[Federal Register Volume 84, Number 77 (Monday, April 22, 2019)]
[Notices]
[Pages 16709-16723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07981]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85655; File No. SR-Phlx-2019-06]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 
1080(m) Related to Routing to Away Markets

April 16, 2019.
    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 April 4, 2019, 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.
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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 relocate and amend Rule 1080(m), titled 
``Away Markets and Order Routing'' to new Rule 1093 with the same 
title. The Exchange also proposes to relocate Rule 1080(m)(v) to new 
Rule 1091.
    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 Exchange proposes to amend \3\ and relocate Rule 1080(m), 
titled ``Away Markets and Order Routing'' to new Rule 1093 with the 
same title. The Exchange will also update cross references to Rule 
1080(m) to reflect new Rule 1093.\4\ The Exchange proposes to reserve 
Rule 1080(m). The Exchange proposes to relocate Rule 1080(m)(v) to Rule 
1091, which is currently reserved, and title that Rule ``Cancellation 
of Orders and Error Account.'' The proposed changes will be discussed 
below in greater detail.
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    \3\ The Exchange notes that the amendments to Rule 1080(m) 
reflect the current operation of the System. The purpose of the 
amendment is to align the rule to the specific operation of the 
routing functionality on Phlx.
    \4\ The Exchange proposes to amend cross-references in Rule 607 
(Covered Sale Fee), Rule 1047 (Trading Halts), Rule 1066 (Certain 
Types of Floor-Based (Non-PHLX XL) Orders Defined) and Rule 1082 
(Firm Quotations).
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Rule 1093
    As noted above, the Exchange is renaming proposed new Rule 1093 as 
``Away Markets and Order Routing.'' There are some universal amendments 
that are proposed to this rule, which are explained herein. The 
Exchange proposes to utilize the term ``System'' \5\ within proposed 
new Rule 1093 and remove references to ``Phlx XL'' which is an outdated 
term. The Exchange proposes new language at the beginning of the rule 
text to proposed new Rule 1093 as described below.
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    \5\ See Rule 1000(b)(45).
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    The Exchange utilizes the term ``NBBO'' in certain places in 
current Rule 1080(m), which term encompasses both the away market 
``ABBO'' and local market ``PBBO,'' although in certain places were the 
local market has been exhausted, it is more accurate to refer to the 
away market only. The Exchange proposes to replace the term ``NBBO'' 
with the term ``ABBO'' where the local market has been exhausted to 
specifically refer to the away market. The Exchange proposes to define 
the term ``minimum price variation'' within the first paragraph of 
proposed Phlx Rule 1093 with the acronym ``MPV'' and utilize the 
acronym throughout the rule.
    Rule 1080(m) references an Opening Process, Phlx Rule 1017, 
throughout the rule. Specifically, Phlx Rule 1017(k) references the 
portion of the Opening Process rule which explains the manner in which 
the Exchange will open an options series and route orders at the 
conclusion of an Opening Process. The language contained in Rule 
1017(k) with respect to routing during an Opening Process is much more 
explicit than the broad language currently contained in Rule 1080(m). 
To avoid any confusion, the Exchange proposes to replace rule text 
related to an Opening Process with a reference to governing Rule 1017. 
Also, the Exchange proposes throughout the rule to remove language 
which states, ``during open trading'' and instead reference ``after an 
Opening Process.'' \6\
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    \6\ The Exchange is also defining the term ``Opening Process'' 
with this proposal as explained below.
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    These universal changes impact multiple rule amendments and will be 
applied throughout the rule. In addition to these amendments, other 
proposed changes are described below.
    The current paragraph to Rule 1080(m) provides,

    The Phlx XL II system will route FIND and SRCH Orders (as 
defined below) with no other contingencies. IOC Orders will be 
cancelled immediately if not executed, and will not be routed. 
Eligible orders can be designated as either available for routing or 
not available for routing. Routable FIND and SRCH Orders (as defined 
in Rule 1080(m)(iv) below) designated as available for routing will 
first be checked by the Phlx XL II system for available contracts 
for potential execution. After checking the Phlx XL II system for 
available contracts, orders are sent to other available market 
centers for potential execution. When checking the book, the Phlx XL 
II system will seek to execute at the price at which it would send 
the order to a destination market center. In situations where the 
Exchange's disseminated bid or offer is inferior to the NBBO price, 
the Phlx XL II system will contemporaneously route an order marked 
as an ISO to each away market disseminating prices better than the 
Exchange's price, for the lesser of: (a) The disseminated size of 
such away markets, or (b) the order size and, if order size remains 
after such routing, trade at the Exchange's disseminated bid or 
offer up to its disseminated size. If contracts still remain 
unexecuted after routing, they are posted on the book. Once on the 
book, should the order subsequently be locked or crossed by another 
market center, the Phlx XL II system will not route the order to the 
locking or crossing market center, except as specified below.

    The Exchange is rewording the above language in proposed new Rule 
1093(a). The Exchange continues to reflect the two routing strategies, 
FIND and SRCH and notes that the two routing strategies

[[Page 16710]]

will be explained in more detail below. The Exchange also proposes to 
note that an order may be marked Do Not Route or ``DNR.'' This concept 
does not exist in the current introductory paragraph although it is 
discussed later in the proposed rule. The Exchange proposes to add the 
concept of DNR at the beginning of proposed Rule 1093 to make clear up-
front that this option is available when selecting a routing strategy. 
The Exchange is rewriting this initial paragraph to introduce concepts 
which are contained throughout the rule text in this initial paragraph. 
The term ``Immediate or Cancel'' is being defined as ``IOC'' within 
this paragraph for ease of reference.
    The Exchange is adding the following sentences to the introductory 
sentence for clarity, to define terms and introduce universal concepts, 
``For purposes of this rule, the Phlx's best bid or offer or ``PBBO'' 
does not include All-or-None Orders \7\ or stop orders \8\ which have 
not been triggered and the ``internal PBBO'' shall refer to the actual 
better price of an order resting on Phlx's Order Book, which is not 
displayed, but available for execution, excluding All-or-None Orders.'' 
This is the case today, non-displayed order types are not reflected in 
the Exchange's disseminated PBBO, rather the actual Order Book or 
``internal PBBO'' represents both displayed and non-displayed order 
types on the Order Book. The Exchange will utilize the terms ``PBBO'' 
and ``internal PBBO,'' as explained herein, throughout the rule.
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    \7\ An All-or None Order may only be submitted by a public 
customer. All-or-None Orders are non-displayed and non-routable. 
All-or-None Orders are executed in price-time priority among all 
public customer orders if the size contingency can be met. The 
Acceptable Trade Range protection in Rule 1099(a) is not applied to 
All-Or-None Orders. See Phlx Rule 1093.
    \8\ A stop order is a limit or market order to buy or sell at a 
limit price when a trade or quote on the Exchange for a particular 
option contract reaches a specified price. A stop-market or stop-
limit order shall not be triggered by a trade that is reported late 
or out of sequence or by a complex order trading with another 
complex order.
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    Generally, the Exchange proposes, for purposes of this rule, to 
provide an explanation of the Route Timer and remove detail concerning 
the Route Timer throughout the rule to avoid repetitiveness.\9\ The 
Exchange proposes to add in this introductory paragraph, ``For purposes 
of this rule, a Route Timer shall not exceed one second \10\ and shall 
begin at the time orders are accepted into the System, and the System 
will consider whether an order can be routed at the conclusion of each 
Route Timer.'' The Exchange believes that this additional language will 
assist market participants in understanding the manner in which this 
term is used throughout this rule.\11\ The Route Timer is currently set 
at 200 milliseconds, which the Exchange has determined is a reasonable 
time period to gather additional interest on the Exchange before 
routing away. The Route Timer is intended to attract additional 
liquidity, much like an auction. The Exchange would issue a notice if 
it were to change the timing of the Route Timer. If the Exchange were 
to select a time which exceeds 1 second it would be required file a 
rule proposal with the Commission.
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    \9\ The Exchange proposes to remove the term ``not to exceed one 
second'' throughout the Rule to avoid repeating this timeframe which 
the Exchange proposes to identify at the beginning of Rule 1093.
    \10\ The Exchange notes that the Route Timer shall not exceed 
one second in this paragraph. The Exchange proposes to remove this 
text throughout the rule to avoid repetitiveness.
    \11\ Proposed new Rule 1093(a) would provide, ``Phlx offers two 
routing strategies, FIND and SRCH. Each of these routing strategies 
will be explained in more detail below. An order may in the 
alternative be marked Do Not Route or ``DNR''. The Exchange notes 
that for purposes of this rule the System will route FIND and SRCH 
Orders with no other contingencies. Immediate or Cancel (``IOC'') 
Orders will be cancelled immediately if not executed, and will not 
be routed. The System checks the Order Book for available contracts 
for potential execution against the FIND or SRCH orders. After the 
System checks the Order Book for available contracts, orders are 
sent to other available market centers for potential execution. When 
checking the Order Book, the System will seek to execute at the 
price at which it would send the order to an away market. For 
purposes of this rule, the Phlx's best bid or offer or ``PBBO'' does 
not include All-or-None Orders or stop orders which have not been 
triggered and the ``internal PBBO'' shall refer to the actual better 
price of an order resting on Phlx's Order Book, which is not 
displayed, but available for execution, excluding All-or-None 
Orders. For purposes of this rule, a Route Timer shall not exceed 
one second and shall begin at the time orders are accepted into the 
System, and the System will consider whether an order can be routed 
at the conclusion of each Route Timer. Finally, for purposes of this 
rule, ``exposure'' or ``exposing'' an order shall mean a 
notification sent to participants with the price, size, and side of 
interest that is available for execution. An order exposure alert is 
sent if the order size is modified. Exposure notifications will be 
sent to participants in accordance with the routing procedures 
described in Rule 1093(a)(iii) below except if an incoming order is 
joining an already established PBBO price when the ABBO is locked or 
crossed with the PBBO, in which case such order will join the 
established PBBO price and no exposure notification will be sent. 
For purposes of this rule Phlx's opening process is governed by Rule 
1017 and includes an opening after a trading halt (``Opening 
Process''). For purposes of this rule, the term ``Public Customer'' 
means a person or entity that is not a broker or dealer in 
securities and is not a professional as defined within Rule 
1000(b)(14).''
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    Also, for purposes of this rule, ``exposure'' or ``exposing'' an 
order shall mean a ``notification sent to participants with the price, 
size, and side of interest that is available for execution.'' The 
Exchange also proposes to add the following language to the end of this 
paragraph, ``Exposure notifications will be sent to participants in 
accordance with the routing procedures described in Rule 1093(a)(iii) 
below except if an incoming order is joining an already established 
PBBO price when the ABBO is locked or crossed with the PBBO, in which 
case such order will join the established PBBO price and no exposure 
notification will be sent.'' Also the Exchange proposes to add ``An 
order exposure alert is sent if the order size is modified.'' \12\ The 
Exchange is adding this language to make clear the manner in which 
exposure notifications are handled today and when the exposure alert is 
sent. Also, the proposal seeks to make clear that an exposure 
notification is not being sent in cases where the incoming order joins 
a previously displayed price when the ABBO is locked or crossed with 
the PBBO. Today, the Exchange executes any response at a price at or 
better than the ABBO on a first come, first served basis prior to 
routing the order to an away market in accordance with the rules 
currently in effect in Rule 1080(m). If a response is received which is 
executable against the full volume of the order, it may execute 
immediately. Since the order was filled, the Route Timer no longer 
exists because the order no longer exists. The Exchange noted in the 
rule change establishing order exposure that, ``Broadcasting the 
message to all market participants should promote broader awareness of, 
and provide increased opportunities for greater participation in, these 
executions and consequentially, facilitate the ability of the Exchange 
to bring together participants and encourage more robust competition 
for these orders. In addition, the proposal would continue to guarantee 
that orders will receive an execution that is at a price at least as 
good as the price disseminated by the best away market at the time the 
order was received.''\13\ The Exchange believes that the exposure 
notification is not necessary in a case where an incoming order joins 
an already established PBBO price when the ABBO is locked or crossed 
with the PBBO. This is because other orders previously established the 
PBBO on Phlx's Order Book. The established PBBO price is a disseminated 
price which is available to market participants. A second exposure 
message would reflect the same price as

[[Page 16711]]

the disseminated PBBO price and would not offer market participants new 
information. This change would conform the rule text to the System's 
operation.
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    \12\ Today, order exposures are sent if the order size is 
modified. The Exchange believes that adding this rule text will 
clarify the rule.
    \13\ See Securities and Exchange Release Act No. 68517 (December 
21, 2012), 77 FR 77134 (December 31, 2012) (SR-Phlx-2012-136).
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    The Exchange proposes to introduce a defined term ``Opening 
Process.'' The term would be defined as the Phlx opening process 
governed by Phlx Rule 1017 and would include an opening after a trading 
halt. Finally, the Exchange proposes for purposes of this rule to 
define a Public Customer as a person or entity that is not a broker or 
dealer in securities and is not a professional as defined within Phlx 
Rule 1000(b)(14). The Exchange proposes to replace references to the 
term ``customer'' with ``Public Customer'' throughout the rule.
    The following rule text exists in the current introductory 
paragraph to Rule 1080(m):

    In situations where the Exchange's disseminated bid or offer is 
inferior to the NBBO price, the Phlx XL II system will 
contemporaneously route an order marked as an ISO to each away 
market disseminating prices better than the Exchange's price, for 
the lesser of: (a) The disseminated size of such away markets, or 
(b) the order size and, if order size remains after such routing, 
trade at the Exchange's disseminated bid or offer up to its 
disseminated size. If contracts still remain unexecuted after 
routing, they are posted on the book. Once on the book, should the 
order subsequently be locked or crossed by another market center, 
the Phlx XL II system will not route the order to the locking or 
crossing market center, except as specified below.

    The Exchange proposes removing the above language because ISO 
orders are currently addressed within Phlx Rule 1083(h) and 1084(a). 
The Exchange makes references to ISO orders throughout proposed Rule 
1093. The manner in which an ISO is handled is sufficiently noted in 
other rules.\14\ The Exchange does not believe that this language is 
necessary. Similar to other order types, if contracts still remain 
unexecuted after routing, they are posted on the Order Book. Today, 
once on the Order Book, should the order subsequently be locked or 
crossed by another market center, the System will not route the order 
to the locking or crossing market center, except as specified within 
proposed Rule 1093.
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    \14\ Phlx Rule 1080 at Commentary .03 provides, ``Intermarket 
Sweep Order'' or ``ISO'' is a limit order that is designated as an 
ISO in the manner prescribed by the Exchange and is executed within 
the system by Participants at multiple price levels without respect 
to Protected Quotations of other Eligible Exchanges as defined in 
Rule 1083. ISOs are immediately executable within the Phlx XL II 
system or cancelled, and shall not be eligible for routing as set 
out in Rule 1080. Simultaneously with the routing of an ISO to the 
Phlx XL II system, one or more additional limit orders, as 
necessary, are routed by the entering party to execute against the 
full displayed size of any Protected Bid or Offer (as defined in 
Rule 1083(n)) in the case of a limit order to sell or buy with a 
price that is superior to the limit price of the limit order 
identified as an ISO. These additional routed orders must be 
identified as ISOs. See also Phlx 1083 and 1084(a).
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    The Exchange is not substantively amending the paragraph in new 
proposed Rule 1093(a)(i) which is currently at Rule 1080(m)(i). The 
Exchange is predominately maintaining the language with some slight 
changes in word choice that the Exchange believes makes the paragraph 
easier to read.\15\
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    \15\ Proposed new Rule 1093(a)(i) would provide, ``Priority of 
Routed Orders. Orders sent to other markets do not retain time 
priority with respect to other orders in the System and the System 
shall continue to execute other orders while routed orders are away 
at another market center. Once routed by the System, an order 
becomes subject to the rules and procedures of the destination 
market including, but not limited to, order cancellation. A routed 
order can be for less than the original incoming order's size. If a 
routed order is subsequently returned, in whole or in part, that 
routed order, or its remainder, shall receive a new time stamp 
reflecting the time of its return to the System, unless any portion 
of the original order remains on the System, in which case the 
routed order shall retain its timestamp and its priority.''
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    Rule 1080(m)(ii) is being relocated without change to proposed new 
Rule 1093(a)(ii). The Exchange is not substantively amending the 
paragraph in new proposed Rule 1093(a)(ii)(A) which is currently at 
Rule 1080(m)(iii)(A).\16\
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    \16\ Proposed new Rule 1093(a)(ii) would provide, ``Entering 
member organizations whose orders are routed to away markets shall 
be obligated to honor such trades that are executed on away markets 
to the same extent they would be obligated to honor a trade executed 
on the Exchange.''
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    Rules 1080(m)(iii)(B)-(G) are being relocated without change to 
proposed new Rule 1093(a)(ii)(B)-(G), respectively.
DNR Orders
    The Exchange proposes to relocate current Rule 1080(m)(iv)(A) to 
proposed new Rule 1093(a)(iii)(A) and amend the rule. Proposed Rule 
1093(a)(iii) would provide, ``The following order types are 
available:'' Current Rule 1080(m)(iv)(A) states,

    DNR Order. A DNR order will never be routed outside of Phlx 
regardless of the prices displayed by away markets. A DNR order may 
execute on the Exchange at a price equal to or better than, but not 
inferior to, the best away market price but, if that best away 
market remains, the DNR order will remain in the Phlx book and be 
displayed at a price one minimum price variation inferior to that 
away best bid/offer. The Exchange shall immediately upon receipt of 
the DNR order expose the order at the NBBO to Phlx XL II 
participants and other market participants. Any incoming order 
interacting with such a resting DNR order will receive the best away 
market price. Should the best away market change its price, or move 
to an inferior price level, the DNR order will automatically re-
price from its one minimum price variation inferior to the original 
away best bid/offer price to one minimum trading increment away from 
the new away best bid/offer price or its original limit price, and 
expose such orders at the NBBO to Phlx XL II participants and other 
market participants only if the re-priced order locks or crosses the 
ABBO. Once priced at its original limit price, it will remain at 
that price until executed or cancelled. Should the best away market 
improve its price such that it locks or crosses the DNR order limit 
price, the Exchange will execute the resulting incoming order that 
is routed from the away market that locked or crossed the DNR order 
limit price.

    The Exchange proposes to add a new sentence to proposed new Rule 
1093(a)(iii)(A) that provides, ``If the DNR Order is locking or 
crossing the ABBO, the DNR Order shall be entered into the Order Book 
at the ABBO price and displayed one minimum price variation (``MPV'') 
\17\ away from the ABBO.'' An order that the entering party has elected 
not to make eligible for routing will be re-priced to the current 
national best offer (for bids) or the current national best bid (for 
offers) and displayed at one MPV above (for offers) or below (for bids) 
the national best price. The Exchange displays the DNR Order at one MPV 
away in compliance with Regulation NMS. An order will not be executed 
at a price that trades through another market or displayed at a price 
that would lock or cross another market. An order that is designated by 
a member as non-routable will be re-priced in order to comply with 
applicable Trade-Through and Locked and Crossed Markets 
restrictions.\18\ This proposed new sentence will add greater 
transparency as to the manner in which the Exchange handles locked and 
cross orders today and re-prices those orders. The Exchange proposes to 
amend the current sentence which states, ``The Exchange shall 
immediately upon receipt of the DNR Order expose the order at the NBBO 
to Phlx XL II participants and other market participants'' to provide, 
``The Exchange shall immediately expose the order at the ABBO to 
participants, provided the option series has opened for trading.'' The 
Exchange notes that inserting ``ABBO'' more clearly provides that the 
away market is considered because the local book has already been 
exhausted

[[Page 16712]]

in this scenario. The Exchange proposes to amend the next sentence 
which provides, ``Any incoming order interacting with such a resting 
DNR Order will receive the best away market price.'' The Exchange 
proposes to instead state, ``Any incoming order interacting with such a 
resting DNR Order will execute at the ABBO price, unless the ABBO is 
improved to a price which crosses the DNR's displayed price, in which 
case the incoming order will execute at the previous ABBO price.'' The 
Exchange is expanding this language because it is accounting for a 
scenario where an ABBO was disseminated after the crossing condition 
took place. This is a change to reflect the current practice and amend 
the rule text to conform to the manner in which the System is 
operating. While the ABBO can improve, when it crosses the DNR Order 
the updated ABBO cannot be utilized to execute the DNR Order. The 
Exchange is amending the sentence, ``Should the best away market change 
its price, or move to an inferior price level, the DNR order will 
automatically re-price from its one minimum price variation inferior to 
the original away best bid/offer price to one minimum trading increment 
away from the new away best bid/offer price or its original limit 
price, and expose such orders at the NBBO to Phlx XL II participants 
and other market participants only if the re-priced order locks or 
crosses the ABBO'' to ``Should the best away market change its price to 
an inferior price level, the DNR Order will automatically re-price from 
its one minimum price variation inferior to the original away best bid/
offer price to one minimum trading increment away from the new away 
best bid/offer price or its original limit price, and expose such 
orders at the ABBO to participants only if the re-priced order locks or 
crosses the ABBO.'' The Exchange is rewording this sentence because the 
NBBO by definition includes the PBBO. However, if the DNR Order locks 
or crosses the PBBO, the DNR Order will immediately execute. Only if 
the DNR Order locks or crosses the ABBO will the DNR Order be exposed. 
This amendment reflects current practice.
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    \17\ Any reference to minimum price variance in the rules will 
be replaced with ``MPV.''
    \18\ Also, an order that is designated by the member as routable 
will be routed in compliance with applicable Trade-Through and 
Locked and Crossed Markets restrictions.
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    The proposed rule text is intended to bring more clarity to the 
current rule regarding DNR Orders.\19\ The Exchange believes that 
adding context around a DNR Order when that order is locked or crossed 
will provide more transparency to the current rule. The Exchange notes 
that consistent with FIND and SRCH Orders, a DNR Order that is locked 
or crossed will display one MPV away from the ABBO. The Exchange 
believes that the proposed language will benefit market participants 
because it provides greater information.
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    \19\ Proposed new Rule 1093(a)(iii)(A) would provide, ``DNR 
Order. A DNR Order will never be routed outside of Phlx regardless 
of the prices displayed by away markets. A DNR Order may execute on 
the Exchange at a price equal to or better than, but not inferior 
to, the best away market price but, if that best away market 
remains, the DNR Order will remain in the Phlx Order Book and be 
displayed at a price one MPV inferior to that away best bid/offer. 
If the DNR Order is locking or crossing the ABBO, the DNR Order 
shall be entered into the Order Book at the ABBO price and displayed 
one MPV away from the ABBO. The Exchange shall immediately expose 
the order at the ABBO to participants, provided the option series 
has opened for trading. Any incoming order interacting with such a 
resting DNR Order will execute at the ABBO price, unless the ABBO is 
improved to a price which crosses the DNR's displayed price, in 
which case the incoming order will execute at the previous ABBO 
price. Should the best away market change its price to an inferior 
price level, the DNR Order will automatically re-price from its one 
minimum price variation inferior to the original away best bid/offer 
price to one minimum trading increment away from the new away best 
bid/offer price or its original limit price, and expose such orders 
at the ABBO to participants only if the re-priced order locks or 
crosses the ABBO. Once priced at its original limit price, it will 
remain at that price until executed or cancelled. Should the best 
away market improve its price such that it locks or crosses the DNR 
Order limit price, the Exchange will execute the resulting incoming 
order that is routed from the away market that locked or crossed the 
DNR Order limit price.''
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FIND Order
    Current Rule 1080(m)(iv)(B) states,

    FIND Order. A FIND order is an order that is routable upon 
receipt during open trading. Only a customer FIND order on the Phlx 
XL II book, whether it is received prior to the opening or it is a 
GTC FIND order from a prior day, may be routed as part of the 
Opening Process. Non-customer FIND orders are not eligible for 
routing during the Opening Process. Once the Opening Process is 
complete, any FIND order is either eligible to trade at the Phlx 
price or placed on the Phlx book either at its limit price or at a 
price that is one Minimum Price Variation (``MPV'') from the ABBO 
price if it would otherwise lock or cross the ABBO. Such FIND order 
will not be eligible for routing until the next time the option 
series is subject to a new Opening Process.

    The Exchange proposes to relocate this paragraph to proposed new 
Rule 1093(a)(iii)(B) and amend this language to provide, ``A FIND Order 
is an order that is: (i) Routable at the conclusion of an Opening 
Process; and (ii) routable upon receipt during regular trading, after 
an option series is open.'' The Exchange believes that expanding the 
current language to add the reference to an Opening Process as well as 
intra-day is more inclusive and will add clarity to the rule text which 
follows this introductory paragraph. The remainder of new Rule 
1093(a)(iii)(B) includes new rule text that is proposed to add context 
to the rule text which follows this paragraph. The Exchange proposes to 
state, ``FIND Orders submitted after an Opening Process initiate their 
own Route Timers and are routed in the order in which their Route 
Timers end.'' Specifically, each order begins a separate Route Timer, 
which cannot be early terminated. Each individual order's Route Timer 
must complete before the order can route to an away market. The 
Exchange believes that this language makes clear how the FIND Order is 
prioritized today for routing purposes, which is sequentially based on 
the Route Timer. Finally, the Exchange proposes to state in the 
introductory paragraph that the System handles marketable and non-
marketable FIND Orders differently. Specifically, FIND Orders that are 
not marketable with ABBO upon receipt will be treated as DNR for the 
remainder of the trading day.\20\
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    \20\ The remainder of the trading day is intended to indicate 
that good-till-cancel and good-till-day orders remaining on the 
Order Book would be able to route the next trading day but not for 
the remainder of the current trading day. The tags would be retained 
on those orders.
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    The remainder of the introductory paragraph at current Rule 
1080(m)(iv)(B) is proposed to be relocated within new Rule 
1093(a)(iii)(B)(1). The Exchange adds the context, ``With respect to an 
Opening Process'' before the current text in Rule 1080(m)(iv)(B) 
starting at the second sentence. The Exchange is amending the next 
sentence to state ``at the conclusion of an Opening Process'' to 
further add context that this routing takes places during an Opening 
Process. The current rule text which states, ``Once the Opening Process 
is complete, any FIND order is either eligible to trade at the Phlx 
price or placed on the Phlx book either at its limit price or at a 
price that is one Minimum Price Variation (``MPV'') from the ABBO price 
if it would otherwise lock or cross the ABBO'' is being reworded. The 
Exchange proposes to state, ``At the end of an Opening Process, any 
FIND Order that is priced through the Opening Price,\21\ pursuant to 
Phlx Rule 1017(a)(iii), will be cancelled, and any FIND Order that is 
at or inferior to the Opening Price will be executed pursuant to Rule 
1017(k).'' \22\ This

[[Page 16713]]

proposed sentence describes which FIND Orders would be cancelled, which 
is currently not described in the rules, although it is the current 
practice. The sentence also references back to Rule 1017(k) for 
execution during an Opening Process. FIND Orders received after an 
Opening Process are subject to other portions of this rule such as 
proposed Rule 1093(a)(iii)(B)(3) and (4), which language is discussed 
below and was relocated from the current Rule 1080(m). Phlx Rule 
1017(k) explains the various processes by which the Exchange will open 
an options series and route orders at the conclusion of an Opening 
Process. The language contained in Rule 1017(k) with respect to routing 
during an Opening Process is much more explicit than the broad language 
contained in Rule 1080(m). To avoid any confusion, the Exchange 
proposes to remove any language from Rule 1080(m), which explains the 
routing process during the opening, and simply refer to the governing 
rule. Proposed new Rule 1093(a)(iii)(B)(2) provides a further 
description of when FIND Orders would rest on the Order Book and the 
reason the order would rest.
---------------------------------------------------------------------------

    \21\ Opening Price is defined in Phlx Rule 1017(a)(iii).
    \22\ Proposed new Rule 1093(a)(iii)(B)(1) would provide, ``With 
respect to an Opening Process, only a Public Customer and 
professional FIND Order on the Order Book, whether it is received 
prior to the opening or it is a GTC FIND Order from a prior day, may 
be routed at the conclusion of an Opening Process. Non-Public 
Customer and non-professional FIND Orders are not eligible for 
routing at the conclusion of an Opening Process. At the end of an 
Opening Process, any FIND Order that is priced through the Opening 
Price, pursuant to Phlx Rule 1017(a)(iii), will be cancelled, and 
any FIND Order that is at or inferior to the Opening Price will be 
executed pursuant to Rule 1017(k). Such FIND Order will not be 
eligible for routing until the next time the option series is 
subject to a new Opening Process.''
---------------------------------------------------------------------------

    The Exchange is adding a new paragraph that is not currently in 
Rule 1080(m) at proposed new Rule 1093(a)(iii)(B)(2). The new proposed 
rule text would read as follows:

    With respect to an Opening Process, if during a route timer at 
the conclusion of an Opening Process pursuant to Rule 1017(k) 
markets move such that the FIND Order is executable against Exchange 
interest, the FIND Order will immediately execute. If during a route 
timer, ABBO markets move such that the FIND Order is no longer 
marketable against the ABBO nor marketable against the PBBO, the 
FIND Order will post at its limit price. If the FIND Order is locked 
or crossed by away quotes, it will route at the completion of the 
route timer. If the ABBO worsens but remains better than the PBBO, 
the FIND Order will reprice and be re-exposed at the new price(s) 
without interrupting the route timer.

    The Exchange currently does not specify in Rule 1080(m) a 
circumstance, when, during an Opening Process route timer, markets move 
and the FIND Order becomes executable against resting interest on the 
Exchange's Order Book. The Exchange proposes to add this scenario as 
well as the outcome. Further, this new language addresses the 
circumstance when during the Opening Process route timer the ABBO moves 
such that the FIND Order is no longer marketable anywhere, then it 
would post to the book. Finally, a locked or crossed FIND Order would 
route at the completion of the route timer, however if the ABBO worsens 
but is better than the PBBO, the FIND order will reprice and be re-
exposed at the new price(s) and the route timer would continue without 
interruption.\23\ The Exchange rules currently does not address what 
happens during the route timer in these situations. The Exchange 
believes that adding this language to proposed new Rule 1093 will bring 
greater clarity to the Rulebook and provide market participants with 
additional information as to the manner in which a FIND Order will be 
handled during the route timer.
---------------------------------------------------------------------------

    \23\ Proposed new Rule 1093(a)(iii)(B)(2) would provide, ``With 
respect to an Opening Process, if during a route timer at the 
conclusion of an Opening Process pursuant to Rule 1017(k) markets 
move such that the FIND Order is executable against Exchange 
interest, the FIND Order will immediately execute. If during a route 
timer, ABBO markets move such that the FIND Order is no longer 
marketable against the ABBO nor marketable against the PBBO, the 
FIND Order will post at its limit price. If the FIND Order is locked 
or crossed by away quotes, it will route at the completion of the 
route timer. If the ABBO worsens but remains better than the PBBO, 
the FIND Order will reprice and be re-exposed at the new price(s) 
without interrupting the route timer.''
---------------------------------------------------------------------------

    The Exchange is relocating the second paragraph within Rule 
1080(m)(iv)(B) to proposed new Rule 1093(a)(iii)(B)(3).\24\ The 
proposed new rule text reads as follows:
---------------------------------------------------------------------------

    \24\ The Exchange proposes to replace ``not eligible for 
routing'' with ``treated as a DNR'' for additional clarity. The 
current rule text reads as follows: A FIND order received during 
open trading that is not marketable against the PBBO or the ABBO 
will be entered into the Phlx XL II book at its limit price. The 
FIND order will not be eligible for routing until the next time the 
option series is subject to a new Opening Process.

    A FIND Order received after an Opening Process that is not 
marketable against the PBBO or the ABBO will be entered into the 
Order Book at its limit price. The FIND Order will be treated as DNR 
---------------------------------------------------------------------------
for the remainder of the trading day.

    The Exchange is also relocating the third paragraph within Rule 
1080(m)(iv)(B) to proposed new Rule 1093(a)(iii)(B)(4).\25\ The 
proposed new rule text reads as follows:
---------------------------------------------------------------------------

    \25\ Currently, the rule text reads as follows: ``A FIND order 
received during open trading that is marketable against the PBBO 
when the ABBO is inferior to the PBBO will be traded at the Exchange 
at the PBBO price. If the FIND order has size remaining after 
exhausting the PBBO, it may: (1) Trade at the next PBBO price (or 
prices) if the order price is locking or crossing that price (or 
prices) up to and including the ABBO price, or (2) be entered into 
the Phlx XL II book at its limit price, or one MPV away from the 
ABBO if locking or crossing the ABBO. The FIND order will not be 
eligible for routing until the next time the option series is 
subject to a new Opening Process.''

    A FIND Order received after an Opening Process that is 
marketable against the internal PBBO when the ABBO is inferior to 
the internal PBBO will be traded at the Exchange at or better than 
the PBBO price. If the FIND Order has size remaining after 
exhausting the PBBO, it may: (1) Trade at the next PBBO price (or 
prices) if the order price is locking or crossing that price (or 
prices) up to and including the ABBO price, (2) be entered into the 
Order Book at its limit price, or (3) if locking or crossing the 
ABBO, be entered into the Order Book at the ABBO price and displayed 
one MPV away from the ABBO. The FIND Order will be treated as DNR 
---------------------------------------------------------------------------
for the remainder of the trading day.

    The Exchange is adding the newly defined term ``internal PBBO'' in 
place of PBBO to account for All-or-None Order treatment. The Exchange 
also notes, the internal PBBO will be traded at the Exchange at or 
better than the PBBO price because All-or-None Orders are non-displayed 
orders that are available for execution on the Order Book. The addition 
of this specificity will make clear that a market participant could 
receive a better execution because the all-or-none resting order is not 
displayed. The Exchange is amending the rule text which currently 
states, ``The FIND order will not be eligible for routing until the 
next time the option series is subject to a new Opening Process'' to 
``The FIND Order will be treated as DNR for the remainder of the 
trading day.'' This language is being amended to conform to the current 
System practice. As noted in the introductory paragraph to FIND Orders, 
these orders that are not marketable with the ABBO upon receipt, rather 
these orders will be treated as DNR for the remainder of the trading 
day. FIND Orders that are marketable with ABBO at the time of receipt 
will not be eligible for routing until the next time the option series 
is subject to a new Opening Process. In this particular instance the 
order was marketable against the PBBO and therefore is marked DNR for 
the remainder of the trading day. The Exchange notes that because the 
FIND Order would not route, even if there was a reopening that it 
proposes to state that the FIND Order would be treated as DNR for the 
remainder of the trading day. The Exchange is making this adjustment to 
conform its rule text to its practice.
    The Exchange is amending the fourth paragraph within Rule 
1080(m)(iv)(B) and relocating it to proposed new Rule

[[Page 16714]]

1093(a)(iii)(B)(5).\26\ Proposed new Rule 1093(a)(iii)(B)(5) would read 
as follows:
---------------------------------------------------------------------------

    \26\ The current rule text provides, ``A FIND order received 
during open trading that is marketable against the PBBO when the 
ABBO is equal to the PBBO will be traded at the Exchange at the 
PBBO. If the FIND order has size remaining after exhausting the 
PBBO, it will initiate a Route Timer, not to exceed one second, and 
expose the FIND order at the NBBO to allow Phlx XL II participants 
and other market participants an opportunity to interact with the 
remainder of the FIND order. During the Route Timer, the FIND order 
will be included in the PBBO at a price one MPV away from the ABBO. 
If, during the Route Timer, any new interest arrives opposite the 
FIND order that is equal to or better than the ABBO price, the FIND 
order will trade against such new interest at the ABBO price.

    A FIND Order received after an Opening Process that is 
marketable against the internal PBBO when the ABBO is equal to the 
internal PBBO will be traded at the Exchange at the internal PBBO. 
If the FIND Order has size remaining after exhausting the PBBO, it 
will initiate a Route Timer, and expose the FIND Order at the ABBO 
to allow market participants an opportunity to interact with the 
remainder of the FIND Order. During the Route Timer, the FIND Order 
will be included in the PBBO at a price one MPV away from the ABBO. 
If, during the Route Timer, any new interest arrives opposite the 
FIND Order that is equal to or better than the ABBO price, the FIND 
Order will trade against such new interest at the ABBO price. If 
during the Route Timer, the ABBO moves and crosses the FIND Order, 
any new interest arrives opposite the FIND Order that is marketable 
---------------------------------------------------------------------------
against the FIND Order will trade at the FIND Order price.

    The Exchange is adding the word ``internal'' before PBBO several 
times within this paragraph as well to account for All-or-None Orders 
resting on the Order Book. The word ``internal'' is meant to represent 
interest on the book, including non-displayed interest. The Route Timer 
was described in the current paragraph, as well as the descriptive 
language `not to exceed one second.'' The Exchange proposes to remove 
the descriptive language here because it is repetitive. Thus, the 
Exchange is amending the following sentence, ``If the FIND order has 
size remaining after exhausting the PBBO, it will initiate a Route 
Timer, not to exceed one second, and expose the FIND order at the NBBO 
to allow market participants an opportunity to interact with the 
remainder of the FIND Order'' to provide ``If the FIND Order has size 
remaining after exhausting the PBBO, it will initiate a Route Timer, 
and expose the FIND Order at the ABBO to allow market participants an 
opportunity to interact with the remainder of the FIND Order.'' The 
Exchange notes that use of the term ABBO is a more accurate 
representation than NBBO because the local market has been exhausted 
and this portion of the rule is describing the FIND Order reacting to 
the ABBO. Finally, the Exchange proposes to add the following sentence 
to the end of this paragraph, ``If during the Route Timer, the ABBO 
moves and crosses the FIND Order, any new interest that arrives 
opposite the FIND Order that is marketable against the FIND Order will 
trade at the FIND Order price.'' This new sentence will address the 
specific situation where the ABBO crosses the FIND Order and the price 
at which the FIND Order would trade. This situation is not currently 
addressed in Rule 1080(m). If the away market price crosses the PBBO, 
the market is crossed and contra interest would execute at the price 
the order rested on the Order Book. If the away price locks the 
displayed price, the contra interest would execute at its displayed 
price in accordance with trade-through provisions. The price at which 
the order booked on Phlx is a valid execution price because of the 
crossed market condition present in this example. The Exchange notes 
that in this situation the away market crossed Phlx's displayed market 
price. The new language will provide market participants with greater 
transparency as to the manner in which the System will handle a FIND 
Order in that particular situation. The Exchange believes that this 
amendment brings more specificity to the current rule.
    The Exchange is amending the fifth paragraph within Rule 
1080(m)(iv)(B) and relocating it to proposed new Rule 
1093(a)(iii)(B)(6). The current rule text reads as follows:

    In the circumstances described in the preceding paragraph, what 
happens to a FIND order after the timer expires depends on the ABBO 
price at that time. If, at the end of the Route Timer, the ABBO is 
still at the same or a better price, the FIND order will route to 
the away market up to a size equal to the lesser of either (a) the 
away market's size or (b) the remaining size of the FIND order. If 
the FIND order still has remaining size after routing, it will be 
entered into the Phlx XL II book and posted at the same price at 
which it was routed. The FIND order will not be eligible for routing 
until the next time the option series is subject to a new Opening 
Process.

    The Exchange is proposing to eliminate the first sentence, ``In the 
circumstances described in the preceding paragraph, what happens to a 
FIND order after the timer expires depends on the ABBO price at that 
time'' because this text is unnecessary and does not provide any new 
information. The Exchange is replacing the words, ``the ABBO is still 
at the same or better price'' with ``the FIND Order is still marketable 
with the ABBO'' in the second sentence of the current rule text because 
the Exchange believes that this phrase better defines the contingency 
for when the FIND Order will route. The Exchange is amending the 
penultimate sentence to provide that the FIND Order may still trade at 
a PBBO price within the Order Book or rest on the Order Book. The 
Exchange is accounting for the possibility that the FIND Order still 
has the possibility of executing or posting to the book. The Exchange 
is also clarifying that only if size remains will the FIND Order not be 
eligible for routing until the next time the option series is subject 
to a new Opening Process. The Exchange believes that this will provide 
additional context to this statement in light of the rest of the rule 
text in this paragraph. Finally, the Exchange proposes to add the 
following sentence for clarity, ``The remaining size of a non-Public 
Customer and non-professional FIND Order will be cancelled upon an 
intra-day trading halt.'' The current rule does not account for an 
intra-day trading halt. Public Customer and professional \27\ orders 
are held by the System until trading resumes, at which point they are 
handled at their original limit price. At the conclusion of an Opening 
Process, the System will only route non-contingency Public Customer and 
professional orders.\28\ The Exchange notes that it cancels all non-
routable interest at the time of an intra-day trading halt. When the 
Exchange re-opens the market, an Opening Process pursuant to Rule 1017 
will occur and at that time, only Public Customer and professional 
orders would be subject to routing. This language provides more 
transparency for market participants as to trading halt situations.\29\
---------------------------------------------------------------------------

    \27\ Professional is defined within Rule 1000(b)(14).
    \28\ See Phlx Rule 1017(k)(C)(6). The System will execute orders 
at the Opening Price that have contingencies (such as, without 
limitation, all-or-none) and non-routable orders, such as a ``Do Not 
Route'' or ``DNR'' Orders, to the extent possible.
    \29\ Proposed new Rule 1093(a)(iii)(B)(6) would provide, ``If, 
at the end of the Route Timer pursuant to subparagraph (5) above, 
the FIND Order is still marketable with the ABBO, the FIND Order 
will route to an away market up to a size equal to the lesser of 
either (1) an away market's size or (2) the remaining size of the 
FIND Order. If the FIND Order still has remaining size after 
routing, it will (i) trade at the next PBBO price or better, subject 
to the order's limit price, and, if contracts still remain 
unexecuted, the remaining size will be routed to away markets 
disseminating the same price as the PBBO, or (ii) be entered into 
the Order Book and posted either at its limit price or re-priced one 
MPV away if the order would otherwise lock or cross the ABBO. If 
size still remains, the FIND Order will not be eligible for routing 
until the next time the option series is subject to a new Opening 
Process. The remaining size of a non-Public Customer and non-
professional FIND Order will be cancelled upon an intra-day trading 
halt.''

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

[[Page 16715]]

    The Exchange proposes to provide an example for proposed Rule 
---------------------------------------------------------------------------
1093(B)(6).

    Example 1: Find Order received when (internal PBBO and ABBO 
equal)--Proposed Rule 1093(a)(iii)(B)(6)

MPV: Penny
Away BBO: 4.30 (100) x 4.40 (20)
PBBO: 4.10 x 4.60
Enter Public Customer FIND Order to sell 50 @ 4.40

PBBO (reprices) 4.10 x 4.40
ABBO (unchanged) 4.30 x 4.40
Enter Firm FIND Order to buy 100 @ 4.40

    Conclusion:
    The Find Order would execute 50 contracts against the Public 
Customer order immediately.
    Subsequently, a Route Timer would initiate and the 50 remaining 
contracts from the FIND Order would be exposed @ 4.40 via an 
exposure notification over market data feeds and protocols.
    At the conclusion of the Route Timer, the FIND Order would route 
20 contracts to the away market BBO @ 4.40.
    The remaining volume of the FIND Order would rest on the Order 
Books and display 30 contracts @ 4.40.

    The Exchange is amending the sixth paragraph within Rule 
1080(m)(iv)(B) and relocating it to proposed new Rule 
1093(a)(iii)(B)(7). The rule text currently reads as follows:

    A FIND order received during open trading that is marketable 
against the ABBO when the ABBO is better than the PBBO will initiate 
a Route Timer not to exceed one second, and expose the FIND order at 
the NBBO to allow Phlx XL II participants and other market 
participants an opportunity to interact with the FIND order. During 
the Route Timer, the FIND order will be included in the PBBO at a 
price one MPV away from the ABBO. If, during the Route Timer, any 
new interest arrives opposite the FIND order that is equal to or 
better than the ABBO price, the FIND order will trade against such 
new interest at the ABBO price.

    The Exchange is adding the word ``internal'' before PBBO several 
times within this paragraph as well to account for All-or-None Orders 
resting on the Order Book, which are non-displayed. The word 
``internal'' is meant to represent interest on the Order Book, 
including non-displayed interest. The Route Timer was described in the 
current paragraph, as well as the descriptive language ``not to exceed 
one second.'' The Exchange proposes to remove the descriptive language 
here as it is repetitive. The Exchange is replacing the ``NBBO'' with 
``ABBO'' so that the first sentence of new Rule 1093(a)(iii)(B)(7) 
would read, ``A FIND Order received after an Opening Process that is 
marketable against the ABBO when the ABBO is better than the internal 
PBBO will initiate a Route Timer, and expose the FIND Order at the ABBO 
to allow participants and other market participants an opportunity to 
interact with the FIND Order.'' The Exchange believes that ABBO is a 
more accurate representation than NBBO because the local market has 
been exhausted. Finally, the Exchange is adding more clarifying 
language in the penultimate last sentence to provide, ``During the 
Route Timer, the FIND Order will be included in the PBBO at a price 
that is the better of one MPV away from the ABBO or the PBBO. '' \30\ 
The addition of the proposed italicized new text accounts for the 
differences that may exist between the local and away markets. Market 
participants would receive the best price and this language more 
accurately reflects this distinction.\31\
---------------------------------------------------------------------------

    \30\ The italicized language represents proposed new rule text.
    \31\ Proposed new Rule 1093(a)(iii)(B)(7) would provide, ``A 
FIND Order received after an Opening Process that is marketable 
against the ABBO when the ABBO is better than the internal PBBO will 
initiate a Route Timer, and expose the FIND Order at the ABBO to 
allow participants and other market participants an opportunity to 
interact with the FIND Order. During the Route Timer, the FIND Order 
will be included in the PBBO at a price that is the better of one 
MPV away from the ABBO or the PBBO. If, during the Route Timer, any 
new interest arrives opposite the FIND Order that is equal to or 
better than the ABBO price, the FIND Order will trade against such 
new interest at the ABBO price.''
---------------------------------------------------------------------------

    The Exchange is amending the seventh paragraph within Rule 
1080(m)(iv)(B) and relocating it to proposed new Rule 
1093(a)(iii)(B)(8). The rule text currently reads as follows:

    In the circumstances described in the preceding paragraph, what 
happens to a FIND order after the Route Timer expires depends on the 
ABBO price at that time. If, at the end of the Route Timer, the ABBO 
is still the best price, the FIND order will route to the away 
market(s) whose disseminated price is better than the PBBO, up to a 
size equal to the lesser of either: (a) The away markets' size, or 
(b) the remaining size of the FIND order. If the FIND order still 
has remaining size after such routing, it will (i) trade at the next 
PBBO price, subject to the order's limit price, and, if contracts 
still remain unexecuted, the remaining size will be routed to away 
markets disseminating the same price as the PBBO, or (ii) be entered 
into the Phlx XL II book and posted at its limit price. The Phlx XL 
II system will route and execute contracts contemporaneously at the 
end of the Route Timer. The FIND order will not be eligible for 
routing until the next time the option series is subject to a new 
Opening Process.

    The Exchange is eliminating the first sentence because it proposes 
to add a cross-reference to the prior subparagraph (7) within the new 
rule text. The Exchange is adding the phrase ``and is marketable with 
the FIND Order'' in the second sentence to add more context to when the 
order will route. The Exchange proposes to state, ``If, at the end of 
the Route Timer pursuant to subparagraph (7) above, the ABBO is still 
the best price and is marketable with the FIND Order,\32\ the order 
will route to the away market(s) whose disseminated price(s) is better 
than the PBBO, up to a size equal to the lesser of either: (1) The away 
markets' size, or (2) the remaining size of the FIND Order.'' The 
Exchange believes that the italicized new text better defines the 
contingency for when the FIND Order will route. Further, the Exchange 
proposes to amend the next sentence to provide, ``If the FIND Order 
still has remaining size after such routing, it will (i) trade at the 
PBBO price or better, subject to the order's limit price, and, if 
contracts still remain unexecuted, the remaining size will be routed to 
away markets disseminating the same price as the PBBO, or (ii) be 
entered into the Order Book and posted either at its limit price or re-
priced one MPV away if the order would otherwise lock or cross the 
ABBO.'' The Exchange believes that adding ``or better'' makes this 
statement accurate because the price can be better than the local 
market. The Exchange is also amending the rule to note that the order 
will reprice one MPV away if it locks or crosses the ABBO. This is the 
case today and the addition of this language makes this sentence more 
accurate because it accounts for a scenario where the market locks or 
crosses the ABBO. The Exchange is deleting this sentence, ``The Phlx XL 
II system will route and execute contracts contemporaneously at the end 
of the Route Timer.'' This sentence is not accurate because the FIND 
Order may not route at the end of the Route Timer. The Exchange's 
System has operated as explained herein. The current rule text does not 
provide for the possibility that the FIND Order may not route at the 
end of the Route Timer. This language will provide an accurate 
description of the current System. The Exchange is also clarifying that 
only if size remains will the FIND Order not be eligible for routing 
until the next time the option series is subject to a new Opening 
Process. The Exchange believes that this will provide additional 
context to this statement in light of the rest of the rule text in this 
paragraph. Finally, the Exchange proposes to add the following sentence 
for clarity, ``The remaining size of a non-Public Customer and non-
professional FIND Order will be cancelled upon an intra-day trading 
halt.'' The current rule does not account

[[Page 16716]]

for an intra-day trading halt. Public Customer and professional orders 
are held by the System until trading resumes, at which point they are 
handled at their original limit price. At the conclusion of an Opening 
Process, the System will only route non-contingency Public Customer and 
professional orders. The Exchange notes that it cancels all non-
routable interest at the time of an intra-day trading halt. When the 
Exchange re-opens the market, an Opening Process pursuant to Rule 1017 
will occur and at that time, only Public Customer and professional 
orders would be subject to routing. This language provides more 
transparency for market participants as to halt situations.\33\
---------------------------------------------------------------------------

    \32\ The italicized language represents proposed new rule text.
    \33\ Proposed new Rule 1093(a)(iii)(B)(8) would provide, ``If, 
at the end of the Route Timer pursuant to subparagraph (7) above, 
the ABBO is still the best price and is marketable with the FIND 
Order, the order will route to the away market(s) whose disseminated 
price(s) is better than the PBBO, up to a size equal to the lesser 
of either: (1) The away markets' size, or (2) the remaining size of 
the FIND Order. If the FIND Order still has remaining size after 
such routing, it will (i) trade at the PBBO price or better, subject 
to the order's limit price, and, if contracts still remain 
unexecuted, the remaining size will be routed to away markets 
disseminating the same price as the PBBO, or (ii) be entered into 
the Order Book and posted either at its limit price or re-priced one 
MPV away if the order would otherwise lock or cross the ABBO. If 
size remains, the FIND Order will not be eligible for routing until 
the next time the option series is subject to a new Opening Process. 
The remaining size of a non-Public Customer and non-professional 
FIND Order will be cancelled upon an intra-day trading halt.''
---------------------------------------------------------------------------

    Finally, the Exchange is amending the last paragraph within Rule 
1080(m)(iv)(B) and relocating it to proposed new Rule 
1093(a)(iii)(B)(9). The rule text currently reads, ``A FIND Order that 
is routed to an away market will be marked as an ISO.'' The Exchange 
proposes to amend this sentence to state, ``A FIND Order that is routed 
to an away market(s) will be marked as an Intermarket Sweep Order 
``ISO'' and designed as an IOC order.'' The Exchange today marks these 
orders as IOC. Orders are routed as IOC so that they do not rest on the 
away market's order book. Unexecuted portions of the routed order would 
be returned to Phlx for further handling. Adding this detail provides 
greater transparency to the rules.
SRCH Order
    The first paragraph current Rule 1080(m)(iv)(C) provides,

    SRCH Order. A SRCH order is a customer order that is routable at 
any time. A SRCH order on the Phlx XL II book during the Opening 
Process (including a re-opening following a trading halt), whether 
it is received prior to the opening or it is a GTC SRCH order from a 
prior day, may be routed as part of the Opening Process. Once the 
Opening Process is complete, a SRCH order is eligible either to: (1) 
trade at the Phlx price if that price is equal to or better than the 
ABBO or, if the ABBO is better than the Phlx price, orders have been 
routed to better priced markets for their full size; or (2) be 
routed to better priced markets if the ABBO price is the best price, 
and/or (3) be placed on the Phlx XL II book at its limit price if 
not participating in the Phlx opening at the opening price and not 
locking or crossing the ABBO. Once on the book, the SRCH order is 
eligible for routing if it is locked or crossed by an away market 
(see below).

    The Exchange proposes to amend and relocate the first two sentences 
of Rule 1080(m)(iv)(C) into paragraph Rule 1093(a)(iii)(C). The 
Exchange proposes to add new rule text to the end of proposed Rule 
1093(a)(iii)(C) to provide, ``Orders initiate their own Route Timers 
and are routed in the order in which their Route Timers end.'' 
Specifically, each order begins a separate Route Timer, which cannot be 
early terminated. Each individual order's Route Timer must complete 
before the order can route to an away market. Additionally, a new Route 
Timer would commence at the conclusion of each Route Timer interval, 
provided the order is still available to trade. The Exchange believes 
that this language makes clear how the SRCH Order is prioritized today 
for routing purposes, which is sequentially based on the Route 
Timer.\34\
---------------------------------------------------------------------------

    \34\ Proposed new Rule 1093(a)(iii)(C) would provide, ``SRCH 
Order. A SRCH Order is a Public Customer order that is routable at 
any time. A SRCH Order on the Order Book during an Opening Process 
(including a re-opening following a trading halt), whether it is 
received prior to an Opening Process or it is a GTC SRCH Order from 
a prior day, may be routed as part of an Opening Process. Orders 
initiate their own Route Timers and are routed in the order in which 
their Route Timers end.''
---------------------------------------------------------------------------

    The Exchange also proposes to add new text into proposed Rule 
1093(a)(iii)(C)(1) as follows,

    At the end of an Opening Process, any SRCH Order that is priced 
through the Opening Price will be cancelled, and any SRCH Order that 
is at or inferior to the Opening Price will be executed pursuant to 
Rule 1017(k). If during a Route Timer, ABBO markets move such that 
the SRCH Order is no longer marketable against the ABBO nor 
marketable against the PBBO, the SRCH Order will book at its limit 
price. If the SRCH Order is locked or crossed by away quotes, it 
will route at the completion of the Route Timer. If the ABBO worsens 
but remains better than the PBBO, the SRCH Order will reprice and be 
re-exposed at the new price(s) without interrupting the Route Timer.

    The Exchange is removing the third and fourth sentences of Rule 
1080(m)(iv)(C) which currently describe the manner in which a SRCH 
Order would route at the end of an Opening Process and replace it with 
a reference to Phlx Rule 1017(k) as described in the new text that is 
being added to 1093(a)(iii)(C)(1). The Exchange believes that the 
addition of this new paragraph which references Phlx Rule 1017(k) 
applies to the manner in which a SRCH Order would route at the end of 
an Opening Process. The Exchange is updating the current rule text to 
make clear that routing is subject to Phlx Rule 1017. Phlx Rule 1017(k) 
explains the various processes by which the Exchange will open an 
options series and route orders at the conclusion of an Opening 
Process. The language contained in Rule 1017(k) with respect to routing 
during an Opening Process is much more explicit than the broad language 
currently contained in Rule 1080(m). To avoid any confusion, the 
Exchange proposes to remove any current language in Rule 1080(m), which 
explains the routing process during the opening, and simply refer to 
the governing rule. The Exchange also proposes various scenarios that 
may occur to a SRCH Order when the Route Timer is in effect. The 
Exchange proposes to add similar scenarios to the FIND Order rule. The 
Exchange believes the proposed rule text adds greater transparency to 
the manner in which Phlx routes by providing market participants with 
all possible outcomes during a Route Timer.
    The Exchange proposes to relocate the following language within the 
second paragraph of current Rule 1080(m)(iv)(C) to Rule 
1093(a)(iii)(C)(2) without any substantive changes. The new text would 
state that, ``A SRCH Order received after an Opening Process that is 
not marketable against the PBBO or the ABBO will be entered into the 
Order Book. Once on the Order Book, the SRCH Order is eligible for 
routing if it is locked or crossed by an away market.'' \35\
---------------------------------------------------------------------------

    \35\ Proposed new Rule 1093(a)(iii)(C)(2) would provide, ``A 
SRCH Order received after an Opening Process that is not marketable 
against the PBBO or the ABBO will be entered into the Order Book. 
Once on the Order Book, the SRCH Order is eligible for routing if it 
is locked or crossed by an away market.''
---------------------------------------------------------------------------

    The Exchange proposes to relocate the following language within the 
third paragraph of Rule 1080(m)(iv)(C) to Rule 1093(a)(iii)(C)(3) 
without any substantive changes. The current rule text reads as 
follows:

    A SRCH order received during open trading that is marketable 
against the PBBO when the ABBO is inferior to the PBBO will be 
traded at the Exchange at the PBBO price. If the SRCH order has size 
remaining after exhausting the PBBO, it may: (1) Trade at the

[[Page 16717]]

next PBBO price (or prices) if the order price is locking or 
crossing that price (or prices) up to and including the price equal 
to the ABBO price, and/or (2) be routed, subject to a Route Timer 
not to exceed one second, to away markets if all Phlx interest at 
better or equal prices has been exhausted, and/or (3) be entered 
into the Phlx XL II book at its limit price if not locking or 
crossing the Phlx price or the ABBO. Once on the book, the SRCH 
order is eligible for routing if it is locked or crossed by an away 
market.

    The Exchange is adding the phrase ``at or better than the PBBO 
price'' to account for All-or-None Orders that are non-displayed. The 
Exchange is also removing the reference to ``not to exceed one second'' 
for the same reasons described in the discussion regarding the proposed 
changes to Rule 1080(m)(iv)(B).\36\ Finally, the Exchange is replacing 
the reference to ``Phlx price'' with ``PBBO,'' and also adding a phrase 
to make clear that it would also include All-or-None Orders that can be 
satisfied. All-or-none orders are non-displayed orders and therefore 
not included in the PBBO. For purposes of the execution price, an All-
or-None Order that can be satisfied may be accessed and a better price 
could be obtained.
---------------------------------------------------------------------------

    \36\ Proposed new Rule 1093(a)(iii)(C)(3) would provide, ``A 
SRCH Order received after an Opening Process that is marketable 
against the PBBO when the ABBO is inferior to the PBBO will be 
traded at the Exchange at or better than the PBBO price. If the SRCH 
Order has size remaining after exhausting the PBBO, it may: (1) 
Trade at the next PBBO price (or prices) if the order price is 
locking or crossing that price (or prices) up to and including the 
price equal to the ABBO price, and/or (2) be routed, subject to a 
Route Timer, to away markets if all Phlx interest at better or equal 
prices has been exhausted, and/or (3) be entered into the Order Book 
at its limit price if not locking or crossing the PBBO, including 
All-or-None Orders which can be satisfied, or the ABBO. Once on the 
Order Book, the SRCH Order is eligible for routing if it is locked 
or crossed by an away market.''
---------------------------------------------------------------------------

    The Exchange proposes to relocate the fourth paragraph of current 
Rule 1080(m)(iv)(C) to Rule 1093(a)(iii)(C)(4) without any substantive 
changes. The current rule text reads as follows:

    A SRCH order received during open trading that is marketable 
against the PBBO when the ABBO is equal to the PBBO will be traded 
at the Exchange at the PBBO. If the SRCH order has size remaining 
after exhausting the PBBO, it will initiate a Route Timer not to 
exceed one second, and expose the SRCH order at the NBBO to allow 
Phlx XL II participants and other market participants an opportunity 
to interact with the SRCH order. During the timer, the SRCH order 
will be included in the PBBO at a price one MPV away from the ABBO. 
If, during the Route Timer, any new interest arrives opposite the 
SRCH order that is equal to or better than the ABBO price, the SRCH 
order will trade against such new interest at the ABBO price.

    The Exchange is adding the term ``internal PBBO'' in two places in 
the first sentence to account for All-or-None Orders that are non-
displayed. The Exchange is replacing ``NBBO'' with ``ABBO'' where only 
the away market is considered because the local market is exhausted. 
The Exchange is also removing the reference to ``not to exceed one 
second'' for the same reasons described in the discussion regarding the 
proposed changes to Rule 1080(m)(iv)(B). Finally, the Exchange proposes 
to add the following sentence to the end of this paragraph, ``If during 
the Route Timer, the ABBO moves and crosses the SRCH Order, any new 
interest that arrives opposite the SRCH Order that is marketable 
against the SRCH Order will trade at the SRCH Order price.'' This new 
sentence will address the specific situation where the ABBO cross a 
SRCH Order and the price at which the SRCH Order would trade. In this 
situation, the away market has crossed Phlx's PBBO. The contra interest 
would therefore execute at the SRCH Order price. This situation is not 
currently addressed within Rule 1080(m). The new language will provide 
market participants with greater transparency as to the manner in which 
the System currently handles a SRCH Order in that particular 
situation.\37\
---------------------------------------------------------------------------

    \37\ Proposed new Rule 1093(a)(iii)(C)(4) would provide, ``A 
SRCH Order received after an Opening Process that is marketable 
against the PBBO when the ABBO is equal to the internal PBBO will be 
traded at the Exchange at the internal PBBO price. If the SRCH Order 
has size remaining after exhausting the PBBO, it will initiate a 
Route Timer and expose the SRCH Order at the ABBO to allow 
participants and other market participants an opportunity to 
interact with the SRCH Order. During the timer, the SRCH Order will 
be included in the PBBO at a price one MPV away from the ABBO. If, 
during the Route Timer, any new interest arrives opposite the SRCH 
Order that is equal to or better than the ABBO price, the SRCH Order 
will trade against such new interest at the ABBO price. If during 
the Route Timer, the ABBO moves and crosses the SRCH Order, any new 
interest arrives opposite the SRCH Order that is marketable against 
the SRCH Order will trade at the SRCH Order price.''
---------------------------------------------------------------------------

    The Exchange proposes to relocate the following language within the 
fifth paragraph of current Rule 1080(m)(iv)(C) to Rule 
1093(a)(iii)(C)(5). The current rule text reads as follows:

    In the circumstances described in the preceding paragraph, what 
happens to a SRCH order after the Route Timer expires depends on the 
ABBO price at that time. If, at the end of the Route Timer, the ABBO 
is still the best price, the SRCH order will route to the away 
market(s) whose disseminated price is better than the PBBO, up to a 
size equal to the lesser of either: (a) The away markets' size, or 
(b) the remaining size of the SRCH order. If the SRCH order still 
has remaining size after such routing, it may (1) trade at the next 
PBBO price (or prices) if the order price is locking or crossing 
that price (or prices) up to the ABBO price, and/or (2) be entered 
into the Phlx XL II book at its limit price if not locking or 
crossing the Phlx price or the ABBO. The Phlx XL II system will 
route and execute contracts contemporaneously at the end of the 
Route Timer. Once on the book, the SRCH order is eligible for 
routing if it is locked or crossed by an away market.

    The Exchange proposes to eliminate the first sentence, ``In the 
circumstances described in the preceding paragraph, what happens to a 
SRCH order after the Route Timer expires depends on the ABBO price at 
that time'' because it is unnecessary and does not provide any new 
information. The Exchange proposes new text within Rule 
1093(a)(iii)(C)(5) to explain the various scenarios that may occur both 
during the Route Timer and also once the Route Timer ends. The second 
sentence of the current rule text provides, ``If, at the end of the 
Route Timer, the ABBO is still the best price, the SRCH order will 
route to the away market(s) whose disseminated price is better than the 
PBBO, up to a size equal to the lesser of either: (a) the away markets' 
size, or (b) the remaining size of the SRCH order.'' The Exchange 
proposes to reword this sentence to provide ``If, at the end of the 
Route Timer pursuant to subparagraph (4) above, the SRCH Order is still 
marketable with the ABBO, the SRCH Order will route up to a size equal 
to the lesser of either: (1) the away markets' size, or (2) the 
remaining size of the SRCH Order.'' The Exchange is adding the phrase 
``the SRCH Order is marketable with the ABBO'' in place of ``the ABBO 
is still the best price'' to add the specific contingency as to when 
the order will route. The Exchange is removing the wording ``to the 
away market(s) whose disseminated price is better than the PBBO'' 
because this language is not necessary. The rule text does not add any 
new information. Routing would occur because the order cannot be 
satisfied on Phlx. Next the Exchange is adding language to account for 
a scenario where the SRCH Order is locked or crossed by away quotes, in 
which case it would route at the completion of the Route Timer. Also, 
the Exchange is adding the situation where the ABBO worsens but is 
better than the PBBO, in which case the SRCH Order will reprice and be 
re-exposed at the new price(s) without interrupting the Route Timer. 
The Exchange believes that this additional language will provide more 
transparency as to all the possibilities with respect to routing the

[[Page 16718]]

SRCH Order once the Route Timer expires.\38\
---------------------------------------------------------------------------

    \38\ Proposed new Rule 1093(a)(iii)(C)(5) would provide, ``If, 
at the end of the Route Timer pursuant to subparagraph (4) above, 
the SRCH Order is still marketable with the ABBO, the SRCH Order 
will route up to a size equal to the lesser of either: (1) The away 
markets' size, or (2) the remaining size of the SRCH Order. If the 
SRCH Order is locked or crossed by away quotes, it will route at the 
completion of the Route Timer. If the ABBO worsens but remains 
better than the PBBO, the SRCH Order will reprice and be re-exposed 
at the new price(s) without interrupting the Route Timer. If the 
SRCH Order still has remaining size after such routing, it may: (1) 
Trade at the next PBBO price (or prices) if the order price is 
locking or crossing that price (or prices) up to the ABBO price, 
and/or (2) be entered into the book at its limit price if not 
locking or crossing the PBBO, including All-or-None Orders which can 
be satisfied, or the ABBO. The System will route and execute 
contracts contemporaneously at the end of the Route Timer. Once on 
the book, the SRCH Order is eligible for routing if it is locked or 
crossed by an away market.''
---------------------------------------------------------------------------

    The Exchange proposes to relocate the following language within the 
sixth paragraph of current Rule 1080(m)(iv)(C) to Rule 
1093(a)(iii)(C)(6). The current rule text reads as follows:

    A SRCH order received during open trading that is marketable 
against the ABBO when the ABBO is better than the PBBO will initiate 
a Route Timer not to exceed one second, and expose the SRCH order at 
the NBBO to allow Phlx XL II participants and other market 
participants an opportunity to interact with the remainder of the 
SRCH order. During the Route Timer, the SRCH order will be included 
in the PBBO at a price one MPV inferior to the ABBO. If, during the 
Route Timer, any new interest arrives opposite the SRCH order that 
is equal to or better than the ABBO price, the SRCH order will trade 
against such new interest at the ABBO price.

    The Exchange is removing the ``not to exceed one second'' language 
in the first sentence consistent with other amendments described 
herein. The Exchange is also replacing ``NBBO'' with ``ABBO'' where 
only the away market is being considered because the local market has 
been exhausted. The words ``with the remainder of'' are being removed 
from the end of the first sentence because these words are superfluous. 
Finally the Exchange is adding additional language, which is 
italicized, to the second sentence to provide, ``During the Route 
Timer, the SRCH Order will be included in the PBBO at a price that is 
the better of one MPV inferior to the ABBO or at the PBBO,'' to account 
for All-or-None Orders which may rest on the Order Book as non-
displayed orders.\39\
---------------------------------------------------------------------------

    \39\ Proposed new Rule 1093(a)(iii)(C)(6) would provide, ``A 
SRCH Order received after an Opening Process that is marketable 
against the ABBO when the ABBO is better than the PBBO will initiate 
a Route Timer, and expose the SRCH Order at the ABBO to allow 
participants and other market participants an opportunity to 
interact with the SRCH Order. During the Route Timer, the SRCH Order 
will be included in the PBBO at a price that is the better of one 
MPV inferior to the ABBO or at the PBBO. If, during the Route Timer, 
any new interest arrives opposite the SRCH Order that is equal to or 
better than the ABBO price, the SRCH Order will trade against such 
new interest at the ABBO price.''
---------------------------------------------------------------------------

    The Exchange proposes to relocate the following language within the 
seventh paragraph of current Rule 1080(m)(iv)(C) to Rule 
1093(a)(iii)(C)(7) without substantive rule changes. The current rule 
text reads as follows:

    In the circumstances described in the preceding paragraph, what 
happens to a SRCH order after the Route Timer expires depends on the 
ABBO price at that time. If, at the end of the Route Timer, the ABBO 
is still the best price, the SRCH order will route to the away 
market(s) whose disseminated price is better than the PBBO, up to a 
size equal to the lesser of either: (a) The away markets' size, or 
(b) the remaining size of the SRCH order. If the SRCH order still 
has remaining size after such routing, it may: (1) Trade at the next 
PBBO price (or prices) if the order price is locking or crossing 
that price (or prices) up to the ABBO price, and/or (2) be entered 
into the Phlx XL II book at its limit price if not locking or 
crossing the Phlx price or the ABBO. Once on the book, the SRCH 
order is eligible for routing if it is locked or crossed by an away 
market.

    The Exchange is rewording the second sentence to replace ``If, at 
the end of the Route Timer, the ABBO is still the best price, the SRCH 
order will route to the away market(s)'' with ``If, at the end of the 
Route Timer pursuant to subparagraph (6) above, the ABBO is still the 
best price and is marketable with the SRCH Order, the order will route 
to the away market(s)'' because the language will conform to similar 
language in this rule. The Exchange believes that this proposed rule 
text does not change the meaning of the sentence, rather it rewords the 
sentence for clarity. The proposed replacement language adds more 
clarity to the rule text.\40\
---------------------------------------------------------------------------

    \40\ Proposed new Rule 1093(a)(iii)(C)(7) would provide, ``If, 
at the end of the Route Timer pursuant to subparagraph (6) above, 
the ABBO is still the best price and is marketable with the SRCH 
Order, the order will route to the away market(s) whose disseminated 
price is better than the PBBO, up to a size equal to the lesser of 
either: (1) The away markets' size, or (2) the remaining size of the 
SRCH Order. If the SRCH Order still has remaining size after such 
routing, it may: (1) Trade at the next PBBO price (or prices) if the 
order price is locking or crossing that price (or prices) up to the 
ABBO price, and/or (2) be entered into the Order Book at its limit 
price if not locking or crossing the PBBO including All-or-None 
Orders which can be satisfied or the ABBO. Once on the Order Book, 
the SRCH Order is eligible for routing if it is locked or crossed by 
an away market.''
---------------------------------------------------------------------------

    The Exchange proposes to relocate the following language within the 
eighth paragraph of current Rule 1080(m)(iv)(C) to Rule 
1093(a)(iii)(C)(8). The current rule text reads as follows:

    A SRCH order on the Phlx XL II book may be routed to an away 
market if it is locked or crossed by an away market. If an ABBO 
locks or crosses the PBBO which includes a SRCH order, the Phlx XL 
II system will initiate a Route Timer not to exceed one second in 
order to allow Phlx users an opportunity to interact with the SRCH 
order. During the Route Timer, the SRCH order remains in the PBBO at 
its posted price. If, during the Route Timer, any new interest 
arrives opposite the SRCH order that is equal to or better than the 
ABBO price, the SRCH order will trade against such new interest at 
its ABBO price.

    The Exchange proposes to amend the remainder of the paragraph to 
read as follows, ``If an ABBO locks or crosses the SRCH Order during a 
new Route Timer, which would subsequently initiate at the conclusion of 
any Route Timer if interest remains, the SRCH Order may route to the 
away market at the ABBO at the conclusion of such Route Timer. If, 
during such Route Timer, any new interest arrives opposite the SRCH 
Order that is equal to or better than the ABBO price, the SRCH Order 
will trade against such new interest at its SRCH Order price.'' \41\ 
The Exchange notes in this new rule text that a Route Timer would 
subsequently initiate at the conclusion of another Route Timer provided 
interest remains. The Exchange notes that with a SRCH Order a Route 
Timer would initiate at the conclusion of a Route Timer in each case. 
This paragraph is intended to convey the repeated process of routing 
which takes place with SRCH Orders when a Route Timer ends. The second 
and third sentence of the current rule text are being removed because 
they are unnecessary and do not provide any new information; the prior 
paragraph provides the context necessary to obtain this information. 
The Exchange is instead noting that where the market is locked or 
crossed the SRCH Order may route at the ABBO when the Route Timer 
concludes. This information provides market participant with greater 
transparency. The Exchange is amending the final sentence to replace 
``ABBO price'' with ``SRCH Order Price''

[[Page 16719]]

to properly reflect the price at which the order will be executed.
---------------------------------------------------------------------------

    \41\ Proposed new Rule 1093(a)(iii)(C)(8) would provide, ``A 
SRCH Order on the Order Book may be routed to an away market if it 
is locked or crossed by an away market. If an ABBO locks or crosses 
the SRCH Order during a new Route Timer, which would subsequently 
initiate at the conclusion of any Route Timer if interest remains, 
the SRCH Order may route to the away market at the ABBO at the 
conclusion of such Route Timer. If, during such Route Timer, any new 
interest arrives opposite the SRCH Order that is equal to or better 
than the ABBO price, the SRCH Order will trade against such new 
interest at its SRCH Order price.''
---------------------------------------------------------------------------

    The Exchange proposes to relocate the following language within the 
ninth paragraph of current Rule 1080(m)(iv)(C) to Rule 
1093(a)(iii)(C)(9).\42\ The paragraph currently reads as follows:
---------------------------------------------------------------------------

    \42\ Proposed new Rule 1093(a)(iii)(C)(9) would provide, ``If, 
at the end of the Route Timer pursuant to subparagraph (8) above, 
the ABBO is still the best price, the SRCH Order will route to the 
away market(s) up to a size equal to the lesser of either: (1) The 
away markets' size, or (2) the remaining size of the SRCH Order. If 
the SRCH Order still has remaining size after such routing, it may: 
(i) Trade at the next PBBO price (or prices) if the order price is 
locking or crossing that price (or prices) up to the ABBO price, 
and/or (ii) be entered into the Order Book at its limit price if not 
locking or crossing the PBBO, including All-or-None Orders which can 
be satisfied, or the ABBO.''

    In the circumstances described in the preceding paragraph, what 
happens to a SRCH order after the Route Timer expires depends on the 
ABBO price at that time. If, at the end of the Route Timer, the ABBO 
is still the best price, the SRCH order will route to the away 
market(s) up to a size equal to the lesser of either: (a) The away 
markets' size, or (b) the remaining size of the SRCH order. If the 
SRCH order still has remaining size, that size will remain on the 
---------------------------------------------------------------------------
book.

    The Exchange proposes to amend the last sentence which provides, 
``If the SRCH order still has remaining size, that size will remain on 
the book.'' The Exchange proposes to state, ``If the SRCH Order still 
has remaining size after such routing, it may: (i) Trade at the next 
PBBO price (or prices) if the order price is locking or crossing that 
price (or prices) up to the ABBO price, and/or (ii) be entered into the 
Order Book at its limit price if not locking or crossing the PBBO, 
including All-or-None Orders which can be satisfied, or the ABBO.'' The 
Exchange notes with this proposed language that the SRCH Order may 
still trade at a PBBO price within the Order Book or rest on the Order 
Book. The Exchange is accounting for the possibility that the SRCH 
Order still has the possibility of executing or posting to the book. 
This proposed rule text conforms with proposed rule text within the 
FIND Order portion of the proposed rule. This new language represents 
current handling.
    The Exchange proposes to relocate the following language within the 
last paragraph of current Rule 1080(m)(iv)(C) to Rule 
1093(a)(iii)(C)(10). The current rule text reads as follows: ``A SRCH 
Order that is routed to an away market will be marked as an ISO.'' The 
Exchange proposes to amend this rule text to provide, ``A SRCH Order 
that is routed to an away market(s) will be marked as an ISO and 
designated as an IOC order.'' The Exchange today marks these orders as 
IOC. Orders are routed as IOC so that they do not rest on the away 
market's order book. Unexecuted portions of the routed order would be 
returned to Phlx for further handling. Adding this detail provides 
greater transparency to the proposed rule.
Rule 1091
    The Exchange proposes to relocate the rule text currently contained 
in Rule 1080(m)(v) to proposed new Rule 1091 and title that rule 
``Cancellation of Orders and Error Account.'' The Exchange proposes to 
re-letter and renumber the rule, however, no other changes are proposed 
except to amend internal cross-references to the proposed re-lettering 
and renumbering.
Rule 1080
    The Exchange proposes to update cross-references to Rule 1080(m) 
within this rule.
Rule 1047
    The Exchange proposes to amend Rule 1047 to make clear the manner 
in which interest is handled during a Trading Halt on Phlx. The 
Exchange proposes an affirmative statement that during a trading halt, 
existing quotes are cancelled. This language is not being amended, 
rather the sentence was confusing and the text is being broken into two 
sentence. Also, the Exchange proposes to address auctions by making 
clear that auction orders and auction responses as well as Crossing 
Orders which can be entered into an auction mechanism will be rejected. 
The Exchange believes that this information will bring greater clarity 
to the trading halt rule.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\43\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\44\ in particular, in that it is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest because the Exchange is adding more detail to 
its routing rule to provide market participants with greater 
transparency. The Exchange believes the added scenarios will provide 
more context to routing in general and for the specific routing 
strategies for the benefit of investors and the public interest. Also, 
in defining terms and utilizing consistent language throughout the 
rule, the Exchange believes proposed Rule 1093 will be more transparent 
with respect to the manner in which Phlx routes orders. The Exchange 
continues to offer various choices to its market participants with 
respect to routing.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b).
    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Rule 1093
    The Exchange's proposal to utilize the term ``System'' will conform 
this rule to other Phlx rules which utilize that term. Explaining the 
Route Timer at the beginning with detail will provide context to use of 
the term throughout the rule and avoid repetitiveness. Replacing the 
term ``NBBO'' with the term ``ABBO'' where appropriate is consistent 
with the Act because the term ``ABBO'' refers to the away market and 
not the local market, which is a more accurate term in situation where 
the local market has been exhausted. Defining minimum price variation, 
Opening Process and Public Customer will bring greater transparency to 
proposed Rule 1093. The use of defined terms will add greater 
transparency to the Exchange's rule.
    The Exchange believes that it is consistent with the Act to remove 
any language from Rule 1080(m), which explains the routing process 
during an Opening Process, and simply refer to the governing rule as it 
will avoid confusion for market participants. Also, the Exchange is 
proposing rule text within proposed Rule 1093 to describe more 
specifically when routing takes places with respect to an Opening 
Process.
    The Exchange's proposal to add the concept of DNR at the beginning 
of the rule to make clear up-front that this option is available when 
selecting a routing strategy is a structural non-substantive change 
intended to bring greater clarity to the rule.
    The addition of proposed text rule text defining the Phlx's best 
bid or offer or ``PBBO'' and the ``internal PBBO'' is intended to add 
greater transparency to proposed Rule 1093. The Exchange proposes to 
more clearly define the terms ``PBBO'' and ``internal PBBO'' to make 
clear that certain non-displayed order types are not reflected in the 
Exchange's disseminated PBBO, rather the actual Order Book or 
``internal PBBO'' represents both displayed and non-displayed order 
types on the Order Book. The Exchange believes that it is consistent 
with the Act and the protection of investors to utilize these two 
different terms, ``PBBO'' and ``internal PBBO,'' to more specifically 
refer to the Order Book.
    The Exchange proposes to more specifically explain within the rule 
text what is meant by ``exposure'' or ``exposing'' an order. The 
Exchange proposes to make clear that exposure shall mean a 
``notification sent to

[[Page 16720]]

participants with the price, size, and side of interest that is 
available for execution.'' The Exchange believes that this additional 
language in consistent with the Act because it will assist market 
participants in understanding the manner in which these terms are used 
throughout this rule. In addition, the Exchange's proposal to add the 
following rule text ``An order exposure alert is sent if the order size 
is modified.'' \45\ The addition of this rule text is consistent with 
the Act because it will make clear the manner in which exposure 
notifications are handled today and when the exposure alert is sent.
---------------------------------------------------------------------------

    \45\ Today, order exposures are sent if the order size is 
modified. The Exchange believes that adding this rule text will 
clarify the rule.
---------------------------------------------------------------------------

    The Exchange's proposal to add the following language, ``Exposure 
notifications will be sent to participants in accordance with the 
routing procedures described in Rule 1093(a)(iii) below except if an 
incoming order is joining an already established PBBO price when the 
ABBO is locked or crossed with the PBBO, in which case such order will 
join the established PBBO price and no exposure notification will be 
sent'' is consistent with the Act because it will assist market 
participants in understanding the manner in which these terms are used 
throughout this rule. The Exchange's proposal to not disseminate an 
exposure notification to participants if an incoming order is joining 
an already established PBBO price when the ABBO is locked or crossed 
with the PBBO is consistent with the Act because in this case, such 
order will join the established PBBO price, which is already 
disseminated. This proposed change would conform the rule to the System 
operation. The Exchange believes that exposing an order which reflects 
a disseminated price could cause confusion rather than inform investors 
and the general public of the availability of an order. Today, the 
Exchange executes responses at a price at or better than the ABBO on a 
first come, first served basis prior to routing the order to an away 
market in accordance with the rules currently in effect in Rule 
1080(m). If a response is received which is executable against the full 
volume of the order, it may execute immediately. Since the order was 
filled, the Route Timer no longer exists because the order no longer 
exists. The Exchange noted in the rule change establishing order 
exposure that, ``Broadcasting the message to all market participants 
should promote broader awareness of, and provide increased 
opportunities for greater participation in, these executions and 
consequentially, facilitate the ability of the Exchange to bring 
together participants and encourage more robust competition for these 
orders. In addition, the proposal would continue to guarantee that 
orders will receive an execution that is at a price at least as good as 
the price disseminated by the best away market at the time the order 
was received.'' \46\ The Exchange believes that this notification is 
not necessary in the case of an incoming order that joins an already 
established PBBO price when the ABBO is locked or crossed with the PBBO 
as other orders previously established the PBBO on the Order Book. The 
established PBBO price is a disseminated price which is available to 
market participants. A second notification with the exposure message 
would reflect the same price as the disseminated PBBO price and would 
not offer market participants new information.
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    \46\ See Securities and Exchange Release Act No. 68517 (December 
21, 2012), 77 FR 77134 (December 31, 2012) (SR-Phlx-2012-136).
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    The Exchange's proposal to remove certain rule text concerning ISO 
orders throughout the new rule is consistent with the Act because other 
Phlx rules address the manner in which an ISO is handled.\47\ Also, the 
text which refers to unexecuted contracts is similar to other order 
types. Today, if contracts still remain unexecuted after routing, they 
are posted on the Order Book, should the order subsequently be locked 
or crossed by another market center, the System will not route the 
order to the locking or crossing market center, except as specified 
within Rule 1080(m). This behavior is not specific to ISO Orders.
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    \47\ Phlx Rule 1080 at Commentary .03 provides, ``Intermarket 
Sweep Order'' or ``ISO'' is a limit order that is designated as an 
ISO in the manner prescribed by the Exchange and is executed within 
the system by Participants at multiple price levels without respect 
to Protected Quotations of other Eligible Exchanges as defined in 
Rule 1083. ISOs are immediately executable within the Phlx XL II 
system or cancelled, and shall not be eligible for routing as set 
out in Rule 1080. Simultaneously with the routing of an ISO to the 
Phlx XL II system, one or more additional limit orders, as 
necessary, are routed by the entering party to execute against the 
full displayed size of any Protected Bid or Offer (as defined in 
Rule 1083(n)) in the case of a limit order to sell or buy with a 
price that is superior to the limit price of the limit order 
identified as an ISO. These additional routed orders must be 
identified as ISOs. See also Phlx 1084 and 1086 also discuss ISO 
orders.
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    The remainder of the rule changes in the introduction are non-
substantive rule changes that simply seek to reorganize and add 
transparency to the current rule text.
DNR Orders
    The Exchange's proposal to add a new sentence to proposed new Rule 
1093(a)(iii)(A) that provides, ``If the DNR Order is locking or 
crossing the ABBO, the DNR Order shall be entered into the Order Book 
at the ABBO price and displayed one MPV away from the ABBO'' is 
consistent with the Act because this behavior is compliant with 
Regulation NMS. An order will not be executed at a price that trades 
through another market or displayed at a price that would lock or cross 
another market. An order that is designated by a member as non-routable 
will be re-priced in order to comply with applicable Trade-Through and 
Locked and Crossed Markets restrictions.\48\ The Exchange's proposal to 
account for a scenario where an ABBO was disseminated after the 
crossing condition took place is consistent with the Act because an 
updated ABBO that crosses the DNR Order cannot be utilized to execute 
the DNR Order. The Exchange believes that adding context around a DNR 
Order when that order is locked or crossed will provide more 
transparency to the rule. The Exchange notes that consistent with FIND 
and SRCH Orders, a DNR Order that is locked or crossed will display one 
MPV away from the ABBO. The Exchange believes that the proposed 
language will benefit market participants because it provides greater 
information.
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    \48\ Also, an order that is designated by the member as routable 
will be routed in compliance with applicable Trade-Through and 
Locked and Crossed Markets restrictions.
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FIND and SRCH Orders
    The Exchange's proposal to expand the current language within FIND 
and SRCH Orders to add a reference to an Opening Process as well as an 
intra-day re-opening is more inclusive and will add clarity to the rule 
text which follows this introductory paragraph.\49\ Also, making clear 
that each order begins a separate Route Timer, which cannot be early 
terminated and the individual order's Route Timer must complete before 
the order can route to an away market is consistent with the Act 
because the Exchange is allowing the entire time on the Route Timer to 
obtain the best price for the order. Finally, in order to maintain 
priority within the System, FIND and SRCH Orders are prioritized today 
for routing purposes. The priority is sequentially based on the Route 
Timer. This proposed new language is consistent with the Act because it 
will make clear

[[Page 16721]]

the manner in which the Route Timer operates.
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    \49\ See proposed rule text at Rule 1093(a)(iii)(B) and (C).
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    The Exchange also proposes to make clear within the proposed rule 
text the diverse handling of marketable and non-marketable orders. The 
proposed language seeks to utilize the terms ``ABBO'' and ``PBBO'' more 
succinctly to distinguish orders which can be executed locally and 
orders must route to an away market to receive an execution.
    The Exchange's proposal to add ``at the conclusion of an Opening 
Process'' to further the proposed text is a non-substantive change that 
adds context that this routing takes places during an Opening 
Process.\50\ Making clear that at the end of an Opening Process, any 
order that is priced through the Opening Price will be cancelled, also 
adds context to the current rule text.\51\ As well as noting that any 
order that is at or inferior to the Opening Price will be executed 
pursuant to Rule 1017(k).\52\ The Exchange will not execute orders at 
inferior prices. The Exchange believes that this language is consistent 
with the Act because it provides an expectation that is consistent for 
the market participant as to the manner in which Phlx will handle their 
order. Phlx Rule 1017(k) explains the various processes by which the 
Exchange will open an options series and route orders at the conclusion 
of an Opening Process. The language contained in Rule 1017(k) with 
respect to routing during an Opening Process is much more explicit than 
the broad language contained in Rule 1080(m). The Exchange's proposal 
to remove any language from Rule 1080(m), which explains the routing 
process during an Opening Process, and simply refer to the governing 
rule is consistent with the Act because the Rule 1017(k) describes an 
Opening Process as part of the larger process and provides more 
context. The reference to the rule will provide a reference for market 
participants.
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    \50\ See proposed rule text at Rule 1093(a)(iii)(B), (B)(1) and 
(2), and (C)(8).
    \51\ See proposed rule text at Rule 1093(a)(iii)(B)(1) and 
(C)(1).
    \52\ See proposed rule text at Rule 1093(a)(iii)(B)(1) and (2) 
and (C)(1). The proposed text makes clear which orders would be 
cancelled, which is currently not described in the rules, although 
it is the current practice. This cited rule text also references 
back to Phlx Rule 1017(k) for execution during an Opening Process.
---------------------------------------------------------------------------

FIND Order
    The Exchange's proposal to provide a scenario which specifies a 
circumstance when, during a Route Timer, if markets move and the FIND 
Order becomes executable against resting interest on the Exchange's 
Order Book that the order would execute is consistent with the Act 
because it makes clear that in this situation the order would post to 
the Order Book because the FIND Order is no longer marketable.\53\ Also 
with respect to a locked or crossed scenario, a FIND Order would route 
at the completion of the Route Timer, however if the ABBO worsens but 
is better than the PBBO, the FIND order will reprice and be re-exposed 
at the new price(s) and the Route Timer would continue without 
interruption.\54\ For both FIND and SRCH Orders, the Exchange notes 
that it is consistent with the Act to route marketable orders and not 
trade-through an away market. The Exchange believes that adding this 
language to its rules will bring greater clarity to the Rulebook and 
provide market participants with additional information as to the 
manner in which an order will be handled during the Route Timer. This 
is also the case for SRCH Orders.
---------------------------------------------------------------------------

    \53\ See proposed new Rule 1093(a)(iii)(B)(2).
    \54\ See proposed new Rule 1093(a)(iii)(B)(4).
---------------------------------------------------------------------------

    The Exchange proposes to note that FIND Orders that are not 
marketable with ABBO upon receipt will be treated as DNR for the 
remainder of the trading day.\55\ This language is being amended to 
conform to the current System practice. As noted in the introductory 
paragraph to FIND Orders, these orders that are not marketable with the 
ABBO upon receipt, rather these orders will be treated as DNR for the 
remainder of the trading day. FIND Orders that are marketable with ABBO 
at the time of receipt will not be eligible for routing until the next 
time the option series is subject to a new Opening Process. In this 
particular instance, the FIND Order was marketable against the PBBO and 
therefore is marked DNR for the remainder of the trading day. The 
Exchange notes that because the FIND Order would not route, even if 
there was a reopening that it proposes to state that the FIND Order 
would be treated as DNR for the remainder of the trading day. The 
Exchange believes this amendment is consistent with e the Act because 
it will provide market participants with the expected outcome and allow 
them to determine if they would like to cancel the order or allow it to 
remain on the Order Book. Providing members with expectations as to the 
manner in which their order will be handled provides clarity and 
consistency.
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    \55\ The remainder of the trading day is intended to indicate 
that good-till-cancel and good-till-day orders remaining on the 
Order Book would be able to route the next trading day but not for 
the remainder of the current trading day. The tags would be retained 
on those orders.
---------------------------------------------------------------------------

    The Exchange's proposal to note a scenario where the ABBO moves and 
crosses the FIND Order during a Route Timer.\56\ In this case, any new 
interest that arrives opposite the FIND Order that is marketable 
against the FIND Order will trade at the FIND Order price. This 
situation is not currently addressed in the rules. If the away market 
price crosses the PBBO, the market is crossed and contra interest would 
execute at the price the order rested on the Order Book. If the away 
price locks the displayed price, the contra interest would execute at 
its displayed price. This proposed rule text is consistent with the Act 
because it would not permit a trade-through but would allow a FIND 
Order to trade where the order is marketable, but does not trade-
though. The new language will provide market participants with greater 
transparency as to the manner in which the System will handle a FIND 
Order in that particular situation. This is also applicable to SRCH 
Orders.
---------------------------------------------------------------------------

    \56\ See proposed new Rule 1093(a)(iii)(B)(5).
---------------------------------------------------------------------------

    The Exchange's addition of language within the FIND Order which 
accounts for both possibilities where the FIND Order may still trade at 
a PBBO price within the Order Book or rest on the Order Book \57\ is 
consistent with the Act because the more expansive language takes into 
account a greater number of potential accounts to inform the 
participant of all possibilities when routing an order. The Exchange's 
clarification that only if size remains will the FIND Order not be 
eligible for routing until the next time the option series is subject 
to a new Opening Process merely provides context for purposes of the 
rule that size may have been exhausted at that point. The Exchange 
views this amendment as non-substantive.
---------------------------------------------------------------------------

    \57\ See proposed new Rule 1093(a)(iii)(B)(6).
---------------------------------------------------------------------------

    With respect to the language which provides, ``The remaining size 
of a non-Public Customer and non-professional FIND or SRCH Order will 
be cancelled upon an intra-day trading halt, the Exchange believes that 
this amendment to the rule text is consistent with the Act because 
Public Customer and professional orders are held by the System until 
trading resumes, at which point they are handled at their original 
limit price. At the conclusion of an Opening Process, the System will 
only route non-contingency Public Customer and non-professional 
orders.\58\ The

[[Page 16722]]

Exchange notes that it cancels all non-routable interest at the time of 
an intra-day trading halt. When the Exchange re-opens the market, an 
Opening Process pursuant to Rule 1017 will occur and at that time, only 
Public Customer and professional orders would be subject to routing. 
The Exchange in this circumstance provides market participants with an 
expectation for their order during a trading halt.
---------------------------------------------------------------------------

    \58\ See Phlx Rule 1017(k)(C)(6). The System will execute orders 
at the Opening Price that have contingencies (such as, without 
limitation, all-or-none) and non-routable orders, such as a ``Do Not 
Route'' or ``DNR'' Orders, to the extent possible.
---------------------------------------------------------------------------

    The Exchange's proposal to delete the sentence, ``The Phlx XL II 
system will route and execute contracts contemporaneously at the end of 
the Route Timer'' \59\ is consistent with the Act because the FIND 
Order may not route at the end of the Route Timer. This sentence was 
not accurate and FIND Orders would route at the end of the Route Timer 
provided they are marketable.
---------------------------------------------------------------------------

    \59\ See proposed new Rule 1093(a)(iii)(B)(7).
---------------------------------------------------------------------------

    The Exchange's proposal to note that ``A FIND Order that is routed 
to an away market(s) will be marked as an Intermarket Sweep Order 
``ISO'' and designed as an IOC order'' \60\ is consistent with the Act 
because orders which are routed and not satisfied are returned to the 
originating market. The Exchange today marks these orders as IOC so the 
order does not rest on the away market's order book. Unexecuted 
portions of the routed order would be returned to Phlx for further 
handling. Adding this detail provides greater transparency to the 
rules. This is also true with respect to SRCH Orders.
---------------------------------------------------------------------------

    \60\ See proposed new Rule 1093(a)(iii)(B)(9).
---------------------------------------------------------------------------

SRCH Order
    The Exchange's proposal to eliminate the sentence which provides, 
``In the circumstances described in the preceding paragraph, what 
happens to a SRCH order after the Route Timer expires depends on the 
ABBO price at that time'' \61\ is consistent with the Act because this 
language is unnecessary and does not provide any new information 
because the Exchange has amended proposed Rule 1093(a)(iii)(C)(4) and 
also proposes changes to this paragraph to explain the various 
scenarios that may occur both during the Route Timer and also once the 
Route Timer ends.
---------------------------------------------------------------------------

    \61\ See current Rule 1080(m)(iv)(C).
---------------------------------------------------------------------------

    The Exchange's proposal to provide, ``If an ABBO locks or crosses 
the SRCH Order during a new Route Timer, which would subsequently 
initiate at the conclusion of any Route Timer if interest remains, the 
SRCH Order may route to the away market at the ABBO at the conclusion 
of such Route Timer. If, during such Route Timer, any new interest 
arrives opposite the SRCH Order that is equal to or better than the 
ABBO price, the SRCH Order will trade against such new interest at its 
SRCH Order price,'' \62\ is consistent with the Act because where the 
market is locked or crossed the SRCH Order may route at the ABBO when 
the Route Timer concludes. This information provides market participant 
with greater transparency.
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    \62\ Proposed new Rule 1093(a)(iii)(C)(8) would provide, ``A 
SRCH Order on the Order Book may be routed to an away market if it 
is locked or crossed by an away market. If an ABBO locks or crosses 
the SRCH Order during a new Route Timer, which would subsequently 
initiate at the conclusion of any Route Timer if interest remains, 
the SRCH Order may route to the away market at the ABBO at the 
conclusion of such Route Timer. If, during such Route Timer, any new 
interest arrives opposite the SRCH Order that is equal to or better 
than the ABBO price, the SRCH Order will trade against such new 
interest at its SRCH Order price.''
---------------------------------------------------------------------------

Rule 1091
    The Exchange's proposal to relocate the rule text currently 
contained in Rule 1080(m)(v) to proposed new Rule 1091 and title that 
rule ``Cancellation of Orders and Error Account'' and re-letter and 
renumber the rule is consistent with the Act because these changes 
update the rule for accuracy. The Exchange notes that these amendments 
are non-substantive.
Rule 1080
    The Exchange's proposal to update cross-references is a non-
substantive rule change.
Rule 607
    The Exchange's proposal to correct a cross-reference within Rule 
607 is a non-substantive rule change.
Rule 1047
    The Exchange's proposal to create a new sentence and redraft the 
current rule while specifically noting that auction orders and auction 
responses as well as Crossing Orders, which can be entered into an 
auction mechanism, will be rejected will bring greater transparency to 
the Exchange's rules and provide members with certainty as to the 
handling of their orders during a trading halt.

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 proposed routing rules 
apply to all market participants including routing during an Opening 
Process. The Exchange believes that adding greater detail to its rules 
does not impose an undue burden on competition, rather it provides 
greater transparency as to the potential outcomes when utilizing 
different routing strategies. Further, the Exchange notes that market 
participants may elect not to route their orders. The Exchange 
continues to offer various options to its market participants with 
respect to routing.

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 \63\ and Rule 19b-
4(f)(6) thereunder.\64\
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    \63\ 15 U.S.C. 78s(b)(3)(A).
    \64\ 17 CFR 240.19b 4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its 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) \65\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \66\ 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 asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become effective and 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, as 
it will allow the Exchange to immediately provide members with greater 
information and transparency on potential order routing strategies 
available on the Exchange. For this reason, the Commission hereby 
waives the 30-day operative delay and

[[Page 16723]]

designates the proposed rule change as operative upon filing.\67\
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    \65\ 17 CFR 240.19b-4(f)(6).
    \66\ 17 CFR 240.19b-4(f)(6)(iii).
    \67\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 [email protected]. Please include 
File Number SR-Phlx-2019-06 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-2019-06. 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-2019-06, and should be submitted on 
or before May 13, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\68\
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    \68\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07981 Filed 4-19-19; 8:45 am]
 BILLING CODE 8011-01-P


