Self-Regulatory Organizations; Nasdaq PHLX LLC; Order Granting Approval of Proposed Rule Change To Create a New Rule 1081, To Amend Electronic Market Maker Obligations and Quoting Requirements for Electronic ROTs, Which Will Be Defined To Include SQTs, RSQTs, Directed SQTs, Directed RSQTs, Specialists, and Remote Specialists, 22717-22720 [2018-10379]
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on May 11, 2018,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express, Priority Mail, &
First-Class Package Service Contract 36
to Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–153, CP2018–219.
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–10469 Filed 5–15–18; 8:45 am]
BILLING CODE 7710–12–P
For the Board.
Dated: May 14, 2018.
Martha Rico-Parra,
Secretary to the Board.
POSTAL SERVICE
Product Change—Priority Mail and
First-Class Package Service
Negotiated Service Agreement
[FR Doc. 2018–10541 Filed 5–14–18; 4:15 pm]
Postal ServiceTM.
Notice.
AGENCY:
ACTION:
BILLING CODE 7905–01–P
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 required notice: May 16,
2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth 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 May 11, 2018,
it filed with the Postal Regulatory
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Priority Mail & First-Class Package
Service Contract 80 to Competitive
Product List. Documents are available at
www.prc.gov, Docket Nos. MC2018–152,
CP2018–218.
SUMMARY:
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–10468 Filed 5–15–18; 8:45 am]
BILLING CODE 7710–12–P
RAILROAD RETIREMENT BOARD
sradovich on DSK3GMQ082PROD with NOTICES
Sunshine Act: Notice of Public Meeting
Notice is hereby given in accordance
with Public Law 92–463 that the
Actuarial Advisory Committee will hold
a meeting on June 5, 2018, at 10:00 a.m.
at the office of the Chief Actuary of the
U. S. Railroad Retirement Board, 844
North Rush Street, Chicago, Illinois, on
the conduct of the 27th Actuarial
Valuation of the Railroad Retirement
System. The agenda for this meeting
will include a discussion of the results
and presentation of the 27th Actuarial
VerDate Sep<11>2014
17:34 May 15, 2018
Valuation. The text and tables which
constitute the Valuation will have been
prepared in draft form for review by the
Committee. It is expected that this will
be the last meeting of the Committee
before publication of the Valuation.
The meeting will be open to the
public. Persons wishing to submit
written statements or make oral
presentations should address their
communications or notices to the RRB
Actuarial Advisory Committee, c/o
Chief Actuary, U.S. Railroad Retirement
Board, 844 North Rush Street, Chicago,
Illinois 60611–2092.
Jkt 244001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83209; File No. SR–Phlx–
2018–22]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Order Granting Approval of
Proposed Rule Change To Create a
New Rule 1081, To Amend Electronic
Market Maker Obligations and Quoting
Requirements for Electronic ROTs,
Which Will Be Defined To Include
SQTs, RSQTs, Directed SQTs, Directed
RSQTs, Specialists, and Remote
Specialists
May 10, 2018.
I. Introduction
On March 20, 2018, Nasdaq PHLX
LLC (‘‘Phlx’’ or the ‘‘Exchange’’) 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 amend the market maker
obligations and quoting requirements
for an SQT, RSQT, Directed SQT,
Directed RSQT, and Specialist
(including Remote Specialist) who
enters electronic quotations into the
Exchange’s System.3 The proposed rule
change was published for comment in
the Federal Register on April 5, 2018.4
The Commission received no comments
on the proposed rule change. This order
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See infra notes 5–9 for definitions of SQT,
RSQT, Directed SQT, Directed RSQT, Specialist,
Remote Specialist, and System.
4 See Securities Exchange Act Release No. 82975
(March 30, 2018), 83 FR 14690 (April 5, 2018)
(‘‘Notice’’).
2 17
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22717
grants approval of the proposed rule
change.
II. Description of the Proposed Rule
Change
The Exchange proposes to amend the
market maker obligations and quoting
requirements for an ‘‘electronic ROT,’’
which would be defined to include an
SQT,5 RSQT,6 Directed SQT, Directed
RSQT,7 and Specialist (including
Remote Specialist) 8 who enters
electronic quotations into the
Exchange’s System,9 and move these
modified provisions to new Phlx Rule
1081.10 The Exchange notes that nonSQT ROTs 11 would not be subject to the
proposed quoting requirements
5 An ‘‘ROT’’ is a regular member of the Exchange
located on the trading floor who has received
permission from the Exchange to trade in options
for his own account. See Phlx Rule 1014(b)(i). A
‘‘Streaming Quote Trader’’ or ‘‘SQT’’ is an ROT who
has received permission from the Exchange to
generate and submit option quotations
electronically in options to which such SQT is
assigned. An SQT may only submit such quotations
while such SQT is physically present on the floor
of the Exchange. An SQT may only trade in a
market making capacity in classes of options in
which the SQT is assigned. See Phlx Rule
1014(b)(ii)(A).
6 A ‘‘Remote Streaming Quote Trader’’ or ‘‘RSQT’’
is an ROT that is a member affiliated with a
‘‘Remote Streaming Quote Trader Organization’’ or
‘‘RSQTO’’ with no physical trading floor presence
who has received permission from the Exchange to
generate and submit option quotations
electronically in options to which such RSQT has
been assigned. See Phlx Rule 1014(b)(ii)(B). See also
Phlx Rule 507(a).
7 A ‘‘Directed SQT’’ or ‘‘Directed RSQT’’ is an
SQT or RSQT that receives a Directed Order. A
‘‘Directed Order’’ is any order (other than a stop or
stop-limit order as defined in Phlx Rule 1066) to
buy or sell which has been directed to a particular
Specialist, RSQT, or SQT by an Order Flow
Provider. An ‘‘Order Flow Provider’’ is any member
or member organization that submits, as agent,
orders to the Exchange. See Phlx Rule 1068(a)(i).
8 A ‘‘Specialist’’ is an Exchange member who is
registered as an options specialist pursuant to Phlx
Rule 501 and Phlx Rule 1020(a). A ‘‘Remote
Specialist’’ is an options specialist that does not
have a physical presence on an Exchange floor. See
Phlx Rule 1020(a)(i) and (ii).
9 The ‘‘System’’ is the automated system for order
execution and trade reporting owned and operated
by the Exchange which comprises: (A) An order
execution service that enables members to
automatically execute transactions in ‘‘System
Securities’’ (defined as all options that are currently
trading on the System); and provides members with
sufficient monitoring and updating capability to
participate in an automated execution environment;
(B) a trade reporting service that submits ‘‘lockedin’’ trades for clearing to a registered clearing
agency for clearance and settlement; transmits lastsale reports of transactions automatically to the
Options Price Reporting Authority for
dissemination to the public and industry; and
provides participants with monitoring and risk
management capabilities to facilitate participation
in a ‘‘locked-in’’ trading environment; and (C) the
data feeds described in Phlx Rule 1070. See Phlx
Rule 1000(b)(45) and (46).
10 See proposed Phlx Rule 1081.
11 A non-SQT ROT is an ROT who is neither an
SQT nor an RSQT. See Phlx Rule 1014(b)(ii)(C).
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
described herein; instead, they are
subject to quarterly trading
requirements as specified in Phlx Rule
1014, Commentary .01.12
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A. Market Maker Obligations
The Exchange proposes first to amend
the generalized description of the
market making obligations of an
electronic ROT on the Exchange. Today,
the Exchange provides that transactions
of a Specialist and an ROT should
constitute a course of dealings
reasonably calculated to contribute to
the maintenance of a fair and orderly
market, and that those members should
not enter into transactions or make bids
or offers that are inconsistent with such
a course of dealings.13 In the Exchange’s
proposal, new Phlx Rule 1081 would
specify that, in registering as an
electronic ROT, a member organization
would be committing to various
obligations. Transactions of an
electronic ROT in its market making
capacity14 would be required to
constitute a course of dealings
reasonably calculated to contribute to
the maintenance of a fair and orderly
market, and those member organizations
would not be permitted to make bids or
offers or enter into transactions that are
inconsistent with such course of
dealings. Electronic ROTs would be
prohibited from effecting purchases or
sales except in a reasonable and orderly
manner.15
In addition, ordinarily during trading
hours, an electronic ROT would be
required to: (i) Maintain a two-sided
market in those options in which the
electronic ROT is registered to trade, in
a manner that enhances the depth,
liquidity, and competitiveness of the
market; (ii) engage, to a reasonable
degree under the existing
circumstances, in dealings for its own
account when there exists, or it is
reasonably anticipating that there will
exist, a lack of price continuity, a
temporary disparity between the supply
of (or demand for) a particular option
contract, or a temporary distortion of
price relationships between option
contracts of the same class; (iii) compete
with other electronic ROTs in all
options in all capacities in which the
electronic ROT is registered to trade; (iv)
make markets that will be honored for
the number of contracts entered into the
12 See
Notice, supra note 4, at 14690.
Phlx Rule 1014(a).
14 According to the Exchange, orders, which
electronic ROTs may enter pursuant to Phlx Rule
1080(b)(i)(B), are not considered market making
activity for purposes of fulfilling the proposed
quoting requirements or other obligations. See
Notice, supra note 4, at 14690 n.5.
15 See proposed Phlx Rule 1081(a).
13 See
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17:34 May 15, 2018
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System in all options in which the
electronic ROT is registered to trade; (v)
update quotations in response to
changed market conditions in all
options in which the electronic ROT is
registered to trade; (vi) maintain active
markets in all options in which the
electronic ROT is registered; and (vii)
honor all orders attributed to the
electronic ROT that the System routes to
away markets pursuant to Phlx Rule
1080(m).16
The proposed rules provide further
that, if Phlx Regulation found any
substantial or continued failure to
engage in a course of dealings as
described above, the electronic ROT
would be subject to disciplinary action
or suspension or revocation of
registration in one or more of the
securities in which the electronic ROT
is registered. The proposed rule
stipulates that nothing in the rule would
limit any other power of the Board
under the rules, or procedures of the
Exchange, with respect to the
registration of an ROT or any violation
by an ROT pursuant to the rule.17 The
Exchange states that the proposed
obligations are similar to those imposed
on market makers by another options
exchange.18
B. Quoting Requirements
The Exchange further proposes to
amend the quoting requirements for
electronic ROTs. Electronic ROTs would
be required to enter bids and offers for
the options to which they are registered,
except in an assigned options series
listed intra-day on the Exchange. On a
daily basis, an electronic ROT would be
required to make markets consistent
with the applicable quoting
requirements, as described further
below. A member organization would be
required to meet each quoting
requirement separately depending on
the role that the member organization
plays with respect to different options
series.19
16 See
proposed Phlx Rule 1081(a).
proposed Phlx Rule 1081(b). The Exchange
explains that it added this rule text to make clear
that the obligations noted within this proposed rule
are not an exclusive list, because an electronic ROT
may be found to have violated other by-laws and
rules of the Exchange that are separate and apart
from these obligations. See Notice, supra note 4, at
14691 n.9.
18 See Notice, supra note 4, at 14690–91 & n.8.
See also BX Rules at Chapter VII, Section 5.
19 See proposed Phlx Rule 1081(c). Specifically,
the proposed rule states that an SQT and RSQT who
is also the Specialist would be held to the quoting
requirements for Specialists in options series in
which the Specialist is assigned and would be held
to the quoting requirements for SQTs and RSQTs
in all other options series where assigned. An SQT
or RSQT who receives a Directed Order would be
held to the quoting requirements for Directed SQTs
and Directed RSQTs. See id.
17 See
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Fmt 4703
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The proposed rules would state
explicitly that an electronic ROT’s bid
and offer for a series of options contracts
would need to be accompanied by the
number of contracts at that price that
the electronic ROT is willing to buy or
sell. Similar to under current rules, the
best bid or best offer submitted by an
electronic ROT would be required to
have a size of not less than the
minimum number of contracts
determined by the Exchange on a classby-class basis, which minimum will be
at least one contract.20 The new rule
would also state that an electronic ROT
that enters a bid in a registered option
series would be required to enter an
offer and vice versa. The quotations
would need to meet the legal quote
width requirements in Phlx Rule
1014(c)(i)(A)(1) and (2).21
With respect to the specific quoting
requirements, currently, the Exchange
requires an SQT and an RSQT to quote
two-sided markets in not less than 60%
of the series in which such SQT or
RSQT is assigned. To satisfy these
requirements when quoting a series, an
SQT or RSQT must quote such series
90% of the trading day (as a percentage
of the total number of minutes in such
trading day) or such higher percentage
as the Exchange may announce in
advance. These obligations apply
collectively to all appointed issues,
rather than on an issue-by-issue basis.22
Under the proposal, SQTs and RSQTs
associated with the same member
organization would be collectively
required to provide two-sided
quotations in 60% of the cumulative
number of seconds, or such higher
percentage as the Exchange may
announce in advance, for which that
member organization’s assigned option
series are open for trading.23
In addition, currently, the Exchange
requires a Specialist, including an RSQT
functioning as a Remote Specialist, to
quote two-sided markets in the lesser of
99% of the series or 100% of the series
minus one call-put pair in each option
in which such Specialist is assigned. To
satisfy these requirements when quoting
a series, a Specialist must quote such
series 90% of the trading day (as a
percentage of the total number of
minutes in such trading day) or such
20 See proposed Phlx Rule 1081(c)(i). See also
Phlx Rule 1014(b)(ii)(D)(3) (specifying the
minimum contract size for SQTs, RSQTs, and
Specialists), the current equivalent provision that is
being replaced.
21 See proposed Phlx Rule 1081(c)(ii).
22 See Phlx Rule 1014(b)(ii)(D)(1).
23 See proposed Phlx Rule 1081(c)(ii)(A). See
infra, notes 35–36 and accompanying text,
regarding the method by which the percentage
would be calculated.
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
higher percentage as the Exchange may
announce in advance. These obligations
apply collectively to all appointed
issues, rather than on an issue-by-issue
basis.24 Under the proposal, Specialists
(including Remote Specialists)
associated with the same member
organization would be collectively
required to provide two-sided
quotations in 90% of the cumulative
number of seconds, or such higher
percentage as the Exchange may
announce in advance, for which that
member organization’s assigned options
series are open for trading.25 The
Exchange states that the Specialists’
heightened quoting requirements as
compared to SQTs and RSQTs allow for
Specialists to receive certain
participation rights.26
Further, currently, the Exchange
requires a Directed SQT and a Directed
RSQT to quote two-sided markets in the
lesser of 99% of the series listed on the
Exchange or 100% of the series listed on
the Exchange minus one call-put pair,27
in each case in at least 60% of the
options in which such Directed SQT or
Directed SQT is assigned.28 To satisfy
these requirements when quoting a
series, a Directed SQT or Directed RSQT
must quote such series 90% of the
trading day (as a percentage of the total
number of minutes in such trading day)
or such higher percentage as the
Exchange may announce in advance.
These obligations apply collectively to
all appointed issues, rather than on an
issue-by-issue basis.29 Under the
proposal, Directed SQTs and Directed
RSQTs associated with the same
member organization would be
collectively required to provide twosided quotations in 90% of the
cumulative number of seconds, or such
higher percentage as the Exchange may
announce in advance, for which that
member organization’s assigned options
series are open for trading. A member
organization would be considered
24 See
Phlx Rule 1014(b)(ii)(D)(2).
proposed Phlx Rule 1081(c)(ii)(B). See
infra, notes 35–36 and accompanying text,
regarding the method by which the percentage
would be calculated.
26 See Notice, supra note 4, at 14693. See also
Phlx Rules 1014(g)(ii) and 1014(g)(vii)(B)(1)(c).
27 ‘‘Call-put pair’’ refers to one call and one put
that cover the same underlying instrument and have
the same expiration date and exercise price. See
Phlx Rule 1014(b)(ii)(D)(6).
28 See Phlx Rule 1014(b)(ii)(D)(1). Whenever a
Directed SQT or Directed RSQT enters a quotation
in an option in which such Directed SQT or
Directed RSQT is assigned, such Directed SQT or
Directed RSQT must maintain until the close of that
trading day quotations for the lesser of 99% of the
series of the option listed on the Exchange or 100%
of the series of the option listed on the Exchange
minus one call-put pair. See id.
29 See id.
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25 See
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17:34 May 15, 2018
Jkt 244001
directed in all assigned options once the
member organization receives a Directed
Order in any option in which they are
assigned and would be considered a
Directed SQT or Directed RSQT until
such time as the member organization
notifies the Exchange that they are no
longer directed.30 The Exchange notes
that the Directed SQTs and Directed
RSQTs’ heightened quoting
requirements as compared to SQTs and
RSQTs allow for Directed SQTs and
Directed RSQTs to receive certain
participation rights.31
The Exchange states that the proposal
better accommodates the occasional
issues that may arise in a particular
series, arguing that the existing quoting
requirements may at times discourage
liquidity in particular options series
because an electronic ROT is forced to
focus on a momentary lapse, rather than
using the appropriate resources to focus
on the options series that need and
consume additional liquidity.32
For SQTs, RSQTs, Directed SQTs, and
Directed RSQTs, the Exchange would
continue to exclude from the above
quoting requirements any Quarterly
Option Series, Adjusted Option Series,
and any option series until the time to
expiration for such series is less than
nine months.33 Specialists would
continue to be subject to the above
quoting requirements for all assigned
option series, including Quarterly
Option Series, Adjusted Option Series,
and any option series with an expiration
of nine months or greater.34
The Exchange would calculate
compliance with the above quoting
requirements by (i) taking the total
number of seconds the member
organization disseminates quotes in
each assigned option series; 35 and (ii)
dividing that time by the eligible total
number of seconds each assigned option
series is open for trading that day.
30 See proposed Phlx Rule 1081(c)(ii)(C). See
infra, notes 35–36 and accompanying text,
regarding the method by which the percentage
would be calculated.
31 See Notice, supra note 4, at 14693. See also
Phlx Rule 1014(g)(viii)(B).
32 See Notice, supra note 4, at 14695.
33 See proposed Phlx Rule 1081(c)(ii)(A) and (C).
See also Phlx Rule 1014(b)(ii)(D)(4), the current
equivalent provision that is being replaced. An
‘‘Adjusted Option Series’’ would be defined as an
option series wherein one option contract in the
series represents the delivery of other than 100
shares of underlying stock or Exchange-Traded
Fund Shares. See proposed Phlx Rule
1081(c)(ii)(A)(i). See also Phlx Rule
1014(b)(ii)(D)(4).
34 See proposed Phlx Rule 1081(c)(ii)(B).
35 With respect to SQTs, RSQTs, Directed SQTs,
and Directed RSQTs, such calculation would
exclude Quarterly Option Series, Adjusted Option
Series, and any option series with an expiration of
nine months or greater. See proposed Phlx Rule
1081(c)(ii)(D).
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Sfmt 4703
22719
Quoting would not be required in every
assigned options series and compliance
with this requirement would be
determined by reviewing the aggregate
of quoting in assigned options series for
the member organization.36 Similar to
current requirements, the Exchange
would consider exceptions to the
quoting requirements based on
demonstrated legal or regulatory
requirements or other mitigating
circumstances. The Exchange would
determine compliance with quoting
requirements on a monthly basis.
However, this monthly compliance
evaluation would not relieve a member
organization of the obligation to provide
continuous two-sided quotes on a daily
basis or prohibit the Exchange from
taking disciplinary action against a
member organization for failure to meet
the quoting requirements each trading
day.37 If a technical failure or limitation
of a System of the Exchange prevents a
member organization from maintaining,
or prevents a member organization from
communicating to the Exchange timely
and accurate quotes, the duration of
such failure or limitation would not be
included in any calculation of quoting
requirements with respect to the
affected quotes.38
The Exchange states that the proposed
quoting requirements as described
above are similar to those of another
options exchange.39
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.40 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,41 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
36 See proposed Phlx Rule 1081(c)(ii)(D). See
Notice, supra note 4, at 14694, for an example of
how the Exchange would calculate compliance with
the quoting requirements.
37 See proposed Phlx Rule 1081(c)(iii). See also
Phlx Rule 1014(b)(ii)(D)(1) and (2), the current
equivalent provision that is being replaced.
38 See proposed Phlx Rule 1081(c)(iv). See also
Phlx Rule 1014(b)(ii)(D)(5), the current equivalent
provision that is being replaced.
39 See Notice, supra note 4, at 14692–93. See also
BX Rules at Chapter VII, Sections 6, 14, and 15.
40 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
41 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 83, No. 95 / Wednesday, May 16, 2018 / Notices
coordination with persons engaged in
facilitating transactions in securities, 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 proposes to add
specificity regarding the general
description in its rules regarding market
maker obligations of an electronic ROT.
The Commission finds that the changes
it is making in this regard are consistent
with the Act and notes that, as the
Exchange maintains, the changes are
consistent with the rules of another
options exchange.42
The Exchange proposes to reduce the
specific quoting requirements for
electronic ROTs of the various types.
SQTs and RSQTs associated with the
same member organization would be
collectively required to provide twosided quotations in 60% of the
cumulative number of seconds for
which that member organization’s
assigned option series are open for
trading. Specialists (including Remote
Specialists) associated with the same
member organization would be
collectively required to provide twosided quotations in 90% of the
cumulative number of seconds for
which that member organization’s
assigned option series are open for
trading. Similarly, Directed SQTs and
Directed RSQTs associated with the
same member organization would be
collectively required to provide twosided quotations in 90% of the
cumulative number of seconds for
which that member organization’s
assigned option series are open for
trading. The Exchange would be able to
designate a higher percentage for any of
these quoting requirements by
announcing such percentage in advance.
These quoting requirements would
apply to all of an electronic ROT’s
assigned options on a daily basis. These
quoting requirements would be
reviewed on a monthly basis, and would
allow the Exchange to review the
electronic ROT’s daily compliance in
the aggregate and determine the
appropriate disciplinary action for
single or multiple failures to comply
with the continuous quoting
requirement during the month period.
The Commission notes that the
proposed rules provide that determining
compliance with the continuous quoting
requirements on a monthly basis would
not relieve the electronic ROT of the
obligation to provide continuous twosided quotes on a daily basis, nor would
it prohibit the Exchange from taking
42 See
BX Rules, Chapter VII, Section 5.
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18:07 May 15, 2018
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disciplinary action against an electronic
ROT for failing to meet the continuous
quoting requirements each trading day.
The Commission finds that the
proposed changes to the quoting
requirements of electronic ROTs are
consistent with the Act. The Exchange
believes that the revised requirements
will enable electronic ROTs to focus on
the options series that need and
consume more liquidity than others. To
the extent this is true, the proposal will
enhance trading opportunities on the
Exchange. Moreover, the Commission
believes that, although the proposal
would reduce the quoting requirements
for the various electronic ROTs from
their current levels, the proposed
changes are consistent, as the Exchange
argues, with the market maker quoting
requirements in place on other
markets.43 The Commission further
notes that, notwithstanding the
proposed changes to the quoting
requirements for Specialists, Directed
SQTs, and Directed RSQTs, the revised
quoting requirements continue to reflect
meaningful market making obligations.
Additionally, the proposed rules reflect
a balance of rights and obligations
consistent with the balance reflected in
the rules of other exchanges for market
participants fulfilling a similar role.44 In
addition, the Commission believes that
the proposed changes to provide
additional detail about how the
Exchange will apply these quoting
requirements adds further clarity to the
rules.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,45 that the
proposed rule change (SR–Phlx–2018–
22), be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–10379 Filed 5–15–18; 8:45 am]
BILLING CODE 8011–01–P
43 See, e.g, BX Rules, Chapter VII, Sections 6, 14,
and 15; NYSE American Rules 925.1NY and
964.1NY; NYSE Arca Rules 6.37B–O and 6.88–O.
44 See, e.g., Nasdaq GEMX Rules 713 and 804;
Nasdaq ISE Rules 713 and 804; Nasdaq MRX Rules
713 and 804. See also supra notes 26 and 31 and
accompanying text.
45 Id.
46 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33095; File No. 812–14819]
Franklin Alternative Strategies Funds,
et al.
May 10, 2018.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of an application for an order
pursuant to: (a) Section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) granting an exemption from
sections 18(f) and 21(b) of the Act; (b)
section 12(d)(1)(J) of the Act granting an
exemption from section 12(d)(1) of the
Act; (c) sections 6(c) and 17(b) of the
Act granting an exemption from sections
17(a)(1), 17(a)(2) and 17(a)(3) of the Act;
and (d) section 17(d) of the Act and rule
17d–1 under the Act to permit certain
joint arrangements and transactions.
Applicants request an order that would
supersede a prior order and that would
permit certain registered management
investment companies to participate in
a joint lending and borrowing facility.1
APPLICANTS: Franklin Alternative
Strategies Funds, Franklin California
Tax-Free Income Fund, Franklin
California Tax-Free Trust, Franklin
Custodian Funds, Franklin ETF Trust,
Franklin Federal Tax-Free Income Fund,
Franklin Floating Rate Master Trust,
Franklin Fund Allocator Series,
Franklin Global Trust, Franklin Gold
and Precious Metals Fund, Franklin
High Income Trust, Franklin Investors
Securities Trust, Franklin Managed
Trust, Franklin U.S. Government Money
Fund, Franklin Municipal Securities
Trust, Franklin Mutual Series Funds,
Franklin New York Tax-Free Income
Fund, Franklin New York Tax-Free
Trust, Franklin Real Estate Securities
Trust, Franklin Strategic Mortgage
Portfolio, Franklin Strategic Series,
Franklin Tax-Free Trust, Franklin
Templeton ETF Trust, Franklin
Templeton Global Trust, Franklin
Templeton International Trust, Franklin
Templeton Money Fund Trust, Franklin
Templeton Variable Insurance Products
Trust, Franklin Value Investors Trust,
Institutional Fiduciary Trust, Templeton
China World Fund, Templeton
Developing Markets Trust, Templeton
Funds, Templeton Global Investment
Trust, Templeton Global Opportunities
Trust, Templeton Global Smaller
Companies Fund, Templeton Growth
1 Franklin Gold Fund, et al., Investment Company
Act Release Nos. 24016 (Sept. 16, 1999) and 24080
(Oct. 13, 1999).
E:\FR\FM\16MYN1.SGM
16MYN1
]]>Agencies
[Federal Register Volume 83, Number 95 (Wednesday, May 16, 2018)]
[Notices]
[Pages 22717-22720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10379]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83209; File No. SR-Phlx-2018-22]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Order Granting
Approval of Proposed Rule Change To Create a New Rule 1081, To Amend
Electronic Market Maker Obligations and Quoting Requirements for
Electronic ROTs, Which Will Be Defined To Include SQTs, RSQTs, Directed
SQTs, Directed RSQTs, Specialists, and Remote Specialists
May 10, 2018.
I. Introduction
On March 20, 2018, Nasdaq PHLX LLC (``Phlx'' or the ``Exchange'')
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
amend the market maker obligations and quoting requirements for an SQT,
RSQT, Directed SQT, Directed RSQT, and Specialist (including Remote
Specialist) who enters electronic quotations into the Exchange's
System.\3\ The proposed rule change was published for comment in the
Federal Register on April 5, 2018.\4\ The Commission received no
comments on the proposed rule change. This order grants approval of the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See infra notes 5-9 for definitions of SQT, RSQT, Directed
SQT, Directed RSQT, Specialist, Remote Specialist, and System.
\4\ See Securities Exchange Act Release No. 82975 (March 30,
2018), 83 FR 14690 (April 5, 2018) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to amend the market maker obligations and
quoting requirements for an ``electronic ROT,'' which would be defined
to include an SQT,\5\ RSQT,\6\ Directed SQT, Directed RSQT,\7\ and
Specialist (including Remote Specialist) \8\ who enters electronic
quotations into the Exchange's System,\9\ and move these modified
provisions to new Phlx Rule 1081.\10\ The Exchange notes that non-SQT
ROTs \11\ would not be subject to the proposed quoting requirements
[[Page 22718]]
described herein; instead, they are subject to quarterly trading
requirements as specified in Phlx Rule 1014, Commentary .01.\12\
---------------------------------------------------------------------------
\5\ An ``ROT'' is a regular member of the Exchange located on
the trading floor who has received permission from the Exchange to
trade in options for his own account. See Phlx Rule 1014(b)(i). A
``Streaming Quote Trader'' or ``SQT'' is an ROT who has received
permission from the Exchange to generate and submit option
quotations electronically in options to which such SQT is assigned.
An SQT may only submit such quotations while such SQT is physically
present on the floor of the Exchange. An SQT may only trade in a
market making capacity in classes of options in which the SQT is
assigned. See Phlx Rule 1014(b)(ii)(A).
\6\ A ``Remote Streaming Quote Trader'' or ``RSQT'' is an ROT
that is a member affiliated with a ``Remote Streaming Quote Trader
Organization'' or ``RSQTO'' with no physical trading floor presence
who has received permission from the Exchange to generate and submit
option quotations electronically in options to which such RSQT has
been assigned. See Phlx Rule 1014(b)(ii)(B). See also Phlx Rule
507(a).
\7\ A ``Directed SQT'' or ``Directed RSQT'' is an SQT or RSQT
that receives a Directed Order. A ``Directed Order'' is any order
(other than a stop or stop-limit order as defined in Phlx Rule 1066)
to buy or sell which has been directed to a particular Specialist,
RSQT, or SQT by an Order Flow Provider. An ``Order Flow Provider''
is any member or member organization that submits, as agent, orders
to the Exchange. See Phlx Rule 1068(a)(i).
\8\ A ``Specialist'' is an Exchange member who is registered as
an options specialist pursuant to Phlx Rule 501 and Phlx Rule
1020(a). A ``Remote Specialist'' is an options specialist that does
not have a physical presence on an Exchange floor. See Phlx Rule
1020(a)(i) and (ii).
\9\ The ``System'' is the automated system for order execution
and trade reporting owned and operated by the Exchange which
comprises: (A) An order execution service that enables members to
automatically execute transactions in ``System Securities'' (defined
as all options that are currently trading on the System); and
provides members with sufficient monitoring and updating capability
to participate in an automated execution environment; (B) a trade
reporting service that submits ``locked-in'' trades for clearing to
a registered clearing agency for clearance and settlement; transmits
last-sale reports of transactions automatically to the Options Price
Reporting Authority for dissemination to the public and industry;
and provides participants with monitoring and risk management
capabilities to facilitate participation in a ``locked-in'' trading
environment; and (C) the data feeds described in Phlx Rule 1070. See
Phlx Rule 1000(b)(45) and (46).
\10\ See proposed Phlx Rule 1081.
\11\ A non-SQT ROT is an ROT who is neither an SQT nor an RSQT.
See Phlx Rule 1014(b)(ii)(C).
\12\ See Notice, supra note 4, at 14690.
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A. Market Maker Obligations
The Exchange proposes first to amend the generalized description of
the market making obligations of an electronic ROT on the Exchange.
Today, the Exchange provides that transactions of a Specialist and an
ROT should constitute a course of dealings reasonably calculated to
contribute to the maintenance of a fair and orderly market, and that
those members should not enter into transactions or make bids or offers
that are inconsistent with such a course of dealings.\13\ In the
Exchange's proposal, new Phlx Rule 1081 would specify that, in
registering as an electronic ROT, a member organization would be
committing to various obligations. Transactions of an electronic ROT in
its market making capacity\14\ would be required to constitute a course
of dealings reasonably calculated to contribute to the maintenance of a
fair and orderly market, and those member organizations would not be
permitted to make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Electronic ROTs would be
prohibited from effecting purchases or sales except in a reasonable and
orderly manner.\15\
---------------------------------------------------------------------------
\13\ See Phlx Rule 1014(a).
\14\ According to the Exchange, orders, which electronic ROTs
may enter pursuant to Phlx Rule 1080(b)(i)(B), are not considered
market making activity for purposes of fulfilling the proposed
quoting requirements or other obligations. See Notice, supra note 4,
at 14690 n.5.
\15\ See proposed Phlx Rule 1081(a).
---------------------------------------------------------------------------
In addition, ordinarily during trading hours, an electronic ROT
would be required to: (i) Maintain a two-sided market in those options
in which the electronic ROT is registered to trade, in a manner that
enhances the depth, liquidity, and competitiveness of the market; (ii)
engage, to a reasonable degree under the existing circumstances, in
dealings for its own account when there exists, or it is reasonably
anticipating that there will exist, a lack of price continuity, a
temporary disparity between the supply of (or demand for) a particular
option contract, or a temporary distortion of price relationships
between option contracts of the same class; (iii) compete with other
electronic ROTs in all options in all capacities in which the
electronic ROT is registered to trade; (iv) make markets that will be
honored for the number of contracts entered into the System in all
options in which the electronic ROT is registered to trade; (v) update
quotations in response to changed market conditions in all options in
which the electronic ROT is registered to trade; (vi) maintain active
markets in all options in which the electronic ROT is registered; and
(vii) honor all orders attributed to the electronic ROT that the System
routes to away markets pursuant to Phlx Rule 1080(m).\16\
---------------------------------------------------------------------------
\16\ See proposed Phlx Rule 1081(a).
---------------------------------------------------------------------------
The proposed rules provide further that, if Phlx Regulation found
any substantial or continued failure to engage in a course of dealings
as described above, the electronic ROT would be subject to disciplinary
action or suspension or revocation of registration in one or more of
the securities in which the electronic ROT is registered. The proposed
rule stipulates that nothing in the rule would limit any other power of
the Board under the rules, or procedures of the Exchange, with respect
to the registration of an ROT or any violation by an ROT pursuant to
the rule.\17\ The Exchange states that the proposed obligations are
similar to those imposed on market makers by another options
exchange.\18\
---------------------------------------------------------------------------
\17\ See proposed Phlx Rule 1081(b). The Exchange explains that
it added this rule text to make clear that the obligations noted
within this proposed rule are not an exclusive list, because an
electronic ROT may be found to have violated other by-laws and rules
of the Exchange that are separate and apart from these obligations.
See Notice, supra note 4, at 14691 n.9.
\18\ See Notice, supra note 4, at 14690-91 & n.8. See also BX
Rules at Chapter VII, Section 5.
---------------------------------------------------------------------------
B. Quoting Requirements
The Exchange further proposes to amend the quoting requirements for
electronic ROTs. Electronic ROTs would be required to enter bids and
offers for the options to which they are registered, except in an
assigned options series listed intra-day on the Exchange. On a daily
basis, an electronic ROT would be required to make markets consistent
with the applicable quoting requirements, as described further below. A
member organization would be required to meet each quoting requirement
separately depending on the role that the member organization plays
with respect to different options series.\19\
---------------------------------------------------------------------------
\19\ See proposed Phlx Rule 1081(c). Specifically, the proposed
rule states that an SQT and RSQT who is also the Specialist would be
held to the quoting requirements for Specialists in options series
in which the Specialist is assigned and would be held to the quoting
requirements for SQTs and RSQTs in all other options series where
assigned. An SQT or RSQT who receives a Directed Order would be held
to the quoting requirements for Directed SQTs and Directed RSQTs.
See id.
---------------------------------------------------------------------------
The proposed rules would state explicitly that an electronic ROT's
bid and offer for a series of options contracts would need to be
accompanied by the number of contracts at that price that the
electronic ROT is willing to buy or sell. Similar to under current
rules, the best bid or best offer submitted by an electronic ROT would
be required to have a size of not less than the minimum number of
contracts determined by the Exchange on a class-by-class basis, which
minimum will be at least one contract.\20\ The new rule would also
state that an electronic ROT that enters a bid in a registered option
series would be required to enter an offer and vice versa. The
quotations would need to meet the legal quote width requirements in
Phlx Rule 1014(c)(i)(A)(1) and (2).\21\
---------------------------------------------------------------------------
\20\ See proposed Phlx Rule 1081(c)(i). See also Phlx Rule
1014(b)(ii)(D)(3) (specifying the minimum contract size for SQTs,
RSQTs, and Specialists), the current equivalent provision that is
being replaced.
\21\ See proposed Phlx Rule 1081(c)(ii).
---------------------------------------------------------------------------
With respect to the specific quoting requirements, currently, the
Exchange requires an SQT and an RSQT to quote two-sided markets in not
less than 60% of the series in which such SQT or RSQT is assigned. To
satisfy these requirements when quoting a series, an SQT or RSQT must
quote such series 90% of the trading day (as a percentage of the total
number of minutes in such trading day) or such higher percentage as the
Exchange may announce in advance. These obligations apply collectively
to all appointed issues, rather than on an issue-by-issue basis.\22\
Under the proposal, SQTs and RSQTs associated with the same member
organization would be collectively required to provide two-sided
quotations in 60% of the cumulative number of seconds, or such higher
percentage as the Exchange may announce in advance, for which that
member organization's assigned option series are open for trading.\23\
---------------------------------------------------------------------------
\22\ See Phlx Rule 1014(b)(ii)(D)(1).
\23\ See proposed Phlx Rule 1081(c)(ii)(A). See infra, notes 35-
36 and accompanying text, regarding the method by which the
percentage would be calculated.
---------------------------------------------------------------------------
In addition, currently, the Exchange requires a Specialist,
including an RSQT functioning as a Remote Specialist, to quote two-
sided markets in the lesser of 99% of the series or 100% of the series
minus one call-put pair in each option in which such Specialist is
assigned. To satisfy these requirements when quoting a series, a
Specialist must quote such series 90% of the trading day (as a
percentage of the total number of minutes in such trading day) or such
[[Page 22719]]
higher percentage as the Exchange may announce in advance. These
obligations apply collectively to all appointed issues, rather than on
an issue-by-issue basis.\24\ Under the proposal, Specialists (including
Remote Specialists) associated with the same member organization would
be collectively required to provide two-sided quotations in 90% of the
cumulative number of seconds, or such higher percentage as the Exchange
may announce in advance, for which that member organization's assigned
options series are open for trading.\25\ The Exchange states that the
Specialists' heightened quoting requirements as compared to SQTs and
RSQTs allow for Specialists to receive certain participation
rights.\26\
---------------------------------------------------------------------------
\24\ See Phlx Rule 1014(b)(ii)(D)(2).
\25\ See proposed Phlx Rule 1081(c)(ii)(B). See infra, notes 35-
36 and accompanying text, regarding the method by which the
percentage would be calculated.
\26\ See Notice, supra note 4, at 14693. See also Phlx Rules
1014(g)(ii) and 1014(g)(vii)(B)(1)(c).
---------------------------------------------------------------------------
Further, currently, the Exchange requires a Directed SQT and a
Directed RSQT to quote two-sided markets in the lesser of 99% of the
series listed on the Exchange or 100% of the series listed on the
Exchange minus one call-put pair,\27\ in each case in at least 60% of
the options in which such Directed SQT or Directed SQT is assigned.\28\
To satisfy these requirements when quoting a series, a Directed SQT or
Directed RSQT must quote such series 90% of the trading day (as a
percentage of the total number of minutes in such trading day) or such
higher percentage as the Exchange may announce in advance. These
obligations apply collectively to all appointed issues, rather than on
an issue-by-issue basis.\29\ Under the proposal, Directed SQTs and
Directed RSQTs associated with the same member organization would be
collectively required to provide two-sided quotations in 90% of the
cumulative number of seconds, or such higher percentage as the Exchange
may announce in advance, for which that member organization's assigned
options series are open for trading. A member organization would be
considered directed in all assigned options once the member
organization receives a Directed Order in any option in which they are
assigned and would be considered a Directed SQT or Directed RSQT until
such time as the member organization notifies the Exchange that they
are no longer directed.\30\ The Exchange notes that the Directed SQTs
and Directed RSQTs' heightened quoting requirements as compared to SQTs
and RSQTs allow for Directed SQTs and Directed RSQTs to receive certain
participation rights.\31\
---------------------------------------------------------------------------
\27\ ``Call-put pair'' refers to one call and one put that cover
the same underlying instrument and have the same expiration date and
exercise price. See Phlx Rule 1014(b)(ii)(D)(6).
\28\ See Phlx Rule 1014(b)(ii)(D)(1). Whenever a Directed SQT or
Directed RSQT enters a quotation in an option in which such Directed
SQT or Directed RSQT is assigned, such Directed SQT or Directed RSQT
must maintain until the close of that trading day quotations for the
lesser of 99% of the series of the option listed on the Exchange or
100% of the series of the option listed on the Exchange minus one
call-put pair. See id.
\29\ See id.
\30\ See proposed Phlx Rule 1081(c)(ii)(C). See infra, notes 35-
36 and accompanying text, regarding the method by which the
percentage would be calculated.
\31\ See Notice, supra note 4, at 14693. See also Phlx Rule
1014(g)(viii)(B).
---------------------------------------------------------------------------
The Exchange states that the proposal better accommodates the
occasional issues that may arise in a particular series, arguing that
the existing quoting requirements may at times discourage liquidity in
particular options series because an electronic ROT is forced to focus
on a momentary lapse, rather than using the appropriate resources to
focus on the options series that need and consume additional
liquidity.\32\
---------------------------------------------------------------------------
\32\ See Notice, supra note 4, at 14695.
---------------------------------------------------------------------------
For SQTs, RSQTs, Directed SQTs, and Directed RSQTs, the Exchange
would continue to exclude from the above quoting requirements any
Quarterly Option Series, Adjusted Option Series, and any option series
until the time to expiration for such series is less than nine
months.\33\ Specialists would continue to be subject to the above
quoting requirements for all assigned option series, including
Quarterly Option Series, Adjusted Option Series, and any option series
with an expiration of nine months or greater.\34\
---------------------------------------------------------------------------
\33\ See proposed Phlx Rule 1081(c)(ii)(A) and (C). See also
Phlx Rule 1014(b)(ii)(D)(4), the current equivalent provision that
is being replaced. An ``Adjusted Option Series'' would be defined as
an option series wherein one option contract in the series
represents the delivery of other than 100 shares of underlying stock
or Exchange-Traded Fund Shares. See proposed Phlx Rule
1081(c)(ii)(A)(i). See also Phlx Rule 1014(b)(ii)(D)(4).
\34\ See proposed Phlx Rule 1081(c)(ii)(B).
---------------------------------------------------------------------------
The Exchange would calculate compliance with the above quoting
requirements by (i) taking the total number of seconds the member
organization disseminates quotes in each assigned option series; \35\
and (ii) dividing that time by the eligible total number of seconds
each assigned option series is open for trading that day. Quoting would
not be required in every assigned options series and compliance with
this requirement would be determined by reviewing the aggregate of
quoting in assigned options series for the member organization.\36\
Similar to current requirements, the Exchange would consider exceptions
to the quoting requirements based on demonstrated legal or regulatory
requirements or other mitigating circumstances. The Exchange would
determine compliance with quoting requirements on a monthly basis.
However, this monthly compliance evaluation would not relieve a member
organization of the obligation to provide continuous two-sided quotes
on a daily basis or prohibit the Exchange from taking disciplinary
action against a member organization for failure to meet the quoting
requirements each trading day.\37\ If a technical failure or limitation
of a System of the Exchange prevents a member organization from
maintaining, or prevents a member organization from communicating to
the Exchange timely and accurate quotes, the duration of such failure
or limitation would not be included in any calculation of quoting
requirements with respect to the affected quotes.\38\
---------------------------------------------------------------------------
\35\ With respect to SQTs, RSQTs, Directed SQTs, and Directed
RSQTs, such calculation would exclude Quarterly Option Series,
Adjusted Option Series, and any option series with an expiration of
nine months or greater. See proposed Phlx Rule 1081(c)(ii)(D).
\36\ See proposed Phlx Rule 1081(c)(ii)(D). See Notice, supra
note 4, at 14694, for an example of how the Exchange would calculate
compliance with the quoting requirements.
\37\ See proposed Phlx Rule 1081(c)(iii). See also Phlx Rule
1014(b)(ii)(D)(1) and (2), the current equivalent provision that is
being replaced.
\38\ See proposed Phlx Rule 1081(c)(iv). See also Phlx Rule
1014(b)(ii)(D)(5), the current equivalent provision that is being
replaced.
---------------------------------------------------------------------------
The Exchange states that the proposed quoting requirements as
described above are similar to those of another options exchange.\39\
---------------------------------------------------------------------------
\39\ See Notice, supra note 4, at 14692-93. See also BX Rules at
Chapter VII, Sections 6, 14, and 15.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\40\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\41\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and
[[Page 22720]]
coordination with persons engaged in facilitating transactions in
securities, 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.
---------------------------------------------------------------------------
\40\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\41\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange proposes to add specificity regarding the general
description in its rules regarding market maker obligations of an
electronic ROT. The Commission finds that the changes it is making in
this regard are consistent with the Act and notes that, as the Exchange
maintains, the changes are consistent with the rules of another options
exchange.\42\
---------------------------------------------------------------------------
\42\ See BX Rules, Chapter VII, Section 5.
---------------------------------------------------------------------------
The Exchange proposes to reduce the specific quoting requirements
for electronic ROTs of the various types. SQTs and RSQTs associated
with the same member organization would be collectively required to
provide two-sided quotations in 60% of the cumulative number of seconds
for which that member organization's assigned option series are open
for trading. Specialists (including Remote Specialists) associated with
the same member organization would be collectively required to provide
two-sided quotations in 90% of the cumulative number of seconds for
which that member organization's assigned option series are open for
trading. Similarly, Directed SQTs and Directed RSQTs associated with
the same member organization would be collectively required to provide
two-sided quotations in 90% of the cumulative number of seconds for
which that member organization's assigned option series are open for
trading. The Exchange would be able to designate a higher percentage
for any of these quoting requirements by announcing such percentage in
advance.
These quoting requirements would apply to all of an electronic
ROT's assigned options on a daily basis. These quoting requirements
would be reviewed on a monthly basis, and would allow the Exchange to
review the electronic ROT's daily compliance in the aggregate and
determine the appropriate disciplinary action for single or multiple
failures to comply with the continuous quoting requirement during the
month period. The Commission notes that the proposed rules provide that
determining compliance with the continuous quoting requirements on a
monthly basis would not relieve the electronic ROT of the obligation to
provide continuous two-sided quotes on a daily basis, nor would it
prohibit the Exchange from taking disciplinary action against an
electronic ROT for failing to meet the continuous quoting requirements
each trading day.
The Commission finds that the proposed changes to the quoting
requirements of electronic ROTs are consistent with the Act. The
Exchange believes that the revised requirements will enable electronic
ROTs to focus on the options series that need and consume more
liquidity than others. To the extent this is true, the proposal will
enhance trading opportunities on the Exchange. Moreover, the Commission
believes that, although the proposal would reduce the quoting
requirements for the various electronic ROTs from their current levels,
the proposed changes are consistent, as the Exchange argues, with the
market maker quoting requirements in place on other markets.\43\ The
Commission further notes that, notwithstanding the proposed changes to
the quoting requirements for Specialists, Directed SQTs, and Directed
RSQTs, the revised quoting requirements continue to reflect meaningful
market making obligations. Additionally, the proposed rules reflect a
balance of rights and obligations consistent with the balance reflected
in the rules of other exchanges for market participants fulfilling a
similar role.\44\ In addition, the Commission believes that the
proposed changes to provide additional detail about how the Exchange
will apply these quoting requirements adds further clarity to the
rules.
---------------------------------------------------------------------------
\43\ See, e.g, BX Rules, Chapter VII, Sections 6, 14, and 15;
NYSE American Rules 925.1NY and 964.1NY; NYSE Arca Rules 6.37B-O and
6.88-O.
\44\ See, e.g., Nasdaq GEMX Rules 713 and 804; Nasdaq ISE Rules
713 and 804; Nasdaq MRX Rules 713 and 804. See also supra notes 26
and 31 and accompanying text.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\45\ that the proposed rule change (SR-Phlx-2018-22), be, and
hereby is, approved.
---------------------------------------------------------------------------
\45\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
---------------------------------------------------------------------------
\46\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10379 Filed 5-15-18; 8:45 am]
BILLING CODE 8011-01-P
