Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Proposed Rule Change To Amend the Exchange Rules To Make Permanent a Program That Allows Transactions To Take Place in Open Outcry Trading at Prices of at Least $0 But Less Than $1 per Option Contract (“Sub-Dollar Cabinet Trades”), 58825-58827 [2017-26912]

Download as PDF Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices 2017, it filed with the Postal Regulatory Commission a USPS Request to Add Priority Mail Express & Priority Mail Contract 54 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2018–49, CP2018–80. Elizabeth A. Reed, Attorney, Corporate and Postal Business Law. [FR Doc. 2017–26905 Filed 12–13–17; 8:45 am] The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 8, 2017, it filed with the Postal Regulatory Commission a USPS Request to Add Priority Mail Contract 386 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2018–50, CP2018–81. SUPPLEMENTARY INFORMATION: Elizabeth A. Reed, Attorney, Corporate and Postal Business Law. BILLING CODE 7710–12–P [FR Doc. 2017–26906 Filed 12–13–17; 8:45 am] POSTAL SERVICE BILLING CODE 7710–12–P Product Change—Priority Mail Negotiated Service Agreement 58825 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. Postal ServiceTM. ACTION: Notice. SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. DATES: Date of notice required under 39 U.S.C. 3642(d)(1): December 14, 2017. FOR FURTHER INFORMATION CONTACT: Elizabeth A. Reed, 202–268–3179. SUPPLEMENTARY INFORMATION: The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 8, 2017, it filed with the Postal Regulatory Commission a USPS Request to Add Priority Mail Contract 387 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2018–52, CP2018–83. [Release No. 34–82245; File No. SR–Phlx– 2017–99] 1. Purpose AGENCY: SUMMARY: Elizabeth A. Reed, Attorney, Corporate and Postal Business Law. [FR Doc. 2017–26908 Filed 12–13–17; 8:45 am] BILLING CODE 7710–12–P Product Change—Priority Mail Negotiated Service Agreement ACTION: Postal Notice. ServiceTM. The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. DATES: Date of notice required under 39 U.S.C. 3642(d)(1): December 14, 2017. FOR FURTHER INFORMATION CONTACT: Elizabeth A. Reed, 202–268–3179. sradovich on DSK3GMQ082PROD with NOTICES SUMMARY: VerDate Sep<11>2014 21:28 Dec 13, 2017 Jkt 244001 December 8, 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 November 29, 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 and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change POSTAL SERVICE AGENCY: Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Proposed Rule Change To Amend the Exchange Rules To Make Permanent a Program That Allows Transactions To Take Place in Open Outcry Trading at Prices of at Least $0 But Less Than $1 per Option Contract (‘‘Sub-Dollar Cabinet Trades’’) The Exchange proposes to a proposal[sic] to amend the Exchange’s rules to make permanent a program that allows transactions to take place in open outcry trading at prices of at least $0 but less than $1 per option contract (‘‘subdollar cabinet trades’’). The text of the proposed rule change is available on the Exchange’s website at http://nasdaqphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00034 Fmt 4703 Sfmt 4703 The Exchange proposes to amend Rule 1059 to make permanent a program that allows transactions to take place at a price that is below $1 per option contract.3 The program is currently subject to a pilot that is scheduled to expire on January 5, 2018.4 An ‘‘accommodation’’ or ‘‘cabinet’’ trade refers to trades in listed options on the Exchange that are worthless or not actively traded. Trading is generally conducted in accordance with Exchange Rules, except as provided in Exchange Rule 1059, Accommodation Transactions (Cabinet Trades), which sets forth specific procedures for engaging in cabinet trades. Rule 1059 provides that a ‘‘cabinet order’’ is a closing limit order at a price of $1 per option contract for the account of a customer, firm, specialist or ROT. An opening order is not a ‘‘cabinet order’’ but may in certain cases be matched with a cabinet order. Prior to the pilot program, only closing limit orders at a price of $1 per option contract for the accounts of customer, firm, specialists and Registered Options Traders (‘‘ROTs’’) could be placed in the cabinet. Rule 1059 currently provides that cabinet transactions at a price of $1 per option contract may occur via open outcry in any options series open for trading on the Exchange. However, the $1 Cabinet Trading procedures are not available in Penny Pilot Program classes 3 See Commentary .02, Limit Orders Priced Below $1, to Exchange Rule 1059, Accommodation Transactions. 4 See Securities Exchange Act Release No. 79782 (January 12, 2017), 82 FR 6667 (January 19, 2017) (SR–Phlx–2017–01). The Exchange initially adopted the program in 2010. See Securities Exchange Act Release No. 63626 (December 30, 2010), 76 FR 812 (January 6, 2011) (SR–Phlx–2010–185). E:\FR\FM\14DEN1.SGM 14DEN1 sradovich on DSK3GMQ082PROD with NOTICES 58826 Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices because in those classes an option series can trade in a standard increment as low as $ 0.01 per share (or $1.00 per option contract with a 100 share multiplier). The Exchange amended the Cabinet Trading procedures to allow transactions to take place in open outcry at a price of at least $0 but less than $1 per option contract. This amendment expires on January 5, 2018. These lowerpriced transactions are permitted to be traded pursuant to the same procedures applicable to $1 Cabinet Trades, except that (i) bids and offers for opening transactions are only permitted to accommodate closing transactions, and (ii) transactions in option classes participating in the Penny Pilot Program are permitted. The Exchange believes that allowing a price of at least $0 but less than $1 better accommodates the closing of options positions in series that are worthless or not actively traded, particularly when there has been a significant move in the price of the underlying security, resulting in a large number of series being out-of-themoney. For example, a market participant might have a long position in a put series with a strike price of $30 and the underlying stock might be trading at $100. In such an instance, there is likely no market to close-out the position, even at the $1 cabinet price. As with other accommodation liquidations under Rule 1059, transactions at prices less than $1 are not disseminated to the public on the consolidated tape. In addition, as with other accommodation liquidations under Rule 1059, the transactions are exempt from the Consolidated Options Audit Trail (‘‘COATS’’) requirements of Exchange Rule 1063(e)(i). However, Rule 1059 requires all transactions, including transaction for less than $1, to be reported to the Exchange following the close of each business day. The Exchange notes that while the level of liquidation trades is not meaningful, such trades serve an essential purpose in that they allow market participants to close out options positions that are worthless or not actively trading. To illustrate, in 2016, there were a total of 442 Cabinet Trades comprising 244,734 contracts. Each contract was executed at a trade price of $ 0.01. The Exchange believes this level of trading demonstrates the benefit of the current program to market participants. The current rule was adopted on a pilot basis to provide the Exchange time to evaluate the efficacy of the change and to address any operational issues that might arise in processing Cabinet trades. In support of making the program permanent, the Exchange VerDate Sep<11>2014 21:28 Dec 13, 2017 Jkt 244001 represents that there are no operational issues in processing and clearing Cabinet Trades in penny and subpenny increments. The Exchange is also not aware of the Options Clearing Corporation (‘‘OCC’’) having operational issues with processing Cabinet trades submitted by the Exchange. Each Cabinet Trade is input manually into the clearing system, and then flows seamlessly for settlement at OCC. More specifically, upon receiving an order for a Cabinet Trade, a Floor Broker fills out a designated cabinet transaction form provided by the Exchange noting the order details. The Floor Broker subsequently calls for a market for the order by announcing the terms of the order to the trading crowd. The Floor Broker proceeds to execute the order and submits the designated cabinet transaction form to the Nasdaq Market Operations staff for clearance and reporting at the close of the business day. Nasdaq Market Operations staff then enter the transaction into the Phlx system, which transmits the trade to OCC for clearance and settlement. At the time of adoption of the pilot the Phlx system permitted reporting a cabinet trade at a price as small as $0.0001, as it does today. The Exchange system allows Cabinet trades to be processed in a manner similar to how all other trades are processed by the exchange. Additionally, the Exchange notes that members and member organizations have not raised any concerns with the processing of Cabinet Trades. 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 Exchange believes that liquidation trades promote competition and afford market participants the opportunity to close out their options positions. The Exchange believes that permanently approving the rules that allow for liquidations at a price less than $1 per option contract would better facilitate the closing of options positions that are worthless or not actively trading, especially in Penny Pilot issues where Cabinet Trades are not otherwise permitted. The Exchange believes that 5 15 6 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00035 Fmt 4703 Sfmt 4703 approving the program on a permanent basis is also consistent with the Act. With respect to the level of liquidation trades transacted on the Exchange, the Exchange believes that the data gathered provides meaningful support to make the program permanent. 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. The Exchange believes that approving the program on a permanent basis will not impact competition, as it will continue to facilitate members’ ability to close positions in worthless or not actively traded series. 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 up to 90 days (i) as the Commission may designate 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. Please include File Number SR– Phlx–2017–99 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. E:\FR\FM\14DEN1.SGM 14DEN1 Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices All submissions should refer to File Number SR–Phlx–2017–99. 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx–2017–99 and should be submitted on or before December 29, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–26912 Filed 12–13–17; 8:45 am] sradovich on DSK3GMQ082PROD with NOTICES BILLING CODE 8011–01–P 7 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 21:28 Dec 13, 2017 Jkt 244001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82253; File No. SR–FINRA– 2017–011] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Amendment No. 1 to a Proposed Rule Change to Adopt a Fee Schedule to Establish the Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail December 8, 2017. On May 8, 2017, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt a fee schedule to establish the fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (‘‘CAT NMS Plan’’). The proposed rule change was published in the Federal Register for comment on May 22, 2017.3 The Commission received seven comment letters on the proposed rule change,4 and a response to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release Nos. 80710 (May 17, 2017), 82 FR 23639 (May 23, 2017) (‘‘Original Proposal’’). 4 Since the CAT NMS Plan Participants’ proposed rule changes to adopt fees to be charged to Industry Members to fund the consolidated audit trail are substantively identical, the Commission is considering all comments received on the proposed rule changes regardless of the comment file to which they were submitted. See text accompanying notes 12–15 infra, for a list of the CAT NMS Plan Participants. See Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, to Brent J. Fields, Secretary, Commission (dated June 6, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1788188-153228.pdf; Letter from Patricia L. Cerny and Steven O’Malley, Compliance Consultants, to Brent J. Fields, Secretary, Commission (dated June 12, 2017), available at: https://www.sec.gov/comments/sr-cboe-2017-040/ cboe2017040-1799253-153675.pdf; Letter from Daniel Zinn, General Counsel, OTC Markets Group Inc., to Eduardo A. Aleman, Assistant Secretary, Commission (dated June 13, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1801717-153703.pdf; Letter from Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, Commission (dated June 22, 2017), available at: https:// www.sec.gov/comments/sr-cboe-2017-040/cboe 2017040-1819670-154195.pdf; Letter from Stuart J. Kaswell, Executive Vice President and Managing Director, General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, Commission (dated June 23, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1822454-154283.pdf; and Letter from Suzanne H. Shatto, Investor, to Commission (dated June 27, 2017), available at: https://www.sec.gov/ 2 17 PO 00000 Frm 00036 Fmt 4703 Sfmt 4703 58827 comments from the Participants.5 On June 30, 2017, the Commission temporarily suspended and initiated proceedings to determine whether to approve or disapprove the proposed rule change.6 The Commission thereafter received seven comment letters,7 and a response to comments from the Participants.8 On November 9, 2017, the Commission extended the time period within which to approve the proposed rule change or disapprove the proposed rule change to January 14, 2018.9 On December 1, 2017, FINRA filed Amendment No. 1 to the proposed rule change, as described in Items I and II below, which Items have been comments/sr-batsedgx-2017-22/batsedgx201722154443.pdf. The Commission also received a comment letter which is not pertinent to these proposed rule changes. See Letter from Christina Crouch, Smart Ltd., to Brent J. Fields, Secretary, Commission (dated June 5, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1785545-153152.htm. 5 See Letter from CAT NMS Plan Participants to Brent J. Fields, Secretary, Commission (dated June 29, 2017), available at: https://www.sec.gov/ comments/sr-batsbyx-2017-11/batsbyx2017111832632-154584.pdf. 6 See Securities Exchange Act Release No. 81067 (June 30, 2017), 82 FR 31656 (July 7, 2017). 7 See Letter from W. Hardy Callcott, Partner, Sidley Austin LLP, to Brent J. Fields, Secretary, Commission (dated July 27, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2148338-157737.pdf; Letter from Kevin Coleman, General Counsel and Chief Compliance Officer, Belvedere Trading LLC, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/ comments/sr-batsbyx-2017-11/batsbyx2017112148360-157740.pdf; Letter from Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2151228157745.pdf; Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https:// www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx 201711-2150977-157744.pdf; Letter from Stuart J. Kaswell, Executive Vice President and Managing Director, General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2150818-157743.pdf; Letter from John Kinahan, Chief Executive Officer, Group One Trading, L.P., to Brent J. Fields, Secretary, Commission (dated August 10, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-2214568-160619.pdf; Letter from Joseph Molluso, Executive Vice President and CFO, Virtu Financial, to Brent J. Fields, Commission (dated August 18, 2017), available at: https:// www.sec.gov/comments/sr-finra-2017-011/finra 2017011-2238648-160830.pdf. 8 See Letter from Michael Simon, Chair, CAT NMS Plan Operating Committee, to Brent J. Fields, Commission, Secretary (dated November 2, 2017), available at https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2674608161412.pdf. 9 See Securities Exchange Act Release No. 82049 (November 9, 2017), 82 FR 53549 (November 16, 2017). E:\FR\FM\14DEN1.SGM 14DEN1

Agencies

[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Notices]
[Pages 58825-58827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26912]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82245; File No. SR-Phlx-2017-99]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
of Proposed Rule Change To Amend the Exchange Rules To Make Permanent a 
Program That Allows Transactions To Take Place in Open Outcry Trading 
at Prices of at Least $0 But Less Than $1 per Option Contract (``Sub-
Dollar Cabinet Trades'')

December 8, 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 November 29, 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 and II below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to a proposal[sic] to amend the Exchange's 
rules to make permanent a program that allows transactions to take 
place in open outcry trading at prices of at least $0 but less than $1 
per option contract (``sub-dollar cabinet trades'').
    The text of the proposed rule change is available on the Exchange's 
website 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 proposes to amend Rule 1059 to make permanent a 
program that allows transactions to take place at a price that is below 
$1 per option contract.\3\ The program is currently subject to a pilot 
that is scheduled to expire on January 5, 2018.\4\
---------------------------------------------------------------------------

    \3\ See Commentary .02, Limit Orders Priced Below $1, to 
Exchange Rule 1059, Accommodation Transactions.
    \4\ See Securities Exchange Act Release No. 79782 (January 12, 
2017), 82 FR 6667 (January 19, 2017) (SR-Phlx-2017-01). The Exchange 
initially adopted the program in 2010. See Securities Exchange Act 
Release No. 63626 (December 30, 2010), 76 FR 812 (January 6, 2011) 
(SR-Phlx-2010-185).
---------------------------------------------------------------------------

    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless or not actively 
traded. Trading is generally conducted in accordance with Exchange 
Rules, except as provided in Exchange Rule 1059, Accommodation 
Transactions (Cabinet Trades), which sets forth specific procedures for 
engaging in cabinet trades.
    Rule 1059 provides that a ``cabinet order'' is a closing limit 
order at a price of $1 per option contract for the account of a 
customer, firm, specialist or ROT. An opening order is not a ``cabinet 
order'' but may in certain cases be matched with a cabinet order. Prior 
to the pilot program, only closing limit orders at a price of $1 per 
option contract for the accounts of customer, firm, specialists and 
Registered Options Traders (``ROTs'') could be placed in the cabinet.
    Rule 1059 currently provides that cabinet transactions at a price 
of $1 per option contract may occur via open outcry in any options 
series open for trading on the Exchange. However, the $1 Cabinet 
Trading procedures are not available in Penny Pilot Program classes

[[Page 58826]]

because in those classes an option series can trade in a standard 
increment as low as $ 0.01 per share (or $1.00 per option contract with 
a 100 share multiplier).
    The Exchange amended the Cabinet Trading procedures to allow 
transactions to take place in open outcry at a price of at least $0 but 
less than $1 per option contract. This amendment expires on January 5, 
2018. These lower-priced transactions are permitted to be traded 
pursuant to the same procedures applicable to $1 Cabinet Trades, except 
that (i) bids and offers for opening transactions are only permitted to 
accommodate closing transactions, and (ii) transactions in option 
classes participating in the Penny Pilot Program are permitted. The 
Exchange believes that allowing a price of at least $0 but less than $1 
better accommodates the closing of options positions in series that are 
worthless or not actively traded, particularly when there has been a 
significant move in the price of the underlying security, resulting in 
a large number of series being out-of-the-money. For example, a market 
participant might have a long position in a put series with a strike 
price of $30 and the underlying stock might be trading at $100. In such 
an instance, there is likely no market to close-out the position, even 
at the $1 cabinet price.
    As with other accommodation liquidations under Rule 1059, 
transactions at prices less than $1 are not disseminated to the public 
on the consolidated tape. In addition, as with other accommodation 
liquidations under Rule 1059, the transactions are exempt from the 
Consolidated Options Audit Trail (``COATS'') requirements of Exchange 
Rule 1063(e)(i). However, Rule 1059 requires all transactions, 
including transaction for less than $1, to be reported to the Exchange 
following the close of each business day.
    The Exchange notes that while the level of liquidation trades is 
not meaningful, such trades serve an essential purpose in that they 
allow market participants to close out options positions that are 
worthless or not actively trading. To illustrate, in 2016, there were a 
total of 442 Cabinet Trades comprising 244,734 contracts. Each contract 
was executed at a trade price of $ 0.01. The Exchange believes this 
level of trading demonstrates the benefit of the current program to 
market participants.
    The current rule was adopted on a pilot basis to provide the 
Exchange time to evaluate the efficacy of the change and to address any 
operational issues that might arise in processing Cabinet trades. In 
support of making the program permanent, the Exchange represents that 
there are no operational issues in processing and clearing Cabinet 
Trades in penny and subpenny increments. The Exchange is also not aware 
of the Options Clearing Corporation (``OCC'') having operational issues 
with processing Cabinet trades submitted by the Exchange. Each Cabinet 
Trade is input manually into the clearing system, and then flows 
seamlessly for settlement at OCC. More specifically, upon receiving an 
order for a Cabinet Trade, a Floor Broker fills out a designated 
cabinet transaction form provided by the Exchange noting the order 
details. The Floor Broker subsequently calls for a market for the order 
by announcing the terms of the order to the trading crowd. The Floor 
Broker proceeds to execute the order and submits the designated cabinet 
transaction form to the Nasdaq Market Operations staff for clearance 
and reporting at the close of the business day. Nasdaq Market 
Operations staff then enter the transaction into the Phlx system, which 
transmits the trade to OCC for clearance and settlement.
    At the time of adoption of the pilot the Phlx system permitted 
reporting a cabinet trade at a price as small as $0.0001, as it does 
today. The Exchange system allows Cabinet trades to be processed in a 
manner similar to how all other trades are processed by the exchange.
    Additionally, the Exchange notes that members and member 
organizations have not raised any concerns with the processing of 
Cabinet Trades.
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 Exchange believes that liquidation trades promote competition and 
afford market participants the opportunity to close out their options 
positions. The Exchange believes that permanently approving the rules 
that allow for liquidations at a price less than $1 per option contract 
would better facilitate the closing of options positions that are 
worthless or not actively trading, especially in Penny Pilot issues 
where Cabinet Trades are not otherwise permitted. The Exchange believes 
that approving the program on a permanent basis is also consistent with 
the Act. With respect to the level of liquidation trades transacted on 
the Exchange, the Exchange believes that the data gathered provides 
meaningful support to make the program permanent.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 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. The Exchange believes that 
approving the program on a permanent basis will not impact competition, 
as it will continue to facilitate members' ability to close positions 
in worthless or not actively traded series.

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 up to 90 days (i) as the 
Commission may designate 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 [email protected]. Please include 
File Number SR-Phlx-2017-99 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.


[[Page 58827]]


All submissions should refer to File Number SR-Phlx-2017-99. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2017-99 and should be submitted on 
or before December 29, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26912 Filed 12-13-17; 8:45 am]
 BILLING CODE 8011-01-P