Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on January 5, 2016, 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, 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.
17 CFR 240.19b-4.
I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change
The Exchange proposes to make nonsubstantive, clarifying amendments to several rules relating to clearing of Exchange options transactions.
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 Exchange proposes to make minor nonsubstantive amendments to four rules relating to options clearing responsibilities of members. The changes are intended to correct minor drafting errors, and to update and improve readability of the rules. The Exchange is also proposing to extend applicability of a rule concerning violations of The Options Clearing Corporation (“OCC”) rules to off-floor transactions as well as to on-floor transactions.
Phlx Rule 1046, Clearing Arrangements, currently provides that a member or member organization conducting an options business must either be: (i) A clearing member of OCC; or (ii) have a clearing arrangement with an Exchange member organization that is a clearing member of OCC. The Exchange is revising the rule to simply state that a member or member organization conducting an options business must be a Clearing Member or have a clearing arrangement with a Clearing Member. The revision simply makes use of the existing defined term “Clearing Member” to improve readability. No change in meaning is intended.
Exchange Rule 1000(b)(3) defines “Clearing Member” as “a member organization which has been admitted to membership in the Options Clearing Corporation pursuant to the provisions of the rules of the Options Clearing Corporation.”
Phlx Rule 1050, Violation Of By-Laws And Rules Of Options Clearing Corporation, currently provides for Exchange penalties in the event a member, member organization or director of a member organization that is a corporation “shall be adjudged guilty in a proceeding under Article XVIII of the by-laws of a violation of any provision of the rules of the Options Clearing Corporation with respect to the reporting, clearance or settlement of any transaction on the options trading floor of this Corporation. . . . ” The Exchange is deleting the reference to a proceeding under Article XVIII of the by-laws, which the Exchange deleted in 2011, and is replacing it with a more general and accurate reference to “an Exchange disciplinary proceeding.” The Exchange is also replacing the reference to “any transaction on the options trading floor of this Corporation” with a reference to “any Exchange options transaction” in view of today's electronic options trading which is not limited to the trading floor and the fact that the Exchange is not otherwise referred to in the rulebook as “this Corporation.” The Exchange did not amend Rule 1050 when it introduced off-floor trading, but is doing so now because whether a transaction takes place on-floor or off-floor has no bearing on the significance of any violation of the OCC rules. The Exchange has determined that there is no reason for off-floor transactions to be excluded from a requirement that transactions must be conducted in accordance with OCC rules. The new rule should ensure that off-floor transactions as well as on-floor transactions are conducted in a manner consistent with OCC rules.
See Securities Exchange Act Release No. 63981 (February 25, 2011), 76 FR 12180 (March 4, 2011) (SR-Phlx-2011-13) (a rule proposal to, among other things, amend the Limited Liability Company Agreement and By-Laws to substantially conform to The NASDAQ Stock Market's Second Amended Limited Liability Company Agreement and By-Laws).
Phlx Rule 1052, Responsibility Of Clearing Options Members For Exchange Options Transactions, currently provides for the clearing of transactions of non-Clearing Members by a “member organization which is a clearing member of the Options Clearing Corporation. . . .” The Exchange again is replacing this quoted language with the more succinct defined term “Clearing Member.” The word “Options” is deleted from the rule's title as superfluous.
Rule 1052 currently provides that every member organization which is a clearing member of the Options Clearing Corporation shall be responsible for the clearance of the Exchange options transactions of such member organization and of each member or member organization who gives up the name of such clearing member in an Exchange options transaction, provided the clearing member has authorized such member or member organization to give up its name with respect to Exchange options transactions.
Finally, Rule 1054, Verification Of Trades And Reconciliation Of Uncompared Trades, imposes certain trade verification and reconciliation obligations on any “member organization which is a clearing member of the Options Clearing Corporation.” Once again the Exchange is replacing the cumbersome language in quotation marks with the succinct, defined term “Clearing Member.” The change is made simply to improve readability.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section 6(b) of the Act in general, and furthers the objectives of section 6(b)(5) of the Act 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 improving the accuracy and readability of the amended rules.
15 U.S.C. 78f(b)(5).
With respect to Rules 1046, 1052 and 1054, employing the defined term “Clearing Member” rather than “a clearing member of the Options Clearing Corporation” shortens the rule and makes it more readable. With respect to Rule 1050, deletion of a reference to a nonexistent provision of the Exchange's bylaws and replacing it with a general reference to the Exchange's disciplinary proceedings should make the rule more understandable. Additionally with respect to Rule 1050, extending the applicability of the rule to off-floor transactions as well as to on-floor transactions should incentivize those who engage in off-floor transactions to comply with OCC rules, which is in the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the clarifying amendments proposed herein will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act inasmuch as they simply improve the accuracy and readability of the rules. Additionally, Rule 1050, as amended, will apply to members transacting off the trading floor as well as those transacting on the trading floor, which should reduce a burden on competition on members who transact primarily on the trading floor and also on members of other markets whose rules require compliance with OCC rules in connection with transactions not occurring on a trading floor.
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 and subparagraph (f)(6) of Rule 19b-4 thereunder.
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.
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 rule-comments@sec.gov. Please include File Number SR-Phlx-2016-03 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-2016-03. 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 such 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-2016-03, and should be submitted on or before February 16, 2016.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01307 Filed 1-22-16; 8:45 am]
BILLING CODE 8011-01-P