the same subject matter, in order to
more easily facilitate compliance by dual members and to prevent
inadvertent misunderstandings of the rules' requirements that can arise
from slight wording differences. These rule changes are generally
intended to promote more effective regulatory compliance by Exchange
members and member organizations. The proposed changes are detailed
below.
Rule 1024(a)(i)
Rule 1024(a)(i) governs registration of Options Principals.\3\ The
rule currently provides that no member or member organization or
individual associated with a member organization shall be approved to
transact options business with the public until such persons, who are
designated as Options Principals, have been approved by and registered
with the Exchange. Additionally, it provides that persons engaged in
the supervision of options sales practice or a person to whom the
designated general partner or executive officer (pursuant to Rule 1025)
or another Registered Options Principal \4\ delegates the authority to
supervise options sales practices shall be designated as Options
Principals. Finally, the rule states that all members and member
organizations must use Web CRD to submit Form U4, Uniform Application
for Securities Industry Registration or Transfer filings on behalf of
their Options Principals. Members and member organizations are required
under the rule to amend Form U4 filings not later than thirty (30) days
after the filer knew or should have known of the facts which gave rise
to the amendment.
---------------------------------------------------------------------------
\3\ See Rule 612(d).
\4\ Id.
---------------------------------------------------------------------------
The Exchange is proposing to amend Rule 1024(a)(i) by adopting
language requiring Options Principals to electronically file a Uniform
Application for Securities Industry Registration or Transfer (Form U4)
with Web CRD, to successfully complete an examination prescribed by the
Exchange and specified in Rule 1024 for the purpose of demonstrating an
adequate knowledge of the options business and of the Rules of the
Exchange, and to further agree in the U4 filing to abide by the Bylaws
and Rules of the Exchange and the Rules of The Options Clearing
Corporation. The Exchange is proposing to remove the sentence that
requires members and member organizations to amend Form U4 filings not
later than thirty (30) days after the filer knew or should have known
of the facts which gave rise to the amendment. However, the Exchange
proposes to add language requiring members and member organizations
that are required to complete Form U4 to promptly (but in any event no
later than 30 days after the filer knew or should have known of the
facts which gave rise to the need for the amendment) electronically
file any required amendments to Form U4 with Web CRD. Additionally, new
language is proposed that would require termination of employment or
affiliation of any Registered Options Principal in such capacity to be
promptly, but in any event no later than 30 days following the
termination, electronically reported to Web CRD together with a brief
statement of the reason for such termination on Form U5. The amendment
would conform Rule 1024(a) more closely to CBOE Rule 9.2. The proposal
would also correct a reference in the second sentence to ``options sale
practice,'' substituting for that term ``options sales practices''.
Rule 1024(b)(ii)
Rule 1024(b)(ii) generally provides that, in approving a customer's
account for options transactions, a member or member organization shall
exercise due diligence to learn the essential facts as to the customer
and his investment objectives and financial situation, and shall make a
record of such information. It also provides for approval and for
confirmation of approval of the customer's account by a Registered
Options Principal qualified individual.
For purposes of clarity, the Exchange proposes to eliminate
references in Rule 1024(b)(ii) to a ``specific'' or ``specified''
Registered Options Principal. It also proposes to delete the words
``qualified individual'' as they appear following references to
Registered Options Principals to eliminate any ambiguity, as it is not
clear what a Registered Options Principal qualified individual
[[Page 44482]]
means if not a Registered Options Principal. Finally, the Exchange
proposes to relocate the phrase ``within a reasonable period of time''
simply to conform the rule in this respect more closely to CBOE Rule
9.7.
Rule 1024(c)(v)
Rule 1024(c)(v) is proposed to be amended by changing an inaccurate
internal cross reference, from Rule 1029(c) to Rule 1029(b).
Rule 1024 Commentary .01 Section 8
The Exchange is proposing to delete the word ``other'' as
unnecessary and to correct the placement of a closing parenthesis,
moving it from after the word ``transactions'' to after the word
``commodities''.
Rule 1024 Commentary .03
The Exchange is proposing to add the inadvertently omitted word
``an'' before the word ``opportunity''.
Rule 1024 Commentary .06
The Exchange is proposing to reword the sentence for clarity, so
that it states that individuals engaged in the supervision of options
sales practices are required to be designated as Options Principals and
are required to qualify as an Options Principal by passing one of the
examinations referred to in the rule. The Exchange also proposes to
amend the rule's reference to the Series 9/10 examination, in order to
use the same name that the Financial Industry Regulatory Authority
(``FINRA'') uses for that examination.
Rule 1024 Commentary .07
The Exchange proposes to add the inadvertently dropped word
``reviewing'' to a sentence that requires individuals who are delegated
responsibility for reviewing, among other things, the acceptance of
discretionary accounts, to be designated as Options Principals and pass
the Series 4 examination.
Rule 1025(a)(iii)A
The Exchange proposes to substitute the word ``responsibility'' for
the word ``responsibilities'' simply to conform the rule more closely
to CBOE Rule 9.8(a)(3)(i).
Rule 1025(b)(i)
The Exchange proposes to make minor, nonsubstantive, clarifying
wording changes which would conform the rule language more closely to
that of CBOE Rule 9.8(b)(1), by removing the unnecessary words ``above-
noted'', by replacing the words ``requirements applicable to'' with the
words ``responsibility of'', by deleting the unnecessary words
``however, the'', and by replacing the words ``other than the principal
supervisory office if such documents and information'' with the words
``off premises so long as the records''.
Rule 1025(b)(iii)
The Exchange proposes to capitalize the word ``Rule'' in a
reference to SEC rule 17a-4, to conform the language more closely to
CBOE Rule 9.8(b)(3).
Rule 1025(b) Concluding Sentence
The words ``any person'' are proposed to be substituted for the
words ``a person'', and an inaccurate reference to ``this paragraph
(b)(3)'' is proposed to be corrected to read ``this paragraph
(b)(iii)''.
Rule 1025(d)
An extraneous word ``the'' is proposed to be deleted before the
word ``proximity'' to conform more closely to CBOE Rule 9.8(d)(1)(i),
and an inaccurate reference to Rule 1025(c) is proposed to be corrected
to read Rule 1025(e).
Rule 1025(e)
The Exchange proposes to remove an extraneous comma to conform the
rule more closely to CBOE Rule 9.8(e)(1) and to change an incorrect
internal cross reference from paragraph (e)(1) to paragraph (e)(i).
Rule 1025(g)
Currently, Rule 1025(g) requires each member organization that
conducts a non-member customer business to submit each year to the
Exchange a written report on the member organization's supervision and
compliance effort during the preceding year. The Exchange proposes to
expand the requirement to conform it more closely to CBOE Rule 9.8(g),
by specifying that the report must also detail the adequacy of the
member organization's ongoing compliance processes and procedures. The
proposed amendments to Rule 1025(g) would also require the Chief
Executive Officer (or equivalent) to certify that the member
organization has in place processes to test the effectiveness of
policies and procedures on a periodic, rather than on a regular, basis.
This change would conform the Exchange's requirement more closely to
the comparable CBOE Rule 9.8(g)5(i)(C) requirement. The proposal would
also correct the spelling of the word ``preceding'' in Rule
1025(g)(ii), add missing semicolons to an itemized list found in Rule
1025(g)(iii), correct inaccurate internal cross references in Rules
1025(g)(v)(C) and (D), as well as correct the placement of a closing
parenthesis in Rule 1025(g)(v)(C). Finally, it would replace the
awkward phrase ``this requirement of this Rule'' with ``the
requirements of this Rule''.
Rule 1025(h)
Rule 1025(h) currently provides that each member organization shall
submit the report required by Rule 1024(g) to its one or more control
persons or, if the member organization has no control person, to the
audit committee of its board of directors or its equivalent committee
or group. The Exchange proposes to replace the inaccurate reference to
Rule 1024(g) with a correct reference to Rule 1025(g). The Exchange
proposes to add language to the end of the rule to establish the
meaning of ``control person,'' proposed to be defined as a person who
controls the member organization. The new language would define the
term ``control'' as meaning the power to exercise a controlling
influence over the management or policies of the member organization,
unless such power is solely the result of an official position with the
member organization. Finally, the new language would state that any
person who owns beneficially, directly or indirectly, more than 20% of
the voting power in the election of directors of the member
organization, or more than 25% of the voting power in the election of
directors of any other corporation which directly or through one or
more affiliates owns beneficially more than 25% of the voting power in
the election of directors of the member organization, shall be presumed
to control the member organization. The proposed new language is based
on CBOE Rules 9.8(h) and 1.1(k), which is incorporated by reference
into CBOE Rule 9.8(h).
Rule 1025 Commentary .02 and .03
Rule 1025 Commentary .02 is proposed to be amended by deleting the
introductory phrase ``In meeting their supervisory responsibilities''
in order to conform the language more closely to CBOE Rule 9.8,
Interpretations and Policies .01. The rule currently requires member
organizations conducting a non-member customer business to enforce
written procedures governing the conduct of options accounts. As
revised, the written procedures would be required to detail the
specific methods used to supervise all non-member customer accounts and
all orders in such accounts. This amendment would also provide greater
clarity regarding the required content of
[[Page 44483]]
the procedures and also would conform the rule more closely to CBOE
Rule 9.8 Interpretations and Policies .01. The last sentence of
Commentary .02 would be revised by replacing the phrase ``short
uncovered'' options positions with the phrase ``uncovered short''
options positions. Finally, the Exchange proposes to amend Rule 1025
Commentary .03 by adding the word ``shall'' to the first sentence, to
conform the language more closely to CBOE Rule 9.8, Interpretations and
Policies .02.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\6\ 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 amendments should remove impediments to and perfect the mechanism
of a free and open market and a national market system, by correcting
various aspects of the rules and by adding additional clarity to the
rules. The minor corrections and clarifications described above should
improve the accuracy of the rules and should also improve their
readability, making them more understandable and thereby facilitating
easier compliance.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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Additionally, where certain sections of the Phlx rules are proposed
to be amended to conform more closely to comparable rules of the CBOE,
the proposed rule change should create greater regulatory parity among
the two options exchanges regarding members' obligations in the areas
of conduct of accounts for options trading and supervision of accounts.
The proposed amendments should create more efficient regulatory
compliance by members of both exchanges due to reduction of differences
in wording and consequent potential for inadvertent regulatory
noncompliance. In this regard, the Exchange believes it is in the
public interest for a more consistently worded regulatory policy and
standard regarding conduct of accounts for options trading and
supervision of accounts to be in effect across options exchanges, for
the benefit of customers.
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. As stated above the proposal is
designed to correct various aspects of the rules and to add additional
clarity to various sections of the rules, which are equally applicable
to all similarly situated members and member organizations. Certain
aspects of the proposed rule change to amend various sections of Rules
1024 and 1025 are also designed to conform to Phlx rules more closely
to comparable rules of CBOE, thus eliminating a potential source of
regulatory arbitrage and facilitating compliance by dual members.
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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov.ase include File
Number SR-Phlx-2017-55 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-2017-55. 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-2017-55 and
should be submitted on or before October 13, 2017.
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\7\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20202 Filed 9-21-17; 8:45 am]
BILLING CODE 8011-01-P