[Federal Register Volume 79, Number 192 (Friday, October 3, 2014)]
[Notices]
[Pages 59874-59876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-23569]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73246; File No. SR-Phlx-2014-59]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Delay the
Implementation Period of the New Options Floor Broker Management System
Until November 3, 2014
September 29, 2014.
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 September 19, 2014, NASDAQ OMX PHLX LLC (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to extend the implementation rollout of its
new Options Floor Broker Management System.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxphlx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposal is to extend the rollout of the
Exchange's enhancements to the Options Floor Broker Management System
(``FBMS''). Today, FBMS enables Floor Brokers and/or their employees to
enter, route, and report transactions stemming from options orders
received on the Exchange. FBMS also establishes an electronic audit
trail for options orders represented by Floor Brokers on the Exchange.
Floor Brokers can use FBMS to submit orders to Phlx XL, rather than
executing the orders in the trading crowd.
With the new FBMS, all options transactions on the Exchange
involving at least one Floor Broker are required to be executed through
FBMS. In connection with order execution, the Exchange allows FBMS to
execute two-sided orders entered by Floor Brokers, including multi-leg
orders up to 15 legs, after the Floor Broker has represented the orders
in the trading crowd. FBMS also provides Floor Brokers with an enhanced
functionality called the complex calculator that calculates and
displays a suggested price of each individual component of a multi-leg
order, up to 15 legs, submitted on a net debit or credit basis.
The Exchange received approval to implement the FBMS enhancements
as of June 1, 2013,\3\ and delayed implementation until July 2013,\4\
until September 2013,\5\ until December 2013,\6\ until March 2014,\7\
and again until September 1, 2014.\8\ The Exchange made a number of
improvements intended to improve the performance of the new system.
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\3\ Securities Exchange Act Release No. 69471 (April 29, 2013),
78 FR 26096 (May 3, 2013) (SR-Phlx-2013-09).
\4\ Securities Exchange Act Release No. 69811 (June 20, 2013),
78 FR 38422 (June 26, 2013) (SR-Phlx-2013-67).
\5\ Securities Exchange Act Release No. 70141 (August 8, 2013),
78 FR 49565 (August 14, 2013) (SR-Phlx-2013-83).
\6\ Securities Exchange Act Release No. 70629 (October 8, 2013),
78 FR 62852 (October 22, 2013) (SR-Phlx-2013-100).
\7\ Securities Exchange Act Release No. 71212 (December 31,
2013), 79 FR 888 (January 7, 2014) (SR-Phlx-2013-129).
\8\ Securities Exchange Act Release No. 72135 (May 9, 2014), 79
FR 27966 (May 15, 2014) (SR-Phlx-2014-33).
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Implementation began on March 7, 2014. In its most recent filing
delaying implementation,\9\ the Exchange stated that the implementation
period would be up to September 1, 2014, during which the new FBMS
enhancements and related rules would operate along with the existing
FBMS and rules.\10\ At this time, the Exchange needs additional time to
complete the implementation because of technology issues with the new
system. The new FBMS is available to all users (Floor Brokers) and in
all options. Nevertheless, the Exchange believes that the Floor Brokers
need additional time to familiarize themselves with the new features of
FBMS, based on that ongoing experience, offer input regarding system
performance, and provide the Exchange with the opportunity to address
performance improvements. Given some technology issues that the
Exchange has encountered during the implementation period, the delay is
needed to allow Floor Brokers additional time to adapt to the new
system as the Exchange works to improve the performance of the new
system. As the performance issues are resolved, the delay will allow
the Floor Brokers to migrate their business in a prudent manner. The
delay is not as a result of major technology changes from the original
proposal and no rule changes are being made; rather, the Exchange
continues to work to, generally, make the system more user-friendly and
provide more useful interfaces for the ultimate user, the Floor Broker.
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\9\ Id.
\10\ In the original filing, the Exchange stated its intent to
implement these enhancements with a trial period of two to four
weeks. Id.
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Accordingly, the Exchange seeks an additional two month period
(until November 3, 2014) to be able to continue the implementation
rollout; the Exchange announced the specific date on which the trial
period will end and the old FBMS will no longer be available in advance
through an Options
[[Page 59875]]
Trader Alert. During the additional time period, the Exchange will
continue to encourage Floor Brokers to use the new FBMS in order to
help them become more familiar with the new features of FBMS.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \11\ in general, and furthers the objectives of Section
6(b)(5) of the Act \12\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest, by enhancing FBMS to make the Exchange's markets more
efficient, to the benefit of the investing public. Although the
Exchange needs additional time to finalize the implementation rollout,
this time period is expected to be limited, depending on user input,
and will involve advance notice to the Exchange membership.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange continues to
believe, as it stated when proposing these enhancements, that these
enhancements to FBMS should result in the Exchange's trading floor
operating in a more efficient way, which should help it compete with
other floor-based exchanges and help the Exchange's Floor Brokers
compete with floor brokers on other options exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
A written comment was received in support of the proposal.\13\ The
Exchange did not solicit comments. The Comment Letter requested the
Commission and Phlx postpone the implementation rollout of the new FBMS
from September 1, 2014 to a later date. The Comment Letter alleges that
the Floor Brokers did not have proper notice of the end of the
implementation period. Also, the Comment Letter requests that the new
FBMS be postponed to ensure the public outcry system is maintained.
Consistent with what the Comment Letter requests, the Exchange is
filing this delay of implementation to extend the implementation
rollout of its new FBMS for an additional two month period. The
Exchange has provided written notice on numerous occasions.\14\ With
respect to preserving the open outcry system, the Exchange notes that
under the new FBMS orders will continue to be represented in the
trading crowd; order exposure has not been eliminated. The Exchange is
merely modernizing how orders are executed and reported to support the
maintenance of an accurate audit trail.
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\13\ See letter from various Phlx Floor Brokers to Mary Jo
White, Chairwoman of the Securities and Exchange Commission, dated
August 28, 2014 (``Comment Letter'').
\14\ See e.g. Options Trader Alerts 2014-26 and 2014-5.
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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 \15\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing.\17\ However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest.\18\ The Exchange has requested that the Commission
waive the 30-day operative delay so that the Exchange can implement the
enhancements once they are ready from a technology perspective.
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\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ Id.
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The Commission believes that the waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest as it will clarify when the delayed implementation of the FBMS
will be effective and operative immediately. In addition, because the
proposal only delays the implementation date of the FBMS and does not
make any additional changes to the FBMS itself, it does not raise any
novel regulatory issues. The Commission notes that the implementation
period was scheduled to expire on September 1, 2014, when the existing
FMBS would cease to operate and the new FBMS would be fully
implemented. However, Phlx has indicated that it needs additional time
to continue the implementation rollout of the new FMBS. Therefore, the
Commission designates the proposal operative upon filing.\19\
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\19\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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: (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.\20\ If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule change should be approved or disapproved.\21\
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\20\ 15 U.S.C. 78s(b)(3)(C).
\21\ Id.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-Phlx-2014-59 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-2014-59. 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 Web site (http://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
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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 Web site 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 such filing also will be available for inspection
and copying at the principal offices of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2014-59, and should be
submitted on or before October 24, 2014.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23569 Filed 10-2-14; 8:45 am]
BILLING CODE 8011-01-P