[Federal Register Volume 82, Number 247 (Wednesday, December 27, 2017)]
[Notices]
[Pages 61351-61353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27831]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82370; File No. SR-Phlx-2017-104]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the Penny 
Pilot Program

December 20, 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 December 12, 2017, 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 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 Phlx Rule 1034 (Minimum 
Increments)\3\ to extend through June 30, 2018 or the date of permanent 
approval, if earlier, the Penny Pilot Program in options classes in 
certain issues (``Penny Pilot'' or ``Pilot''), and to change the date 
when delisted classes may be replaced in the Penny Pilot.
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    \3\ References herein to rules refer to rules of Phlx, unless 
otherwise noted.
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    The text of the proposed rule change is set forth below. Proposed 
new language is underlined; deleted text is in brackets.
* * * * *

Nasdaq PHLX Rules

Options Rules

* * * * *

Rule 1034. Minimum Increments

    (a) Except as provided in sub-paragraphs (i)(B) and (iii) below, 
all options on stocks, index options, and Exchange Traded Fund Shares 
quoting in decimals at $3.00 or higher shall have a minimum increment 
of $.10, and all options on stocks and index options quoting in 
decimals under $3.00 shall have a minimum increment of $.05.
    (i)(A) No Change.
    (B) For a pilot period scheduled to expire June 30, 2018[December 
31, 2017] or the date of permanent approval, if earlier (the 
``pilot''), certain options shall be quoted and traded on the Exchange 
in minimum increments of $0.01 for all series in such options with a 
price of less than $3.00, and in minimum increments of $0.05 for all 
series in such options with a price of $3.00 or higher, except that 
options overlying the PowerShares QQQ Trust (``QQQQ'')[supreg], SPDR 
S&P 500 Exchange Traded Funds (``SPY''), and iShares Russell 2000 Index 
Funds (``IWM'') shall be quoted and traded in minimum increments of 
$0.01 for all series regardless of the price. A list of such options 
shall be communicated to membership via an Options Trader Alert 
(``OTA'') posted on the Exchange's website.
    The Exchange may replace any pilot issues that have been delisted 
with the next most actively traded multiply listed options classes that 
are not yet included in the pilot, based on trading activity in the 
previous six months. The replacement issues may be added to the pilot 
on the second trading day following January 1, 2018[July 1, 2017].
    (C) No Change.
    (ii)-(v) No Change.
* * * * *

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 filing is to amend Phlx Rule 1034 to extend the 
Penny Pilot through June 30, 2018 or the date of permanent approval, if 
earlier,\4\ and to change the date when delisted classes may be 
replaced in the Penny Pilot. The Exchange believes that extending the 
Penny Pilot will allow for further analysis of the Penny Pilot and a 
determination of how the program should be structured in the future.
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    \4\ The options exchanges in the U.S. that have pilot programs 
similar to the Penny Pilot (together ``pilot programs'') are 
currently working on a proposal for permanent approval of the 
respective pilot programs.
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    Under the Penny Pilot, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index Tracking 
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and 
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series. The Penny Pilot is currently 
scheduled to expire on December 31, 2017.\5\
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    \5\ See Securities Exchange Act Release No. 80755 (May 24, 
2017), 82 FR 25025 (May 31, 2017) (SR-Phlx-2017-36).
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    The Exchange proposes to extend the time period of the Penny Pilot 
through June 30, 2018 or the date of permanent approval, if earlier, 
and to provide a revised date for adding replacement

[[Page 61352]]

issues to the Penny Pilot. The Exchange proposes that any Penny Pilot 
Program issues that have been delisted may be replaced on the second 
trading day following January 1, 2018. The replacement issues will be 
selected based on trading activity in the previous six months.\6\
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    \6\ The replacement issues will be announced to the Exchange's 
membership via an Options Trader Alert (OTA) posted on the 
Exchange's website. Penny Pilot replacement issues will be selected 
based on trading activity in the previous six months, as is the case 
today. The replacement issues would be identified based on The 
Options Clearing Corporation's trading volume data. For example, for 
the January replacement, trading volume from May 30, 2017 through 
November 30, 2017 would be analyzed. The month immediately preceding 
the replacement issues' addition to the Pilot Program (i.e., 
December) would not be used for purposes of the six-month analysis.
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    This filing does not propose any substantive changes to the Penny 
Pilot Program; all classes currently participating in the Penny Pilot 
will remain the same and all minimum increments will remain unchanged. 
The Exchange believes the benefits to public customers and other market 
participants who will be able to express their true prices to buy and 
sell options have been demonstrated to outweigh the potential increase 
in quote traffic.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change, which extends the Penny 
Pilot for an additional six months through June 30, 2018 or the date of 
permanent approval, if earlier, and changes the date for replacing 
Penny Pilot issues that were delisted to the second trading day 
following January 1, 2018, will enable public customers and other 
market participants to express their true prices to buy and sell 
options for the benefit of all market participants. This is consistent 
with the Act.

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. To the contrary, this proposal 
is pro-competitive because it allows Penny Pilot issues to continue 
trading on the Exchange.
    Moreover, the Exchange believes that the proposed rule change will 
allow for further analysis of the Pilot and a determination of how the 
Pilot should be structured in the future; and will serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.
    The Pilot is an industry-wide initiative supported by all other 
option exchanges. The Exchange believes that extending the Pilot will 
allow for continued competition between market participants on the 
Exchange trading similar products as their counterparts on other 
exchanges, while at the same time allowing the Exchange to continue to 
compete for order flow with other exchanges in option issues trading as 
part of the Pilot.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing.\12\ However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the 
Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because doing so will allow the Pilot Program to continue without 
interruption in a manner that is consistent with the Commission's prior 
approval of the extension and expansion of the Pilot Program and will 
allow the Exchange and the Commission additional time to analyze the 
impact of the Pilot Program. Accordingly, the Commission designates the 
proposed rule change as operative upon filing with the Commission.\14\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and the 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 pre-filing requirement.
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the operative delay for this 
proposal, 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 such 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 under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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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

[[Page 61353]]

     Send an email to [email protected]. Please include 
File Number SR-Phlx-2017-104 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-2017-104. 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-2017-104 and 
should be submitted on or before January 17, 2018.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-27831 Filed 12-26-17; 8:45 am]
BILLING CODE 8011-01-P