Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1019, Adopt a New Rule 1073, Adopt a New Rule 1074, Rule 1080, Adopt a New Rule 1096, and Adopt a New Rule 1097, 32794-32802 [2019-14494]
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32794
Federal Register / Vol. 84, No. 131 / Tuesday, July 9, 2019 / Notices
Act 14 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 15
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
proposed rule change may become
effective and operative immediately
upon filing. The Exchange states that
waiver of the 30-day operative delay
would streamline and simplify the
listing rule applicable to the Shares and
thereby reduce the Fund’s compliance
costs. The Exchange further states that,
if the Shares were not currently listed,
they would be eligible for immediate
listing pursuant to Nasdaq Rule
5735(b)(1) and the Exchange asserts that
there is no reason the Shares should be
treated differently because they are
already listed on the Exchange. For
those reasons, the Exchange believes
that waiver of the operative delay would
be consistent with the protection of
investors and the public interest. The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change operative upon
filing.16
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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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:
14 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
16 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
15 17
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2019–052 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–NASDAQ–2019–052. 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–NASDAQ–2019–052 and
should be submitted on or before July
30, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–14489 Filed 7–8–19; 8:45 am]
BILLING CODE 8011–01–P
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86286; File No. SR–Phlx–
2019–25]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 1019,
Adopt a New Rule 1073, Adopt a New
Rule 1074, Rule 1080, Adopt a New
Rule 1096, and Adopt a New Rule 1097
July 2, 2019.
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 June 20,
2019, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to a proposal
to amend Rule 1019, ‘‘Acceptance of Bid
and Offer,’’ adopt a new Rule 1073,
‘‘Kill Switch,’’ adopt a new Rule 1074
‘‘Detection of Loss of Communication,’’
Rule 1080, ‘‘Electronic Acceptance of
Quotes and Orders,’’ adopt a new Rule
1096, ‘‘Entry and Display of Orders’’
and adopt a new Rule 1097,
‘‘Limitations on Order Entry.’’
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.
1 15
17 17
CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes several
amendments within this rule change: (i)
Amend Rule 1019, ‘‘Acceptance of Bid
and Offer’’; (ii) adopt a new Rule 1073,
‘‘Kill Switch,’’ and Rule 1074
‘‘Detection of Loss of Communication,’’
from relocated rule text from Rule 1080,
‘‘Electronic Acceptance of Quotes and
Orders,’’; (iii) adopt a new Rule 1096,
‘‘Entry and Display of Orders’’; and (iv)
adopt a new Rule 1097, ‘‘Limitations on
Order Entry.’’ With this proposal, the
Exchange intends to create a rule that
concerns the requirements for
submitting a quote and a separate rule
that concerns the requirements for
submitting an order. The Exchange also
is proposing to relocate rules to
reorganize its Rulebook and conform
certain rule text within Rule 1097 to
rules of other Nasdaq markets.3
Rule 1019, Acceptance of Bid or Offer
Currently, Rule 1019 is titled
‘‘Acceptance of Bid or Offer.’’ The
Exchange proposes to retitle Rule 1019
as ‘‘Entry and Display of Quotes.’’ The
Exchange proposes to amend Rule
1019(a) to revise the text of (a) from ‘‘All
bids or offers for option contracts dealt
in on the Exchange made and accepted
in accordance with these Rules shall
constitute binding contracts between the
parties thereto but shall be subjected to
the exercise by the Board of Directors of
the powers in respect thereto vested in
said Board by the By-Laws, and to the
Rules of the Exchange, and said
contracts shall also be subject to the
rules of The Options Clearing
Corporation and to the exercise by The
Options Clearing Corporation of the
powers reserved to it in its by-laws and
rules’’ to more simply ‘‘All bids or offers
for option contracts dealt in on the
Exchange made and accepted in
accordance with these Rules shall
constitute binding contracts between the
parties thereto but shall be subjected to
applicable requirements and the rules of
the Clearing Corporation. The Exchange
is proposing to removing the
requirement for the Board of Directors to
Act and retain the applicability of the
rules of the Clearing Corporation.
The Exchange proposes to add a new
Rule 1019(b) to describe the current
requirements and conditions for
submitting quotes. These requirements
3 The
Exchange intends to file a separate rule
change for each Nasdaq market to amend rules as
described herein.
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reflect the current System operation
today. The Exchange proposes to
memorialize the various requirements
for the submission of quotes into the
System for greater transparency. The
Exchange proposes to provide at new
Rule 1019(b), ‘‘Quotes are subject to the
following requirements and
conditions:’’. The Exchange proposes to
add at Rule 1019(b)(1) that ‘‘RSQTs or
Remote Specialists may generate and
submit option quotations.’’ Current Rule
1080(k) provides,
Electronic Streaming Quotations. SQTs
may generate and submit option quotations if
such SQT is physically present on the
Exchange floor, and RSQTs may generate and
submit option quotations from off the floor of
the Exchange, electronically.
Respecting options trading on Phlx XL II,
specialists, SQTs and RSQTs who are quoting
in an option may also submit Sweeps, which
are defined in and governed by Rule 1082.
The Exchange proposes removing this
rule text within Rule 1080(k) and
memorializing the quoting requirements
within Rule 1019. The first paragraph
within Rule 1080(k) describes SQTs and
RSQTs that stream quotations. These
participants are currently defined
within Rule 1014(b). This language in
the first paragraph of Rule 1080(k) is
redundant and unnecessary. The second
paragraph of Rule 1080(k) references
Sweeps within Phlx Rule 1082, ‘‘Firm
Quotations,’’ which describes sweeps
within that rule in relation to Quote
Exhaust. The Exchange proposes to
provide at proposed new Rule
1019(b)(2) that ‘‘The System shall timestamp a quote which shall determine
the time ranking of the quote for
purposes of processing the quote.’’ The
Exchange notes that all quotes today are
time-stamped for purposes of processing
quotes. Proposed Rule 1019(b)(3) states
that ‘‘Specialists, Remote Specialists
and ROTs may enter bids and/or offers
in the form of a two-sided quote. Only
one quote may be submitted at a time
for an option series.’’ The Exchange
believes that this information will
provide Specialists, Remote Specialists
and ROTs with information on
submitting a quote. The Exchange notes
that bid or offer size may be a ‘‘0,’’
however a price is required to be
entered for both the bid and offer to be
entered into the System. Further, the
Exchange proposes at Rule 1019(b)(4) to
provide clarity for entering quotes and
proposes to specify, ‘‘The System
accepts quotes for the Opening Process
as specified in Rule 1017.’’ 4 The
4 Rule 1017(d) provides, ‘‘Phlx Electronic Market
Maker Valid Width Quotes and Opening Sweeps
received starting at 9:25 a.m. are included in the
Opening Process. Orders entered at any time before
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Exchange believes that this information
will bring greater transparency to the
Rulebook with respect to limitations for
submitting quotations into the System.
The Exchange proposes a provision
regarding firm quote within proposed
Rule 1019(b)(5):
Firm Quote. When quotes in options on
another market or markets are subject to
relief from the firm quote requirement set
forth in the SEC Quote Rule,5 orders and
quotes will receive an automatic execution at
or better than the NBBO based on the best bid
or offer in markets whose quotes are not
subject to such relief. Such determination
may be made by way of notification from
another market that its quotes are not firm or
are unreliable; administrative message from
the Option Price Reporting Authority
(‘‘OPRA’’); quotes received from another
market designated as ‘‘not firm’’ using the
appropriate indicator; and/or telephonic or
electronic inquiry to, and verification from,
another market that its quotes are not firm.
The Exchange shall maintain a record of each
instance in which another exchange’s quotes
are excluded from the Exchange’s calculation
of NBBO, and shall notify such other
exchange that its quotes have been so
excluded. Where quotes in options on
another market or markets previously subject
to relief from the firm quote requirement set
forth in the Quote Rule are no longer subject
to such relief, such quotations will be
included in the calculation of NBBO for such
options. Such determination may be made by
way of notification from another market that
its quotes are firm; administrative message
from OPRA; and/or telephonic or electronic
inquiry to, and verification from, another
market that its quotes are firm.
Phlx Rule 1082 describes Firm Quote
for purposes of quote submission. The
Exchange proposes to memorialize
within its Rules the requirement for the
dissemination of quotations pursuant to
Reg NMS.6 The Exchange is proposing
to add the above rule text to provide
context as to this restriction for
submitting quotes. The Exchange
proposes to make clear the manner in
which quote relief will occur.
Specifically, this proposed rule text
indicates the manner in which a
determination for quote relief is made.
Further, the rule notes the Exchange
shall maintain a record of each instance
in which another exchange’s quotes are
excluded from the Exchange’s
calculation of NBBO, and shall notify
such other exchange that its quotes have
been so excluded. Also, when relief is
no longer available, such quotations will
be included in the calculation of NBBO
for such options. The Exchange notes
an option series opens are included in the Opening
Process.’’
5 The term ‘‘SEC Quote rule’’ shall mean rule 602
of Regulation NMS under the Securities Exchange
Act of 1934, as amended. See Phlx Rule 1082(a)(iii).
6 17 CFR 242.602.
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Federal Register / Vol. 84, No. 131 / Tuesday, July 9, 2019 / Notices
how the determination is made that
relief is no longer available. The
proposed rule text adds greater context
to the manner in which Firm Quote
relief is applied. This rule text
represents the current practice.
Similarly, the Exchange proposes to
provide the following at proposed new
Rule 1019(b)(6):
Trade-Through Compliance and Locked or
Crossed Markets. A quote will not be
executed at a price that trades through
another market or displayed at a price that
would lock or cross another market. If, at the
time of entry, a quote would cause a locked
or crossed market violation or would cause
a trade-through violation, it will be re-priced
to the current national best offer (for bids) or
the current national best bid (for offers) and
displayed at one minimum price variance
above (for offers) or below (for bids) the
national best price.
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Today, quotations may not be
executed against prices that tradethrough an away market as provided for
in the Options Order Protection and
Locked/Crossed Market Plan which is
also described within Phlx Rules 1083,
1084 and 1086. Also, quotations may
not lock or cross an away market. The
repricing is provided for today within
Phlx Rule 1093.7 By stating this
limitation in the rule, Specialists and
ROTs will have greater clarity as to this
limitation. Further, the Exchange is
making clear that a quote that would
cause a locked or crossed market
violation or would cause a tradethrough violation will be re-priced. The
Exchange would display the quote at
one minimum price variation (‘‘MPV’’)
above (for offers) or below (for bids) the
national best price. Repricing quotes is
consistent with the Act because the
Exchange is not permitted to lock or
cross an away market’s quote or order.
7 Phlx Rule 1093(a)(iii)(A) provides that a DNR
Order may execute on the Exchange at a price equal
to or better than, but not inferior to, the best away
market price but, if that best away market remains,
the DNR Order will remain in the Phlx Order Book
and be displayed at a price one minimum price
variation (‘‘MPV’’) inferior to that away best bid/
offer. If the DNR Order is locking or crossing the
ABBO, the DNR Order shall be entered into the
Order Book at the ABBO price and displayed one
MPV away from the ABBO. Similar language is
provided for with respect to the routable orders
(FIND and SRCH). Phlx Rule 1093(a)(iii)(B)(4)
provides ‘‘A FIND Order received after an Opening
Process that is marketable against the internal PBBO
when the ABBO is inferior to the internal PBBO
will be traded at the Exchange at or better than the
PBBO price. If the FIND Order has size remaining
after exhausting the PBBO, it may: (1) Trade at the
next PBBO price (or prices) if the order price is
locking or crossing that price (or prices) up to and
including the ABBO price, (2) be entered into the
Order Book at its limit price, or (3) if locking or
crossing the ABBO, be entered into the Order Book
at the ABBO price and displayed one MPV away
from the ABBO.’’ This is also the case for a SRCH
Order. See Phlx Rule 1093(a)(iii)(C)(4).
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The Exchange reprices the quotes one
MPV inferior to cause the displayed
price to reflect the available market on
Phlx.
Finally, the Exchange proposes at
Rule 1019(b)(7) to provide, ‘‘Quotes
submitted to the System are subject to
the following: minimum increments
provided for in Rule 1034, risk
protections provided for in Rule 1099
and Quote Exhaust provided for in Rule
1082.’’ The Exchange is noting herein
the manner in which a quote may be
rejected by the System to provide
market participants with expectations as
to the interplay among the various Phlx
Rules. Specifically, if the Specialist or
ROT does not submit a quotation
compliant with Rule 1034, the quote
will not be accepted by the System
because market participants are required
to abide by Rule 1034 which describes
the increments with which options
series are to be quoted. Rule 1099
provides a list of all protections
applicable to quotes that may be
rejected. Finally, Specialists and ROTs
are subject to the Exchange’s rule
regarding quote exhaust within Rule
1082(a)(ii)(B)(3). The Exchange believes
that this rule will provide Members
with requirements and conditions for
submitting quotations and provide
transparency as to limitations that cause
a quote to be rejected.
The Exchange proposes to provide at
Rule 1019(c), ‘‘Quotes will be displayed
in the System as described in Rule
1070.’’ Rule 1070, titled ‘‘Data Fees and
Trade Information’’ provides for the
available feeds that Members may
access on the Exchange. This list
represents the available data feeds and
the content of those data feeds which
are offered today by Phlx.
The amendment to Phlx Rule 1019 to
create a list of all the requirements and
conditions for submitting quotes on
Phlx within one rule is consistent with
the Act because it will provide greater
transparency to market participants of
the applicable requirements. Further,
this proposal will make the current rule
clear and understandable for market
participants thereby protecting investors
and the general public. The Exchange
notes that while some of these
requirements appear in other rules, for
ease of reference the requirements are
located within a single rule with this
proposal. The proposal reflects the
Exchange’s current practice with respect
to quoting requirements. This proposal
will conform this Rule to other Nasdaq
affiliated markets filing similar rules.8
The Exchange’s proposal is intended to
provide greater information with respect
to Firm Quote within new Rule
1019(b)(5) and regarding trade-through
and locked and crossed markets
1019(b)(6). The addition rule text is
consistent with the Act because the
Exchange is adding detail regarding the
method in which orders which are firm
or locked and crossed will be handled
in the System. The notifications for
Firm Quote are made clear with the
proposed rule text. The Exchange
believes that it is consistent with the
Act to specify when quotes are firm and
the handling of such quotes by the
System for the protection of investors
and the general public. The clarity is
designed to promote just and equitable
principles of trade by notifying all
participants engaged in market making
of potential outcomes. Today,
quotations may not be executed against
at prices that trade-through an away
market. Also, quotations may not lock or
cross an away market. The repricing of
quotations is consistent with the Act
because repricing prevents the Exchange
from disseminating a price which locks
or crosses another market. Phlx is
required avoiding displaying a
quotation that would lock or cross a
quotation of another market center at
the time it is displayed. Preventing
inferior prices from displaying perfects
the mechanism of a free and open
market and a national market system,
and, in general to protect investors and
the public interest.
8 Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq
MRX, LLC, Nasdaq BX, Inc. and Nasdaq Stock
Market LLC intend to file similar rules to proposed
Phlx Rule 1019.
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Relocation of Kill Switch and Detection
of Loss of Communication
The Exchange also proposes to
relocate the rule text at Rule 1019(b),
Kill Switch, and (c), Detection of Loss
of Communication, to new Rules 1073
and 1074, respectively. The relocations
are consistent with the Act because the
proposed changes are intended to
provide greater transparency to these
rules by making them easier to locate
which benefits investors and the public
interest. The Exchange is not proposing
to amend the Kill Switch or Detection
of Loss of Communication rules; this
rule change is non-substantive. The
Exchange proposes to update internal
cross-references.
Rule 1080, Electronic Acceptance of
Quotes and Orders
The Exchange proposes to amend
Rule 1080(a)(i)(B) to add the following
sentence to Specialized Quote Feed
(‘‘SQF’’), ‘‘Specialists, SQTs and RSQTs
may only enter interest into SQF in their
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assigned options series.’’ The Exchange
notes that today these participants may
utilize SQF to quote only in their
assigned options series.9 This proposed
rule text is consistent with the Act
because it will add greater clarity to the
current rule for the protection of
investors and the public interest.
The Exchange proposes to delete
certain rule text within Rule
1080(c)(ii)(C) and 1080(j) and relocate
that language to new Rule 1097, as
described below.
The Exchange also proposes to delete
Rule 1080(k), as discussed above, and
Rule 1080(l) which is currently
reserved. These proposed amendments
are consistent with the Act because they
are simply administrative and nonsubstantive.
Rule 1096, Entry and Display of Orders
Similar to Rule 1019, which describes
requirements for quotes, the Exchange
proposes to adopt a new Rule 1096,
‘‘Entry and Display of Orders’’ and
describe the current requirements and
conditions for entering orders. The
Exchange notes that the requirements
provided for within this rule represent
the current practice. The purpose of
Rule 1096 is to memorialize this
information within a single rule.
The Exchange proposes to state
within new Rule 1096(a), ‘‘Members can
enter orders into the System, subject to
the following requirements and
conditions:’’. The Exchange proposes
within new Rule 1096(a)(1), ‘‘Members
shall be permitted to transmit to the
System multiple orders at a single as
well as multiple price levels.’’ The
Exchange’s new rule text at 1096(a)
proposes to make clear that multiple
orders may be transmitted to the System
as single or multiple price levels. This
is the case today. The Exchange
proposes to memorialize the manner in
which orders may be submitted to the
System to add more detail to its rules.
The Exchange proposes at new Rule
1096(a)(2), ‘‘The System accepts orders
beginning at a time specified by the
Exchange and communicated on the
Exchange’s website.’’ The System
accepts orders beginning at a time
specified by the Exchange and
communicated on the Exchange’s
website.10
The Exchange proposes new Rule
1096(a)(3), ‘‘The System shall time9 Rules 501, ‘‘Specialist Appointment’’ and 507
‘‘Application for Approval as an SQT, RSQT, or
RSQTO and Assignment in Options’’ govern option
assignments.
10 The Exchange’s website makes the timeframes
in which orders may be submitted to the System:
https://www.nasdaqtrader.com/content/phlx/phlx_
systemtime.pdf.
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stamp an order which shall determine
the time ranking of the order for
purposes of processing the order.’’
Further, all orders are time-stamped to
determine the time ranking of the order
for purposes of processing the order
within the System. This is also the case
today and the Exchange is adding this
detail to its rules to describe the timestamp.
The Exchange proposes to add new
Rule 1096(a)(4), ‘‘Orders submitted to
the System are subject to the following:
minimum increments provided for in
Rule 1034, risk protections provided for
in Rule 1099, and the restrictions of any
order type as provided for in Rule
1080(b). Orders may execute at multiple
prices.’’ All orders must adhere to other
rule requirements such as minimum
increments, risk protection rules and
order types. Similar to the rule text for
quotes, order are currently subject the
minimum increment requirements in
Rule 1034 and also the risk protections
for orders which are listed within
current Rule 1099. This rule provides a
list of other requirements which may
impact the execution of an order.
Finally, orders may execute at multiple
prices.
The Exchange proposes to add new
Rule 1096(a)(5) the following,
‘‘Nullification by Mutual Agreement.
Trades may be nullified if all parties
participating in the trade agree to the
nullification. In such case, one party
must notify the Exchange and the
Exchange promptly will disseminate the
nullification to OPRA. It is considered
conduct inconsistent with just and
equitable principles of trade for a party
to use the mutual adjustment process to
circumvent any applicable Exchange
rule, the Act or any of the rules and
regulations thereunder.’’ The rule text of
new Rule 1096(a)(5) is similar to Nasdaq
ISE, LLC (‘‘ISE’’) Options 3, Section
4(b). Trades may be nullified today by
agreement of the parties. The Exchange
believes that it is consistent with the
Act to permit parties to agree to a
nullification provided the nullification
does not violate other exchange rules.
The Exchange notes that parties may not
agree to a mutual agreement for
purposes that would cause another rule
to be violated. The Exchange believes
that it is consistent with the Act and
protection of investors and general
public to make clear the expected
behavior with respect to nullifications.
Proposed Rule 1096(b) is similar to
ISE Options 3, Section 15(a). This
proposed rule provides,
NBBO Price Protection. Orders, other than
Intermarket Sweep Orders (as defined in Rule
1083(h)), will not be automatically executed
by the System at prices inferior to the NBBO
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32797
(as defined in Rule 1083(j)). There is no
NBBO price protection with respect to any
other market whose quotations are Non-Firm
(as defined in Rule 1083(k)).
The Exchange believes that although
Phlx Rule 1084 11 makes clear that
simple orders may not execute at prices
inferior to the NBBO, this rule text will
provide that limitation in this proposed
list of limitations for ease of reference.
The Exchange notes that this NBBO
Protection applies to orders and
therefore is being discussed within
proposed Rule 1096, which applies to
all market participants. In contrast, Rule
1019, which applies to quotes entered
by those members that conduct market
marking, Specialists and ROTs,
describes the Firm Quote protections
and the interplay of NBBO with respect
to quotes. Trade-Through is described in
both Rules 1019 and 1096.
Proposed Rule 1096(c) seeks to define
the Exchange’s best bid and offer as the
‘‘PBBO’’ and distinguish the displayed
book from the non-displayed book for
reference. The Exchange provides that
the System automatically executes
eligible orders using the Exchange’s
displayed best bid and offer (‘‘PBBO’’).
Phlx also permits members to enter nondisplayed orders. The non-displayed
orders are available on the Exchange’s
order book (‘‘internal PBBO’’). The Phlx
contingency orders, which are nondisplayed are exclusively: (i) All-orNone Orders; 12 and (ii) stop orders 13
(collectively ‘‘Non-Displayed
Contingency Orders’’). Finally, Phlx
reprices orders to avoid locking or
crossing another market as explained
below. Therefore, on Phlx, eligible
orders will execute at the best price
available, the PBBO or the internal
PBBO. The Exchange believes that this
information will provide Members with
additional information to how the
Exchange describes its displayed and
non-displayed orders. Further the
proposal to add information related to
NBBO Protection and define the
Exchange’s best bid and offer as the
11 Phlx Rule 1084 describes the avoidance of
trade-through and Rule 1083(h) described ISOs.
12 An All-or-None Order is a limit or market order
that is to be executed in its entirety or not at all.
An All-or None Order may only be submitted by a
public customer. All-or-None Orders are nondisplayed and non-routable. All-or-None Orders are
executed in price-time priority among all public
customer orders if the size contingency can be met.
The Acceptable Trade Range protection in Rule
1099(a) is not applied to All-Or-None Orders. See
Phlx Rule 1078.
13 A stop order is a limit or market order to buy
or sell at a limit price when a trade or quote on the
Exchange for a particular option contract reaches a
specified price. A stop-market or stop-limit order
shall not be triggered by a trade that is reported late
or out of sequence or by a complex order trading
with another complex order. See Phlx Rule 1080(b).
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‘‘PBBO’’ and distinguish the displayed
book from the non-displayed book for
reference will bring greater transparency
and clarity to the Exchange’s rules. The
Exchange disseminates its PBBO which
does not contain non-displayed
information. The Exchange believes that
describing the ‘‘internal PBBO’’ will
bring greater transparency to the rule as
the Order Book may contain nondisplayed orders which may offer better
prices than the PBBO. The Exchange
believes describing the displayed and
non-displayed order book will inform
members as to availability of orders on
the Order Book and protect investors
and the general public by providing
additional information about nondisplayed order types.
Similar to Rule 1019(b)(6), the
Exchange proposes to note at new Rule
1096(d),
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Trade-Through Compliance and Locked or
Crossed Markets. An order will not be
executed at a price that trades through
another market or displayed at a price that
would lock or cross another market. An order
that is designated by the member as routable
will be routed in compliance with applicable
Trade-Through and Locked and Crossed
Markets restrictions. An order that is
designated by a member as non-routable will
be re-priced in order to comply with
applicable Trade-Through and Locked and
Crossed Markets restrictions. If, at the time of
entry, an order that the entering party has
elected not to make eligible for routing would
cause a locked or crossed market violation or
would cause a trade-through violation, it will
be re-priced to the current national best offer
(for bids) or the current national best bid (for
offers) and displayed at one minimum price
variance above (for offers) or below (for bids)
the national best price.
Today, orders may not be executed at
a price that trades through an away
market. Also, orders may not lock or
cross an away market. Routable orders
must comply with Trade-Through and
Locked and Crossed Markets
restrictions. The Exchange reprices
orders that are non-routable. The
Exchange proposes to make clear the
manner in which orders are repriced on
the order book. This repricing is
described today within Rule
1093(a)(iii)(A), (B) and (C) which
describes routing. This rule text is
similar to rule text within BX Chapter
VI, Section 7(b)(3)(C). Today, orders
may not be executed at prices that
trades through an away market. Also,
orders may not lock or cross an away
market. Routable orders must comply
with Trade-Through and Locked and
Crossed Markets restrictions within
Phlx Rule 1084. The Exchange reprices
orders that are non-routable. The
Exchange’s proposal to memorialize rule
text related to trade-throughs will make
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clear the manner in which orders are
repriced on the order book and protect
investors and general public by further
describing this restriction with respect
to orders specifically. This repricing is
described today within Rule
1093(a)(iii)(A), (B) and (C) which
describes routing. The Exchange would
re-price an order to the current national
best offer (for bids) or the current
national best bid (for offers) and
displayed at one MPV above (for offers)
or below (for bids) the national best
price. The Exchange reprices orders one
MPV inferior to cause the displayed
price to reflect the available market on
Phlx.14 The repricing of orders is
consistent with the Act because
repricing prevents the Exchange from
disseminating a price which locks or
crosses another market. Phlx is required
avoiding displaying an order that would
lock or cross a quotation of another
market center at the time it is displayed.
Preventing inferior prices from
displaying perfects the mechanism of a
free and open market and a national
market system, and, in general to protect
investors and the public interest.
Finally, the Exchange proposes to
provide at new Rule 1096(e), similar to
Rule 1019(c) which states, ‘‘Orders will
be displayed in the System as described
in Rule 1099.’’
The Exchange’s proposal to adopt a
new Rule 1096, ‘‘Entry and Display of
Orders’’ and describe the current
requirements and conditions for
entering orders, similar to proposed
changes to Rule 1019 for quotes is
consistent with the Act because it will
provide transparency as to manner in
which orders may be submitted to the
System. The Exchange’s new rule
reflects the current requirements for
submitting orders into the System.
Similar to proposed Rule 1019, the
Exchange proposes to memorialize
requirements and limitations within one
rule for ease of reference.
Rule 1097, Limitations on Order Entry
The Exchange proposes to adopt a
new Rule 1097, titled ‘‘Limitations on
Order Entry,’’ and relocate rule text
from Rule 1080. The Exchange proposes
to adopt rule text within new Rule
1097(a) which rule is similar to ISE
Options 3, Section 22(b) as follows:
Limit Orders. Members shall not enter
public customer limit orders into the System
in the same options series, for the account or
accounts of the same or related beneficial
owners, in such a manner that the beneficial
owner(s) effectively is operating as a market
maker by holding itself out as willing to buy
and sell such options contract on a regular
PO 00000
14 See
Phlx Rule 1086.
Frm 00100
Fmt 4703
Sfmt 4703
or continuous basis. In determining whether
a beneficial owner effectively is operating as
a market maker, the Exchange will consider,
among other things: The simultaneous or
near-simultaneous entry of limit orders to
buy and sell the same options contract and
the entry of multiple limit orders at different
prices in the same options series.
Specifically, Phlx Rule 1080(j) is
similar to ISE Options 3, Section 22(b)
in that it prohibits public customers,15
which are equivalent to ISE Priority
Customers, from entering limit orders
into the Order Book in the same option
series in a manner where the public
customer is effectively operating as a
market maker by holding itself out as
willing to buy and sell such options
contract on a regular or continuous
basis. Both rules are [sic] extend to
beneficial owners. Phlx rule [sic] 1080(j)
provides, ‘‘[i]n determining whether an
off floor member or beneficial owner
effectively is operating as a market
maker, the Exchange will consider,
among other things: The simultaneous
or near-simultaneous entry of limit
orders to buy and sell the same options
contract; the multiple acquisition and
liquidation of positions in the same
options series during the same day; and
the entry of multiple limit orders at
different prices in the same options
series.’’ This language is the same as
ISE’s Options 3, Section 22(b). Because
Phlx has a trading floor, the ‘‘off floor’’
references are in Phlx Rule 1080(j) and
no such references are in the ISE Rules.
Further, Phlx’s Rule 1080(j) provides,
‘‘The limitation set forth in this Rule
1080(j) does not apply to the accounts
of off-floor broker dealers or
Professionals as the term is defined in
Rule 1000(b)(14).’’ Phlx Rule 1080(j)
therefore would apply to accounts for
public customers, and prevent public
customers from conducting business as
a market maker. ISE Options 3, Section
22(b) was adopted to limit the ability of
Electronic Access Members that are not
market makers to compete on
preferential terms within ISE’s
automated systems,16 including Priority
Customers, who are provided with
certain benefits, such as priority of bids
and offers. ISE’s Prior Rule Change
noted that it did not believe it was
necessary to impose Options 3, Section
22 restrictions on the entry of
Professional or broker-dealer orders
because the same priority does not exist.
15 For purposes of this rule change, the term
‘‘public customer’’ shall mean a person or entity
that is not a broker or dealer in securities and is
not a Professional, as that term is defined within
Phlx Rule 1000(b)(14).
16 See Securities Exchange Act Release No. 63017
(September 29, 2010), 75 FR 61795 (October 6,
2010) (SR–ISE–2010–95) (‘‘Prior Rule Change’’).
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Both rules therefore apply to same
market participants. The Exchange notes
that the Phlx and ISE Rules are
substantively the same, despite the
difference in the rule text.
On Phlx, ROTs (as well as Specialists)
are required to register with the
Exchange.17 On Phlx, ROTs are entitled
to certain allocations 18 and preferential
pricing 19 and are obligated to submit
Valid Width Quotes during the
opening 20 and quotes intra-day.21 The
Exchange believes that public customers
that desire to make markets on Phlx
should register with the Exchange. The
Exchange also notes that ROTs are
restricted from entering orders on Phlx
as described within Rule 1080(b). The
Exchange also proposes to amend the
title from ‘‘Limitations on Orders’’ to
‘‘Limit Orders.’’ The Exchange notes
that the term ‘‘Phlx XL’’ is the same as
the defined term ‘‘System.’’ 22 Finally,
the Exchange proposes to remove the
final sentence, ‘‘Notwithstanding the
foregoing, the limitation in Rule 1080(j)
above will continue to apply to all-ornone orders submitted by Professionals
to the Exchange.’’ Rule 1078 notes that
All-or-None Orders may be only be
entered by Public Customers. This order
type was recently amended and
therefore this limitation is
unnecessary.23
The Exchange proposes to relocate
rule text from current Rule
1080(c)(ii)(C)(2) to proposed Rule
1097(b). Current Rule 1080(c)(ii)(C)(2)
provides,
Principal Transactions: Order Entry Firms
may not execute as principal against orders
on the limit order book they represent as
agent unless: (a) Agency orders are first
exposed on the limit order book for at least
one (1) second, (b) the Order Entry Firm has
been bidding or offering on the Exchange for
17 See
Phlx Rule 507.
Rule 100(g)(vi).
19 See Phlx’s Pricing Schedule at Options 8.
20 See Phlx Rule 1017.
21 See Phlx Rule 1081.
22 The term ‘‘System’’ shall mean 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; 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 (‘‘OPRA’’) 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 at
Rule 1070. See Phlx Rule 1000(b)(45).
23 See Securities Exchange Act Release No. 85262
(March 7, 2019), 84 FR 9192 (March 13, 2019) (SR–
Phlx–2019–03).
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18 See
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32799
at least one (1) second prior to receiving an
agency order that is executable against such
order, (c) the Order Entry Firm proceeds in
accordance with the crossing rules contained
in Rule 1064, (d) the orders are entered into
Price Improvement XL or ‘‘PIXL’’ pursuant to
Rule 1087, (e) the orders are entered into the
Complex Order Live Auction or ‘‘COLA’’
pursuant to Rule 1080, Commentary
.02(c)(ii)(e), or (f) orders entered into the
Qualified Contingent Cross or ‘‘QCC’’
mechanism pursuant to Rules 1080(o).
a customer, member, member organization,
or non-member broker-dealer to execute
immediately against agency orders delivered
to the Exchange, whether such orders are
delivered via AUTOM or represented in the
trading crowd by a member or a member
organization, except for: (a) Orders entered
into PIXL pursuant to Rule 1087, (b) orders
entered into COLA pursuant to Rule 1080,
Commentary .02(c)(ii)(e), or (c) orders
entered into the QCC mechanism pursuant to
Rules 1080(o).
This rule provides for the exposure of
orders entered on Phlx. Specifically,
with respect to orders entered as where
a Phlx member is acting as agent and
principal on an order, the order must be
exposed for one second prior to
execution to allow an opportunity for
price improvement. The Exchange has
filed for certain functionalities which
are exceptions to the general standard of
one second exposure. These
functionalities have provisions which
describe the manner in which orders
can be entered into the Price
Improvement XL or ‘‘PIXL’’
mechanism 24 the Complex Order Live
Auction or ‘‘COLA’’ 25 pursuant to Rule
1098(e); or the Qualified Contingent
Cross or ‘‘QCC’’ mechanism.26 Further,
Phlx Rule 1064 permits members to
cross orders provided certain
contingencies are met. This rule is
intended to encourage price discovery
and price improvement of all orders
entered on Phlx. The Exchange proposes
to utilize the broader term ‘‘members’’
instead of the specific term ‘‘Order
Entry Firms’’ 27 as this rule applies to all
members. The Exchange has updated
the current rule references.
The Exchange proposes to delete the
rule text from current Rule
1080(c)(ii)(C)(2) and (3) which provides,
This language is repetitive of language
currently within current Rule
1080(c)(ii)(C)(1). Current Rule
1080(c)(ii)(C)(1) requires exposure
similar to of one second and describes
the same behavior as current Rule
1080(c)(ii)(C)(2) and (3) and lists the
same exceptions. The Exchange does
not believe that this rule text is
necessary or covers a scenario that is not
contemplated by current Rule
1080(c)(ii)(C)(2) and (3). The Exchange
believes that this rule was merely the
inverse of the rule for principal
transactions.
The Exchange proposes new rule text
at proposed Rule 1097(c)(1) which is the
same rule text within ISE Options 3,
Section 22 at Supplementary Material
.01 and is similar to rule text at Phlx
Rule 1087(f), related to PIXL. Rule
1097(b)(1) would provide,
Solicitation Orders. Order Entry Firms
must expose orders they represent as agent
for at least one (1) second before such orders
may be automatically executed, in whole or
in part, against orders solicited from
members and non-member broker-dealers to
transact with such orders, except for: (a)
Orders entered into PIXL pursuant to Rule
1087, (b) orders entered into COLA pursuant
to Rule 1080, Commentary .02(c)(ii)(e), or (c)
orders entered into the QCC mechanism
pursuant to Rules 1080(o).
(3) It shall be a violation of Rule
1080(c)(ii)(C) for any Exchange member or
member organization to be a party to any
arrangement designed to circumvent Rule
1080(c)(ii)(C) by providing an opportunity for
Phlx Rule 1087.
Rule 1098(e) or (f).
26 See Rule 1088.
27 The term ‘‘Order Entry Firms’’ is described in
Rule 1080(c)(ii) as a member organization of the
Exchange that is able to route orders to AUTOM.
Replacing the term ‘‘Order Entry Firm’’ with
‘‘member’’ does not change the meaning on the
sentence.
PO 00000
24 See
25 See
Frm 00101
Fmt 4703
Sfmt 4703
This Rule prevents a member from
executing agency orders to increase its
economic gain from trading against the order
without first giving other trading interest on
the Exchange an opportunity to either trade
with the agency order or to trade at the
execution price when the Member was
already bidding or offering on the book.
However, the Exchange recognizes that it
may be possible for an member to establish
a relationship with a customer or other
person (including affiliates) to deny agency
orders the opportunity to interact on the
Exchange and to realize similar economic
benefits as it would achieve by executing
agency orders as principal. It will be a
violation of this Rule for a member to be a
party to any arrangement designed to
circumvent this Rule by providing an
opportunity for a customer or other person
(including affiliates) to regularly execute
against agency orders handled by the member
immediately upon their entry into the
System.
The Exchange believes that
specifically noting this prohibition
within the proposed rule will assist
members in understanding the type of
behavior that would violate Exchange
rules when executing agency orders.
Specifically, today pursuant to Phlx
Rule 707, ‘‘Conduct Inconsistent with
Just and Equitable Principles of Trade,’’
it would be violative for members to
execute agency orders to increase its
economic gain from trading against the
order without first giving other trading
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interest on Phlx an opportunity to either
trade with the agency order or to trade
at the execution price when the member
was already bidding or offering on the
book. The Exchange proposes to make
clear with this Rule that members may
not gain by failing to expose orders
submitted on an agency basis. The
Exchange is promoting transparency of
orders to prevent members from seeking
price discovery and potentially
preventing price improvement which
may result from exposing an order.
The Exchange proposes to add a new
rule at 1097(c) which provides, ‘‘Prior to
or after submitting an order to Phlx, a
member cannot inform another member
or any other third party of any of the
terms of the order for purposes of
violating Rule 1095.’’ Similar rule text is
contained in The Nasdaq Options
Market LLC (‘‘NOM’’) Rules.28 The
Exchange believes that adding this
language will better information
participants that Rule 1097 prohibits
such behavior. The Exchange desires to
conform the language in this rule to that
of affiliated Nasdaq markets.
The Exchange’s proposal to adopt a
new Rule 1097 will conform proposed
Rule 1097 to other Nasdaq affiliated
markets filing similar rules.29 The
Exchange’s proposal to add rule text to
describe potential violations of this rule
will bring greater clarity to current
limitations that exist when entering
orders. Proposed Rule 1097 is consistent
with the Act because it provides one
rule for ease of reference which list the
current limitations within Rule 1080
and some additional limitations. The
Exchange believes the proposed rule
will promote just and equitable
principles of trade and remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
will continue to make clear the
requirement to expose orders as well as
present more specific limitations on
order entry which would violate Phlx
Rules. Providing members with more
information as to the type of behavior
that is violative with respect to order
exposure will prevent inadvertent
violations of Exchange rules and ensure
that orders are subject to appropriate
price discovery.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
28 See NOM Rules at Chapter VII, Section 12 at
Commentary .04.
29 Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq
MRX, LLC, Nasdaq BX, Inc. and Nasdaq Stock
Market LLC are adopting similar rules to proposed
Phlx Rule 1097.
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of the Act,30 in general, and furthers the
objectives of Section 6(b)(5) of the Act,31
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 as
provided for within the purpose section.
Phlx proposes amendments to Phlx
Rule 1019 to create a list of all the
requirements and conditions for
submitting quotes on Phlx within one
rule is consistent with the Act because
it will provide greater transparency to
market participants of the applicable
requirements. The Exchange’s proposal
is intended to provide greater
information with respect to Firm Quote
within new Rule 1019(b)(5) and
regarding trade-through and locked and
crossed markets 1019(b)(6). The
addition rule text is consistent with the
Act because the Exchange is adding
detail regarding the method in which
orders which are firm or locked and
crossed will be handled in the System.
The notifications for Firm Quote are
made clear with the proposed rule text.
The Exchange believes that it is
consistent with the Act to specify when
quotes are firm and the handling of such
quotes by the System for the protection
of investors and the general public. The
clarity is designed to promote just and
equitable principles of trade by
notifying all participants engaged in
market making of potential outcomes.
Today, quotations may not be executed
against at prices that trade-through an
away market. Also, quotations may not
lock or cross an away market. The
repricing of quotations is consistent
with the Act because repricing prevents
the Exchange from disseminating a price
which locks or crosses another market.
Phlx is required avoiding displaying a
quotation that would lock or cross a
quotation of another market center at
the time it is displayed. Preventing
inferior prices from displaying perfects
the mechanism of a free and open
market and a national market system,
and, in general to protect investors and
the public interest.
Similar to Rule 1019, which describes
requirements for quotes, the Exchange
proposes to adopt a new Rule 1096,
‘‘Entry and Display of Orders’’ and
describe the current requirements and
conditions for entering orders. The
Exchange notes that the requirements
provided for within this rule represent
the current practice. The purpose of
Rule 1096 is to memorialize this
PO 00000
30 15
31 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00102
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Sfmt 4703
information within a single rule to
provide a list of other requirements
which may impact the execution of an
order. Trades may be nullified today by
agreement of the parties. The Exchange
believes that it is consistent with the
Act to permit parties to agree to a
nullification provided the nullification
does not violate other exchange rules.
The Exchange notes that parties may not
agree to a mutual agreement for
purposes that would cause another rule
to be violated. The Exchange believes
that it is consistent with the Act and
protection of investors and general
public to make clear the expected
behavior with respect to nullifications.
Today, orders may not be executed at
a price that trades through an away
market. Also, orders may not lock or
cross an away market. Routable orders
must comply with Trade-Through and
Locked and Crossed Markets
restrictions. The repricing of orders is
consistent with the Act because
repricing prevents the Exchange from
disseminating a price which locks or
crosses another market. Phlx is required
avoiding displaying an order that would
lock or cross a quotation of another
market center at the time it is displayed.
Preventing inferior prices from
displaying perfects 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’s proposal to adopt a new
Rule 1096, ‘‘Entry and Display of
Orders’’ and describe the current
requirements and conditions for
entering orders, similar to proposed
changes to Rule 1019 for quotes is
consistent with the Act because it will
provide transparency as to manner in
which orders may be submitted to the
System. The Exchange’s new rule
reflects the current requirements for
submitting orders into the System.
Similar to proposed Rule 1019, the
Exchange proposes to memorialize
requirements and limitations within one
rule for ease of reference.
The Exchange’s proposal to adopt a
new Rule 1097 will conform proposed
Rule 1097 to other Nasdaq affiliated
markets filing similar rules.32 The
Exchange’s proposal to add rule text to
describe potential violations of this rule
will bring greater clarity to current
limitations that exist when entering
orders. Proposed Rule 1097 is consistent
with the Act because it provides one
rule for ease of reference which list the
current limitations within Rule 1080
32 Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq
MRX, LLC, Nasdaq BX, Inc. and Nasdaq Stock
Market LLC are adopting similar rules to proposed
Phlx Rule 1097.
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and some additional limitations. The
Exchange believes the proposed rule
will promote just and equitable
principles of trade and remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
will continue to make clear the
requirement to expose orders as well as
present more specific limitations on
order entry which would violate Phlx
Rules. Providing members with more
information as to the type of behavior
that is violative with respect to order
exposure will prevent inadvertent
violations of Exchange rules and ensure
that orders are subject to appropriate
price discovery.
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 that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange notes that other options
markets have similar rules with respect
to order and quote entry and the
requirements to expose orders. The
implementation of such rules may vary
across options markets. Despite the
variation in implementation, the
Exchange does not believe this proposal
creates an undue burden on intermarket competition because the
requirements for order exposure are
consistent with respect to all markets as
well as the ability to submit quotes and
orders on all options markets.
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Rule 1019, Acceptance of Quote and
Orders
The Exchange’s proposal to add Rule
1019(b) to describe the current
requirements and conditions for
submitting quotes does not impose an
undue burden on competition and all
Specialists and ROTs are subject to
these requirements today. The Exchange
is memorializing its current practice by
reflecting the various requirements and
limitations for quote entry in one rule
for ease of reference and clarity. The
Exchange is also proposing to conform
this rule to similar rules across other
Nasdaq affiliated exchanges.
Rule 1080, Electronic Acceptance of
Quotes and Orders
The Exchange’s proposal to amend
Rule 1080(a)(i)(B) to add the following
sentence to Specialized Quote Feed
(‘‘SQF’’), ‘‘Specialists, SQTs and RSQTs
may only enter interest into SQF in their
assigned options series’’ is consistent
with the Act because it will make clear
the manner in which quotes may be
submitted to the System.
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The Exchange’s proposal to remove
rule text within Rule 1080(k) and
memorializing the quoting requirements
within Rule 1019 does not impose an
undue burden on competition and all
Specialists and ROTs are subject to
these requirements today.
Rule 1096, Entry and Display of Orders
The Exchange’s proposal to adopt a
new Rule 1096, ‘‘Entry and Display of
Orders’’ and describe the current
requirements and conditions for
entering orders, similar to proposed
changes to Rule 1019 for quotes does
not impose an undue burden on
competition because it applies
uniformly to all members. This rule
memorializes the manner in which
orders may be submitted to the System
and provides transparency as to manner
in which orders may be submitted to the
System. The Exchange’s new rule text
memorializes the current requirements
for submitting orders into the System.
Similar to proposed Rule 1019, the
Exchange proposes to memorialize
requirements and limitations within one
rule for ease of reference. The Exchange
is also proposing to conform this rule to
similar rules across other Nasdaq
affiliated exchanges.
Adding new rules for ‘‘Nullification
by Mutual Agreement and new Rule
1096(a)(5) does not impose an undue
burden on competition as these rules
apply to all members today and would
be considered conduct violate of Rule
707, ‘‘Conduct Inconsistent with Just
and Equitable Principles of Trade.’’
Rule 1097, Limitations on Order Entry
The Exchange’s proposal to adopt a
new Rule 1097, titled ‘‘Limitations on
Orders,’’ and relocate rule text from
current Rule 1080 will conform
proposed Rule 1097 to other Nasdaq
affiliated markets filing similar rules.33
This rule will apply uniformly to all
members. The Exchange’ proposal add
new rule text at proposed Rule
1097(c)(1) which is the same rule text
within ISE Options 3, Section 22 at
Supplementary Material .01 and is
similar to rule text at Rule 1087(f)
related to PIXL will provide members
greater transparency as to the type of
behavior that would violate Exchange
rules when executing agency orders.
Additionally, adding a new rule at
1097(d), similar to rule text is contained
in NOM Rules,34 will better inform
participants that Rule 1097 prohibits
33 Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq
MRX, LLC, Nasdaq BX, Inc. and Nasdaq Stock
Market LLC intend to adopt similar rules to
proposed Phlx Rule 1097.
34 See NOM Rules at Chapter VII, Section 12 at
Commentary .04.
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
32801
such behavior. The Exchange desires to
conform the language in this rule to that
of affiliated Nasdaq markets.
Relocation of Kill Switch and Detection
of Loss of Communication
The Exchange’s proposal to relocate
the rule text at Rule 1019(b), Kill
Switch, and (c), Detection of Loss of
Communication, to new Rules 1073 and
1074, respectively does not impose an
undue burden on competition. The
relocations are non-substantive and
intended to provide greater
transparency to these rules by making
them easier to locate.
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
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 35 and
subparagraph (f)(6) of Rule 19b–4
thereunder.36
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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:
15 U.S.C. 78s(b)(3)(A)(iii).
17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
35
36
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Federal Register / Vol. 84, No. 131 / Tuesday, July 9, 2019 / Notices
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2019–25 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.
khammond on DSKBBV9HB2PROD with NOTICES
All submissions should refer to File
Number SR-Phlx-2019–25. 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–2019–25, and should
be submitted on or before July 30, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–14494 Filed 7–8–19; 8:45 am]
17 CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:47 Jul 08, 2019
[Release No. 34–86291; File No. SR–NYSE–
2019–20]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Designation of Longer Period for
Commission Action on Proposed Rule
Change Amending Section 302 of the
Listed Company Manual To Provide
Exemptions for the Issuers of Certain
Categories of Securities From the
Obligation to Hold Annual
Shareholders’ Meetings
July 3, 2019.
On May 6, 2019, New York Stock
Exchange LLC (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 Section 302 of the
Listed Company Manual (the ‘‘Manual’’)
to provide exemptions for the issuers of
certain categories of securities from the
obligation to hold annual shareholders’
meetings. The proposed rule change was
published for comment in the Federal
Register on May 23, 2019.3 The
Commission has received no comments
on the proposal.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is July 7, 2019.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates August 21, 2019, as the date
by which the Commission shall either
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 85889
(May 17, 2019), 84 FR 23815.
4 15 U.S.C. 78s(b)(2).
5 Id.
2 17
BILLING CODE 8011–01–P
37
SECURITIES AND EXCHANGE
COMMISSION
Jkt 247001
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approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NYSE–2019–20).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–14622 Filed 7–8–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86300; File No. SR–
NYSEArca–2019–46]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.37–E To
Update a Rule Cross Reference
July 3, 2019.
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 June 25,
2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.37–E (Order Execution and
Routing) to update a rule cross
reference. The proposed rule change is
available on the Exchange’s website at
www.nyse.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
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 84, Number 131 (Tuesday, July 9, 2019)]
[Notices]
[Pages 32794-32802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14494]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86286; File No. SR-Phlx-2019-25]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1019,
Adopt a New Rule 1073, Adopt a New Rule 1074, Rule 1080, Adopt a New
Rule 1096, and Adopt a New Rule 1097
July 2, 2019.
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 June 20, 2019, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to a proposal to amend Rule 1019,
``Acceptance of Bid and Offer,'' adopt a new Rule 1073, ``Kill
Switch,'' adopt a new Rule 1074 ``Detection of Loss of Communication,''
Rule 1080, ``Electronic Acceptance of Quotes and Orders,'' adopt a new
Rule 1096, ``Entry and Display of Orders'' and adopt a new Rule 1097,
``Limitations on Order Entry.''
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.
[[Page 32795]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes several amendments within this rule change:
(i) Amend Rule 1019, ``Acceptance of Bid and Offer''; (ii) adopt a new
Rule 1073, ``Kill Switch,'' and Rule 1074 ``Detection of Loss of
Communication,'' from relocated rule text from Rule 1080, ``Electronic
Acceptance of Quotes and Orders,''; (iii) adopt a new Rule 1096,
``Entry and Display of Orders''; and (iv) adopt a new Rule 1097,
``Limitations on Order Entry.'' With this proposal, the Exchange
intends to create a rule that concerns the requirements for submitting
a quote and a separate rule that concerns the requirements for
submitting an order. The Exchange also is proposing to relocate rules
to reorganize its Rulebook and conform certain rule text within Rule
1097 to rules of other Nasdaq markets.\3\
---------------------------------------------------------------------------
\3\ The Exchange intends to file a separate rule change for each
Nasdaq market to amend rules as described herein.
---------------------------------------------------------------------------
Rule 1019, Acceptance of Bid or Offer
Currently, Rule 1019 is titled ``Acceptance of Bid or Offer.'' The
Exchange proposes to retitle Rule 1019 as ``Entry and Display of
Quotes.'' The Exchange proposes to amend Rule 1019(a) to revise the
text of (a) from ``All bids or offers for option contracts dealt in on
the Exchange made and accepted in accordance with these Rules shall
constitute binding contracts between the parties thereto but shall be
subjected to the exercise by the Board of Directors of the powers in
respect thereto vested in said Board by the By-Laws, and to the Rules
of the Exchange, and said contracts shall also be subject to the rules
of The Options Clearing Corporation and to the exercise by The Options
Clearing Corporation of the powers reserved to it in its by-laws and
rules'' to more simply ``All bids or offers for option contracts dealt
in on the Exchange made and accepted in accordance with these Rules
shall constitute binding contracts between the parties thereto but
shall be subjected to applicable requirements and the rules of the
Clearing Corporation. The Exchange is proposing to removing the
requirement for the Board of Directors to Act and retain the
applicability of the rules of the Clearing Corporation.
The Exchange proposes to add a new Rule 1019(b) to describe the
current requirements and conditions for submitting quotes. These
requirements reflect the current System operation today. The Exchange
proposes to memorialize the various requirements for the submission of
quotes into the System for greater transparency. The Exchange proposes
to provide at new Rule 1019(b), ``Quotes are subject to the following
requirements and conditions:''. The Exchange proposes to add at Rule
1019(b)(1) that ``RSQTs or Remote Specialists may generate and submit
option quotations.'' Current Rule 1080(k) provides,
Electronic Streaming Quotations. SQTs may generate and submit
option quotations if such SQT is physically present on the Exchange
floor, and RSQTs may generate and submit option quotations from off
the floor of the Exchange, electronically.
Respecting options trading on Phlx XL II, specialists, SQTs and
RSQTs who are quoting in an option may also submit Sweeps, which are
defined in and governed by Rule 1082.
The Exchange proposes removing this rule text within Rule 1080(k)
and memorializing the quoting requirements within Rule 1019. The first
paragraph within Rule 1080(k) describes SQTs and RSQTs that stream
quotations. These participants are currently defined within Rule
1014(b). This language in the first paragraph of Rule 1080(k) is
redundant and unnecessary. The second paragraph of Rule 1080(k)
references Sweeps within Phlx Rule 1082, ``Firm Quotations,'' which
describes sweeps within that rule in relation to Quote Exhaust. The
Exchange proposes to provide at proposed new Rule 1019(b)(2) that ``The
System shall time-stamp a quote which shall determine the time ranking
of the quote for purposes of processing the quote.'' The Exchange notes
that all quotes today are time-stamped for purposes of processing
quotes. Proposed Rule 1019(b)(3) states that ``Specialists, Remote
Specialists and ROTs may enter bids and/or offers in the form of a two-
sided quote. Only one quote may be submitted at a time for an option
series.'' The Exchange believes that this information will provide
Specialists, Remote Specialists and ROTs with information on submitting
a quote. The Exchange notes that bid or offer size may be a ``0,''
however a price is required to be entered for both the bid and offer to
be entered into the System. Further, the Exchange proposes at Rule
1019(b)(4) to provide clarity for entering quotes and proposes to
specify, ``The System accepts quotes for the Opening Process as
specified in Rule 1017.'' \4\ The Exchange believes that this
information will bring greater transparency to the Rulebook with
respect to limitations for submitting quotations into the System.
---------------------------------------------------------------------------
\4\ Rule 1017(d) provides, ``Phlx Electronic Market Maker Valid
Width Quotes and Opening Sweeps received starting at 9:25 a.m. are
included in the Opening Process. Orders entered at any time before
an option series opens are included in the Opening Process.''
---------------------------------------------------------------------------
The Exchange proposes a provision regarding firm quote within
proposed Rule 1019(b)(5):
Firm Quote. When quotes in options on another market or markets
are subject to relief from the firm quote requirement set forth in
the SEC Quote Rule,\5\ orders and quotes will receive an automatic
execution at or better than the NBBO based on the best bid or offer
in markets whose quotes are not subject to such relief. Such
determination may be made by way of notification from another market
that its quotes are not firm or are unreliable; administrative
message from the Option Price Reporting Authority (``OPRA''); quotes
received from another market designated as ``not firm'' using the
appropriate indicator; and/or telephonic or electronic inquiry to,
and verification from, another market that its quotes are not firm.
The Exchange shall maintain a record of each instance in which
another exchange's quotes are excluded from the Exchange's
calculation of NBBO, and shall notify such other exchange that its
quotes have been so excluded. Where quotes in options on another
market or markets previously subject to relief from the firm quote
requirement set forth in the Quote Rule are no longer subject to
such relief, such quotations will be included in the calculation of
NBBO for such options. Such determination may be made by way of
notification from another market that its quotes are firm;
administrative message from OPRA; and/or telephonic or electronic
inquiry to, and verification from, another market that its quotes
are firm.
\5\ The term ``SEC Quote rule'' shall mean rule 602 of
Regulation NMS under the Securities Exchange Act of 1934, as
amended. See Phlx Rule 1082(a)(iii).
Phlx Rule 1082 describes Firm Quote for purposes of quote
submission. The Exchange proposes to memorialize within its Rules the
requirement for the dissemination of quotations pursuant to Reg NMS.\6\
The Exchange is proposing to add the above rule text to provide context
as to this restriction for submitting quotes. The Exchange proposes to
make clear the manner in which quote relief will occur. Specifically,
this proposed rule text indicates the manner in which a determination
for quote relief is made. Further, the rule notes the Exchange shall
maintain a record of each instance in which another exchange's quotes
are excluded from the Exchange's calculation of NBBO, and shall notify
such other exchange that its quotes have been so excluded. Also, when
relief is no longer available, such quotations will be included in the
calculation of NBBO for such options. The Exchange notes
[[Page 32796]]
how the determination is made that relief is no longer available. The
proposed rule text adds greater context to the manner in which Firm
Quote relief is applied. This rule text represents the current
practice.
---------------------------------------------------------------------------
\6\ 17 CFR 242.602.
---------------------------------------------------------------------------
Similarly, the Exchange proposes to provide the following at
proposed new Rule 1019(b)(6):
Trade-Through Compliance and Locked or Crossed Markets. A quote
will not be executed at a price that trades through another market
or displayed at a price that would lock or cross another market. If,
at the time of entry, a quote would cause a locked or crossed market
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current
national best bid (for offers) and displayed at one minimum price
variance above (for offers) or below (for bids) the national best
price.
Today, quotations may not be executed against prices that trade-
through an away market as provided for in the Options Order Protection
and Locked/Crossed Market Plan which is also described within Phlx
Rules 1083, 1084 and 1086. Also, quotations may not lock or cross an
away market. The repricing is provided for today within Phlx Rule
1093.\7\ By stating this limitation in the rule, Specialists and ROTs
will have greater clarity as to this limitation. Further, the Exchange
is making clear that a quote that would cause a locked or crossed
market violation or would cause a trade-through violation will be re-
priced. The Exchange would display the quote at one minimum price
variation (``MPV'') above (for offers) or below (for bids) the national
best price. Repricing quotes is consistent with the Act because the
Exchange is not permitted to lock or cross an away market's quote or
order. The Exchange reprices the quotes one MPV inferior to cause the
displayed price to reflect the available market on Phlx.
---------------------------------------------------------------------------
\7\ Phlx Rule 1093(a)(iii)(A) provides that a DNR Order may
execute on the Exchange at a price equal to or better than, but not
inferior to, the best away market price but, if that best away
market remains, the DNR Order will remain in the Phlx Order Book and
be displayed at a price one minimum price variation (``MPV'')
inferior to that away best bid/offer. If the DNR Order is locking or
crossing the ABBO, the DNR Order shall be entered into the Order
Book at the ABBO price and displayed one MPV away from the ABBO.
Similar language is provided for with respect to the routable orders
(FIND and SRCH). Phlx Rule 1093(a)(iii)(B)(4) provides ``A FIND
Order received after an Opening Process that is marketable against
the internal PBBO when the ABBO is inferior to the internal PBBO
will be traded at the Exchange at or better than the PBBO price. If
the FIND Order has size remaining after exhausting the PBBO, it may:
(1) Trade at the next PBBO price (or prices) if the order price is
locking or crossing that price (or prices) up to and including the
ABBO price, (2) be entered into the Order Book at its limit price,
or (3) if locking or crossing the ABBO, be entered into the Order
Book at the ABBO price and displayed one MPV away from the ABBO.''
This is also the case for a SRCH Order. See Phlx Rule
1093(a)(iii)(C)(4).
---------------------------------------------------------------------------
Finally, the Exchange proposes at Rule 1019(b)(7) to provide,
``Quotes submitted to the System are subject to the following: minimum
increments provided for in Rule 1034, risk protections provided for in
Rule 1099 and Quote Exhaust provided for in Rule 1082.'' The Exchange
is noting herein the manner in which a quote may be rejected by the
System to provide market participants with expectations as to the
interplay among the various Phlx Rules. Specifically, if the Specialist
or ROT does not submit a quotation compliant with Rule 1034, the quote
will not be accepted by the System because market participants are
required to abide by Rule 1034 which describes the increments with
which options series are to be quoted. Rule 1099 provides a list of all
protections applicable to quotes that may be rejected. Finally,
Specialists and ROTs are subject to the Exchange's rule regarding quote
exhaust within Rule 1082(a)(ii)(B)(3). The Exchange believes that this
rule will provide Members with requirements and conditions for
submitting quotations and provide transparency as to limitations that
cause a quote to be rejected.
The Exchange proposes to provide at Rule 1019(c), ``Quotes will be
displayed in the System as described in Rule 1070.'' Rule 1070, titled
``Data Fees and Trade Information'' provides for the available feeds
that Members may access on the Exchange. This list represents the
available data feeds and the content of those data feeds which are
offered today by Phlx.
The amendment to Phlx Rule 1019 to create a list of all the
requirements and conditions for submitting quotes on Phlx within one
rule is consistent with the Act because it will provide greater
transparency to market participants of the applicable requirements.
Further, this proposal will make the current rule clear and
understandable for market participants thereby protecting investors and
the general public. The Exchange notes that while some of these
requirements appear in other rules, for ease of reference the
requirements are located within a single rule with this proposal. The
proposal reflects the Exchange's current practice with respect to
quoting requirements. This proposal will conform this Rule to other
Nasdaq affiliated markets filing similar rules.\8\ The Exchange's
proposal is intended to provide greater information with respect to
Firm Quote within new Rule 1019(b)(5) and regarding trade-through and
locked and crossed markets 1019(b)(6). The addition rule text is
consistent with the Act because the Exchange is adding detail regarding
the method in which orders which are firm or locked and crossed will be
handled in the System. The notifications for Firm Quote are made clear
with the proposed rule text. The Exchange believes that it is
consistent with the Act to specify when quotes are firm and the
handling of such quotes by the System for the protection of investors
and the general public. The clarity is designed to promote just and
equitable principles of trade by notifying all participants engaged in
market making of potential outcomes. Today, quotations may not be
executed against at prices that trade-through an away market. Also,
quotations may not lock or cross an away market. The repricing of
quotations is consistent with the Act because repricing prevents the
Exchange from disseminating a price which locks or crosses another
market. Phlx is required avoiding displaying a quotation that would
lock or cross a quotation of another market center at the time it is
displayed. Preventing inferior prices from displaying perfects the
mechanism of a free and open market and a national market system, and,
in general to protect investors and the public interest.
---------------------------------------------------------------------------
\8\ Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq MRX, LLC, Nasdaq
BX, Inc. and Nasdaq Stock Market LLC intend to file similar rules to
proposed Phlx Rule 1019.
---------------------------------------------------------------------------
Relocation of Kill Switch and Detection of Loss of Communication
The Exchange also proposes to relocate the rule text at Rule
1019(b), Kill Switch, and (c), Detection of Loss of Communication, to
new Rules 1073 and 1074, respectively. The relocations are consistent
with the Act because the proposed changes are intended to provide
greater transparency to these rules by making them easier to locate
which benefits investors and the public interest. The Exchange is not
proposing to amend the Kill Switch or Detection of Loss of
Communication rules; this rule change is non-substantive. The Exchange
proposes to update internal cross-references.
Rule 1080, Electronic Acceptance of Quotes and Orders
The Exchange proposes to amend Rule 1080(a)(i)(B) to add the
following sentence to Specialized Quote Feed (``SQF''), ``Specialists,
SQTs and RSQTs may only enter interest into SQF in their
[[Page 32797]]
assigned options series.'' The Exchange notes that today these
participants may utilize SQF to quote only in their assigned options
series.\9\ This proposed rule text is consistent with the Act because
it will add greater clarity to the current rule for the protection of
investors and the public interest.
---------------------------------------------------------------------------
\9\ Rules 501, ``Specialist Appointment'' and 507 ``Application
for Approval as an SQT, RSQT, or RSQTO and Assignment in Options''
govern option assignments.
---------------------------------------------------------------------------
The Exchange proposes to delete certain rule text within Rule
1080(c)(ii)(C) and 1080(j) and relocate that language to new Rule 1097,
as described below.
The Exchange also proposes to delete Rule 1080(k), as discussed
above, and Rule 1080(l) which is currently reserved. These proposed
amendments are consistent with the Act because they are simply
administrative and non-substantive.
Rule 1096, Entry and Display of Orders
Similar to Rule 1019, which describes requirements for quotes, the
Exchange proposes to adopt a new Rule 1096, ``Entry and Display of
Orders'' and describe the current requirements and conditions for
entering orders. The Exchange notes that the requirements provided for
within this rule represent the current practice. The purpose of Rule
1096 is to memorialize this information within a single rule.
The Exchange proposes to state within new Rule 1096(a), ``Members
can enter orders into the System, subject to the following requirements
and conditions:''. The Exchange proposes within new Rule 1096(a)(1),
``Members shall be permitted to transmit to the System multiple orders
at a single as well as multiple price levels.'' The Exchange's new rule
text at 1096(a) proposes to make clear that multiple orders may be
transmitted to the System as single or multiple price levels. This is
the case today. The Exchange proposes to memorialize the manner in
which orders may be submitted to the System to add more detail to its
rules. The Exchange proposes at new Rule 1096(a)(2), ``The System
accepts orders beginning at a time specified by the Exchange and
communicated on the Exchange's website.'' The System accepts orders
beginning at a time specified by the Exchange and communicated on the
Exchange's website.\10\
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\10\ The Exchange's website makes the timeframes in which orders
may be submitted to the System: https://www.nasdaqtrader.com/content/phlx/phlx_systemtime.pdf.
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The Exchange proposes new Rule 1096(a)(3), ``The System shall time-
stamp an order which shall determine the time ranking of the order for
purposes of processing the order.'' Further, all orders are time-
stamped to determine the time ranking of the order for purposes of
processing the order within the System. This is also the case today and
the Exchange is adding this detail to its rules to describe the time-
stamp.
The Exchange proposes to add new Rule 1096(a)(4), ``Orders
submitted to the System are subject to the following: minimum
increments provided for in Rule 1034, risk protections provided for in
Rule 1099, and the restrictions of any order type as provided for in
Rule 1080(b). Orders may execute at multiple prices.'' All orders must
adhere to other rule requirements such as minimum increments, risk
protection rules and order types. Similar to the rule text for quotes,
order are currently subject the minimum increment requirements in Rule
1034 and also the risk protections for orders which are listed within
current Rule 1099. This rule provides a list of other requirements
which may impact the execution of an order. Finally, orders may execute
at multiple prices.
The Exchange proposes to add new Rule 1096(a)(5) the following,
``Nullification by Mutual Agreement. Trades may be nullified if all
parties participating in the trade agree to the nullification. In such
case, one party must notify the Exchange and the Exchange promptly will
disseminate the nullification to OPRA. It is considered conduct
inconsistent with just and equitable principles of trade for a party to
use the mutual adjustment process to circumvent any applicable Exchange
rule, the Act or any of the rules and regulations thereunder.'' The
rule text of new Rule 1096(a)(5) is similar to Nasdaq ISE, LLC
(``ISE'') Options 3, Section 4(b). Trades may be nullified today by
agreement of the parties. The Exchange believes that it is consistent
with the Act to permit parties to agree to a nullification provided the
nullification does not violate other exchange rules. The Exchange notes
that parties may not agree to a mutual agreement for purposes that
would cause another rule to be violated. The Exchange believes that it
is consistent with the Act and protection of investors and general
public to make clear the expected behavior with respect to
nullifications.
Proposed Rule 1096(b) is similar to ISE Options 3, Section 15(a).
This proposed rule provides,
NBBO Price Protection. Orders, other than Intermarket Sweep
Orders (as defined in Rule 1083(h)), will not be automatically
executed by the System at prices inferior to the NBBO (as defined in
Rule 1083(j)). There is no NBBO price protection with respect to any
other market whose quotations are Non-Firm (as defined in Rule
1083(k)).
The Exchange believes that although Phlx Rule 1084 \11\ makes clear
that simple orders may not execute at prices inferior to the NBBO, this
rule text will provide that limitation in this proposed list of
limitations for ease of reference. The Exchange notes that this NBBO
Protection applies to orders and therefore is being discussed within
proposed Rule 1096, which applies to all market participants. In
contrast, Rule 1019, which applies to quotes entered by those members
that conduct market marking, Specialists and ROTs, describes the Firm
Quote protections and the interplay of NBBO with respect to quotes.
Trade-Through is described in both Rules 1019 and 1096.
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\11\ Phlx Rule 1084 describes the avoidance of trade-through and
Rule 1083(h) described ISOs.
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Proposed Rule 1096(c) seeks to define the Exchange's best bid and
offer as the ``PBBO'' and distinguish the displayed book from the non-
displayed book for reference. The Exchange provides that the System
automatically executes eligible orders using the Exchange's displayed
best bid and offer (``PBBO''). Phlx also permits members to enter non-
displayed orders. The non-displayed orders are available on the
Exchange's order book (``internal PBBO''). The Phlx contingency orders,
which are non-displayed are exclusively: (i) All-or-None Orders; \12\
and (ii) stop orders \13\ (collectively ``Non-Displayed Contingency
Orders''). Finally, Phlx reprices orders to avoid locking or crossing
another market as explained below. Therefore, on Phlx, eligible orders
will execute at the best price available, the PBBO or the internal
PBBO. The Exchange believes that this information will provide Members
with additional information to how the Exchange describes its displayed
and non-displayed orders. Further the proposal to add information
related to NBBO Protection and define the Exchange's best bid and offer
as the
[[Page 32798]]
``PBBO'' and distinguish the displayed book from the non-displayed book
for reference will bring greater transparency and clarity to the
Exchange's rules. The Exchange disseminates its PBBO which does not
contain non-displayed information. The Exchange believes that
describing the ``internal PBBO'' will bring greater transparency to the
rule as the Order Book may contain non-displayed orders which may offer
better prices than the PBBO. The Exchange believes describing the
displayed and non-displayed order book will inform members as to
availability of orders on the Order Book and protect investors and the
general public by providing additional information about non-displayed
order types.
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\12\ An All-or-None Order is a limit or market order that is to
be executed in its entirety or not at all. An All-or None Order may
only be submitted by a public customer. All-or-None Orders are non-
displayed and non-routable. All-or-None Orders are executed in
price-time priority among all public customer orders if the size
contingency can be met. The Acceptable Trade Range protection in
Rule 1099(a) is not applied to All-Or-None Orders. See Phlx Rule
1078.
\13\ A stop order is a limit or market order to buy or sell at a
limit price when a trade or quote on the Exchange for a particular
option contract reaches a specified price. A stop-market or stop-
limit order shall not be triggered by a trade that is reported late
or out of sequence or by a complex order trading with another
complex order. See Phlx Rule 1080(b).
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Similar to Rule 1019(b)(6), the Exchange proposes to note at new
Rule 1096(d),
Trade-Through Compliance and Locked or Crossed Markets. An order
will not be executed at a price that trades through another market
or displayed at a price that would lock or cross another market. An
order that is designated by the member as routable will be routed in
compliance with applicable Trade-Through and Locked and Crossed
Markets restrictions. An order that is designated by a member as
non-routable will be re-priced in order to comply with applicable
Trade-Through and Locked and Crossed Markets restrictions. If, at
the time of entry, an order that the entering party has elected not
to make eligible for routing would cause a locked or crossed market
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current
national best bid (for offers) and displayed at one minimum price
variance above (for offers) or below (for bids) the national best
price.
Today, orders may not be executed at a price that trades through an
away market. Also, orders may not lock or cross an away market.
Routable orders must comply with Trade-Through and Locked and Crossed
Markets restrictions. The Exchange reprices orders that are non-
routable. The Exchange proposes to make clear the manner in which
orders are repriced on the order book. This repricing is described
today within Rule 1093(a)(iii)(A), (B) and (C) which describes routing.
This rule text is similar to rule text within BX Chapter VI, Section
7(b)(3)(C). Today, orders may not be executed at prices that trades
through an away market. Also, orders may not lock or cross an away
market. Routable orders must comply with Trade-Through and Locked and
Crossed Markets restrictions within Phlx Rule 1084. The Exchange
reprices orders that are non-routable. The Exchange's proposal to
memorialize rule text related to trade-throughs will make clear the
manner in which orders are repriced on the order book and protect
investors and general public by further describing this restriction
with respect to orders specifically. This repricing is described today
within Rule 1093(a)(iii)(A), (B) and (C) which describes routing. The
Exchange would re-price an order to the current national best offer
(for bids) or the current national best bid (for offers) and displayed
at one MPV above (for offers) or below (for bids) the national best
price. The Exchange reprices orders one MPV inferior to cause the
displayed price to reflect the available market on Phlx.\14\ The
repricing of orders is consistent with the Act because repricing
prevents the Exchange from disseminating a price which locks or crosses
another market. Phlx is required avoiding displaying an order that
would lock or cross a quotation of another market center at the time it
is displayed. Preventing inferior prices from displaying perfects the
mechanism of a free and open market and a national market system, and,
in general to protect investors and the public interest.
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\14\ See Phlx Rule 1086.
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Finally, the Exchange proposes to provide at new Rule 1096(e),
similar to Rule 1019(c) which states, ``Orders will be displayed in the
System as described in Rule 1099.''
The Exchange's proposal to adopt a new Rule 1096, ``Entry and
Display of Orders'' and describe the current requirements and
conditions for entering orders, similar to proposed changes to Rule
1019 for quotes is consistent with the Act because it will provide
transparency as to manner in which orders may be submitted to the
System. The Exchange's new rule reflects the current requirements for
submitting orders into the System. Similar to proposed Rule 1019, the
Exchange proposes to memorialize requirements and limitations within
one rule for ease of reference.
Rule 1097, Limitations on Order Entry
The Exchange proposes to adopt a new Rule 1097, titled
``Limitations on Order Entry,'' and relocate rule text from Rule 1080.
The Exchange proposes to adopt rule text within new Rule 1097(a) which
rule is similar to ISE Options 3, Section 22(b) as follows:
Limit Orders. Members shall not enter public customer limit
orders into the System in the same options series, for the account
or accounts of the same or related beneficial owners, in such a
manner that the beneficial owner(s) effectively is operating as a
market maker by holding itself out as willing to buy and sell such
options contract on a regular or continuous basis. In determining
whether a beneficial owner effectively is operating as a market
maker, the Exchange will consider, among other things: The
simultaneous or near-simultaneous entry of limit orders to buy and
sell the same options contract and the entry of multiple limit
orders at different prices in the same options series.
Specifically, Phlx Rule 1080(j) is similar to ISE Options 3,
Section 22(b) in that it prohibits public customers,\15\ which are
equivalent to ISE Priority Customers, from entering limit orders into
the Order Book in the same option series in a manner where the public
customer is effectively operating as a market maker by holding itself
out as willing to buy and sell such options contract on a regular or
continuous basis. Both rules are [sic] extend to beneficial owners.
Phlx rule [sic] 1080(j) provides, ``[i]n determining whether an off
floor member or beneficial owner effectively is operating as a market
maker, the Exchange will consider, among other things: The simultaneous
or near-simultaneous entry of limit orders to buy and sell the same
options contract; the multiple acquisition and liquidation of positions
in the same options series during the same day; and the entry of
multiple limit orders at different prices in the same options series.''
This language is the same as ISE's Options 3, Section 22(b). Because
Phlx has a trading floor, the ``off floor'' references are in Phlx Rule
1080(j) and no such references are in the ISE Rules. Further, Phlx's
Rule 1080(j) provides, ``The limitation set forth in this Rule 1080(j)
does not apply to the accounts of off-floor broker dealers or
Professionals as the term is defined in Rule 1000(b)(14).'' Phlx Rule
1080(j) therefore would apply to accounts for public customers, and
prevent public customers from conducting business as a market maker.
ISE Options 3, Section 22(b) was adopted to limit the ability of
Electronic Access Members that are not market makers to compete on
preferential terms within ISE's automated systems,\16\ including
Priority Customers, who are provided with certain benefits, such as
priority of bids and offers. ISE's Prior Rule Change noted that it did
not believe it was necessary to impose Options 3, Section 22
restrictions on the entry of Professional or broker-dealer orders
because the same priority does not exist.
[[Page 32799]]
Both rules therefore apply to same market participants. The Exchange
notes that the Phlx and ISE Rules are substantively the same, despite
the difference in the rule text.
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\15\ For purposes of this rule change, the term ``public
customer'' shall mean a person or entity that is not a broker or
dealer in securities and is not a Professional, as that term is
defined within Phlx Rule 1000(b)(14).
\16\ See Securities Exchange Act Release No. 63017 (September
29, 2010), 75 FR 61795 (October 6, 2010) (SR-ISE-2010-95) (``Prior
Rule Change'').
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On Phlx, ROTs (as well as Specialists) are required to register
with the Exchange.\17\ On Phlx, ROTs are entitled to certain
allocations \18\ and preferential pricing \19\ and are obligated to
submit Valid Width Quotes during the opening \20\ and quotes intra-
day.\21\ The Exchange believes that public customers that desire to
make markets on Phlx should register with the Exchange. The Exchange
also notes that ROTs are restricted from entering orders on Phlx as
described within Rule 1080(b). The Exchange also proposes to amend the
title from ``Limitations on Orders'' to ``Limit Orders.'' The Exchange
notes that the term ``Phlx XL'' is the same as the defined term
``System.'' \22\ Finally, the Exchange proposes to remove the final
sentence, ``Notwithstanding the foregoing, the limitation in Rule
1080(j) above will continue to apply to all-or-none orders submitted by
Professionals to the Exchange.'' Rule 1078 notes that All-or-None
Orders may be only be entered by Public Customers. This order type was
recently amended and therefore this limitation is unnecessary.\23\
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\17\ See Phlx Rule 507.
\18\ See Rule 100(g)(vi).
\19\ See Phlx's Pricing Schedule at Options 8.
\20\ See Phlx Rule 1017.
\21\ See Phlx Rule 1081.
\22\ The term ``System'' shall mean 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; 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
(``OPRA'') 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 at Rule 1070. See Phlx
Rule 1000(b)(45).
\23\ See Securities Exchange Act Release No. 85262 (March 7,
2019), 84 FR 9192 (March 13, 2019) (SR-Phlx-2019-03).
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The Exchange proposes to relocate rule text from current Rule
1080(c)(ii)(C)(2) to proposed Rule 1097(b). Current Rule
1080(c)(ii)(C)(2) provides,
Principal Transactions: Order Entry Firms may not execute as
principal against orders on the limit order book they represent as
agent unless: (a) Agency orders are first exposed on the limit order
book for at least one (1) second, (b) the Order Entry Firm has been
bidding or offering on the Exchange for at least one (1) second
prior to receiving an agency order that is executable against such
order, (c) the Order Entry Firm proceeds in accordance with the
crossing rules contained in Rule 1064, (d) the orders are entered
into Price Improvement XL or ``PIXL'' pursuant to Rule 1087, (e) the
orders are entered into the Complex Order Live Auction or ``COLA''
pursuant to Rule 1080, Commentary .02(c)(ii)(e), or (f) orders
entered into the Qualified Contingent Cross or ``QCC'' mechanism
pursuant to Rules 1080(o).
This rule provides for the exposure of orders entered on Phlx.
Specifically, with respect to orders entered as where a Phlx member is
acting as agent and principal on an order, the order must be exposed
for one second prior to execution to allow an opportunity for price
improvement. The Exchange has filed for certain functionalities which
are exceptions to the general standard of one second exposure. These
functionalities have provisions which describe the manner in which
orders can be entered into the Price Improvement XL or ``PIXL''
mechanism \24\ the Complex Order Live Auction or ``COLA'' \25\ pursuant
to Rule 1098(e); or the Qualified Contingent Cross or ``QCC''
mechanism.\26\ Further, Phlx Rule 1064 permits members to cross orders
provided certain contingencies are met. This rule is intended to
encourage price discovery and price improvement of all orders entered
on Phlx. The Exchange proposes to utilize the broader term ``members''
instead of the specific term ``Order Entry Firms'' \27\ as this rule
applies to all members. The Exchange has updated the current rule
references.
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\24\ See Phlx Rule 1087.
\25\ See Rule 1098(e) or (f).
\26\ See Rule 1088.
\27\ The term ``Order Entry Firms'' is described in Rule
1080(c)(ii) as a member organization of the Exchange that is able to
route orders to AUTOM. Replacing the term ``Order Entry Firm'' with
``member'' does not change the meaning on the sentence.
---------------------------------------------------------------------------
The Exchange proposes to delete the rule text from current Rule
1080(c)(ii)(C)(2) and (3) which provides,
Solicitation Orders. Order Entry Firms must expose orders they
represent as agent for at least one (1) second before such orders
may be automatically executed, in whole or in part, against orders
solicited from members and non-member broker-dealers to transact
with such orders, except for: (a) Orders entered into PIXL pursuant
to Rule 1087, (b) orders entered into COLA pursuant to Rule 1080,
Commentary .02(c)(ii)(e), or (c) orders entered into the QCC
mechanism pursuant to Rules 1080(o).
(3) It shall be a violation of Rule 1080(c)(ii)(C) for any
Exchange member or member organization to be a party to any
arrangement designed to circumvent Rule 1080(c)(ii)(C) by providing
an opportunity for a customer, member, member organization, or non-
member broker-dealer to execute immediately against agency orders
delivered to the Exchange, whether such orders are delivered via
AUTOM or represented in the trading crowd by a member or a member
organization, except for: (a) Orders entered into PIXL pursuant to
Rule 1087, (b) orders entered into COLA pursuant to Rule 1080,
Commentary .02(c)(ii)(e), or (c) orders entered into the QCC
mechanism pursuant to Rules 1080(o).
This language is repetitive of language currently within current
Rule 1080(c)(ii)(C)(1). Current Rule 1080(c)(ii)(C)(1) requires
exposure similar to of one second and describes the same behavior as
current Rule 1080(c)(ii)(C)(2) and (3) and lists the same exceptions.
The Exchange does not believe that this rule text is necessary or
covers a scenario that is not contemplated by current Rule
1080(c)(ii)(C)(2) and (3). The Exchange believes that this rule was
merely the inverse of the rule for principal transactions.
The Exchange proposes new rule text at proposed Rule 1097(c)(1)
which is the same rule text within ISE Options 3, Section 22 at
Supplementary Material .01 and is similar to rule text at Phlx Rule
1087(f), related to PIXL. Rule 1097(b)(1) would provide,
This Rule prevents a member from executing agency orders to
increase its economic gain from trading against the order without
first giving other trading interest on the Exchange an opportunity
to either trade with the agency order or to trade at the execution
price when the Member was already bidding or offering on the book.
However, the Exchange recognizes that it may be possible for an
member to establish a relationship with a customer or other person
(including affiliates) to deny agency orders the opportunity to
interact on the Exchange and to realize similar economic benefits as
it would achieve by executing agency orders as principal. It will be
a violation of this Rule for a member to be a party to any
arrangement designed to circumvent this Rule by providing an
opportunity for a customer or other person (including affiliates) to
regularly execute against agency orders handled by the member
immediately upon their entry into the System.
The Exchange believes that specifically noting this prohibition
within the proposed rule will assist members in understanding the type
of behavior that would violate Exchange rules when executing agency
orders. Specifically, today pursuant to Phlx Rule 707, ``Conduct
Inconsistent with Just and Equitable Principles of Trade,'' it would be
violative for members to execute agency orders to increase its economic
gain from trading against the order without first giving other trading
[[Page 32800]]
interest on Phlx an opportunity to either trade with the agency order
or to trade at the execution price when the member was already bidding
or offering on the book. The Exchange proposes to make clear with this
Rule that members may not gain by failing to expose orders submitted on
an agency basis. The Exchange is promoting transparency of orders to
prevent members from seeking price discovery and potentially preventing
price improvement which may result from exposing an order.
The Exchange proposes to add a new rule at 1097(c) which provides,
``Prior to or after submitting an order to Phlx, a member cannot inform
another member or any other third party of any of the terms of the
order for purposes of violating Rule 1095.'' Similar rule text is
contained in The Nasdaq Options Market LLC (``NOM'') Rules.\28\ The
Exchange believes that adding this language will better information
participants that Rule 1097 prohibits such behavior. The Exchange
desires to conform the language in this rule to that of affiliated
Nasdaq markets.
---------------------------------------------------------------------------
\28\ See NOM Rules at Chapter VII, Section 12 at Commentary .04.
---------------------------------------------------------------------------
The Exchange's proposal to adopt a new Rule 1097 will conform
proposed Rule 1097 to other Nasdaq affiliated markets filing similar
rules.\29\ The Exchange's proposal to add rule text to describe
potential violations of this rule will bring greater clarity to current
limitations that exist when entering orders. Proposed Rule 1097 is
consistent with the Act because it provides one rule for ease of
reference which list the current limitations within Rule 1080 and some
additional limitations. The Exchange believes the proposed rule will
promote just and equitable principles of trade and remove impediments
to and perfect the mechanism of a free and open market and a national
market system because it will continue to make clear the requirement to
expose orders as well as present more specific limitations on order
entry which would violate Phlx Rules. Providing members with more
information as to the type of behavior that is violative with respect
to order exposure will prevent inadvertent violations of Exchange rules
and ensure that orders are subject to appropriate price discovery.
---------------------------------------------------------------------------
\29\ Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq MRX, LLC, Nasdaq
BX, Inc. and Nasdaq Stock Market LLC are adopting similar rules to
proposed Phlx Rule 1097.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\30\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\31\ 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 as provided for within the purpose section.
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\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Phlx proposes amendments to Phlx Rule 1019 to create a list of all
the requirements and conditions for submitting quotes on Phlx within
one rule is consistent with the Act because it will provide greater
transparency to market participants of the applicable requirements. The
Exchange's proposal is intended to provide greater information with
respect to Firm Quote within new Rule 1019(b)(5) and regarding trade-
through and locked and crossed markets 1019(b)(6). The addition rule
text is consistent with the Act because the Exchange is adding detail
regarding the method in which orders which are firm or locked and
crossed will be handled in the System. The notifications for Firm Quote
are made clear with the proposed rule text. The Exchange believes that
it is consistent with the Act to specify when quotes are firm and the
handling of such quotes by the System for the protection of investors
and the general public. The clarity is designed to promote just and
equitable principles of trade by notifying all participants engaged in
market making of potential outcomes. Today, quotations may not be
executed against at prices that trade-through an away market. Also,
quotations may not lock or cross an away market. The repricing of
quotations is consistent with the Act because repricing prevents the
Exchange from disseminating a price which locks or crosses another
market. Phlx is required avoiding displaying a quotation that would
lock or cross a quotation of another market center at the time it is
displayed. Preventing inferior prices from displaying perfects the
mechanism of a free and open market and a national market system, and,
in general to protect investors and the public interest.
Similar to Rule 1019, which describes requirements for quotes, the
Exchange proposes to adopt a new Rule 1096, ``Entry and Display of
Orders'' and describe the current requirements and conditions for
entering orders. The Exchange notes that the requirements provided for
within this rule represent the current practice. The purpose of Rule
1096 is to memorialize this information within a single rule to provide
a list of other requirements which may impact the execution of an
order. Trades may be nullified today by agreement of the parties. The
Exchange believes that it is consistent with the Act to permit parties
to agree to a nullification provided the nullification does not violate
other exchange rules. The Exchange notes that parties may not agree to
a mutual agreement for purposes that would cause another rule to be
violated. The Exchange believes that it is consistent with the Act and
protection of investors and general public to make clear the expected
behavior with respect to nullifications.
Today, orders may not be executed at a price that trades through an
away market. Also, orders may not lock or cross an away market.
Routable orders must comply with Trade-Through and Locked and Crossed
Markets restrictions. The repricing of orders is consistent with the
Act because repricing prevents the Exchange from disseminating a price
which locks or crosses another market. Phlx is required avoiding
displaying an order that would lock or cross a quotation of another
market center at the time it is displayed. Preventing inferior prices
from displaying perfects 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's proposal to adopt a new Rule 1096,
``Entry and Display of Orders'' and describe the current requirements
and conditions for entering orders, similar to proposed changes to Rule
1019 for quotes is consistent with the Act because it will provide
transparency as to manner in which orders may be submitted to the
System. The Exchange's new rule reflects the current requirements for
submitting orders into the System. Similar to proposed Rule 1019, the
Exchange proposes to memorialize requirements and limitations within
one rule for ease of reference.
The Exchange's proposal to adopt a new Rule 1097 will conform
proposed Rule 1097 to other Nasdaq affiliated markets filing similar
rules.\32\ The Exchange's proposal to add rule text to describe
potential violations of this rule will bring greater clarity to current
limitations that exist when entering orders. Proposed Rule 1097 is
consistent with the Act because it provides one rule for ease of
reference which list the current limitations within Rule 1080
[[Page 32801]]
and some additional limitations. The Exchange believes the proposed
rule will promote just and equitable principles of trade and remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it will continue to make clear the
requirement to expose orders as well as present more specific
limitations on order entry which would violate Phlx Rules. Providing
members with more information as to the type of behavior that is
violative with respect to order exposure will prevent inadvertent
violations of Exchange rules and ensure that orders are subject to
appropriate price discovery.
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\32\ Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq MRX, LLC, Nasdaq
BX, Inc. and Nasdaq Stock Market LLC are adopting similar rules to
proposed Phlx Rule 1097.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that
other options markets have similar rules with respect to order and
quote entry and the requirements to expose orders. The implementation
of such rules may vary across options markets. Despite the variation in
implementation, the Exchange does not believe this proposal creates an
undue burden on inter-market competition because the requirements for
order exposure are consistent with respect to all markets as well as
the ability to submit quotes and orders on all options markets.
Rule 1019, Acceptance of Quote and Orders
The Exchange's proposal to add Rule 1019(b) to describe the current
requirements and conditions for submitting quotes does not impose an
undue burden on competition and all Specialists and ROTs are subject to
these requirements today. The Exchange is memorializing its current
practice by reflecting the various requirements and limitations for
quote entry in one rule for ease of reference and clarity. The Exchange
is also proposing to conform this rule to similar rules across other
Nasdaq affiliated exchanges.
Rule 1080, Electronic Acceptance of Quotes and Orders
The Exchange's proposal to amend Rule 1080(a)(i)(B) to add the
following sentence to Specialized Quote Feed (``SQF''), ``Specialists,
SQTs and RSQTs may only enter interest into SQF in their assigned
options series'' is consistent with the Act because it will make clear
the manner in which quotes may be submitted to the System.
The Exchange's proposal to remove rule text within Rule 1080(k) and
memorializing the quoting requirements within Rule 1019 does not impose
an undue burden on competition and all Specialists and ROTs are subject
to these requirements today.
Rule 1096, Entry and Display of Orders
The Exchange's proposal to adopt a new Rule 1096, ``Entry and
Display of Orders'' and describe the current requirements and
conditions for entering orders, similar to proposed changes to Rule
1019 for quotes does not impose an undue burden on competition because
it applies uniformly to all members. This rule memorializes the manner
in which orders may be submitted to the System and provides
transparency as to manner in which orders may be submitted to the
System. The Exchange's new rule text memorializes the current
requirements for submitting orders into the System. Similar to proposed
Rule 1019, the Exchange proposes to memorialize requirements and
limitations within one rule for ease of reference. The Exchange is also
proposing to conform this rule to similar rules across other Nasdaq
affiliated exchanges.
Adding new rules for ``Nullification by Mutual Agreement and new
Rule 1096(a)(5) does not impose an undue burden on competition as these
rules apply to all members today and would be considered conduct
violate of Rule 707, ``Conduct Inconsistent with Just and Equitable
Principles of Trade.''
Rule 1097, Limitations on Order Entry
The Exchange's proposal to adopt a new Rule 1097, titled
``Limitations on Orders,'' and relocate rule text from current Rule
1080 will conform proposed Rule 1097 to other Nasdaq affiliated markets
filing similar rules.\33\ This rule will apply uniformly to all
members. The Exchange' proposal add new rule text at proposed Rule
1097(c)(1) which is the same rule text within ISE Options 3, Section 22
at Supplementary Material .01 and is similar to rule text at Rule
1087(f) related to PIXL will provide members greater transparency as to
the type of behavior that would violate Exchange rules when executing
agency orders. Additionally, adding a new rule at 1097(d), similar to
rule text is contained in NOM Rules,\34\ will better inform
participants that Rule 1097 prohibits such behavior. The Exchange
desires to conform the language in this rule to that of affiliated
Nasdaq markets.
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\33\ Nasdaq ISE, LLC, Nasdaq GEMX, LLC, Nasdaq MRX, LLC, Nasdaq
BX, Inc. and Nasdaq Stock Market LLC intend to adopt similar rules
to proposed Phlx Rule 1097.
\34\ See NOM Rules at Chapter VII, Section 12 at Commentary .04.
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Relocation of Kill Switch and Detection of Loss of Communication
The Exchange's proposal to relocate the rule text at Rule 1019(b),
Kill Switch, and (c), Detection of Loss of Communication, to new Rules
1073 and 1074, respectively does not impose an undue burden on
competition. The relocations are non-substantive and intended to
provide greater transparency to these rules by making them easier to
locate.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \35\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\36\
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\35\ 15 U.S.C. 78s(b)(3)(A)(iii).
\36\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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:
[[Page 32802]]
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-2019-25 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-2019-25. 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-2019-25, and should be submitted on
or before July 30, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-14494 Filed 7-8-19; 8:45 am]
BILLING CODE 8011-01-P
