Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Proposed Rule Change to a Proposal To Amend Rule 1079, FLEX Index, Equity and Currency Options and Rule 1059, Accommodation Transactions, 12058-12060 [2018-05451]
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12058
Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices
the 1,380 hours per response (345
hours) is prepared by the registrant for
a total annual reporting burden of 2,070
hours (345 hours per response × 6
responses).
An agency may conduct or sponsor,
and a person is not required to respond
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number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE, Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: March 14, 2018.
Eduardo A. Aleman,
Assistant Secretary.
burden hours (0.50 hours per response
× 21,968 responses).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE, Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: March 14, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05524 Filed 3–16–18; 8:45 am]
BILLING CODE 8011–01–P
[FR Doc. 2018–05528 Filed 3–16–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Submission for OMB Review;
Comment Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
sradovich on DSK3GMQ082PROD with NOTICES
Extension:
Form 3, SEC File No. 270–125, OMB
Control No. 3235–0104.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection[s] of information
discussed below.
Exchange Act Forms 3 is filed by
insiders of public companies that have
a class of securities registered under
Section 12 of the Exchange Act. Form 3
is an initial statement beneficial
ownership of securities. Approximately
21,968 insiders file Form 3 annually and
it takes approximately 0.50 hours to
prepare for a total of 10,984 annual
VerDate Sep<11>2014
16:43 Mar 16, 2018
Jkt 244001
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
information regarding the use of
representations and warranties in the
asset-backed securities markets. We
estimate that approximately 13,374
securitizers will file Form ABS–EE
annually at estimated 170,089 burden
hours per response. In addition, we
estimate that 25% of the 50.87152 hours
per response (12.71788 hours) is carried
internally by the securitizers for a total
annual reporting burden of 170,089
hours (12.71788 hours per response ×
13,374 responses).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE, Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: March 14, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05526 Filed 3–16–18; 8:45 am]
BILLING CODE 8011–01–P
Extension:
Form ABS–EE, SEC File No. 270–609,
OMB Control No.3235–706.
SECURITIES AND EXCHANGE
COMMISSION
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection of information
discussed below.
Form ABS–EE (17 CFR 249.1401) is
filed by asset-backed issuers to provide
asset-level information for registered
offerings of asset-backed securities at
the time of securitization and on an
ongoing basis required by Item 1111(h)
of Regulation AB (17 CFR 229.1111(h)).
The purpose of the information
collected on Form ABS–EE is to
implement the disclosure requirements
of Section 7(c) of the Securities Act of
1933 (15 U.S.C. 77g(c)) to provide
[Release No. 34–82866; File No. SR–Phlx–
2018–20]
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Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing of
Proposed Rule Change to a Proposal
To Amend Rule 1079, FLEX Index,
Equity and Currency Options and Rule
1059, Accommodation Transactions
March 13, 2018.
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 February
28, 2018, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\19MRN1.SGM
19MRN1
Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices
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 a proposal
to amend Rule 1079, FLEX Index,
Equity and Currency Options and Rule
1059, Accommodation Transactions.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqphlx.cchwallstreet.com/,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
sradovich on DSK3GMQ082PROD with NOTICES
The Exchange proposes to amend
Rule 1079 governing FLEX option
transactions in order to permit open
FLEX option positions to be closed
pursuant to Rule 1059, Accommodation
Transactions, which provides for
cabinet trading 3 and which is
sometimes referred to as the ‘‘cabinet
3 Currently cabinet or accommodation trading of
option contracts is intended to accommodate
persons wishing to effect closing transactions in
those series of options dealt in on the Exchange for
which there is no auction market. An
accommodation or cabinet trade refers to trades in
listed options on the Exchange that are worthless
or not actively traded, often times conducted to
establish tax losses. Cabinet or accommodation
trading of option contracts is currently intended to
accommodate persons wishing to effect closing
transactions in those series of options dealt in on
the Exchange for which there is no auction market.
A cabinet trade is a transaction in which the percontract value of the cabinet trade is less than the
per-contract value of a trade at the specified
minimum increment for the option contract. The
current proposal would extend the availability of
cabinet trading to FLEX options in certain
circumstances.
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rule’’. Conforming changes are proposed
to be made to Rule 1059 itself.
FLEX options are currently traded on
the Exchange pursuant to the
procedures set forth in Rule 1079 which
permit market participants to customize
equity options to fit specific investment
strategies and goals. Rule 1079 allows
investors to specify characteristics such
as the expiration date, strike price, and
exercise-style of FLEX option contracts.
Rule 1079(a)(4) governs the quote format
of FLEX trades, requiring bids and offers
to be made pursuant to Rule 1034 which
specifies minimum increments.4
An ‘‘accommodation’’ or ‘‘cabinet’’
trade refers to trades in listed options on
the Exchange that are of minimal value
or are not actively traded. Cabinet
trading is generally conducted in
accordance with Exchange Rules except
as provided in Rule 1059 which sets
forth specific procedures for cabinet
trades. Rule 1059(a) 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.5 The rule provides that an
opening order is not a cabinet order, but
may in certain cases be matched with a
cabinet order.
Phlx now proposes new Rule 1079(g),
which would provide that open FLEX
option positions are eligible to be closed
in cabinet trades under Rule 1059. The
proposed new rule would specify that
the FLEX option cabinet order may be
executed against contraside interest to
close a FLEX option position or, to the
extent permitted under Rule 1059(a)(iii),
against contraside interest which opens
a FLEX option position. Under the new
rule Sections (a) and (b) of Rule 1079
would not apply to FLEX option
transactions executed pursuant to Rule
1079(g) and Rule 1059, while Sections
(c)–(g) of Rule 1079 would continue to
apply to any FLEX option position
opened pursuant to Rule 1059.6
4 Rule 1034(a) provides for quote formats ‘‘(A) in
the case of FLEX index options and equity options,
a bid and/or offer in the form of a decimal price
(e.g., .10 or .25), pursuant to Rule 1034, a specific
dollar amount, or a percentage of the underlying
equivalent value, in the case of FLEX index options,
or security, in the case of FLEX equity options,
rounded to the nearest minimum increment; or (B)
in the case of FLEX currency options, in the form
of dollars per unit of underlying foreign currency
in the minimum increments set forth for U.S. dollar
settled foreign currency options in Rule 1034(a).’’
5 Commentary .02 to Rule 1059 provides that
limit orders with a price of at least $0 but less than
$1 per option contract may also trade under the
terms and conditions in Rule 1059, subject to
certain limitations.
6 Rule 1079(a), Characteristics, sets forth the
potential characteristics (including, for example,
underlying interest, type, exercise price, quote
format, exercise style, and expiration date) of FLEX
options and is inapplicable to and unnecessary for
cabinet trade closing of FLEX option positions
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12059
New, conforming Commentary
language would also be added to Rule
1059. Proposed new Rule 1059
Commentary .03 would specify that,
pursuant to Rule 1079(g), open FLEX
option positions are eligible to be closed
in accordance with Rule 1059 at the
minimum increments specified therein.
The Commentary would state that a
FLEX option cabinet order could be
executed against contraside interest
which itself closes a FLEX option
position or, to the extent permitted
under Rule 1059(a)(iii), against
contraside interest which opens a FLEX
option position. Thus, as proposed, the
new language would require the
initiating side of each FLEX cabinet
trade to be a closing transaction, and
would permit cabinet trading which
opens FLEX positions to occur only as
and when already permitted under Rule
1059’s existing priority rules for nonFLEX cabinet trades. Language would be
added to Rule 1059 Commentary .03
paralleling the last two sentences of
proposed Rule 1079(g) which detail the
provisions of Rule 1079 that shall not
apply to FLEX option transactions
executed pursuant to Rule 1079(g) and
Rule 1059, as well as the provisions of
Rule 1079 that shall apply to FLEX
option positions opened pursuant to
Rule 1059.
Proposed new Rule 1079(g) would
permit an open FLEX option position to
be closed through the use of a cabinet
order, which would be represented by a
floor broker on the floor as specified in
Rule 1059(a).7 In the past, the Exchange
did not provide for the closing of FLEX
trades under the cabinet rule due to lack
of interest. More recently, market
whose characteristics are already known. Other
provisions of Rule 1079(a) which define certain
aspects of the FLEX request for quote (RFQ) process
as well as Rule 1079(b), Procedure for Quoting and
Trading FLEX Options, are likewise inapplicable,
given that trading FLEX Options in the cabinet
would instead be governed by the Rule 1059 cabinet
trading rules. Rule 1079 Section (c), Who May
Trade FLEX Options, would continue to apply and
would restrict participation in FLEX cabinet trades
to the entities meeting the requirements of that
section. Rule 1079 Sections (d), Position Limits, (e),
Exercise Limits, and (f), relating to the exercise-byexception procedure of Rule 805 of the Options
Clearing Corporation, would continue to apply to
any open FLEX position resulting from a FLEX
option transaction conducted under Rule 1059.
7 Rule 1059(a)(iii) sets forth the manner in which
a cabinet order may be either crossed or matched
in three different scenarios: First, when the floor
broker holds the cabinet order only, second, when
the floor broker holds the cabinet order and also a
contra-side cabinet order, and third, when the floor
broker holds a cabinet order and also a contra-side
opening order. Once the cabinet order has been
either crossed or matched, the floor broker is
required by Rule 1059(a)(iv) to submit the
designated cabinet form to the Nasdaq Market
Operations staff for clearance and reporting at the
close of the business day.
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Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices
sradovich on DSK3GMQ082PROD with NOTICES
participants have expressed a desire to
close FLEX option positions under the
cabinet rule and this proposed rule
change will permit them to do so. The
rule would provide that
notwithstanding Rule 1079(a)(4)
regarding FLEX Index, Equity and
Currency Options minimum increments,
open FLEX option positions are eligible
to be closed in accordance with Rule
1059, Accommodation Transactions, at
the minimum increments specified
therein. The Exchange believes that
permitting FLEX option positions to be
closed pursuant to the cabinet rule will
provide FLEX option investors
additional flexibility in the maintenance
or closing out of their FLEX option
positions.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,8 in general, and furthers the
objectives of Section 6(b)(5) of the Act,9
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
permitting investors who desire to close
FLEX options positions the flexibility to
do so in a cabinet transaction. The
Exchange believes that cabinet trades
promote competition and afford market
participants greater opportunities to
close out their options positions. By
providing FLEX options holders the
additional flexibility of proposed Rule
1079(g) and Rule 1059 Commentary .03,
the Exchange should be able to attract
additional FLEX option transactions to
the Exchange. The proposed
amendments should perfect the
mechanism of a free and open market
and improve market quality by
permitting holders of FLEX positions to
trade out of those positions more easily
and efficiently.
The proposed amendments should
perfect the mechanism of a free and
open market by stating clearly that Rule
1079(a), Characteristics, and Rule
1079(b), Procedure for Quoting and
Trading FLEX Options, will not apply,
given that trading FLEX Options in the
cabinet would instead be governed by
the Rule 1059 cabinet trading rules.
Rule 1079 Section (c), Who May Trade
FLEX Options, would continue to apply
and would restrict participation in
FLEX cabinet trades to the entities
meeting the requirements of that
section. Rule 1079 Sections (d), Position
8 15
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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Limits, (e), Exercise Limits, and (f),
relating to the exercise-by-exception
procedure of Rule 805 of the Options
Clearing Corporation, would continue to
apply to any open FLEX position
resulting from a FLEX option
transaction conducted under Rule 1059.
Additionally, the proposed language
will protect investors and the public
interest because Sections (c)–(g) of Rule
1079 shall continue to apply to any
FLEX option position opened pursuant
to Rule 1059, just as they apply today
to FLEX positions opened pursuant to
Rule 1079.
Electronic Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
All submissions should refer to File
Number SR–Phlx–2018–20. 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 (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 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–2018–20 and should
be submitted on or before April 9, 2018.
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
proposed rule change would allow all
market participants holding FLEX
option positions the flexibility to close
them using the same procedures
currently set forth in the cabinet rule for
non-FLEX option positions. Permitting
FLEX option positions to be closed
pursuant to the cabinet rule will provide
FLEX option investors additional
opportunities to close out their FLEX
option positions.
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:
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• 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–2018–20 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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05451 Filed 3–16–18; 8:45 am]
BILLING CODE 8011–01–P
10 17
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CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 83, Number 53 (Monday, March 19, 2018)]
[Notices]
[Pages 12058-12060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05451]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82866; File No. SR-Phlx-2018-20]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
of Proposed Rule Change to a Proposal To Amend Rule 1079, FLEX Index,
Equity and Currency Options and Rule 1059, Accommodation Transactions
March 13, 2018.
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 February 28, 2018, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule
[[Page 12059]]
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 a proposal to amend Rule 1079, FLEX Index,
Equity and Currency Options and Rule 1059, Accommodation Transactions.
The text of the proposed rule change is available on the Exchange's
website at https://nasdaqphlx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 1079 governing FLEX option
transactions in order to permit open FLEX option positions to be closed
pursuant to Rule 1059, Accommodation Transactions, which provides for
cabinet trading \3\ and which is sometimes referred to as the ``cabinet
rule''. Conforming changes are proposed to be made to Rule 1059 itself.
---------------------------------------------------------------------------
\3\ Currently cabinet or accommodation trading of option
contracts is intended to accommodate persons wishing to effect
closing transactions in those series of options dealt in on the
Exchange for which there is no auction market. An accommodation or
cabinet trade refers to trades in listed options on the Exchange
that are worthless or not actively traded, often times conducted to
establish tax losses. Cabinet or accommodation trading of option
contracts is currently intended to accommodate persons wishing to
effect closing transactions in those series of options dealt in on
the Exchange for which there is no auction market. A cabinet trade
is a transaction in which the per-contract value of the cabinet
trade is less than the per-contract value of a trade at the
specified minimum increment for the option contract. The current
proposal would extend the availability of cabinet trading to FLEX
options in certain circumstances.
---------------------------------------------------------------------------
FLEX options are currently traded on the Exchange pursuant to the
procedures set forth in Rule 1079 which permit market participants to
customize equity options to fit specific investment strategies and
goals. Rule 1079 allows investors to specify characteristics such as
the expiration date, strike price, and exercise-style of FLEX option
contracts. Rule 1079(a)(4) governs the quote format of FLEX trades,
requiring bids and offers to be made pursuant to Rule 1034 which
specifies minimum increments.\4\
---------------------------------------------------------------------------
\4\ Rule 1034(a) provides for quote formats ``(A) in the case of
FLEX index options and equity options, a bid and/or offer in the
form of a decimal price (e.g., .10 or .25), pursuant to Rule 1034, a
specific dollar amount, or a percentage of the underlying equivalent
value, in the case of FLEX index options, or security, in the case
of FLEX equity options, rounded to the nearest minimum increment; or
(B) in the case of FLEX currency options, in the form of dollars per
unit of underlying foreign currency in the minimum increments set
forth for U.S. dollar settled foreign currency options in Rule
1034(a).''
---------------------------------------------------------------------------
An ``accommodation'' or ``cabinet'' trade refers to trades in
listed options on the Exchange that are of minimal value or are not
actively traded. Cabinet trading is generally conducted in accordance
with Exchange Rules except as provided in Rule 1059 which sets forth
specific procedures for cabinet trades. Rule 1059(a) 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.\5\ The
rule provides that an opening order is not a cabinet order, but may in
certain cases be matched with a cabinet order.
---------------------------------------------------------------------------
\5\ Commentary .02 to Rule 1059 provides that limit orders with
a price of at least $0 but less than $1 per option contract may also
trade under the terms and conditions in Rule 1059, subject to
certain limitations.
---------------------------------------------------------------------------
Phlx now proposes new Rule 1079(g), which would provide that open
FLEX option positions are eligible to be closed in cabinet trades under
Rule 1059. The proposed new rule would specify that the FLEX option
cabinet order may be executed against contraside interest to close a
FLEX option position or, to the extent permitted under Rule
1059(a)(iii), against contraside interest which opens a FLEX option
position. Under the new rule Sections (a) and (b) of Rule 1079 would
not apply to FLEX option transactions executed pursuant to Rule 1079(g)
and Rule 1059, while Sections (c)-(g) of Rule 1079 would continue to
apply to any FLEX option position opened pursuant to Rule 1059.\6\
---------------------------------------------------------------------------
\6\ Rule 1079(a), Characteristics, sets forth the potential
characteristics (including, for example, underlying interest, type,
exercise price, quote format, exercise style, and expiration date)
of FLEX options and is inapplicable to and unnecessary for cabinet
trade closing of FLEX option positions whose characteristics are
already known. Other provisions of Rule 1079(a) which define certain
aspects of the FLEX request for quote (RFQ) process as well as Rule
1079(b), Procedure for Quoting and Trading FLEX Options, are
likewise inapplicable, given that trading FLEX Options in the
cabinet would instead be governed by the Rule 1059 cabinet trading
rules. Rule 1079 Section (c), Who May Trade FLEX Options, would
continue to apply and would restrict participation in FLEX cabinet
trades to the entities meeting the requirements of that section.
Rule 1079 Sections (d), Position Limits, (e), Exercise Limits, and
(f), relating to the exercise-by-exception procedure of Rule 805 of
the Options Clearing Corporation, would continue to apply to any
open FLEX position resulting from a FLEX option transaction
conducted under Rule 1059.
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New, conforming Commentary language would also be added to Rule
1059. Proposed new Rule 1059 Commentary .03 would specify that,
pursuant to Rule 1079(g), open FLEX option positions are eligible to be
closed in accordance with Rule 1059 at the minimum increments specified
therein. The Commentary would state that a FLEX option cabinet order
could be executed against contraside interest which itself closes a
FLEX option position or, to the extent permitted under Rule
1059(a)(iii), against contraside interest which opens a FLEX option
position. Thus, as proposed, the new language would require the
initiating side of each FLEX cabinet trade to be a closing transaction,
and would permit cabinet trading which opens FLEX positions to occur
only as and when already permitted under Rule 1059's existing priority
rules for non-FLEX cabinet trades. Language would be added to Rule 1059
Commentary .03 paralleling the last two sentences of proposed Rule
1079(g) which detail the provisions of Rule 1079 that shall not apply
to FLEX option transactions executed pursuant to Rule 1079(g) and Rule
1059, as well as the provisions of Rule 1079 that shall apply to FLEX
option positions opened pursuant to Rule 1059.
Proposed new Rule 1079(g) would permit an open FLEX option position
to be closed through the use of a cabinet order, which would be
represented by a floor broker on the floor as specified in Rule
1059(a).\7\ In the past, the Exchange did not provide for the closing
of FLEX trades under the cabinet rule due to lack of interest. More
recently, market
[[Page 12060]]
participants have expressed a desire to close FLEX option positions
under the cabinet rule and this proposed rule change will permit them
to do so. The rule would provide that notwithstanding Rule 1079(a)(4)
regarding FLEX Index, Equity and Currency Options minimum increments,
open FLEX option positions are eligible to be closed in accordance with
Rule 1059, Accommodation Transactions, at the minimum increments
specified therein. The Exchange believes that permitting FLEX option
positions to be closed pursuant to the cabinet rule will provide FLEX
option investors additional flexibility in the maintenance or closing
out of their FLEX option positions.
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\7\ Rule 1059(a)(iii) sets forth the manner in which a cabinet
order may be either crossed or matched in three different scenarios:
First, when the floor broker holds the cabinet order only, second,
when the floor broker holds the cabinet order and also a contra-side
cabinet order, and third, when the floor broker holds a cabinet
order and also a contra-side opening order. Once the cabinet order
has been either crossed or matched, the floor broker is required by
Rule 1059(a)(iv) to submit the designated cabinet form to the Nasdaq
Market Operations staff for clearance and reporting at the close of
the business day.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\9\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest,
by permitting investors who desire to close FLEX options positions the
flexibility to do so in a cabinet transaction. The Exchange believes
that cabinet trades promote competition and afford market participants
greater opportunities to close out their options positions. By
providing FLEX options holders the additional flexibility of proposed
Rule 1079(g) and Rule 1059 Commentary .03, the Exchange should be able
to attract additional FLEX option transactions to the Exchange. The
proposed amendments should perfect the mechanism of a free and open
market and improve market quality by permitting holders of FLEX
positions to trade out of those positions more easily and efficiently.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The proposed amendments should perfect the mechanism of a free and
open market by stating clearly that Rule 1079(a), Characteristics, and
Rule 1079(b), Procedure for Quoting and Trading FLEX Options, will not
apply, given that trading FLEX Options in the cabinet would instead be
governed by the Rule 1059 cabinet trading rules. Rule 1079 Section (c),
Who May Trade FLEX Options, would continue to apply and would restrict
participation in FLEX cabinet trades to the entities meeting the
requirements of that section. Rule 1079 Sections (d), Position Limits,
(e), Exercise Limits, and (f), relating to the exercise-by-exception
procedure of Rule 805 of the Options Clearing Corporation, would
continue to apply to any open FLEX position resulting from a FLEX
option transaction conducted under Rule 1059. Additionally, the
proposed language will protect investors and the public interest
because Sections (c)-(g) of Rule 1079 shall continue to apply to any
FLEX option position opened pursuant to Rule 1059, just as they apply
today to FLEX positions opened pursuant to Rule 1079.
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 proposed rule change would
allow all market participants holding FLEX option positions the
flexibility to close them using the same procedures currently set forth
in the cabinet rule for non-FLEX option positions. Permitting FLEX
option positions to be closed pursuant to the cabinet rule will provide
FLEX option investors additional opportunities to close out their FLEX
option positions.
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 [email protected]. Please include
File Number SR-Phlx-2018-20 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-2018-20. 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 (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 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-2018-20 and should be submitted on
or before April 9, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05451 Filed 3-16-18; 8:45 am]
BILLING CODE 8011-01-P
