Self-Regulatory Organizations; Nasdaq PHLX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, Section 17, To Decommission the Exchange's Quote Removal Kill Switch Functionality, 52702-52704 [2021-20447]

Download as PDF 52702 Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Notices 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–ISE–2021–19 and should be submitted on or before October 13, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–20449 Filed 9–21–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93015; File No. SR–Phlx– 2021–51] Self-Regulatory Organizations; Nasdaq PHLX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, Section 17, To Decommission the Exchange’s Quote Removal Kill Switch Functionality (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to decommission the Exchange’s quote removal Kill Switch functionality at Options 3, Section 17. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/phlx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Options 3, Section 17 to decommission the Exchange’s quote removal Kill Switch functionality, which is an optional tool that allows Market Makers 4 to initiate a message (or messages) 5 to the System 6 to promptly remove their quotes from the market. Market Makers may submit a request to the System to remove quotes based on certain identifier(s) on either a user or group level (‘‘Identifier’’).7 If quotes are September 16, 2021. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on September 2, 2021, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 16:44 Sep 21, 2021 Jkt 253001 4 For purposes of this filing, Market Makers include Lead Market Makers, Streaming Quote Traders, and Remote Streaming Quote Traders. See Options 1, Section 1(b)(28). 5 Today, Market Makers can log into an interface to send a message to the Exchange to initiate the Kill Switch. 6 For purposes of this filing, the term ‘‘System’’ shall mean the automated system for order execution and trade reporting owned and operated by the Exchange. See Options 1, Section 1(b)(57). 7 Identifiers include Exchange accounts, ports, and/or badges or mnemonics. Thus, a Market Maker using Kill Switch may elect to remove quotes for PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 cancelled by the Market Maker using Kill Switch, it will result in the removal of all quotes requested for the Identifier(s). The Market Maker will be unable to enter any additional quotes for the affected Identifier(s) until the Market Maker sends a re-entry request to the Exchange.8 Due to the lack of demand for the quote removal Kill Switch by Market Makers, the Exchange proposes to decommission this optional tool by the end of Q4 2021.9 Through consultation with individual Market Maker firms prior to filing this rule change, the Exchange did not receive any negative feedback for its proposal to decommission the quote removal Kill Switch functionality. The Exchange has also provided all market participants with advance notice that it will decommission this functionality in Q4 2021.10 With the proposed changes, the Exchange seeks to streamline its product offerings and to reallocate Exchange resources to other business and risk management initiatives. While the Exchange will no longer offer this optional functionality to Market Makers, it will continue to offer similar quote management tools that would assist Market Makers with their efforts to manage their risk with respect to quotes on the Exchange. For example, Market Makers are currently able to send a mass purge request through Specialized Quote Feed (‘‘SQF’’) to pull their existing quotes from the market and inhibit the entry of new quotes until the Market Maker sends a message to the Exchange to re-enter the System.11 an individual Identifier (e.g., badge) or any group of Identifiers (e.g., all badges within one Market Maker firm). Permissible groups must reside within a single member firm. 8 See Options 3, Section 17. The Kill Switch tool also currently allows Phlx members to cancel open orders and prevent new order submission. The Exchange is not proposing to decommission the order cancellation portion of the Kill Switch tool at this time. 9 No Market Makers have used the Kill Switch for quote removal in 2021. 10 See Options Trader Alert #2021–49. 11 ‘‘SQF’’ is an interface that allows Lead Market Makers, Streaming Quote Traders (‘‘SQTs’’) and Remote Streaming Quote Traders (‘‘RSQTs’’) to connect, send, and receive messages related to quotes, Immediate-or-Cancel Orders, and auction responses into and from the Exchange. Features include the following: (1) Options symbol directory messages (e.g., underlying and complex instruments); (2) system event messages (e.g., start of trading hours messages and start of opening); (3) trading action messages (e.g., halts and resumes); (4) execution messages; (5) quote messages; (6) Immediate-or-Cancel Order messages; (7) risk protection triggers and purge notifications; (8) opening imbalance messages; (9) auction notifications; and (10) auction responses. The SQF Purge Interface only receives and notifies of purge requests from the Lead Market Maker, SQT or RSQT. Lead Market Makers, SQTs and RSQTs may E:\FR\FM\22SEN1.SGM 22SEN1 Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Notices Indeed, the Exchange has found that Market Makers utilize this SQF purge functionality instead of the Kill Switch quote removal tool when they want to remove their quotes from the market. In addition, all Phlx members, including Market Makers, may contact the Exchange’s market operations staff to request that the Exchange cancel any of their existing bids, offers, or orders in any series of options.12 Furthermore, the Exchange will continue to have mandatory System-enforced risk mechanisms that automatically remove quotes for the Market Maker once certain pre-set thresholds or conditions are met. This includes risk protections such as rapid fire risk controls 13 and cancel on disconnect.14 To effect the decommissioning of the quote removal Kill Switch, the Exchange proposes to amend Options 3, Section 17 by eliminating all references to quote removal within this Rule. In connection with this change, the Exchange will also renumber current Options 3, Section 17(a)(2) and (a)(3) as Options 3, Section 17(a)(1) and (a)(2), respectively. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,15 in general, and furthers the objectives of Section 6(b)(5) of the Act,16 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. Additionally, the Exchange believes that the proposed rule change is consistent with the Section 6(b)(5) requirement that the rules of an exchange not be designed to permit unfair only enter interest into SQF in their assigned options series. See Options 3, Section 7(a)(i)(B). 12 See Options 3, Section 19. 13 The rapid fire risk controls automatically remove Market Maker quotes submitted over SQF when certain firm-set thresholds are met. Once the thresholds are triggered, the Market Maker must send a re-entry indicator to re-enter the System. See Options 3, Section 15(c)(2). 14 When the SQF Port detects the loss of communication with a member’s Client Application because the Exchange’s server does not receive a Heartbeat message for a certain time period (‘‘nn’’ seconds), the Exchange will automatically logoff the member’s affected Client Application and automatically cancel all of the member’s open quotes. Quotes will be cancelled across all Client Applications that are associated with the same Lead Market Maker or Market Maker (collectively ‘‘Market Maker’’) ID and underlying issues. See Options 3, Section 18(a). 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 16:44 Sep 21, 2021 Jkt 253001 discrimination between customers, issuers, brokers, or dealers. Specifically, the Exchange does not believe that the proposed rule change will affect the protection of investors or the public interest or the maintenance of a fair and orderly market because no Market Makers have used the quote removal Kill Switch risk control in 2021. In addition, the Exchange notes that the use of this tool is completely optional, and the Exchange will continue to offer Market Makers similar risk management tools such as the SQF mass quote purge functionality. As discussed above, the Exchange has found that Market Makers use the SQF purge functionality much more frequently than the quote removal Kill Switch to pull their quotes from the market. Furthermore, Market Makers will retain the ability to contact market operations staff to manually purge their quotes from the market. In addition, the Exchange will continue to implement mandatory System-enforced risk mechanisms that automatically remove quotes for the Market Maker once certain pre-set thresholds or conditions are met (i.e., rapid fire and cancel on disconnect). Also, the Exchange believes that the low usage rate for the quote removal Kill Switch does not warrant the continuous resources necessary for System support of such tools. As a result, the Exchange also believes that the proposal will remove impediments to and perfect the mechanism of a free and open market and a national market system by allowing the Exchange to reallocate System capacity and resources currently used to maintain this functionality to the development and maintenance of other business initiatives and risk management products. As noted above, the Exchange will retain the ability for Phlx members to utilize Kill Switch to cancel orders and prevent new order submission. The Exchange does not believe that decommissioning the quote removal portion of the Kill Switch tool for Market Makers is unfairly discriminatory because Market Makers are professional traders with their own risk settings, and have more sophisticated infrastructures than most other market participants. Furthermore, as discussed above, the Exchange has determined that Market Makers currently use the mass purge functionality on SQF to pull their quotes from the market instead of using the quote removal Kill Switch tool to achieve the same result. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 52703 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change will allow the Exchange to decommission a risk management tool that is rarely, if ever, used on the Exchange. As discussed above, Market Makers currently have a variety of similar tools like the quote removal Kill Switch that allow them to pull their quotes from the market and inhibit the entry of new quotes, including the mass quote purge functionality on SQF that the Exchange has found Market Makers use much more frequently than the quote removal Kill Switch to achieve the same result. As noted above, the Exchange will retain the ability for Phlx members to utilize Kill Switch to cancel orders and prevent new order submission. The Exchange does not believe that decommissioning the quote removal portion of the Kill Switch tool for Market Makers will impose an undue burden on competition because Market Makers are professional traders with their own risk settings, and have more sophisticated infrastructures than most other market participants. 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) of the Act 17 and Rule 19b– 4(f)(6) thereunder.18 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 17 15 U.S.C. 78s(b)(3)(A). 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. 18 17 E:\FR\FM\22SEN1.SGM 22SEN1 52704 Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Notices 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. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 J. Matthew DeLesDernier, Assistant Secretary. 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: [FR Doc. 2021–20447 Filed 9–21–21; 8:45 am] 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–2021–51 on the subject line. Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Amend Exchange Rule 2616, Priority of Orders 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–2021–51. 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–2021–51 and should be submitted on or before October 13, 2021. On July 20, 2021, MIAX PEARL, LLC (‘‘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 Exchange Rule 2616, Priority of Orders, to provide that an order will receive a new timestamp when its position is modified via a Cancel/ Replace message during a Short Sale Period. The proposed rule change was published for comment in the Federal Register on August 6, 2021.3 The Commission has not received any comment letters on the proposed rule change. 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 after publication of the notice for this proposed rule change is September 20, 2021. The Commission is extending the 45day time period for Commission action on the proposed rule change. The Commission finds that it is appropriate VerDate Sep<11>2014 16:44 Sep 21, 2021 Jkt 253001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93024; File No. SR– PEARL–2021–35] 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 November 4, 2021, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR–PEARL–2021– 35). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–20451 Filed 9–21–21; 8:45 am] BILLING CODE 8011–01–P September 16, 2021. 19 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 92545 (August 2, 2021), 86 FR 43279 (August 6, 2021). 4 15 U.S.C. 78s(b)(2). 1 15 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–450, OMB Control No. 3235–0505] Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Extension: Rule 303 of Regulation ATS Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Rule 303 of Regulation ATS (17 CFR 242.303) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (‘‘Exchange Act’’). Regulation ATS sets forth a regulatory regime for ‘‘alternative trading systems’’ (‘‘ATSs’’), which are entities that carry out exchange functions but are not required to register as national securities exchanges under the Act. In lieu of exchange registration, an ATS can instead opt to register with the Commission as a broker-dealer and, as a condition to not having to register as an exchange, must instead comply with Regulation ATS. Rule 303 of Regulation ATS (17 CFR 242.303) describes the record preservation requirements for ATSs. Rule 303 also describes how such 5 Id. 6 17 E:\FR\FM\22SEN1.SGM CFR 200.30–3(a)(31). 22SEN1

Agencies

[Federal Register Volume 86, Number 181 (Wednesday, September 22, 2021)]
[Notices]
[Pages 52702-52704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20447]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93015; File No. SR-Phlx-2021-51]


Self-Regulatory Organizations; Nasdaq PHLX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, 
Section 17, To Decommission the Exchange's Quote Removal Kill Switch 
Functionality

September 16, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on September 2, 2021, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 decommission the Exchange's quote removal 
Kill Switch functionality at Options 3, Section 17.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Options 3, Section 17 to 
decommission the Exchange's quote removal Kill Switch functionality, 
which is an optional tool that allows Market Makers \4\ to initiate a 
message (or messages) \5\ to the System \6\ to promptly remove their 
quotes from the market. Market Makers may submit a request to the 
System to remove quotes based on certain identifier(s) on either a user 
or group level (``Identifier'').\7\ If quotes are cancelled by the 
Market Maker using Kill Switch, it will result in the removal of all 
quotes requested for the Identifier(s). The Market Maker will be unable 
to enter any additional quotes for the affected Identifier(s) until the 
Market Maker sends a re-entry request to the Exchange.\8\
---------------------------------------------------------------------------

    \4\ For purposes of this filing, Market Makers include Lead 
Market Makers, Streaming Quote Traders, and Remote Streaming Quote 
Traders. See Options 1, Section 1(b)(28).
    \5\ Today, Market Makers can log into an interface to send a 
message to the Exchange to initiate the Kill Switch.
    \6\ For purposes of this filing, the term ``System'' shall mean 
the automated system for order execution and trade reporting owned 
and operated by the Exchange. See Options 1, Section 1(b)(57).
    \7\ Identifiers include Exchange accounts, ports, and/or badges 
or mnemonics. Thus, a Market Maker using Kill Switch may elect to 
remove quotes for an individual Identifier (e.g., badge) or any 
group of Identifiers (e.g., all badges within one Market Maker 
firm). Permissible groups must reside within a single member firm.
    \8\ See Options 3, Section 17. The Kill Switch tool also 
currently allows Phlx members to cancel open orders and prevent new 
order submission. The Exchange is not proposing to decommission the 
order cancellation portion of the Kill Switch tool at this time.
---------------------------------------------------------------------------

    Due to the lack of demand for the quote removal Kill Switch by 
Market Makers, the Exchange proposes to decommission this optional tool 
by the end of Q4 2021.\9\ Through consultation with individual Market 
Maker firms prior to filing this rule change, the Exchange did not 
receive any negative feedback for its proposal to decommission the 
quote removal Kill Switch functionality. The Exchange has also provided 
all market participants with advance notice that it will decommission 
this functionality in Q4 2021.\10\ With the proposed changes, the 
Exchange seeks to streamline its product offerings and to reallocate 
Exchange resources to other business and risk management initiatives. 
While the Exchange will no longer offer this optional functionality to 
Market Makers, it will continue to offer similar quote management tools 
that would assist Market Makers with their efforts to manage their risk 
with respect to quotes on the Exchange. For example, Market Makers are 
currently able to send a mass purge request through Specialized Quote 
Feed (``SQF'') to pull their existing quotes from the market and 
inhibit the entry of new quotes until the Market Maker sends a message 
to the Exchange to re-enter the System.\11\

[[Page 52703]]

Indeed, the Exchange has found that Market Makers utilize this SQF 
purge functionality instead of the Kill Switch quote removal tool when 
they want to remove their quotes from the market.
---------------------------------------------------------------------------

    \9\ No Market Makers have used the Kill Switch for quote removal 
in 2021.
    \10\ See Options Trader Alert #2021-49.
    \11\ ``SQF'' is an interface that allows Lead Market Makers, 
Streaming Quote Traders (``SQTs'') and Remote Streaming Quote 
Traders (``RSQTs'') to connect, send, and receive messages related 
to quotes, Immediate-or-Cancel Orders, and auction responses into 
and from the Exchange. Features include the following: (1) Options 
symbol directory messages (e.g., underlying and complex 
instruments); (2) system event messages (e.g., start of trading 
hours messages and start of opening); (3) trading action messages 
(e.g., halts and resumes); (4) execution messages; (5) quote 
messages; (6) Immediate-or-Cancel Order messages; (7) risk 
protection triggers and purge notifications; (8) opening imbalance 
messages; (9) auction notifications; and (10) auction responses. The 
SQF Purge Interface only receives and notifies of purge requests 
from the Lead Market Maker, SQT or RSQT. Lead Market Makers, SQTs 
and RSQTs may only enter interest into SQF in their assigned options 
series. See Options 3, Section 7(a)(i)(B).
---------------------------------------------------------------------------

    In addition, all Phlx members, including Market Makers, may contact 
the Exchange's market operations staff to request that the Exchange 
cancel any of their existing bids, offers, or orders in any series of 
options.\12\ Furthermore, the Exchange will continue to have mandatory 
System-enforced risk mechanisms that automatically remove quotes for 
the Market Maker once certain pre-set thresholds or conditions are met. 
This includes risk protections such as rapid fire risk controls \13\ 
and cancel on disconnect.\14\
---------------------------------------------------------------------------

    \12\ See Options 3, Section 19.
    \13\ The rapid fire risk controls automatically remove Market 
Maker quotes submitted over SQF when certain firm-set thresholds are 
met. Once the thresholds are triggered, the Market Maker must send a 
re-entry indicator to re-enter the System. See Options 3, Section 
15(c)(2).
    \14\ When the SQF Port detects the loss of communication with a 
member's Client Application because the Exchange's server does not 
receive a Heartbeat message for a certain time period (``nn'' 
seconds), the Exchange will automatically logoff the member's 
affected Client Application and automatically cancel all of the 
member's open quotes. Quotes will be cancelled across all Client 
Applications that are associated with the same Lead Market Maker or 
Market Maker (collectively ``Market Maker'') ID and underlying 
issues. See Options 3, Section 18(a).
---------------------------------------------------------------------------

    To effect the decommissioning of the quote removal Kill Switch, the 
Exchange proposes to amend Options 3, Section 17 by eliminating all 
references to quote removal within this Rule. In connection with this 
change, the Exchange will also renumber current Options 3, Section 
17(a)(2) and (a)(3) as Options 3, Section 17(a)(1) and (a)(2), 
respectively.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\15\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\16\ 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. Additionally, the Exchange believes that the proposed rule 
change is consistent with the Section 6(b)(5) requirement that the 
rules of an exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange does not believe that the proposed rule 
change will affect the protection of investors or the public interest 
or the maintenance of a fair and orderly market because no Market 
Makers have used the quote removal Kill Switch risk control in 2021. In 
addition, the Exchange notes that the use of this tool is completely 
optional, and the Exchange will continue to offer Market Makers similar 
risk management tools such as the SQF mass quote purge functionality. 
As discussed above, the Exchange has found that Market Makers use the 
SQF purge functionality much more frequently than the quote removal 
Kill Switch to pull their quotes from the market. Furthermore, Market 
Makers will retain the ability to contact market operations staff to 
manually purge their quotes from the market. In addition, the Exchange 
will continue to implement mandatory System-enforced risk mechanisms 
that automatically remove quotes for the Market Maker once certain pre-
set thresholds or conditions are met (i.e., rapid fire and cancel on 
disconnect).
    Also, the Exchange believes that the low usage rate for the quote 
removal Kill Switch does not warrant the continuous resources necessary 
for System support of such tools. As a result, the Exchange also 
believes that the proposal will remove impediments to and perfect the 
mechanism of a free and open market and a national market system by 
allowing the Exchange to reallocate System capacity and resources 
currently used to maintain this functionality to the development and 
maintenance of other business initiatives and risk management products.
    As noted above, the Exchange will retain the ability for Phlx 
members to utilize Kill Switch to cancel orders and prevent new order 
submission. The Exchange does not believe that decommissioning the 
quote removal portion of the Kill Switch tool for Market Makers is 
unfairly discriminatory because Market Makers are professional traders 
with their own risk settings, and have more sophisticated 
infrastructures than most other market participants. Furthermore, as 
discussed above, the Exchange has determined that Market Makers 
currently use the mass purge functionality on SQF to pull their quotes 
from the market instead of using the quote removal Kill Switch tool to 
achieve the same result.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change will 
allow the Exchange to decommission a risk management tool that is 
rarely, if ever, used on the Exchange. As discussed above, Market 
Makers currently have a variety of similar tools like the quote removal 
Kill Switch that allow them to pull their quotes from the market and 
inhibit the entry of new quotes, including the mass quote purge 
functionality on SQF that the Exchange has found Market Makers use much 
more frequently than the quote removal Kill Switch to achieve the same 
result.
    As noted above, the Exchange will retain the ability for Phlx 
members to utilize Kill Switch to cancel orders and prevent new order 
submission. The Exchange does not believe that decommissioning the 
quote removal portion of the Kill Switch tool for Market Makers will 
impose an undue burden on competition because Market Makers are 
professional traders with their own risk settings, and have more 
sophisticated infrastructures than most other market participants.

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) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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

[[Page 52704]]

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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2021-51 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-2021-51. 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-2021-51 and should be submitted on 
or before October 13, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-20447 Filed 9-21-21; 8:45 am]
BILLING CODE 8011-01-P
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