Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 2, Sections 5 and 10 and Options 3, Section 15, 61550-61554 [2024-16805]
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Federal Register / Vol. 89, No. 147 / Wednesday, July 31, 2024 / Notices
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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.20 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: (i)
necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) 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:
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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–
GEMX–2024–23 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–GEMX–2024–23. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–GEMX–2024–23 and should be
submitted on or before August 21, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–16803 Filed 7–30–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100599; File No. SR–Phlx–
2024–26]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 2,
Sections 5 and 10 and Options 3,
Section 15
July 25, 2024.
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 July 16,
2024, 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 amend
Options 2, Sections 5 and 10 and
Options 3, Section 15.
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
20 15
U.S.C. 78s(b)(3)(A)(ii).
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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
Phlx proposes to amend: (1) Directed
Market Maker quoting obligations in
Options 2, Section 5, Electronic Market
Maker Obligations and Quoting
Requirements; (2) a reference to
‘‘Exchange’s best price’’ in Options 2,
Section 10, Directed Orders; and (3) rule
text related to the Acceptable Trade
Range in Options 3, Section 15, Simple
Order Risk Protections. Each change
will be discussed below.
Options 2, Section 5
The Exchange proposes to amend the
rule text within Options 2, Section
5(c)(2)(C) related to the quoting
obligations applicable to a Directed
Market Maker.
The current rule text states that
Directed SQTs and Directed RSQTs,
associated with the same member
organization, are collectively required to
provide two-sided quotations in 90% of
the cumulative number of seconds, or
such higher percentage as Phlx may
announce in advance, for which that
member organization’s assigned options
series are open for trading. With respect
to a Directed Market Maker, Phlx
currently requires that the Directed
Market Maker provide two-sided
quotations in 90% of the cumulative
number of seconds, or such higher
percentage as Phlx may announce in
advance, in any options series in which
the Directed Market Maker has executed
a Directed Order on a daily basis. Phlx
requires the Market Maker to fulfill this
requirement in addition to its
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Federal Register / Vol. 89, No. 147 / Wednesday, July 31, 2024 / Notices
requirement to quote as a Market Maker
or a Lead Market Maker.
Below the Exchange presents
examples of how the new rule text
would operate.
Example 1
D Assume a Market Maker was
assigned in options overlying AAPL,
SPY, NFLX, ORCL and ADBE.
D Assume this Market Maker had
previously executed a Directed Order
and executes a Directed Order in NFLX
and ADBE on February 27, 2024.
D The Directed Market Maker
obligation is a daily obligation once
triggered and continues until the
Directed Market Maker notifies the
Exchange that it no longer desires to be
a part of the Directed Order program.
D Moreover, on February 28, 2024 and
each day thereafter the Directed Market
Maker is required to provide two-sided
quotations in 90% of the cumulative
number of seconds among all options
series in which the Directed Market
Maker has executed a Directed Order on
a daily basis until a Directed Market
Maker notifies the Exchange that it is no
longer directed. Therefore, the Directed
Market Maker would be required to
quote at 90% of the cumulative number
of seconds among all options series in
which the Directed Market Maker has
executed a Directed Order each day,
regardless of whether the Directed
Market Maker executed a Directed Order
that day.
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Obligations
This Market Maker is required to
provide two-sided quotations in 60% of
the cumulative number of seconds, or
such higher percentage as Phlx may
announce in advance, for which that
member’s assigned options series are
open for trading among AAPL, SPY, and
ORCL to fulfill its Market Maker
obligation.
Separately, this Market Maker would
be obligated, separate and apart from its
Market Maker obligations described in
this example, to provide two-sided
quotations in 90% of the cumulative
number of seconds, or such higher
percentage as Phlx may announce in
advance, among NFLX and ADBE to
fulfill its Directed Market Maker
Obligation.
This Market Maker would not be
required to make two-sided markets in
any Quarterly Option Series, any
Adjusted Option Series, and any option
series with an expiration of nine months
or greater for options on equities and
ETFs or with an expiration of twelve
months or greater for index options in
AAPL, SPY, NFLX, ORCL and ADBE
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when meeting its Market Maker or
Directed Market Maker requirements.
Example 2
D Assume a Lead Market Maker was
assigned in options overlying AAPL,
SPY, NFLX, ORCL and ADBE.
D Assume this Lead Market Maker
had previously executed a Directed
Order and executes a Directed Order in
NFLX and ADBE on February 27, 2024.
The Directed Market Maker obligation is
a daily obligation once triggered and
continues until the Directed Market
Maker notifies the Exchange that it no
longer desires to be a part of the
Directed Order program.
D The Directed Market Maker
obligation is a daily obligation once
triggered and continues until the
Directed Market Maker notifies the
Exchange that it no longer desires to be
a part of the Directed Order program.
D Moreover, on February 28, 2024 and
each day thereafter the Directed Market
Maker is required to provide two-sided
quotations in 90% of the cumulative
number of seconds among all options
series in which the Directed Market
Maker has executed a Directed Order on
a daily basis until a Directed Market
Maker notifies the Exchange that it is no
longer directed. Therefore, the Directed
Market Maker would be required to
quote at 90% of the cumulative number
of seconds among all options series in
which the Directed Market Maker has
executed a Directed Order each day,
regardless of whether the Directed
Market Maker executed a Directed Order
that day.
Obligations
This Lead Market Maker, associated
with the same member, is collectively
required to provide two-sided
quotations in 90% of the cumulative
number of seconds, or such higher
percentage as Phlx may announce in
advance, among AAPL, SPY, and ORCL
to fulfill its Lead Market Maker
obligation.3
Separately, this Lead Market Maker
would be obligated, separate and apart
from its Lead Market Maker obligations
described in this example, to provide
two-sided quotations in 90% of the
cumulative number of seconds, or such
higher percentage as Phlx may
announce in advance, among NFLX and
ADBE to fulfill its Directed Market
Maker obligation.
This Market Maker would not be
required to make two-sided markets in
any Quarterly Option Series, any
Adjusted Option Series, and any option
series with an expiration of nine months
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3 See
Options 2, Section 4(j)(1).
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61551
or greater for options on equities and
ETFs or with an expiration of twelve
months or greater for index options in
AAPL, SPY, NFLX, ORCL and ADBE
when meeting its Lead Market Maker or
Directed Market Maker requirements.
The Exchange proposes to amend the
rule text in Options 2, Section 5(c)(2)(C)
to require Directed Lead Market Makers,
Directed SQTs and Directed RSQTs
(collectively ‘‘Directed Market
Makers’’),4 associated with the same
member organization, collectively, to
provide two-sided quotations in 90% of
the cumulative number of seconds, or
such higher percentage as Phlx may
announce in advance, among all option
series in which the Directed Market
Maker has executed a Directed Order on
a daily basis, except that a Directed
Market Maker shall not be required to
make two-sided markets in any
Quarterly Option Series, any Adjusted
Option Series, and any option series
with an expiration of nine months or
greater for options on equities and
exchange-traded funds (‘‘ETFs’’) or with
an expiration of twelve months or
greater for index options. The Exchange
notes that the proposed requirements
are similar to requirements imposed by
other options exchanges. NYSE Arca,
Inc. (‘‘NYSE Arca’’) and NYSE
American LLC (‘‘NYSE American’’)
require that their lead market makers
and market makers provide continuous
two-sided quotations throughout the
trading day in issues for which it
receives Directed Orders for 90% of the
time the Exchange is open for trading in
each issue.5
The Exchange also proposes to
relocate certain rule text within Options
2, Section 5(c)(2)(C) to make clear the
requirements applicable to a Directed
Market Maker and make other
amendments as well. The Exchange
4 The Exchange will utilize the term ‘‘Directed
Market Makers’’ throughout to refer to Directed
Lead Market Makers, Directed SQTs and Directed
RSQTs. The Exchange will also utilize the term
‘‘Market Maker’’ in this 19b4 to refer to a Lead
Market Maker, SQT and an RSQT. See Options 7,
Section 1(b)(28), ‘‘A ‘Market Maker’ means a
Streaming Quote Trader or a Remote Streaming
Quote Trader who enters quotations for his own
account electronically into the System.’’ Further,
see Options 7, Section 1(b)(27), ‘‘A ‘Lead Market
Maker’ means a member who is registered as an
options Lead Market Maker pursuant to Options 2,
Section 12(a). A Lead Market Maker includes a
Remote Lead Market Maker which is defined as a
Lead Market Maker in one or more classes that does
not have a physical presence on the Exchange’s
Trading Floor and is approved by the Exchange
pursuant to Options 2, Section 11.’’
5 See NYSE Arca Rule 6.88–O and NYSE
American Rule 964.1NY. NYSE Arca Rule 6.88–
O(iv) states that these obligations will apply
collectively to all series in all of the issues for
which the Directed Order Market Maker receives
Directed Orders, rather than on an issue-by-issue
basis.
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Federal Register / Vol. 89, No. 147 / Wednesday, July 31, 2024 / Notices
proposes to amend the timeframe in
which a Directed Market Maker is
obligated to commence complying with
the quoting obligations of Options 2,
Section 5(c)(2)(C).6 Today, a Directed
Market Maker must commence
complying with the quoting obligations
specified in Options 2, Section
5(c)(2)(C) when a Directed Market
Maker receives a Directed Order in any
option in which they are assigned until
such time as the Directed Market Maker
notifies the Exchange that they are no
longer directed. Pursuant to Options 2,
Section 10(a)(ii), ‘‘[w]hen the
Exchange’s disseminated price is the
NBBO at the time of receipt of the
Directed Order, and the Directed Lead
Market Maker, SQT or RSQT is quoting
at the Exchange’s best price, the
Directed Order shall be automatically
executed and allocated in accordance
with Options 3, Section 10(a)(1).’’ The
Exchange proposes to amend Options 2,
Section 5(c)(2)(C) to instead begin
requiring a Directed Market Maker to
comply with the Directed Market Maker
quoting obligations in Options 2,
Section 5(c)(2)(C) when the Directed
Market Maker executes its first Directed
Order in any option in which they are
assigned. A Directed Market Maker has
the ongoing quoting obligation from the
time a Directed Market Maker executes
its first Directed Order in the options in
which the Directed Market Maker is
assigned until a Directed Market Maker
notifies the Exchange that the Directed
Market Maker is no longer directed.
Because Directed Market Makers are
unaware if an order is directed to them
until such time as they execute the
Directed Order and receive an allocation
pursuant to Options 3, Section 10, the
Exchange believes that starting the
quoting obligation once a Directed
Order is executed is a practical
approach to ensuring that Directed
Market Makers comply with their
quoting obligations.
The proposed rule text would
provide,
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Directed Lead Market Makers, Directed
SQTs and Directed RSQTs (‘‘Directed Market
Makers’’), associated with the same member
organization, are collectively required to
provide two-sided quotations in 90% of the
cumulative number of seconds, or such
higher percentage as Phlx may announce in
advance, among all options series in which
the Directed Market Maker has executed a
Directed Order on a daily basis, except that
6 Options 2, Section 5(c)(2)(C) provides that a
member organization shall be considered directed
in all assigned options once the member
organization receives a Directed Order in any
option in which they are assigned and shall be
considered a Directed SQT or Directed RSQT until
such time as the member organization notifies the
Exchange that they are no longer directed.
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a Directed Market Maker shall not be
required to make two-sided markets in any
Quarterly Options Series, any Adjusted
Options Series, and any options series with
an expiration of nine months or greater for
options on equities and ETFs or with an
expiration of twelve months or greater for
index options. A Directed Market Maker has
the ongoing quoting obligation from the time
a Directed Market Maker executes its first
Directed Order in the options in which the
Directed Market Maker is assigned until a
Directed Market Maker notifies the Exchange
that the Directed Market Maker is no longer
directed.
A Directed Market Maker shall not be
required to make two-sided markets in any
Quarterly Options Series, any Adjusted
Options Series, and any options series with
an expiration of nine months or greater for
options on equities and ETFs or with an
expiration of twelve months or greater for
index options and would receive a
participation entitlement in the Quarterly
Options Series, the Adjusted Options Series,
and an options series with an expiration of
nine months or greater for options on equities
and ETFs or with an expiration of twelve
months or greater for index options for the
Directed Order, only if it complies with the
heightened 90% quoting requirement.
As is the case today, a Directed
Market Maker must be quoting at the
Exchange’s best price 7 at the time of
receipt of the Directed Order to be
entitled to the allocation in accordance
with Options 3, Section 10. The
Exchange notes that the amendment
adds clarity to the Exchange’s current
practice 8 and harmonizes the rules of
Phlx with those of other Nasdaq
affiliated markets.
Options 2, Section 10
The Exchange proposes to amend
Options 2, Section 10, Directed Orders.
Specifically, Options 2, Section 10(a)(ii)
provides, ‘‘When the Exchange’s
disseminated price is the NBBO at the
time of receipt of the Directed Order,
and the Directed Lead Market Maker,
SQT or RSQT is quoting at the
Exchange’s best price, the Directed
Order shall be automatically executed
7 As part of this proposed rule change the
Exchange is amending Options 2, Section 10(a)(ii)
to replace the words ‘‘Exchange’s best price’’ with
‘‘better of the internal PBBO or the NBBO.’’ The
‘‘internal PBBO’’ is comprised of non-displayed and
displayed orders on the Exchange’s order book.
8 Phlx noted in a 2018 rule change that if a
member desired to become a Directed SQT that the
quoting obligations specified in Rule 1081(c)(ii)(C)
(now Options 2, Section 5) would commence when
that Directed SQT executed an order directed to the
Directed SQT. See Securities Exchange Act Release
No. 82975 (March 30, 2018), 83 FR 14690, 14694
(April 5, 2018) (SR–Phlx–2018–22) (Notice of Filing
of Proposed Rule Change To Create a New Rule
1081, To Amend Electronic Market Maker
Obligations and Quoting Requirements for
Electronic ROTs, Which Will Be Defined To Include
SQTs, RSQTs, Directed SQTs, Directed RSQTs,
Specialists, and Remote Specialists).
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and allocated in accordance with
Options 3, Section 10(a)(1).’’ The
Exchange proposes to amend this
sentence to replace the words
‘‘Exchange’s best price’’ with ‘‘better of
the internal PBBO or the NBBO.’’ The
Exchange proposes this amendment to
conform the rule text with language
throughout the Options 3 trading rules
that describe the Exchange’s best price
with references to the internal PBBO
and NBBO. Pursuant to Options 3,
Section 5, the System automatically
executes eligible orders using the
Exchange’s displayed best bid and offer
(‘‘PBBO’’) or the Exchange’s nondisplayed order book (‘‘internal PBBO’’)
if there are non-displayed orders on the
order book or the best bid and/or offer
on the Exchange has been repriced
pursuant to Options 3, Section 5(d) or
Options 3, Section 4(b)(6) which
describes trade-through compliance and
locked and crossed markets. The
Exchange also proposes to amend the
citation to ‘‘Options 3, Section 10(a)(1)’’
to the more precise citation ‘‘Options 3,
Section 10(a)(1)(C)’’ which describes the
Directed Market Maker Priority
allocation. The Exchange’s amendment
will bring additional clarity to current
rule text and harmonize the rule text
with Options 3 language.
Options 3, Section 15
Today, Options 3, Section 15(b)(1)(A)
provides that, ‘‘Upon receipt of a new
order/quote, the Reference Price is the
better of the National Best Bid (‘‘NBB’’)
or internal best bid for sell orders/
quotes and the National Best Offer
(‘‘NBO’’) or internal best offer for buy
orders/quotes, excluding All-or-None
Orders which cannot be satisfied, or the
last price at which the order/quote is
posted whichever is higher for a buy
order/quote or lower for a sell order/
quote.’’ The Exchange proposes to
remove the phrase ‘‘excluding All-orNone Orders which cannot be satisfied’’
from the rule text. The Exchange
previously filed a rule change 9 to
amend All-or-None Orders so that they
may only be submitted by a Public
Customer as an Immediate-or-Cancel
Order. As a result of this rule change,
All-or-None Orders no longer rest on the
order book. Upon entry, an All-or-None
Order is executed in its entirety or
cancelled if it cannot execute. The
Exchange inadvertently did not remove
the aforementioned rule text which
would require an All-or-None Order to
9 See Securities Exchange Act Release No. 98142
(August 16, 2023), 88 FR 57140 (August 22, 2023)
(SR–Phlx–2023–34) (Nasdaq PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change To Amend Phlx’s All-or-None Order)
(‘‘SR–Phlx–2023–34’’).
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rest to be applicable. At this time, the
Exchange proposes to also remove this
rule text reference to All-or-None Orders
in Options 3, Section 15(b)(1)(A),
similar to the other rule text rule
references that were removed in SR–
Phlx–2023–34.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Section 6(b)(5) of the Act,11
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.
Options 2, Section 5
The Exchange’s proposal to amend
the Directed Market Maker quoting
obligations in Options 2, Section
5(c)(2)(C) is consistent with the Act.
Other options exchanges today require
Directed Market Makers, collectively, to
provide two-sided quotations in 90% of
the cumulative number of seconds
among all options series in which the
Directed Market Maker has received a
Directed Order on a daily basis. The
proposed Directed Market Maker
quoting obligations would require
Directed Market Makers, collectively, to
provide two-sided quotations in 90% of
the cumulative number of seconds or
such higher percentage as Phlx may
announce in advance, among all options
series in which the Directed Market
Maker has executed a Directed Order on
a daily basis in addition to their quoting
requirements as Market Makers and
Lead Market Makers.
The Exchange believes that these
quoting requirements create a direct
nexus between the allocation that would
be received by a Directed Market Maker
pursuant to Options 3, Section 10 and
the liquidity that the Directed Market
Maker would be required to provide to
the market in that particular options
series. The Exchange notes that any
Directed Market Maker quoting at the
NBBO would need to provide two-sided
quotations in 90% of the cumulative
number of seconds among all options
series in which the Directed Market
Maker has executed a Directed Order for
the entire day in which the Directed
Market Maker received the Directed
Order and each day thereafter, on a
daily basis, until a Directed Market
Maker notifies the Exchange that it is no
longer directed. The Exchange believes
10 15
11 15
that this quoting obligation is designed
to promote just and equitable principles
of trade by ensuring that Directed
Market Makers quote competitively in
as many series as possible to attract
Directed Orders so that they may receive
an enhanced allocation as a Directed
Market Maker.
The proposed rule text would
harmonize the Directed Market Maker’s
quoting obligations with other options
exchanges, such as NYSE Arca and
NYSE American which require that
their lead market makers and market
makers provide continuous two-sided
quotations throughout the trading day in
issues for which it receives Directed
Orders for 90% of the time the Exchange
is open for trading in each issue.12
The Exchange’s proposal to amend
Options 2, Section 5(c)(2)(C) to require
a Directed Market Maker to commence
complying with the Options 2, Section
5(c)(2)(C) quoting obligations when the
Directed Market Maker executes its first
Directed Order in any option in which
they are assigned is a practical approach
to ensuring that Directed Market Makers
comply with their quoting obligations.
Directed Market Makers are unaware if
an order is directed to them until such
time as they execute the Directed Order
and receive an allocation pursuant to
Options 3, Section 10. Further, the
Exchange notes that a Directed Market
Maker must be quoting at the
Exchange’s best price 13 at the time of
receipt of the Directed Order to be
entitled to the allocation in accordance
with Options 3, Section 10.
Options 2, Section 10
The Exchange’s proposal to amend
Options 2, Section 10, Directed Orders,
to replace the words ‘‘Exchange’s best
price’’ with ‘‘better of the internal PBBO
or the NBBO’’ is consistent with the Act.
The proposed amendment will conform
the rule text with language throughout
the Options 3 trading rules that describe
the Exchange’s best price with
references to the internal PBBO and
NBBO. Additionally, the Exchange’s
amendment will protect investors and
the general public by adding clarity to
current rule text as well as harmonizing
the rule text with Options 3 language.
Options 3, Section 15
The Exchange’s proposal to remove
rule text within Options 3, Section
15(b)(1)(A), related to the Acceptable
Trade Range, is consistent with the Act
as SR–Phlx–2023–34 amended All-orNone Orders such that they may only be
submitted by a Public Customer as an
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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12 See
13 See
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supra note 5.
supra note 7.
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61553
Immediate-or-Cancel Order. An All-OrNone Order will either execute
immediately or be cancelled back to the
member or member organization. The
Exchange inadvertently did not remove
the aforementioned rule text which
would require an All-or-None Order to
rest to be applicable. This change will
remove the incorrect rule text and bring
greater clarity to the rules.
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.
Options 2, Section 5
The Exchange’s proposal to amend
the Directed Market Maker quoting
obligations in Options 2, Section
5(c)(2)(C) does not impose an undue
burden on competition as every
Directed Market Maker would be
required, collectively, to provide twosided quotations in 90% of the
cumulative number of seconds or such
higher percentage as Phlx may
announce in advance, among all options
series in which the Directed Market
Maker has executed a Directed Order for
the entire day in which the Directed
Market Maker received the Directed
Order, on a daily basis, until a Directed
Market Maker notifies the Exchange that
it is no longer directed. The proposal
does not impose a burden on intermarket competition as other options
markets today impose similar quoting
obligations.
The Exchange’s proposal to amend
Options 2, Section 5(c)(2)(C) to require
a Directed Market Maker to commence
complying with the Options 2, Section
5(c)(2)(C) quoting obligations when the
Directed Market Maker executes its first
Directed Order in any option in which
they are assigned does not impose an
undue burden on competition because
all Directed Market Makers will be
required to commence complying with
Options 2, Section 5(c)(2)(C) when the
Directed Market Maker executes its first
Directed Order in any option in which
they are assigned. The proposal does not
impose a burden on inter-market
competition as other options markets
today impose similar quoting
obligations and may amend their rules
to mirror those of Phlx.
Options 2, Section 10
The Exchange’s proposal to amend
Options 2, Section 10, Directed Orders,
to replace the words ‘‘Exchange’s best
price’’ with ‘‘better of the internal PBBO
or the NBBO’’ does not impose an
E:\FR\FM\31JYN1.SGM
31JYN1
61554
Federal Register / Vol. 89, No. 147 / Wednesday, July 31, 2024 / Notices
undue burden on competition because
the amendment more specifically
describes the Exchange’s best price with
references to the internal PBBO and
NBBO. The Exchange’s amendment will
add clarity to current rule text.
Options 3, Section 15
The Exchange’s proposal to remove
rule text within Options 3, Section
15(b)(1)(A), related to the Acceptable
Trade Range, does not impose an undue
burden on competition as All-or-None
Orders may only be submitted by a
Public Customer as an Immediate-orCancel Order. An All-Or-None Order
will either execute immediately or be
cancelled back to the member or
member organization. Removing the
incorrect rule text will bring greater
clarity to the rules.
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 14 and
subparagraph (f)(6) of Rule 19b–4
thereunder.15
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.
lotter on DSK11XQN23PROD with NOTICES1
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
14 15
U.S.C. 78s(b)(3)(A)(iii).
15 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.
VerDate Sep<11>2014
17:29 Jul 30, 2024
Jkt 262001
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:
SECURITIES AND EXCHANGE
COMMISSION
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–2024–26 on the subject line.
Self-Regulatory Organizations; MIAX
Sapphire, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Establish Proprietary
Market Data Products
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–2024–26. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–Phlx–2024–26 and should be
submitted on or before August 21, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–16805 Filed 7–30–24; 8:45 am]
[Release No. 34–100588; File No. SR–
SAPPHIRE–2024–01]
July 25, 2024.
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 July 19,
2024, MIAX Sapphire, LLC (‘‘MIAX
Sapphire’’ 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to establish
proprietary market data products. The
text of the proposed rule change is
available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/miax-sapphire/rule-filings, at
the Exchange’s principal office, 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 establish
the MIAX Sapphire Top of Market
(‘‘ToM’’) data feed, MIAX Sapphire
Complex Top of Market (‘‘cToM’’) data
BILLING CODE 8011–01–P
PO 00000
1 15
16 17
CFR 200.30–3(a)(12).
Frm 00158
Fmt 4703
Sfmt 4703
2 17
E:\FR\FM\31JYN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
31JYN1
]]>Agencies
[Federal Register Volume 89, Number 147 (Wednesday, July 31, 2024)]
[Notices]
[Pages 61550-61554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16805]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100599; File No. SR-Phlx-2024-26]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 2,
Sections 5 and 10 and Options 3, Section 15
July 25, 2024.
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 July 16, 2024, 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 amend Options 2, Sections 5 and 10 and
Options 3, Section 15.
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
Phlx proposes to amend: (1) Directed Market Maker quoting
obligations in Options 2, Section 5, Electronic Market Maker
Obligations and Quoting Requirements; (2) a reference to ``Exchange's
best price'' in Options 2, Section 10, Directed Orders; and (3) rule
text related to the Acceptable Trade Range in Options 3, Section 15,
Simple Order Risk Protections. Each change will be discussed below.
Options 2, Section 5
The Exchange proposes to amend the rule text within Options 2,
Section 5(c)(2)(C) related to the quoting obligations applicable to a
Directed Market Maker.
The current rule text states that Directed SQTs and Directed RSQTs,
associated with the same member organization, are collectively required
to provide two-sided quotations in 90% of the cumulative number of
seconds, or such higher percentage as Phlx may announce in advance, for
which that member organization's assigned options series are open for
trading. With respect to a Directed Market Maker, Phlx currently
requires that the Directed Market Maker provide two-sided quotations in
90% of the cumulative number of seconds, or such higher percentage as
Phlx may announce in advance, in any options series in which the
Directed Market Maker has executed a Directed Order on a daily basis.
Phlx requires the Market Maker to fulfill this requirement in addition
to its
[[Page 61551]]
requirement to quote as a Market Maker or a Lead Market Maker.
Below the Exchange presents examples of how the new rule text would
operate.
Example 1
[ssquf] Assume a Market Maker was assigned in options overlying
AAPL, SPY, NFLX, ORCL and ADBE.
[ssquf] Assume this Market Maker had previously executed a Directed
Order and executes a Directed Order in NFLX and ADBE on February 27,
2024.
[ssquf] The Directed Market Maker obligation is a daily obligation
once triggered and continues until the Directed Market Maker notifies
the Exchange that it no longer desires to be a part of the Directed
Order program.
[ssquf] Moreover, on February 28, 2024 and each day thereafter the
Directed Market Maker is required to provide two-sided quotations in
90% of the cumulative number of seconds among all options series in
which the Directed Market Maker has executed a Directed Order on a
daily basis until a Directed Market Maker notifies the Exchange that it
is no longer directed. Therefore, the Directed Market Maker would be
required to quote at 90% of the cumulative number of seconds among all
options series in which the Directed Market Maker has executed a
Directed Order each day, regardless of whether the Directed Market
Maker executed a Directed Order that day.
Obligations
This Market Maker is required to provide two-sided quotations in
60% of the cumulative number of seconds, or such higher percentage as
Phlx may announce in advance, for which that member's assigned options
series are open for trading among AAPL, SPY, and ORCL to fulfill its
Market Maker obligation.
Separately, this Market Maker would be obligated, separate and
apart from its Market Maker obligations described in this example, to
provide two-sided quotations in 90% of the cumulative number of
seconds, or such higher percentage as Phlx may announce in advance,
among NFLX and ADBE to fulfill its Directed Market Maker Obligation.
This Market Maker would not be required to make two-sided markets
in any Quarterly Option Series, any Adjusted Option Series, and any
option series with an expiration of nine months or greater for options
on equities and ETFs or with an expiration of twelve months or greater
for index options in AAPL, SPY, NFLX, ORCL and ADBE when meeting its
Market Maker or Directed Market Maker requirements.
Example 2
[ssquf] Assume a Lead Market Maker was assigned in options
overlying AAPL, SPY, NFLX, ORCL and ADBE.
[ssquf] Assume this Lead Market Maker had previously executed a
Directed Order and executes a Directed Order in NFLX and ADBE on
February 27, 2024. The Directed Market Maker obligation is a daily
obligation once triggered and continues until the Directed Market Maker
notifies the Exchange that it no longer desires to be a part of the
Directed Order program.
[ssquf] The Directed Market Maker obligation is a daily obligation
once triggered and continues until the Directed Market Maker notifies
the Exchange that it no longer desires to be a part of the Directed
Order program.
[ssquf] Moreover, on February 28, 2024 and each day thereafter the
Directed Market Maker is required to provide two-sided quotations in
90% of the cumulative number of seconds among all options series in
which the Directed Market Maker has executed a Directed Order on a
daily basis until a Directed Market Maker notifies the Exchange that it
is no longer directed. Therefore, the Directed Market Maker would be
required to quote at 90% of the cumulative number of seconds among all
options series in which the Directed Market Maker has executed a
Directed Order each day, regardless of whether the Directed Market
Maker executed a Directed Order that day.
Obligations
This Lead Market Maker, associated with the same member, is
collectively required to provide two-sided quotations in 90% of the
cumulative number of seconds, or such higher percentage as Phlx may
announce in advance, among AAPL, SPY, and ORCL to fulfill its Lead
Market Maker obligation.\3\
---------------------------------------------------------------------------
\3\ See Options 2, Section 4(j)(1).
---------------------------------------------------------------------------
Separately, this Lead Market Maker would be obligated, separate and
apart from its Lead Market Maker obligations described in this example,
to provide two-sided quotations in 90% of the cumulative number of
seconds, or such higher percentage as Phlx may announce in advance,
among NFLX and ADBE to fulfill its Directed Market Maker obligation.
This Market Maker would not be required to make two-sided markets
in any Quarterly Option Series, any Adjusted Option Series, and any
option series with an expiration of nine months or greater for options
on equities and ETFs or with an expiration of twelve months or greater
for index options in AAPL, SPY, NFLX, ORCL and ADBE when meeting its
Lead Market Maker or Directed Market Maker requirements.
The Exchange proposes to amend the rule text in Options 2, Section
5(c)(2)(C) to require Directed Lead Market Makers, Directed SQTs and
Directed RSQTs (collectively ``Directed Market Makers''),\4\ associated
with the same member organization, collectively, to provide two-sided
quotations in 90% of the cumulative number of seconds, or such higher
percentage as Phlx may announce in advance, among all option series in
which the Directed Market Maker has executed a Directed Order on a
daily basis, except that a Directed Market Maker shall not be required
to make two-sided markets in any Quarterly Option Series, any Adjusted
Option Series, and any option series with an expiration of nine months
or greater for options on equities and exchange-traded funds (``ETFs'')
or with an expiration of twelve months or greater for index options.
The Exchange notes that the proposed requirements are similar to
requirements imposed by other options exchanges. NYSE Arca, Inc.
(``NYSE Arca'') and NYSE American LLC (``NYSE American'') require that
their lead market makers and market makers provide continuous two-sided
quotations throughout the trading day in issues for which it receives
Directed Orders for 90% of the time the Exchange is open for trading in
each issue.\5\
---------------------------------------------------------------------------
\4\ The Exchange will utilize the term ``Directed Market
Makers'' throughout to refer to Directed Lead Market Makers,
Directed SQTs and Directed RSQTs. The Exchange will also utilize the
term ``Market Maker'' in this 19b4 to refer to a Lead Market Maker,
SQT and an RSQT. See Options 7, Section 1(b)(28), ``A `Market Maker'
means a Streaming Quote Trader or a Remote Streaming Quote Trader
who enters quotations for his own account electronically into the
System.'' Further, see Options 7, Section 1(b)(27), ``A `Lead Market
Maker' means a member who is registered as an options Lead Market
Maker pursuant to Options 2, Section 12(a). A Lead Market Maker
includes a Remote Lead Market Maker which is defined as a Lead
Market Maker in one or more classes that does not have a physical
presence on the Exchange's Trading Floor and is approved by the
Exchange pursuant to Options 2, Section 11.''
\5\ See NYSE Arca Rule 6.88-O and NYSE American Rule 964.1NY.
NYSE Arca Rule 6.88-O(iv) states that these obligations will apply
collectively to all series in all of the issues for which the
Directed Order Market Maker receives Directed Orders, rather than on
an issue-by-issue basis.
---------------------------------------------------------------------------
The Exchange also proposes to relocate certain rule text within
Options 2, Section 5(c)(2)(C) to make clear the requirements applicable
to a Directed Market Maker and make other amendments as well. The
Exchange
[[Page 61552]]
proposes to amend the timeframe in which a Directed Market Maker is
obligated to commence complying with the quoting obligations of Options
2, Section 5(c)(2)(C).\6\ Today, a Directed Market Maker must commence
complying with the quoting obligations specified in Options 2, Section
5(c)(2)(C) when a Directed Market Maker receives a Directed Order in
any option in which they are assigned until such time as the Directed
Market Maker notifies the Exchange that they are no longer directed.
Pursuant to Options 2, Section 10(a)(ii), ``[w]hen the Exchange's
disseminated price is the NBBO at the time of receipt of the Directed
Order, and the Directed Lead Market Maker, SQT or RSQT is quoting at
the Exchange's best price, the Directed Order shall be automatically
executed and allocated in accordance with Options 3, Section
10(a)(1).'' The Exchange proposes to amend Options 2, Section
5(c)(2)(C) to instead begin requiring a Directed Market Maker to comply
with the Directed Market Maker quoting obligations in Options 2,
Section 5(c)(2)(C) when the Directed Market Maker executes its first
Directed Order in any option in which they are assigned. A Directed
Market Maker has the ongoing quoting obligation from the time a
Directed Market Maker executes its first Directed Order in the options
in which the Directed Market Maker is assigned until a Directed Market
Maker notifies the Exchange that the Directed Market Maker is no longer
directed. Because Directed Market Makers are unaware if an order is
directed to them until such time as they execute the Directed Order and
receive an allocation pursuant to Options 3, Section 10, the Exchange
believes that starting the quoting obligation once a Directed Order is
executed is a practical approach to ensuring that Directed Market
Makers comply with their quoting obligations.
---------------------------------------------------------------------------
\6\ Options 2, Section 5(c)(2)(C) provides that a member
organization shall be considered directed in all assigned options
once the member organization receives a Directed Order in any option
in which they are assigned and shall be considered a Directed SQT or
Directed RSQT until such time as the member organization notifies
the Exchange that they are no longer directed.
---------------------------------------------------------------------------
The proposed rule text would provide,
Directed Lead Market Makers, Directed SQTs and Directed RSQTs
(``Directed Market Makers''), associated with the same member
organization, are collectively required to provide two-sided
quotations in 90% of the cumulative number of seconds, or such
higher percentage as Phlx may announce in advance, among all options
series in which the Directed Market Maker has executed a Directed
Order on a daily basis, except that a Directed Market Maker shall
not be required to make two-sided markets in any Quarterly Options
Series, any Adjusted Options Series, and any options series with an
expiration of nine months or greater for options on equities and
ETFs or with an expiration of twelve months or greater for index
options. A Directed Market Maker has the ongoing quoting obligation
from the time a Directed Market Maker executes its first Directed
Order in the options in which the Directed Market Maker is assigned
until a Directed Market Maker notifies the Exchange that the
Directed Market Maker is no longer directed.
A Directed Market Maker shall not be required to make two-sided
markets in any Quarterly Options Series, any Adjusted Options
Series, and any options series with an expiration of nine months or
greater for options on equities and ETFs or with an expiration of
twelve months or greater for index options and would receive a
participation entitlement in the Quarterly Options Series, the
Adjusted Options Series, and an options series with an expiration of
nine months or greater for options on equities and ETFs or with an
expiration of twelve months or greater for index options for the
Directed Order, only if it complies with the heightened 90% quoting
requirement.
As is the case today, a Directed Market Maker must be quoting at
the Exchange's best price \7\ at the time of receipt of the Directed
Order to be entitled to the allocation in accordance with Options 3,
Section 10. The Exchange notes that the amendment adds clarity to the
Exchange's current practice \8\ and harmonizes the rules of Phlx with
those of other Nasdaq affiliated markets.
---------------------------------------------------------------------------
\7\ As part of this proposed rule change the Exchange is
amending Options 2, Section 10(a)(ii) to replace the words
``Exchange's best price'' with ``better of the internal PBBO or the
NBBO.'' The ``internal PBBO'' is comprised of non-displayed and
displayed orders on the Exchange's order book.
\8\ Phlx noted in a 2018 rule change that if a member desired to
become a Directed SQT that the quoting obligations specified in Rule
1081(c)(ii)(C) (now Options 2, Section 5) would commence when that
Directed SQT executed an order directed to the Directed SQT. See
Securities Exchange Act Release No. 82975 (March 30, 2018), 83 FR
14690, 14694 (April 5, 2018) (SR-Phlx-2018-22) (Notice of Filing of
Proposed Rule Change To Create a New Rule 1081, To Amend Electronic
Market Maker Obligations and Quoting Requirements for Electronic
ROTs, Which Will Be Defined To Include SQTs, RSQTs, Directed SQTs,
Directed RSQTs, Specialists, and Remote Specialists).
---------------------------------------------------------------------------
Options 2, Section 10
The Exchange proposes to amend Options 2, Section 10, Directed
Orders. Specifically, Options 2, Section 10(a)(ii) provides, ``When the
Exchange's disseminated price is the NBBO at the time of receipt of the
Directed Order, and the Directed Lead Market Maker, SQT or RSQT is
quoting at the Exchange's best price, the Directed Order shall be
automatically executed and allocated in accordance with Options 3,
Section 10(a)(1).'' The Exchange proposes to amend this sentence to
replace the words ``Exchange's best price'' with ``better of the
internal PBBO or the NBBO.'' The Exchange proposes this amendment to
conform the rule text with language throughout the Options 3 trading
rules that describe the Exchange's best price with references to the
internal PBBO and NBBO. Pursuant to Options 3, Section 5, the System
automatically executes eligible orders using the Exchange's displayed
best bid and offer (``PBBO'') or the Exchange's non-displayed order
book (``internal PBBO'') if there are non-displayed orders on the order
book or the best bid and/or offer on the Exchange has been repriced
pursuant to Options 3, Section 5(d) or Options 3, Section 4(b)(6) which
describes trade-through compliance and locked and crossed markets. The
Exchange also proposes to amend the citation to ``Options 3, Section
10(a)(1)'' to the more precise citation ``Options 3, Section
10(a)(1)(C)'' which describes the Directed Market Maker Priority
allocation. The Exchange's amendment will bring additional clarity to
current rule text and harmonize the rule text with Options 3 language.
Options 3, Section 15
Today, Options 3, Section 15(b)(1)(A) provides that, ``Upon receipt
of a new order/quote, the Reference Price is the better of the National
Best Bid (``NBB'') or internal best bid for sell orders/quotes and the
National Best Offer (``NBO'') or internal best offer for buy orders/
quotes, excluding All-or-None Orders which cannot be satisfied, or the
last price at which the order/quote is posted whichever is higher for a
buy order/quote or lower for a sell order/quote.'' The Exchange
proposes to remove the phrase ``excluding All-or-None Orders which
cannot be satisfied'' from the rule text. The Exchange previously filed
a rule change \9\ to amend All-or-None Orders so that they may only be
submitted by a Public Customer as an Immediate-or-Cancel Order. As a
result of this rule change, All-or-None Orders no longer rest on the
order book. Upon entry, an All-or-None Order is executed in its
entirety or cancelled if it cannot execute. The Exchange inadvertently
did not remove the aforementioned rule text which would require an All-
or-None Order to
[[Page 61553]]
rest to be applicable. At this time, the Exchange proposes to also
remove this rule text reference to All-or-None Orders in Options 3,
Section 15(b)(1)(A), similar to the other rule text rule references
that were removed in SR-Phlx-2023-34.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 98142 (August 16,
2023), 88 FR 57140 (August 22, 2023) (SR-Phlx-2023-34) (Nasdaq PHLX
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Phlx's All-or-None Order) (``SR-Phlx-2023-34'').
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Options 2, Section 5
The Exchange's proposal to amend the Directed Market Maker quoting
obligations in Options 2, Section 5(c)(2)(C) is consistent with the
Act. Other options exchanges today require Directed Market Makers,
collectively, to provide two-sided quotations in 90% of the cumulative
number of seconds among all options series in which the Directed Market
Maker has received a Directed Order on a daily basis. The proposed
Directed Market Maker quoting obligations would require Directed Market
Makers, collectively, to provide two-sided quotations in 90% of the
cumulative number of seconds or such higher percentage as Phlx may
announce in advance, among all options series in which the Directed
Market Maker has executed a Directed Order on a daily basis in addition
to their quoting requirements as Market Makers and Lead Market Makers.
The Exchange believes that these quoting requirements create a
direct nexus between the allocation that would be received by a
Directed Market Maker pursuant to Options 3, Section 10 and the
liquidity that the Directed Market Maker would be required to provide
to the market in that particular options series. The Exchange notes
that any Directed Market Maker quoting at the NBBO would need to
provide two-sided quotations in 90% of the cumulative number of seconds
among all options series in which the Directed Market Maker has
executed a Directed Order for the entire day in which the Directed
Market Maker received the Directed Order and each day thereafter, on a
daily basis, until a Directed Market Maker notifies the Exchange that
it is no longer directed. The Exchange believes that this quoting
obligation is designed to promote just and equitable principles of
trade by ensuring that Directed Market Makers quote competitively in as
many series as possible to attract Directed Orders so that they may
receive an enhanced allocation as a Directed Market Maker.
The proposed rule text would harmonize the Directed Market Maker's
quoting obligations with other options exchanges, such as NYSE Arca and
NYSE American which require that their lead market makers and market
makers provide continuous two-sided quotations throughout the trading
day in issues for which it receives Directed Orders for 90% of the time
the Exchange is open for trading in each issue.\12\
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\12\ See supra note 5.
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The Exchange's proposal to amend Options 2, Section 5(c)(2)(C) to
require a Directed Market Maker to commence complying with the Options
2, Section 5(c)(2)(C) quoting obligations when the Directed Market
Maker executes its first Directed Order in any option in which they are
assigned is a practical approach to ensuring that Directed Market
Makers comply with their quoting obligations. Directed Market Makers
are unaware if an order is directed to them until such time as they
execute the Directed Order and receive an allocation pursuant to
Options 3, Section 10. Further, the Exchange notes that a Directed
Market Maker must be quoting at the Exchange's best price \13\ at the
time of receipt of the Directed Order to be entitled to the allocation
in accordance with Options 3, Section 10.
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\13\ See supra note 7.
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Options 2, Section 10
The Exchange's proposal to amend Options 2, Section 10, Directed
Orders, to replace the words ``Exchange's best price'' with ``better of
the internal PBBO or the NBBO'' is consistent with the Act. The
proposed amendment will conform the rule text with language throughout
the Options 3 trading rules that describe the Exchange's best price
with references to the internal PBBO and NBBO. Additionally, the
Exchange's amendment will protect investors and the general public by
adding clarity to current rule text as well as harmonizing the rule
text with Options 3 language.
Options 3, Section 15
The Exchange's proposal to remove rule text within Options 3,
Section 15(b)(1)(A), related to the Acceptable Trade Range, is
consistent with the Act as SR-Phlx-2023-34 amended All-or-None Orders
such that they may only be submitted by a Public Customer as an
Immediate-or-Cancel Order. An All-Or-None Order will either execute
immediately or be cancelled back to the member or member organization.
The Exchange inadvertently did not remove the aforementioned rule text
which would require an All-or-None Order to rest to be applicable. This
change will remove the incorrect rule text and bring greater clarity to
the rules.
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.
Options 2, Section 5
The Exchange's proposal to amend the Directed Market Maker quoting
obligations in Options 2, Section 5(c)(2)(C) does not impose an undue
burden on competition as every Directed Market Maker would be required,
collectively, to provide two-sided quotations in 90% of the cumulative
number of seconds or such higher percentage as Phlx may announce in
advance, among all options series in which the Directed Market Maker
has executed a Directed Order for the entire day in which the Directed
Market Maker received the Directed Order, on a daily basis, until a
Directed Market Maker notifies the Exchange that it is no longer
directed. The proposal does not impose a burden on inter-market
competition as other options markets today impose similar quoting
obligations.
The Exchange's proposal to amend Options 2, Section 5(c)(2)(C) to
require a Directed Market Maker to commence complying with the Options
2, Section 5(c)(2)(C) quoting obligations when the Directed Market
Maker executes its first Directed Order in any option in which they are
assigned does not impose an undue burden on competition because all
Directed Market Makers will be required to commence complying with
Options 2, Section 5(c)(2)(C) when the Directed Market Maker executes
its first Directed Order in any option in which they are assigned. The
proposal does not impose a burden on inter-market competition as other
options markets today impose similar quoting obligations and may amend
their rules to mirror those of Phlx.
Options 2, Section 10
The Exchange's proposal to amend Options 2, Section 10, Directed
Orders, to replace the words ``Exchange's best price'' with ``better of
the internal PBBO or the NBBO'' does not impose an
[[Page 61554]]
undue burden on competition because the amendment more specifically
describes the Exchange's best price with references to the internal
PBBO and NBBO. The Exchange's amendment will add clarity to current
rule text.
Options 3, Section 15
The Exchange's proposal to remove rule text within Options 3,
Section 15(b)(1)(A), related to the Acceptable Trade Range, does not
impose an undue burden on competition as All-or-None Orders may only be
submitted by a Public Customer as an Immediate-or-Cancel Order. An All-
Or-None Order will either execute immediately or be cancelled back to
the member or member organization. Removing the incorrect rule text
will bring greater clarity to the rules.
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 \14\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 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:
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-2024-26 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-2024-26. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-Phlx-2024-26 and should be
submitted on or before August 21, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-16805 Filed 7-30-24; 8:45 am]
BILLING CODE 8011-01-P
