[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)]
[Notices]
[Pages 40197-40199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17906]
[[Page 40197]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81433; File No. SR-Phlx-2017-69]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Related to Quoting
at the Opening
August 18, 2017.
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 August 16, 2017, 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\ 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 Phlx Rule 1017, entitled ``Openings
in Options.''
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqphlx.cchwallstreet.com/ 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 this rule change is to amend Phlx Rule 1017,
entitled ``Openings in Options'' to specifically amend opening
obligations for Specialists.\3\ The Exchange notes that the proposed
rule change is similar to a Nasdaq MRX, LLC (``MRX'') rule.\4\
---------------------------------------------------------------------------
\3\ The term ``Specialist'' applies to transactions for the
account of a Specialist (as defined in Exchange Rule 1020(a)).
\4\ See MRX Rule 701.
---------------------------------------------------------------------------
Today, Phlx Rule 1017(d)(iii) states that the Specialist assigned
in a particular equity option must enter a Valid Width Quote not later
than one minute following the dissemination of a quote or trade by the
market for the underlying security or, in the case of index options,
following the receipt of the opening price in the underlying index. The
Specialist assigned in a particular U.S. dollar-settled FCO must enter
a Valid Width Quote not later than 30 seconds after the announced
market opening.
First, the Exchange proposes to add the words ``or index'' to
further clarify that the requirement applies to equities and index
options. The Exchange proposes this addition to further clarify the
requirement in Rule 1017(d)(iii) clearly applies to equity and index
options.
Second, the Exchange proposes to modify the Specialist's current
obligation to enter Valid Width Quotes not later than one minute
following the dissemination of a quote or trade by the market for the
underlying security or, in the case of index options, following the
receipt of the opening price in the underlying index for all assigned
options, or in the case of a U.S. dollar-settled FCO after the
announced market opening. The Exchange believes that the current
requirement is very burdensome and instead proposes to add ``in 90% of
their assigned series'' to require a Specialist to enter a Valid Width
Quote not later than one minute following the dissemination of a quote
or trade by the market for the underlying security or, in the case of
index options, following the receipt of the opening price in 90% of
their assigned series, or in the case of U.S. dollar-settled FCOs in
90% of their assigned series not later than 30 seconds after the
announced market opening.
Further, the Exchange proposes to require Specialists to promptly
enter a Valid Width Quote in the remainder of their assigned series,
which did not open within one minute following the dissemination of a
quote or trade by the market for the underlying security or, in the
case of index options, following the receipt of the opening price in
the underlying index or, with respect to a U.S. dollar-settled FCO,
following the announced market opening. The Exchange's proposal is
intended to account for market conditions which may prevent a
Specialist from opening all assigned series, for example an extremely
volatile market which may impact the Specialist's ability to enter
aggressive quotes. Another example would be that news pertaining to a
specific security is causing the underlying price to fluctuate rapidly
and significantly, thereby causing the Specialist to await the
underlying equity price to settle before entering a Valid Width Quote.
The Exchange's surveillance staff would monitor to ensure that
Specialists are complying with these requirements during the Opening
Process.
Today, the Opening Process for an options series will be conducted
on or after 9:30 a.m. if the system has received, within two minutes
(or such shorter time as determined by the Exchange and disseminated to
membership on the Exchange's Web site) of the opening trade or quote on
the market for the underlying security in the case of equity options
or, in the case of index options, within two minutes of the receipt of
the opening price in the underlying index (or such shorter time as
determined by the Exchange and disseminated to membership on the
Exchange's Web site), or within two minutes of market opening for the
underlying currency in the case of a U.S. dollar-settled FCO (or such
shorter time as determined by the Exchange and disseminated to
membership on the Exchange's Web site) the Specialist's Valid Width
Quote, the Valid Width Quotes of two Phlx Electronic Market Makers
other than the Specialist or if neither the Specialist or two Phlx
Electronic Market Makers have submitted Valid Width Quotes, within the
specified timeframe then one Phlx Electronic Market Maker's Valid Width
Quote.\5\
---------------------------------------------------------------------------
\5\ See Rule 1017(d)(i)(A)-(C).
---------------------------------------------------------------------------
The Exchange is also proposing to amend existing rule text in Phlx
Rule 1017(d)(iii) to lowercase a reference to the ``Opening Price'' as
that reference refers to the underlying security's opening price, not
the defined Opening Price in Rule 1017(a)(iii).
Implementation
The Exchange proposes to implement this rule change on September
29, 2017.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\7\
[[Page 40198]]
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 for the reasons stated
below.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange's first proposal at Rule 701(c)(3) to clarify that the
requirement applies to equities and index options will make clear the
applicability of the Specialist's requirement to enter Valid Width
Quotes. This proposed amendment is non-substantive and is intended to
add clarity to the rules.
The second proposal to amend a Specialist's requirement to enter
Valid Width Quotes during the Opening Process is consistent with the
Act because the 90% requirement to provide a Valid Width Quote in a
series to which the Specialist is assigned will continue to ensure that
options series are opened in a timely manner, while not imposing a
burdensome requirement on market participants. Specialists would be
required to promptly enter a Valid Width Quote in the remainder of
their assigned series, which did not open within one minute of the
dissemination of a quote or trade by the market for the underlying
security or in the case of index options, following the receipt of the
opening price or, with respect to U.S. dollar-settled FCOs, following
the announced market opening. The Exchange would monitor Specialists to
ensure that they promptly provided a Valid Width Quote for the
remainder of the series within a reasonable amount of time. The
Exchange notes that market conditions could cause a Specialist to
experience circumstances where opening 100% of all of their assigned
series within one minute of the dissemination of a quote or trade by
the market for the underlying security or, in the case of index
options, following the receipt of the opening price in the underlying
index or, with respect to U.S. dollar-settled FCOs, following the
announced market opening, is not feasible.
The Exchange believes that the proposed 90% Valid Width Quoting
obligation, not later than one minute following the dissemination of a
quote or trade by the market for the underlying security or, in the
case of index options, following the receipt of the opening price in
the underlying index or, with respect to U.S. dollar-settled FCOs,
following the announced market opening, along with the ``prompt''
standard for the remaining 10% of their assigned series will ensure all
series are opened in a timely manner. The Exchange's proposal accounts
for market conditions which may prevent a Specialist from opening all
assigned series, for example an extremely volatile market which may
impact the Specialist's ability to enter aggressive quotes. Another
example would be that news pertaining to a specific security is causing
the underlying price to fluctuate rapidly and significantly, thereby
causing the Specialist to await the underlying equity price to settle
before entering a Valid Width Quote. The Exchange believes that the
time frame for Specialists to provide a Valid Width Quote in 90% of
their assigned series not later than one minute following the
dissemination of a quote or trade by the market for the underlying
security or, in the case of index options, following the receipt of the
opening price in the underlying index or, with respect to U.S. dollar-
settled FCOs, following the announced market opening, will ensure
liquidity on Phlx during the Opening Process.
The Exchange desires to encourage Specialists to continue to make
markets on Phlx at the Opening. The Exchange believes that requiring
Specialists to provide a Valid Width Quote in 90% of their assigned
options not later than one minute following the dissemination of a
quote or trade by the market for the underlying security or, in the
case of index options, following the receipt of the opening price in
the underlying index or, with respect to U.S. dollar-settled FCOs,
following the announced market opening along with the ``prompt''
standard for the remaining 10% will enhance the market making functions
for Specialists and serve to maintain a fair and orderly market thereby
promoting the protection of investors and the public interest.
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 proposal does not change
the intense competition that exists among the options markets for
options business including on the opening. Nor does the Exchange
believe that the proposal will impose any burden on intra-market
competition; the Opening Process involves many types of participants
and interest.
The Exchange's proposal to require a Specialist to enter a Valid
Width Quote in 90% of their assigned series not later than one minute
time following the dissemination of a quote or trade by the market for
the underlying security or, in the case of index options, following the
receipt of the opening price in the underlying index or, with respect
to U.S. dollar-settled FCOs, following the announced market opening and
promptly enter a Valid Width quote for the remaining 10% their assigned
series does not create an undue burden on competition. The proposal
will continue to ensure that options series are opened in a timely
manner, while not imposing a burdensome requirement on market
participants. Specialists would be required to promptly enter a Valid
Width Quote in the remainder of their assigned series which were not
open within one minute following the dissemination of a quote or trade
by the market for the underlying security or, in the case of index
options, following the receipt of the opening price in the underlying
index or, with respect to U.S. dollar-settled FCOs, following the
announced market opening. The Exchange would monitor Specialists to
ensure that they promptly entered a Valid Width Quote for the remainder
of their assigned series within a reasonable amount of time. The
Exchange notes that market conditions could cause a Specialist to
experience circumstances where entering a Valid Width Quote for 100% of
all of their assigned series within one minute following the
dissemination of a quote or trade by the market for the underlying
security or, in the case of index options, following the receipt of the
opening price in the underlying index or with respect to U.S. dollar-
settled FCOs within one minute after the announced market opening, is
not feasible. The Exchange believes that the proposed 90% obligation to
enter a Valid Width Quote not later than one minute following the
dissemination of a quote or trade by the market for the underlying
security or, in the case of index options, following the receipt of the
opening price in the underlying index or, with respect to U.S. dollar-
settled FCOs, following the announced market opening for the underlying
security along with the ``prompt'' standard for the remaining series
will ensure all series are opened in a timely manner.
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
[[Page 40199]]
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 \8\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 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, along
with a brief description and text of 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.
---------------------------------------------------------------------------
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:
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-2017-69 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-2017-69. 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 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 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; 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-2017-69 and should be
submitted on or before September 14, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17906 Filed 8-23-17; 8:45 am]
BILLING CODE 8011-01-P