
[Federal Register Volume 80, Number 247 (Thursday, December 24, 2015)]
[Notices]
[Pages 80403-80408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32383]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76687; File No. SR-Phlx-2015-85]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Delete 
Sections (e) Through (h) of Exchange Rule 1020, Registration and 
Functions of Options Specialists

December 18, 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 December 16, 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, II, 
and III, below, which Items have been prepared by the Exchange. The 
Exchange has designated this proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it effective upon 
filing with the Commission. The Commission is publishing this notice to

[[Page 80404]]

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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete sections (e) through (h) of 
Exchange Rule 1020, Registration and Functions of Options Specialists, 
as well as the associated ``Guidelines for Exemptive Relief Under Rule 
1020 for Approved Persons or Member Organizations Associated with a 
Specialist Member Organization'' and Rule 1023, Specialist's 
Transactions with Listed Company.
    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 is proposing to adopt a principles-based approach to 
prohibit the misuse of material non-public information by specialists 
by deleting Sections (e) through (h) of Exchange Rule 1020, 
Registration and Functions of Options Specialists, as well as the 
associated ``Guidelines for Exemptive Relief Under Rule 1020 for 
Approved Persons or Member Organizations Associated with a Specialist 
Member Organization,'' and Rule 1023, Specialist's Transactions with 
Listed Company (collectively, the ``Specialist Restrictions''). In 
doing so, the Exchange would harmonize its rules governing Phlx members 
\5\ and member organizations \6\ generally, and Phlx specialists in 
particular, relating to protecting against the misuse of material, non-
public information. The Exchange believes that the Specialist 
Restrictions are no longer necessary because all specialists are 
subject to the Exchange's general principles-based requirements 
governing the protection against the misuse of material, non-public 
information, pursuant to Phlx Rule 761, Supervisory Procedures Relating 
to ITSFEA and to Prevention of Misuse of Material Nonpublic 
Information, which obviates the need for separately-prescribed 
requirements for a subset of market participants on the Exchange. 
Additionally, there is no separate regulatory purpose served by having 
separate rules for specialists. The Exchange notes that this proposed 
rule change will not decrease the protections against the misuse of 
material, non-public information; instead, it is designed to provide 
more flexibility to market participants. This is a competitive filing 
that is based on a proposal recently submitted by NYSE MKT LLC (``NYSE 
MKT'') and approved by the Commission.\7\
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    \5\ Phlx Rule 1(n) defines ``Member'' as a permit holder which 
has not been terminated in accordance with the By-Laws and Rules of 
the Exchange.
    \6\ Phlx Rule 1(o) defines ``Member Organization'' as a 
corporation, partnership (general or limited), limited liability 
partnership, limited liability company, business trust or similar 
organization, transacting business as a broker or a dealer in 
securities and which has the status of a member organization by 
virtue of (i) admission to membership given to it by the Membership 
Department pursuant to the provisions of Rules 900.1 or 900.2 or the 
By-Laws or (ii) the transitional rules adopted by the Exchange 
pursuant to Section 6-4 of the By-Laws.
    \7\ See Securities Exchange Act Release No. 75432 (July 13, 
2015), 80 FR 42597 (July 17, 2015) (Order Approving SR-NYSEMKT-2015-
23). See also Securities Exchange Act Release No. 75792 (August 31, 
2015), 80 FR 53606 (September 4, 2015) (SR-ISE-2015-26).
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    A ``specialist'' is an Exchange member who is registered as an 
options specialist pursuant to Exchange Rule 1020(a). Specialists are 
subject to quoting and registration obligations set forth in Rules 
1014(b), 1020 and 1080.02. Quoting obligations of other market makers 
known as Registered Options Traders (``ROTs'') are also set forth in 
Rule 1014.\8\ That rule sets forth the main difference between 
specialists and ROTs, namely that specialists have a heightened quoting 
obligation as compared to ROTs. In addition to a heightened quoting 
obligation pursuant to Rule 1014, specialists are eligible to receive a 
greater allocation of participation rights under certain circumstances.
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    \8\ A Registered Option Trader (``ROT'') is defined in Exchange 
Rule 1014(b) as a regular member of the Exchange located on the 
trading floor who has received permission from the Exchange to trade 
in options for his own account. ROTs include Streaming Quote Traders 
(``SQTs'') and Remote Streaming Quote Traders (``RSQTs''), as well 
as on and off-floor ROTS. An SQT is defined in Exchange Rule 
1014(b)(ii)(A) as an ROT who has received permission from the 
Exchange to generate and submit option quotations electronically in 
options to which such SQT is assigned. An RSQT is defined in 
Exchange Rule 1014(b)(ii)(B) as an ROT that is a member affiliated 
with an Remote Streaming Quote Trader Organization (``RSQTO'') with 
no physical trading floor presence who has received permission from 
the Exchange to generate and submit option quotations electronically 
in options to which such RSQT has been assigned. An RSQTO, which may 
also be referred to as a Remote Market Making Organization 
(``RMO''), is a member organization in good standing that satisfies 
the RSQTO readiness requirements in Rule 507(a).
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    Importantly, all ROTs and specialists have access to the same 
information in the Exchange's order book. Moreover, neither ROTs nor 
specialists have agency obligations on the Exchange's order book. As 
such, the distinctions between specialists and ROTs are their quoting 
requirements set forth in Rule 1014.
    Notwithstanding that specialists have access to the same Exchange 
trading information as all other market participants on the Exchange, 
the Exchange has specific rules governing how specialists may operate. 
Currently, Phlx Rule 1023 restricts specialists and various affiliates 
from effecting certain transactions with a company in options of which 
the specialist is registered.\9\ Rule 1020(e) limits the ability of 
specialists' affiliates to purchase or sell options in which the 
specialist is registered for any account in which the affiliate is 
interested.\10\ Rule 1020(f)

[[Page 80405]]

provides an exemption from the restrictions imposed by Rules 1023 and 
1020(e), but only if the Exchange has approved procedures restricting 
the flow of material non-public corporate or market information between 
the specialist's affiliate and the specialist member organization and 
any member, officer or employee associated therewith. The procedures 
are required to comply with the ``Guidelines for Exemptive Relief under 
Rule 1020 for Approved Persons or Member Organizations Affiliated with 
a Specialist Member Organization'' (the ``Guidelines''), which are 
referred to in, and set forth following, Rule 1020(f).
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    \9\ Specifically, Rule 1023 provides that no specialist or his 
member organization, or any member, limited partner, officer, 
employee, approved person or party approved shall directly or 
indirectly, effect any business transaction with a company or any 
officer, director or 10% stockholder of a company in which options 
of such company the specialist is registered, except for business 
transactions in goods and services on terms generally available to 
the public. It further provides that no specialist, his member 
organization or corporate subsidiary of such organization shall 
accept an order for the purchase or sale of any option in which he 
is registered as a specialist directly (i) from the company issuing 
such stock or (ii) from any officer, director or 10% stockholder of 
that company.
    \10\ Specifically, Rule 1020(e) provides that no member (other 
than a specialist acting pursuant to paragraphs 1020(c) or (d)), 
limited partner, officer, employee, approved person or party 
approved, who is affiliated with a specialist or specialist member 
organization, shall, during the period of such affiliation, purchase 
or sell any option in which such specialist is registered for any 
account in which such person or party has a direct or indirect 
interest. Any such person or party may, however, reduce or liquidate 
an existing position in an option in which such specialist is 
registered provided that such orders are (i) identified as being for 
an account in which such person or party has a direct or indirect 
interest; (ii) approved for execution for an Options Exchange 
Official; and (iii) executed by the specialist in a manner 
reasonably calculated to contribute to the maintenance of price 
continuity with reasonable depth. No order entered pursuant to Rule 
1020(e) shall be given priority over, or parity with, any order 
represented in the market at the same price.
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Proposed Rule Change
    The Exchange believes that the Specialist Restrictions, including 
the Guidelines and the Exchange approval requirement, are no longer 
necessary and proposes to delete them. The Exchange believes that Rule 
761, Supervisory Procedures Relating to ITSFEA and to Prevention of the 
Misuse of Material Nonpublic Information, Commentary .02 governing the 
misuse of material, non-public information, provides for an 
appropriate, principles-based approach to prevent the market abuses the 
Specialist Restrictions are designed to address. Specifically, Rule 
761, Commentary .02 requires every member or member organization to 
establish, maintain and enforce written policies and procedures 
reasonably designed, taking into consideration the nature of the 
member's business, to prevent the misuse of material non-public 
information by such member or persons associated with such member in 
violation of the Securities Exchange Act of 1934 and the rules 
thereunder and the Exchange's own rules. For purposes of Rule 761, 
Commentary .02, misuse of material non-public information means:

    (a) Trading in any securities issued by a corporation, 
partnership, Portfolio Depository Receipts, Index Fund Shares, trust 
issued receipts, currency trust shares or a trust or similar 
entities, or in any related securities or related options or other 
derivative securities, or in any related commodity, related 
commodity futures or options on commodity futures or any other 
related commodity derivatives, while in possession of material 
nonpublic information concerning that corporation, Portfolio 
Depository Receipt, Index Fund Share, trust issued receipts, 
currency trust shares, trust or similar entity;
    (b) trading in an underlying security or related options or 
other derivative securities, or in any related commodity, related 
commodity futures or options on commodity futures or any other 
related commodity derivatives, while in possession of material 
nonpublic information concerning imminent transactions in the above; 
and
    (c) disclosing to another person any material nonpublic 
information involving a corporation, partnership, Portfolio 
Depository Receipts, Index Fund Shares, trust issued receipts, 
currency trust shares or a trust or similar entities whose shares 
are publicly traded or an imminent transaction in an underlying 
security or in any related commodity, related commodity futures or 
options on commodity futures or any other related commodity 
derivatives, for the purpose of facilitating the possible misuse of 
such material nonpublic information.

    Because members and member organizations are already subject to the 
requirements of Rule 761, Commentary .02, the Exchange does not believe 
it necessary to separately require specific limitations on specialists. 
Deleting the Specialist Restrictions including the Guidelines and its 
requirements for specific procedures would provide specialists 
flexibility to adapt their policies and procedures as appropriate to 
reflect changes to their business model, business activities, or the 
securities market in a manner similar to how members and member 
organizations on the Exchange currently operate and consistent with 
Exchange Rule 761, Commentary .02.
    As noted above, specialists are distinguished under Exchange rules 
from ROTs in that specialists have heightened quoting obligations and 
differing participation entitlements. However, none of these heightened 
obligations or different entitlements provides different or greater 
access to non-public information than any other member or member 
organization on the Exchange. Accordingly, because specialists do not 
have any trading advantages at the Exchange due to their market role, 
the Exchange believes they should be subject to the same rules as other 
members and member organizations regarding the protection against the 
misuse of material non-public information, which in this case is 
existing Exchange Rule 761, Commentary .02.\11\
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    \11\ The Exchange notes that by deleting the Specialist 
Restrictions, the Exchange would no longer require specific 
information barriers for specialists or require pre-approval of any 
information barriers that a specialist would erect for purposes of 
protecting against the misuse of material non-public information. 
However, the policies and procedures of specialists, including those 
relating to information barriers, would be subject to review by 
FINRA, on behalf of the Exchange, pursuant to a Regulatory Services 
Agreement.
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    The Exchange is not proposing to change what is considered to be 
material, non-public information that an affiliated brokerage business 
of a specialist could share with such specialist. In that regard, the 
proposed rule change will not permit affiliates of a specialist to have 
access to any non-public order or quote information of the specialist, 
including hidden or undisplayed size or price information of such 
orders or quotes. Affiliates of specialists would only have access to 
orders and quotes that are publicly available to all market 
participants. Members do not expect to receive any additional order or 
quote information as a result of this proposed rule change. The 
Exchange does not believe that there will be any material change to 
member information barriers as a result of the removal of the Exchange 
pre-approval requirement. The Exchange has rules prohibiting members 
from disadvantaging their customers or other market participants by 
improperly capitalizing on the member's access to or receipt of 
material, non-public information.\12\
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    \12\ For example, Rule 748 requires each member or member 
organization to establish, maintain, and enforce written supervisory 
procedures, and a system for applying such procedures, to supervise 
the types of business(es) in which the member or member organization 
engages in and to supervise the activities of all registered 
representatives, employees, and associated persons. The written 
supervisory procedures and the system for applying such procedures 
must reasonably be expected to prevent and detect, insofar as 
practicable, violations of the applicable securities laws and 
regulations, including the By-Laws and Rules of the Exchange., [sic] 
Additionally, Rule 1064 provides that no member organization or 
person associated with a member or member organization who has 
knowledge of the material terms and conditions of a solicited order, 
an order being facilitated, or orders being crossed, the execution 
of which are imminent, shall enter, based on such knowledge, an 
order to buy or sell an option for the same underlying security; an 
order to buy or sell the security underlying such class; or an order 
to buy or sell any related instrument until (i) the terms and 
conditions of the order and any changes in the terms of the order of 
which the member, member organization or person associated with a 
member or member organization has knowledge are disclosed to the 
trading crowd, or (ii) the trade can no longer reasonably be 
considered imminent in view of the passage of time since the order 
was received.
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    Further, the Exchange does not believe there will be any material 
change to specialist information barriers as a result of removal of the 
Exchange's pre-approval requirements. In fact, the Exchange anticipates 
that eliminating the pre-approval requirement should facilitate 
implementation of changes to specialist information barriers as 
necessary to protect against the misuse of material, non-public 
information. The Exchange also suggests that the pre-approval 
requirement is unnecessary because specialists do not have agency 
responsibilities to orders in the book, or time and place information 
advantages because of their market role.

[[Page 80406]]

    The Exchange notes that its proposed principles-based approach to 
protecting against the misuse of material non-public information for 
all its members and member organizations is consistent with recently 
filed and approved rule changes for NYSE MKT, NYSE Arca Equities, Inc. 
(``NYSE Arca''), BATS Exchange, Inc. (``BATS''), and New York Stock 
Exchange LLC (``NYSE'') governing cash equity market makers on those 
respective exchanges.\13\ Except for prescribed rules relating to 
floor-based designated market makers on the NYSE, who have access to 
specified non-public trading information, each of these exchanges have 
moved to a principles-based approach to protecting against the misuse 
of material non-public information. In connection with approving those 
rule changes, the Commission found that, with adequate oversight by the 
exchanges of their members, eliminating prescriptive information 
barrier requirements should not reduce the effectiveness of exchange 
rules requiring members to establish and maintain systems to supervise 
the activities of members, including written procedures reasonably 
designed to ensure compliance with applicable federal securities law 
and regulations, and with the rules of the applicable exchange.
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    \13\ See Securities Exchange Act Release No. 75432 (July 13, 
2015), 80 FR 42597 (July 17, 2015) (Order Approving Adopting a 
Principles-Based Approach to Prohibit the Misuse of Material 
Nonpublic Information by Specialists and e-Specialists by Deleting 
Rule 927.3NY and Section (f) of Rule 927.5NY). See also Securities 
Exchange Act Release Nos. 60604 (Sept. 2, 2009), 76 FR 46272 (Sept. 
8, 2009) (SR-NYSEArca-2009-78) (Order approving elimination of NYSE 
Arca rule that required market makers to establish and maintain 
specifically prescribed information barriers, including discussion 
of NYSE Arca and Nasdaq rules) (``Arca Approval Order''); 61574 
(Feb. 23, 2010), 75 FR 9455 (Mar. 2, 2010) (SR-BATS-2010-003) (Order 
approving amendments to BATS Rule 5.5 to move to a principles-based 
approach to protecting against the misuse of material, nonpublic 
information, and noting that the proposed change is consistent with 
the approaches of NYSE Arca and Nasdaq) (``BATS Approval Order''); 
and 72534 (July 3, 2014), 79 FR 39440 (July 10, 2014), [sic] SR-
NYSE-2014-12) (Order approving amendments to NYSE Rule 98 governing 
designated market makers to move to a principles-based approach to 
prohibit the misuse of material non-public information) (``NYSE 
Approval Order'').
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    The Exchange believes that a principles-based rule applicable to 
members of options markets would be equally effective in protecting 
against the misuse of material non-public information.\14\ Indeed, 
Exchange Rule 761, Commentary .02 is currently applicable to 
specialists and already requires policies and procedures reasonably 
designed to protect against the misuse of material non-public 
information, which is similar to the respective NYSE MKT, NYSE Arca 
Equities, BATS and NYSE rules governing cash equity market makers. The 
Exchange believes Exchange Rule 761, Commentary .02 provides 
appropriate protection against the misuse of material non-public 
information by specialists such that there is no further need for 
prescriptive information barrier requirements as set forth in the 
Specialist Restrictions.
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    \14\ International Securities Exchange, Inc. (``ISE'') and BOX 
Options Exchange LLC (``BOX'') have recently taken a similar 
approach. See Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Adopting a Principles-Based Approach to 
Prohibit the Misuse of Material, Non-public Information by Market 
Makers by Deleting Rule 810, Securities Exchange Act Release No. 
75792 (August 31, 2015), 80 FR 53606 (September 4, 2015) (SR-ISE-
2015-26). See also Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change to Adopt a Principles-based Approach to 
Prohibit the Misuse of Material Nonpublic Information by Market 
Makers, Securities Exchange Act Release No. 75916 (September 14, 
2015), 80 FR 56503 (September 18, 2015) (SR-BOX-2015-31).
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    The Exchange notes that even with this proposed rule change, 
pursuant to Exchange Rule 761, Commentary .02 a specialist would still 
be obligated to ensure that its policies and procedures reflect the 
current state of its business and continue to be reasonably designed to 
achieve compliance with applicable federal securities law and 
regulations, including Section 15(g) of the Act,\15\ and with 
applicable Exchange rules, including being reasonably designed to 
protect against the misuse of material, non-public information. While 
information barriers would not specifically be required under the 
proposal, Rule 761, Commentary .02 already requires that a member or 
member organization consider its business model or business activities 
in structuring its policies and procedures, which may dictate that an 
information barrier or a functional separation be part of the 
appropriate set of policies and procedures that would be reasonably 
designed to achieve compliance with applicable securities law and 
regulations, and with applicable Exchange rules.
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    \15\ 15 U.S.C. 78o(g).
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    The Exchange believes that the proposed reliance on principles-
based Rule 761, Commentary .02 would ensure that a specialist would be 
required to protect against the misuse of any material non-public 
information. As noted above, Rule 761, Commentary .02 already requires 
that firms refrain from trading while in possession of material non-
public information concerning imminent transactions in the security or 
related product. The Exchange believes that moving to a principles-
based approach rather than prescribing how and when to wall off a 
specialist from the rest of the firm would provide specialists with 
flexibility when managing risk across a firm, including integrating 
options positions with other positions of the firm or, as applicable, 
by the respective independent trading unit.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \17\ 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. The Exchange believes that the proposed rule change would 
remove impediments to and perfect the mechanism of a free and open 
market by adopting a principles based approach to permit a member or 
member organization to maintain and enforce policies and procedures to, 
among other things, prohibit the misuse of material non-public 
information and provide flexibility on how a specialist structures its 
operations.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange notes that the proposed rule change is based on an 
approved rule of the Exchange to which members and member organizations 
are subject--Rule 761, Commentary .02--and harmonizes the rules 
governing members and member organizations. Moreover, specialists would 
continue to be subject to federal and Exchange requirements for 
protecting material non-public order information.\18\ The Exchange 
believes that the proposed rule change would remove impediments to and 
perfect the mechanism of a free and open market because it would 
harmonize the Exchange's approach to protecting against the misuse of 
material non-public information and no longer subject specialists to 
prescriptive requirements. The Exchange does not believe that the 
existing prescriptive requirements applicable to specialists are 
narrowly tailored to their roles because specialists do not have access 
to Exchange trading information in a manner different from any other 
market participant on the Exchange.
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    \18\ See 15 U.S.C. 78o(g) and Exchange Rule 761, Commentary .02.
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    The Exchange further believes the proposal is designed to prevent 
fraudulent and manipulative acts and

[[Page 80407]]

practices and to promote just and equitable principles of trade because 
existing rules make clear to members and member organizations the type 
of conduct that is prohibited by the Exchange. While the proposal 
eliminates prescriptive requirements relating to the misuse of material 
non-public information, specialists would remain subject to existing 
Exchange rules requiring them to establish and maintain systems to 
supervise their activities, and to create, implement, and maintain 
written procedures that are reasonably designed to comply with 
applicable securities laws and Exchange rules, including the 
prohibition on the misuse of material, non-public information. 
Additionally, the policies and procedures of specialists, including 
those relating to information barriers, would be subject to review by 
FINRA, on behalf of the Exchange.
    The Exchange notes that the proposed rule change would still 
require that specialists maintain and enforce policies and procedures 
reasonably designed to ensure compliance with applicable federal 
securities laws and regulations and with Exchange rules. Even though 
there would no longer be pre-approval of specialist information 
barriers, any specialist written policies and procedures would continue 
to be subject to oversight by the Exchange and therefore the 
elimination of prescribed restrictions should not reduce the 
effectiveness of the Exchange rules to protect against the misuse of 
material non-public information. Rather, members and member 
organizations will be able to utilize a flexible, principles-based 
approach to modify their policies and procedures as appropriate to 
reflect changes to their business model, business activities, or to the 
securities market itself. Moreover, while specified information 
barriers may no longer be required, a member or member organization's 
business model or business activities may dictate that an information 
barrier or functional separation be part of the appropriate set of 
policies and procedures that would be reasonably designed to achieve 
compliance with applicable securities laws and regulations, and with 
applicable Exchange rules. The Exchange therefore believes that the 
proposed rule change will maintain the existing protection of investors 
and the public interest that is currently applicable to specialists, 
while at the same time removing impediments to and perfecting a free 
and open market by moving to a principles-based approach to protect 
against the misuse of material non-public information.

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. As indicated above, the rule 
change is being proposed as a competitive response to a filing 
submitted by NYSE MKT that was recently approved by the Commission. The 
Exchange believes that the proposal will enhance competition by 
allowing specialists to comply with applicable Exchange rules in a 
manner best suited to their business models, business activities, and 
the securities markets, thus reducing regulatory burdens while still 
ensuring compliance with applicable securities laws and regulations and 
Exchange rules. The Exchange believes that the proposal will foster a 
fair and orderly marketplace without being overly burdensome upon 
specialists.
    Moreover, the Exchange believes that the proposed rule change would 
eliminate a burden on competition for members and member organizations 
which currently exists as a result of disparate rule treatment between 
options and equities markets regarding how to protect against the 
misuse of material non-public information. For those members and member 
organizations that are also members of equity exchanges, their 
respective equity market maker operations are now subject to a 
principles-based approach to protecting against the misuse of material 
non-public information. The Exchange believes it would remove a burden 
on competition to enable members and member organizations to similarly 
apply a principles-based approach to protecting against the misuse of 
material non-public information in the options space as ISE has 
recently done. To this end, the Exchange notes that Exchange Rule 761, 
Commentary .02 still requires a specialist to evaluate its business to 
assure that its policies and procedures are reasonably designed to 
protect against the misuse of material non-public information. However, 
with this proposed rule change, a member or member organization that 
trades equities and options could look at its firm more holistically to 
structure its operations in a manner that provides it with better tools 
to manage its risks across multiple security classes, while at the same 
time protecting against the misuse of material non-public information.

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 \19\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \20\ 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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    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-2015-85 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-PHLX-2015-85. This file

[[Page 80408]]

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 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; 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-2015-85 and 
should be submitted on or before January 14, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-32383 Filed 12-23-15; 8:45 am]
BILLING CODE 8011-01-P


