[Federal Register Volume 82, Number 243 (Wednesday, December 20, 2017)]
[Notices]
[Pages 60458-60460]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27343]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82322; File No. SR-Phlx-2017-101]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to 
Specialist Obligations

December 14, 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 November 29, 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.
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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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 1017, entitled ``Openings in 
Options,'' to specify the obligations of a Specialist when entering 
Valid Width Quotes \3\ during the Opening Process.
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    \3\ A Valid Width Quote is a two-sided electronic quotation 
submitted by a Phlx Electronic Market Maker that consists of a bid/
ask differential that is compliant with Rule 1014(c)(i)(A)(1)(a). 
See Rule 1017(a)(ix).
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqphlx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange is proposing to amend Rule 1017, Openings in Options, 
to amend the obligations of a Specialist when entering Valid Width 
Quotes during the Opening Process. In addition, the Exchange proposes 
to make clear the obligations of a Specialist and a Phlx Electronic 
Market Maker once an options series has opened.
    Currently, Rule 1017(d)(i) provides, the Opening Process for an 
option series will be conducted pursuant to paragraphs (f)-(k) of Phlx 
Rule 1017 below on or after 9:30 a.m. if: The ABBO, if any, is not 
crossed; and the system has received, within two minutes (or such 
shorter time as determined by the Exchange and disseminated to 
membership on the Exchange's website) 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 website), or within two minutes of market opening for the 
underlying currency in the case of U.S. dollar-settled FCO (or such 
shorter time as determined by the Exchange and disseminated to 
membership on the Exchange's website) any of the following: (A) The 
Specialist's Valid Width Quote; (B) the Valid Width Quotes of at least 
two Phlx Electronic Market Makers other than the Specialist; or (C) if 
neither the Specialist's Valid Width Quote nor the Valid Width Quotes 
of two Phlx Electronic Market Makers have been submitted within such 
timeframe, one Phlx Electronic Market Maker has submitted a Valid Width 
Quote.
    Thereafter, Rule 1017(d)(iii) specifies that the Specialist 
assigned in a particular equity or index option must enter 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. The Specialist 
assigned in a particular U.S. dollar-settled FCO must enter a Valid 
Width Quote, in 90% of their assigned series, not later than 30 seconds 
after the announced market opening. The Specialist must 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 proposes to make clear that a Specialist has the 
obligations specified in Phlx Rule 1017(d)(iii) to promptly enter a 
Valid Width Quote in the remainder of their assigned series in cases 
where the Specialist's assigned series was not already opened by a Phlx 
Electronic Market Maker as permitted by Rule 1017(d)(i) as noted 
herein. The Specialist would continue to have the ultimate obligation 
to open each assigned series, however this rule change would not 
require the Specialist to enter a Valid Width Quote for the 10% 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 during the Opening Process if a 
Phlx Electronic Market Maker entered an order pursuant to Rule 
1017(d)(i)(B) and (C) within the timeframe specified for the Specialist 
to enter a Valid Width Quote as noted in Rule 1017(d)(iii). Also, the 
Specialist assigned in a particular U.S. dollar-settled FCO must enter 
a Valid Width Quote for 10% of their assigned series, not later than 3 
[sic] seconds after the announced market opening during the Opening 
Process if a Phlx Electronic Market Makers entered [sic] an order 
pursuant to Rule 1017(d)(i)(B) and (C)

[[Page 60459]]

within the timeframe specified for the Specialist to enter a Valid 
Width Quote as noted in Rule 1017(d)(iii).
    Today Phlx Rule 1017 requires a Specialist to open the market and 
provides an alternative mechanism to permit an alternative opening by a 
Phlx Electronic Market Maker.\4\ The proposal seeks to make clear the 
obligations of the Specialist with respect to options series that were 
open by a Phlx Electronic Market Maker as well as the quoting 
obligations of a Phlx Electronic Market Maker that opened the options 
series. The Exchange also proposes to amend Rule 1017(d)(iii) [sic] to 
state that a Phlx Electronic Market Maker that submits a quote during 
the opening in any option series pursuant to Rule 1017(d)(i)(B) and (C) 
must submit continuous, two-sided quotes in such options series 
pursuant to Rule 1014(b)(ii)(D)(1) once an option series has opened. 
Specifically, the Exchange proposes to add rule text to Rule 
1017(d)(iii) to provide that ``once an options series has opened 
pursuant to Rule 1017(d)(i)(A)-(C), a Specialist must submit 
continuous, two-sided quotes in such options series pursuant to Rule 
1014(b)(ii)(D)(2).
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    \4\ See Phlx Rule 1017(d)(i)(A)-(C).
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    Further, the Exchange proposes to add rule text to Rule 1017(d)(iv) 
to states that ``A Phlx Electronic Market Maker other than a Specialist 
that submits a quote pursuant to Rule 1017 in any option series when 
the Specialist's quote has not been submitted shall be required, once 
an options series has opened, to submit continuous, two-sided quotes in 
such option series pursuant to Rule 1014(b)(ii)(D)(1).''
    The Exchange proposes to make clear that a Specialist has an 
obligation to enter Valid Width Quotes during the Opening Process 
within the timeframes specified in Rule 1017(d)(iii). In the event that 
an options series opened pursuant to 1017(d)(i)(B) and (C), a 
Specialist would be required to submit continuous, two-sided quotes in 
such options series pursuant to Rule 1014(b)(ii)(D)(2). Also, in this 
instance, a Phlx Electronic Market would be required to submit 
continuous, two-sided quotes in such option series pursuant to Rule 
1014(b)(ii)(D)(1). The purpose of this new rule text is to make clear 
the quoting obligations for both Specialists and Phlx Electronic 
Markets during the opening and the manner in which Rule 1701, relating 
to the Opening Process, and Rule 1014, relating to market maker quoting 
obligations, interact with each other.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ 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 
amending Phlx Rule 1017(d)(iii) to further specify that a Specialist's 
obligation during the Opening Process and once an option series has 
opened as well as the obligations of a Phlx Electronic Market to the 
extent that an option series opened pursuant to 1017(d)(i)(B) or (C). 
The Exchange believes that this proposal is consistent with the Act 
because a Specialist continues to be responsible to enter Valid Width 
Quotes during the Opening Process and thereafter submit continuous, 
two-sided quotes in such options series pursuant to 1014(b)(ii)(D)(2). 
In the event that an options series opened pursuant to Rule 
1017(d)(i)(B) or (C), the Phlx Electronic Market Maker must submit 
continuous, two-sided quotes in such option series, once the options 
series has opened, pursuant to Rule 1014(b)(ii)(D)(1). The Exchange 
believes that this proposed rule change will make clear the obligations 
of the Specialist with respect to submitting Valid Width Quotes and 
thereafter, once an options series has opened, submitting continuous 
two-sided quotes, when a Phlx Electronic Market Maker may have already 
entered a quote to open an options series. The Exchange's proposal to 
add rule text to clearly specify the quoting obligations of a 
Specialist and a Phlx Electronic Market Maker during the Opening 
Process and once an option series has opened will provide greater 
clarity to the Opening Process and also to the interplay between 
quoting obligations during the Opening Process and intra-day quoting 
obligations noted within Rule 1014.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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. Once an options series has 
opened, [sic] a Specialist continues to be responsible to enter Valid 
Width Quotes during the Opening Process and thereafter submit 
continuous, two-sided quotes in such options series pursuant to 
1014(b)(ii)(D)(2). Also, if an options series opened pursuant to Rule 
1017(d)(i)(B) or (C), a Phlx Electronic Market Maker shall be required 
to submit continuous, two-sided quotes in such option series, once an 
option series has opened pursuant to 1014(b)(ii)(D)(1). This proposed 
rule text makes clear that Phlx Electronic Market Makers are required 
to submit continuous, two-sided quotes in such option series pursuant 
to 1014(b)(ii)(D)(1), in the event an options series opened pursuant to 
Rule 1017(d)(i)(B) or (C). The proposal provides greater clarity to the 
Opening Process and also to the interplay between quoting obligations 
during the Opening Process and intra-day quoting obligations noted 
within Rule 1014.

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 \7\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 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 prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. In its filing with the Commission, 
the Exchange requests that the Commission waive the 30-day operative 
delay. The Exchange represents that the proposed rule change would 
clarify the quoting obligations for both Specialists and Phlx

[[Page 60460]]

Electronic Market Makers during the Opening Process and the manner in 
which Rule 1701, relating to the Opening Process, and Rule 1014, 
relating to market maker quoting obligations, interact with each other. 
According to the Exchange, these obligations should be immediately 
clarified to prevent confusion and uncertainty for market makers 
quoting on the Exchange. For the reasons articulated by the Exchange, 
the Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission designates the proposed rule change to be 
operative upon filing.\10\
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    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2017-101 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-2017-101. 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 (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2017-101 and should be submitted on 
or before January 10, 2018.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-27343 Filed 12-19-17; 8:45 am]
 BILLING CODE 8011-01-P