Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Relocate Rules From Its Current Rulebook Into Its New Rulebook Shell

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 February 3, 2020, 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to relocate rules from its current Rulebook into its new Rulebook shell.

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 purpose of this rule change is to relocate Phlx rules into the new Rulebook shell with some amendments to the shell. The Exchange has already relocated options rules of its Affiliated Exchanges so that it may harmonize its rules, where applicable, across Nasdaq markets. The relocation and harmonization of the Phlx options rules is part of the Exchange's continued effort to promote efficiency and conformity of its processes with those of its Affiliated Exchanges. The Exchange believes that the placement of the Phlx Rules into their new location in the shell will facilitate the use of the Rulebook by members.

Universal Changes

The Exchange proposes to replace references to “Phlx XL”, “Phlx XL II”, “trading system” and “system” with the defined term “System” throughout the new rules. The Exchange proposes to replace the terms “specialist” and “Specialist” with the term “Lead Market Maker” to define this market participant throughout the Rulebook. The Exchange proposes to replace the terms “Remote Specialist” with the term “Remote Lead Market Maker” to define this market participant throughout the Rulebook. Any references to “Directed Specialist” shall be replaced with “Directed Lead Market Maker.” The Exchange proposes to replace the term “Registered Options Trader” with the term “Market Maker” to define this participant throughout the Rulebook. Any references to (“ROTs”) will be removed from the Rulebook. With respect to renaming the market participants, the Exchange notes that there are no changes to the roles and responsibilities of these market participants in connection with the name change.

The Exchange proposes to change references to “Commentary” to “Supplementary Material” to conform the term throughout the Rulebook. The defined terms “Exchange Act” and “SEC” replaced the terms “Securities Exchange Act of 1934” and “Securities and Exchange Commission”, respectively.

The Exchange proposes to update all cross-references within the Rule to the new relocated rule cites. The Exchange proposes to replace internal rule references to simply state “this Rule” where the rule is citing itself without a more specific cite included in the Rule. For example, if Phlx Rule 1014 refers currently to “Rule 1014” or “this Rule 1014” the Exchange will amend the phrase to simply “this Rule.” The Exchange proposes to conform numbering and lettering in certain rules to the remainder of the Rulebook. Finally, the Exchange proposes to delete any current Rules that are reserved in the Rulebook and add new reserved rules where other Nasdaq Affiliated Exchanges may have a rule in use and there is no comparable rule on Phlx.

General 1

The Exchange proposes to relocate definitions from Rule 1 into proposed General 1, Section 1, except for the term “Options Exchange Official,” which will be relocated into proposed Options 1, Section 1.

General 2

General 2 would be comprised of the following rules:

The Exchange proposes to reserve those sections where Phlx does not have rules similar to other Nasdaq Affiliated Markets.

General 3

The Exchange proposes to relocate the following rules into General 3, “Membership and Access.”

The Exchange proposes to delete Rule 900 as unnecessary given the new Rulebook organization structure. The Exchange proposes to delete current Rule 900.2(e) within proposed General 3, Section 5, because Rule 798 is currently reserved and that provision is no longer applicable.

General 9

The Exchange proposes to adopt a new General 9, titled “Regulation.” The Exchange proposes to relocate the following rules into General 9:

Equities 7

The Exchange proposes to relocate Rule 607 titled “Covered Sales Fee” to Equities 7, Equity Pricing at new proposed Section 5. Also, Rule 2040, Nonregistered Foreign Finders, does not appear in PSX Rule 3202, this rule applies to equity products today. The Exchange believes its failure to be included within PSX Rule 3202 was an oversight and proposes to include this Rule within General 9.

Options 1

The Exchange proposes to rename current Options 1 from “Options Definitions” to “General Provisions.” The Exchange proposes to relocate definitions from Rule 1000, Applicability, Definitions and References, into proposed General 1, Section 1. The Exchange proposes not to relocate the terms “System Book Feed” and “System Securities” from Rule 1000 into Options 1, Section 1. The term “System Book Feed” is not utilized in the Rulebook currently. The term “System Securities” is only utilized within the definition of the term “System” at proposed Options 1, Section 1(a)(52) and within current Rule 911 which was relocated to General 2, Section 12. The term is simply replaced by referring to option series. The Exchange believes that replacing the term with the term “option series” will make the Rulebook clear. The Exchange also proposes to relocate the definition of “Option Exchange Official” which is currently located in General I, Section 1 into this section as this term relates to the trading of options.

Options 2

The Exchange proposes to rename Options 2 from “Options Trading Rules” to “Options Market Participants” and relocate the following rules into this chapter:

The Exchange proposes to relocate a portion of a sentence from current Rule 1014(b) to Options 8, Section 11(b). The sentence provides, “. . . Exchange options transactions initiated by such Market Maker on the Trading Floor for any account in which he had an interest shall to the extent prescribed by the Exchange be in such assigned classes.” This sentence is being relocated into Options 8, Section 11 because it pertains to Floor Market Maker assignments. The remainder of current Rule 1014(b) was relocated to Options 3, Section 4(b).

Rule 452, “Limitations on Members' Trading Because of Customers' Orders” is being relocated into Options 8, Section 17.

Options 2A

The Exchange proposes to reserve Options Section 2A.

Options 3

The Exchange proposes to rename Options 3 from “Options Market Participants” to “Options Trading Rules” and relocate the following rules into this chapter:

Options 4

The Exchange proposes to relocate rules within Options 4 Options Listing Rules as follows:

Rule text within current Commentary .01(6) of Rule 1010, which provides, “. . . provided, however, that in the case of a Restructure Security approved for options listing and trading under paragraph (d) of Commentary .05 under Rule 1009, such trading volume requirements must be satisfied based on the trading volume history of the Restructure Security.”

Options 4A

The Exchange proposes to relocate rules within new proposed Options 4A, which is proposed to be titled “Options Index Rules” as follows:

The Exchange proposes to amend the rule text within Options 4A, Section 18(b) to remove the word “Specialist” and replace that word with “Exchange” and cite to the manual authority within current Rule 1047(b). The Exchange previously removed any functionality which permitted executions to be manually handled by a specialist. An Options Exchange Official determines a manual trading halt.

Options 4B

The Exchange proposes a new Options 4B, titled “Options on Treasury Securities.”

Options 5

The Exchange proposes to rename Options 5 from “Options Trade Administration” to “Order Protection and Locked and Crossed Markets” and relocate rules within Options 5 as follows:

Options 6

The Exchange proposes rename Options 6 from “Order Protection and Locked and Cross Markets” to “Options Trade Administration” and relocate rules within Options 6 as follows:

Options 6A

The Exchange proposes to relocate rules within new proposed Options 6A titled “Closing Transactions” as follows:

Options 6B

The Exchange proposes to relocate rules within new proposed Options 6B titled “Exercises and Deliveries” as follows:

Options 6C

The Exchange proposes to relocate rules within new proposed Options 6C titled “Margins” as follows:

Options 6D

The Exchange proposes to relocate rules within new proposed Options 6D titled “Net Capital Requirements” as follows:

Options 6E

The Exchange proposes to relocate rules within new proposed Options 6E titled “Records, Reports and Audits” as follows:

The commentary section in Rule 760 has been relocated to Options 6E, Section 1(b).

Options 7

The Exchange proposes to relocate Rule 607 titled “Covered Sales Fee to Options 7, Options Pricing, at new proposed Section 12.

Options 8

Rule 110, “Bids and Offers—Manners,” Rule 119, “Precedence of Highest Bid” and Rule 120, “Precedence of Offers at Same Price” are being relocated within the Supplementary Material to Options 8, Section 24, “Bids and Offers—Premium”.

The Exchange proposes to remove references to Rule 723 as this rule no longer exists. The Exchange also proposes to remove obsolete rule text at the end of Options 8, Section 39 at C-2, Options Floor Based Management System, which provides, “The Exchange anticipates that it will implement the Snapshot feature referenced herein and described further in Options 8, Section 28(e) during the Fourth Quarter of 2017. The Exchange will notify members via an Options Trader Alert, to be posted on the Exchange's website, at least seven calendar days prior to the date when Snapshot will be available for use.”

Options 9

The Exchange proposes to relocate rules within new proposed Options 9 titled “Business Conduct” as follows:

Options 10

The Exchange proposes to relocate rules within new proposed Options 10 titled “Doing Business with the Public” as follows:

The Exchange proposes to reserve Options 10, Sections 24 and 25. The Commentary section in Phlx Rules 1027 is being relocated to Section (f) within Options 10, Section 9. The Commentary section in Phlx Rules 1028 is being relocated to Section (f) within Options 10, Section 22.

Options 11

Finally, the Exchange proposes to relocate the Options Minor Rule Violations into Options 11 titled “Minor Rule Plan Violations” as follows:

PSX Rules

Rule 133, “Trading Halts Due to Extraordinary Market Volatility” is being relocated to new PSX Rule 3101 as this rule is solely an equities rule. Rule 652, “Limitation of Exchange Liability and Reimbursement of Certain Expenses” is being relocated into new PSX Rule 3102. Rule 103, “Dealings on the Exchange—Securities” is being relocated to new PSX Rule 3400. Rule 112, “Bids and Offers—“When Issued” ” is being relocated to new PSX Rule 3401. Rule 128, “Price of Execution Binding” is being relocated to new PSX Rule 3402. Rule 274, “Payment on Delivery—Collect on Delivery” is being relocated to new PSX Rule 3403. Rule 279, “Book-Entry Settlement” is being relocated to new PSX Rule 3404. Rule 431, “Ex-dividend, Ex-rights” is being relocated into new PSX Rule 3405. Rule 432, “Ex-warrants” is being relocated into new PSX Rule 3406. Rule 433, “Buyer Entitled to Dividend, etc.” is being relocated into new PSX Rule 3407. Rule 434, “Claims for Dividend, etc.” is being relocated into new PSX Rule 3408. Rule 451, “Taking or Supplying Securities Named in Order” is being relocated into new PSX Rule 3409. Rule 452, “Limitations on Members' Trading Because of Customers' Orders” is being relocated into new PSX Rule 3410. Rule 453, “Successive Transactions by Members” is being relocated into new PSX Rule 3411. Rule 455, “Short Sales” is being relocated into new PSX Rule 3412. Rule 721, “Proper and Adequate Margin” is being relocated into new PSX Rule 3413. Rule 723, “Prohibition on Free-Riding in Cash Accounts” is being relocated into new PSX Rule 3414. Rule 703, “Financial Responsibility and Reporting” is being relocated into new PSX Rule 3500. Rule 712, “Independent Audit” is being relocated into new PSX Rule 3501. Rule 785, “Automated Submission of Trading Data” is being relocated into new PSX Rule 3502. Rule 707, “Conduct Inconsistent with Just and Equitable Principles of Trade” is being relocated into Rule 3503. Rule 708, “Acts Detrimental to the Interest or Welfare of the Exchange” is being relocated into Rule 3504. Rule 742, “Restrictions on Pledge of Customers' Securities” is being relocated into new PSX Rule 3505. Rule 757, “Anti-Money Laundering Compliance Program” is being relocated into new PSX Rule 3506. Rule 762, “Telemarketing” is being relocated into new PSX Rule 3507. Rule 980, “Regulatory Services Agreements” is being relocated into new PSX Rule 3600.

The Exchange also proposes to amend PSX Rule 3202 to remove rules that: (1) Have been relocated into a general section and are therefore applicable to equities; (2) have been relocated into the PSX Rules or Equity 7; (3) which are reserved rules; and (4) remove references to Rule 623 (Fingerprinting), Rule 722 (Miscellaneous Securities Margin Accounts) and Rule 772 (Trading for Joint Account) as these rules do not exist in the Phlx Rulebook.

Equity Titles

The Exchange proposes to amend the current titles of Equity 2, 3, 4 and 7. The Exchange proposes to rename Equity 2, from “Equity Trading Rules” to “Equity Market Participants.” The Exchange proposes to rename Equity 3 from “Equity Market Participants” to “Equity Trading Rules.” The Exchange proposes to rename Equity 4 from “Equity Listing Rules” to “Limit Up-Limit Down”. Finally, the Exchange proposes to reserve Equity 6 which is currently titled “Limit Up-Limit Down.”

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 and to protect investors and the public interest by bringing greater transparency to its rules by relocating its Rules into the new Rulebook shell together with other rules which have already been relocated. The Exchange's proposal is consistent with the Act and will protect investors and the public interest by harmonizing its rules, where applicable, across Nasdaq markets so that members can readily locate rules which cover similar topics. The relocation and harmonization of the Phlx Rules is part of the Exchange's continued effort to promote efficiency and conformity of its processes with those of its Affiliated Exchanges. The Exchange believes that the placement of the Phlx Rules into their new location in the shell will facilitate the use of the Rulebook by members. Specifically, the Exchange believes that market participants that are members of more than one Nasdaq market will benefit from the ability to compare Rulebooks.

The Exchange is not substantively amending rule text unless noted otherwise within this rule change. The renumbering, re-lettering, deleting reserved rules, amending cross-references and other minor technical changes will bring greater transparency to Phlx's Rules. The Exchange intends to file other rule change to relocate Affiliated Exchange Rulebooks to relocate corresponding rules into the same location in each Rulebook for ease of reference. The Exchange believes its proposal will benefit investors and the general public by increasing the transparency of its Rulebook and promoting easy comparisons among the various Nasdaq Rulebooks.

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 believes that the proposed amendments do not impose an undue burden on competition because the amendments to relocate the Rules are non-substantive. This rule change is intended to bring greater clarity to the Exchange's Rules. Renumbering, re-lettering, deleting reserved rules and amending cross-references will bring greater transparency to Phlx's Rules.

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) of the Act and Rule 19b-4(f)(6) thereunder.

A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act normally does not become operative for 30 days after the date of its filing. 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. The Exchange has requested that the Commission waive the 30-day operative delay so that the Exchange could immediately relocate its rules. According to the Exchange, the proposal is intended to make it easier for members to locate the various Exchange rules, and is part of a larger effort to reorganize the Exchange's rules and those of its Affiliated Exchanges. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.

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 change 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-2020-03 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-2020-03. 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 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-2020-03, and should be submitted on or before March 12, 2020.