
[Federal Register Volume 80, Number 170 (Wednesday, September 2, 2015)]
[Notices]
[Pages 53211-53213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21665]



[[Page 53211]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75773; File No. SR-Phlx-2015-73]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to 
Manipulative Operations

August 27, 2015.
    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 19, 2015, 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 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 Rules 782, entitled ``Manipulative 
Operations'' to enumerate manipulative trading practices which are 
already prohibited, but not specified.
    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 purpose of this proposed rule change is to amend Rule 782, 
entitled ``Manipulative Operations'' to specify other manipulative 
trading practices which are currently prohibited. Today the 
manipulative trade practices specified in the amended rule text are 
prohibited from being transacted on the Exchange pursuant to both 
federal laws \3\ and Exchange Rules.\4\ The enumerated manipulative 
practices in Rule 782, including the amended rule text, is not an 
exhaustive list, rather, these activities serve as guidance to certain 
trading practices that are prohibited on Phlx.
---------------------------------------------------------------------------

    \3\ See 17 CFR 10b-5.
    \4\ Phlx Rule 782 currently states, ``[n]o member, member 
organization, partner or stockholder therein shall directly or 
indirectly participate in or have any interest in the profits of a 
manipulative operation or knowingly manage or finance a manipulative 
operation.'' Also, Phlx Rule 707 prohibits conduct inconsistent with 
just and equitable principles of trade and Rule 708 prohibits acts 
detrimental to the welfare of the Exchange.
---------------------------------------------------------------------------

    The Exchange proposes to adopt the rule text currently in The 
NASDAQ Stock Market LLC (``Nasdaq'') Rule 3351, entitled ``Trading 
Practices'' to provide market participants with additional guidance 
related to prohibited trading practices.\5\ The proposed rule text 
would enumerate certain manipulative trading practices, which are 
currently prohibited. Phlx Rule 782 applies to both equities and 
options transactions.
---------------------------------------------------------------------------

    \5\ Nasdaq Rule 3351 is an equities rule.
---------------------------------------------------------------------------

    The new rule text would enumerate prohibitions such that no member 
or member organization shall be permitted to execute or cause to be 
executed or participate in an account for which there are executed 
purchases of any listed security, at successively higher prices, or 
sales of any such security at successively lower prices, for the 
purpose of creating or inducing a false, misleading or artificial 
appearance of activity in such security or for the purpose of unduly or 
improperly influencing the market price for such security or for the 
purpose of establishing a price which does not reflect the true state 
of the market in such security.
    No member or member organization would be permitted to create or 
induce a false or misleading appearance of activity in a listed 
security or create or induce a false or misleading appearance with 
respect to the market in such security for these types of activities in 
the amended rule text: (1) Execute any transaction in such security 
which involves no change in the beneficial ownership thereof; or (2) 
enter any order or orders for the purchase of such security with the 
knowledge that an order or orders of substantially the same size, and 
at substantially the same price, for the sale of any such security, has 
been or will be entered by or for the same or different parties; or (3) 
enter any order or orders for the sale of any such security with the 
knowledge that an order or orders of substantially the same size, and 
at substantially the same price, for the purchase of such security, has 
been or will be entered by or for the same or different parties.
    The new rule text would specify that no member or member 
organization would be permitted to execute purchases or sales of a 
listed security for any account in which such member or member 
organization is directly or indirectly interested, which purchases or 
sales are excessive in view of the member's or member organization's 
financial resources or in view of the market for such security.
    The rule text enumerates a prohibition for members and member 
organizations from participating directly or indirectly, in the profits 
of a manipulative operation or knowingly managing or financing a 
manipulative operation. This would include: (1) Any pool, syndicate or 
joint account organized or used intentionally for the purpose of 
unfairly influencing the market price of a listed security; (2) the 
solicitation of subscriptions to or the acceptance of discretionary 
orders from any such pool, syndicate or joint account; or (3) the 
carrying on margin of a position in such securities or the advancing of 
credit through loans to any such pool, syndicate or joint account.
    The rule text specifies that no member or member organization shall 
make any statement or circulate and disseminate any information 
concerning a listed security which such member knows or has reasonable 
grounds for believing is false or misleading or would improperly 
influence the market price of such security.
    No member, member organization or person associated with a member 
or member organization shall, directly or indirectly, hold any interest 
or participation in any joint account for buying or selling a listed 
security, unless such joint account is promptly reported to Phlx. The 
report should contain the following information for each account: (1) 
Name of the account, with names of all participants and their 
respective interests in profits and losses; (2) a statement regarding 
the purpose of

[[Page 53212]]

the account; (3) name of the member carrying and clearing the account; 
and (4) a copy of any written agreement or instrument relating to the 
account.
    The rule text states that no member or member organization shall 
offer that a transaction or transactions to buy or sell a listed 
security will influence the closing transaction on the Consolidated 
Tape or The Options Price Reporting Authority (``OPRA''). A member or 
member organization may, but is not obligated to, accept a stop order 
in a listed security. A buy stop order is an order to buy which becomes 
a market order when a transaction takes place at or above the stop 
price. A sell stop order is an order to sell which becomes a market 
order when a transaction takes place at or below the stop price. A 
member or member organization may, but is not obligated to, accept stop 
limit orders in listed securities. When a transaction occurs at the 
stop price, the stop limit order to buy or sell becomes a limit order 
at the limit price.
    No member, member organization or person associated with a member 
or member organization shall execute or cause to be executed, directly 
or indirectly, on a Phlx transaction in a security subject to an 
initial public offering until such security has first opened for 
trading on the national securities exchange listing the security, as 
indicated by the dissemination of an opening transaction in the 
security by the listing exchange via the Consolidated Tape or OPRA.
    The Exchange believes that the addition of this rule text will 
bolster the current rule and provide members and member organizations 
with guidance on the type of manipulative practices that are 
specifically prohibited on Phlx. Also, the Exchange believes that the 
addition of the rule text will serve to also conform the Exchange's 
rule to that of Nasdaq.
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\ 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, 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. The Exchange believes that the 
proposed rule text will prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, and better 
protect investors and the public interest.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes is the proposed rule change is consistent 
with principles of just and equitable principles of trade while also 
ensuring that members and member organizations may continue to engage 
in transactions that do not present the risk of abusive trading 
practices that the rule is intended to prevent. The Exchange believes 
that proposed rule text would enhance the protection of orders of 
market participants by specifically addressing various types of 
currently prohibited abusive trading that may be intended to take 
advantage of such orders. Specifically, the proposed rule change seeks 
to provide greater guidance by enumerating certain manipulative trading 
practices that are currently prohibited.
    As previously noted, the proposed rule text is similar to Nasdaq 
Rule 3351. While Nasdaq Rule 3351 applies to equity transactions, Phlx 
proposes to apply the amended rule text to both equity and options 
transactions, as is the case today with Rule 782 today. The Exchange 
believes that specifying the type of manipulative conduct that is 
already prohibited and described in Rule 782, including the amended 
rule text, on both the equities and options market will prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade and better protect investors and the 
public interest. The Exchange proposes to prohibit this type of 
behavior on the Exchange as a whole. The Exchange believes specifying 
the practices that are currently prohibited on both the equities and 
options markets promotes just and equitable principles of trade.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The proposed rule change is not designed to address any 
competitive issues, rather it is designed to enable the Exchange to 
protect orders of market participants from abusive and manipulative 
conduct on both the equities and options markets, by offering 
additional guidance, while also harmonizing the rule to that of Nasdaq. 
The Exchange's proposed amendments seek to harmonize the Rulebook with 
that of Nasdaq.

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 \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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 for 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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. 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 proposed 
rule change may become operative immediately.
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Exchange believes that the proposal would benefit investors and 
market participants by specifically enumerating certain abusive and 
manipulative trading practices, which the Exchange notes are currently 
prohibited. The Exchange further states that amending Phlx Rule 782 to 
provide market participants with additional guidance regarding such 
activity would ``benefit the protection of investors and the public 
interest.'' Based on the foregoing, the Commission finds that waiving 
the 30-day operative delay is consistent with the protection of

[[Page 53213]]

investors and the public interest and hereby designates the proposal 
operative upon filing.\14\
---------------------------------------------------------------------------

    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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-2015-73 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-2015-73. 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 offices 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-2015-73, 
and should be submitted on or before September 23, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-21665 Filed 9-1-15; 8:45 am]
 BILLING CODE 8011-01-P


