Notice2023-17976
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx's All-or-None Order
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Published
August 22, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 161 (Tuesday, August 22, 2023)</title>
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[Federal Register Volume 88, Number 161 (Tuesday, August 22, 2023)]
[Notices]
[Pages 57140-57142]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-17976]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98142; File No. SR-Phlx-2023-34]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx's
All-or-None Order
August 16, 2023.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 3, 2023, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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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 to amend its Rules at Options 3, Options
Trading Rules, at: Section 7, Types of Orders and Order and Quote
Protocols; Section 8, Options Opening Process; Section 10, Electronic
Execution Priority and Processing in the System; Section 12, Electronic
Qualified Contingent Cross Order; Section 13, Price Improvement XL
(``PIXL''); Section 14, Complex Orders; Section 23, Data Feeds and
Trade Information; Options 5, Section 4, Order Routing; and Options 7,
Section 3, Rebates and Fees for Adding and Removing Liquidity in SPY.
The Exchange also proposes to amend its Rules at Options 8, Floor
Trading, at: Section 30, Crossing, Facilitation and Solicited Orders;
and Section 32, Types of Floor-Based (Non-System) Orders.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/rules</a>, 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
Phlx proposes to amend Options 3, Options Trading Rules, at:
Section 7, Types of Orders and Order and Quote Protocols; Section 8,
Options Opening Process; Section 10, Electronic Execution Priority and
Processing in the System; Section 12, Electronic Qualified Contingent
Cross Order; Section 13, Price Improvement XL (``PIXL''); Section 14,
Complex Orders; Section 23, Data Feeds and Trade Information; Option5,
Section 4, Order Routing; and Options 7, Section 3, Rebates and Fees
for Adding and Removing Liquidity in SPY. The Exchange also proposes to
amend its Rules at Options 8, Floor Trading, at: Section 30, Crossing,
Facilitation and Solicited Orders; and Section 32, Types of Floor-Based
(Non-System) Orders.
Background
Today, Phlx's All-or-None Orders are described in Options 7,
Section 7(b)(5) as Limit Orders or Market Orders that are executed in
their entirety or not at all. All-or None Orders may only be submitted
by a Public Customer.\3\ Phlx's All-or-None Orders rest on the order
book as non-displayed orders. The Exchange does not disseminate bids or
offers of All-or-None Orders to the Options Price Reporting Authority
or ``OPRA'' and Top of PHLX Options \4\ feed, however All-or-None
Orders are displayed in the PHLX Orders \5\ and PHLX Depth of Book \6\
feed. Further, All-or-None Orders are executed in price-time priority
among all Public Customer orders if the size contingency can be met. If
an All-or-None Order contingency cannot be met, the All-or-None Order
would be by-passed until such time as the contingency could be met.\7\
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\3\ 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 Options 1, Section (b)(45). See Options 1, Section
1(b)(46).
\4\ Top of PHLX Options (``TOPO'') is a direct data feed product
that includes the Exchange's best bid and offer price, with
aggregate size, based on displayable order and quoting interest on
Phlx and last sale information for trades executed on Phlx. The data
contained in the TOPO data feed is identical to the data
simultaneously sent to the processor for the OPRA and subscribers of
the data feed. The data provided for each options series includes
the symbols (series and underlying security), put or call indicator,
expiration date, the strike price of the series, and whether the
option series is available for trading on Phlx and identifies if the
series is available for closing transactions only. See Options 3,
Section 23(a)(1).
\5\ PHLX Orders is a real-time full Limit Order book data feed
that provides pricing information for orders on the PHLX Order book
for displayed order types and All-or-None Orders, as well as market
participant capacity. PHLX Orders is currently provided as part of
the TOPO Plus Orders data product. PHLX Orders provides real-time
information to enable users to keep track of the single and complex
order book(s). The data provided for each options series includes
the symbols (series and underlying security), put or call indicator,
expiration date, the strike price of the series, leg information on
complex strategies and whether the option series is available for
trading on Phlx and identifies if the series is available for
closing transactions only. The feed also provides auction and
exposure notifications and order imbalances on opening/reopening
(size of matched contracts and size of the imbalance). See Options
3, Section 23(a)(2).
\6\ PHLX Depth of Market is a data product that provides: (i)
order and quotation information for individual quotes and orders on
the order book; (ii) last sale information for trades executed on
Phlx; (iii) auction; and (iv) an Imbalance Message which includes
the symbol, side of the market, size of matched contracts, size of
the imbalance, and price of the affected series. The data provided
for each options series includes the symbols (series and underlying
security), put or call indicator, expiration date, the strike price
of the series, and whether the option series is available for
trading on Phlx and identifies if the series is available for
closing transactions only. The feed also provides order imbalances
on opening/reopening (size of matched contracts and size of the
imbalance) and exposure notifications, with market participant
capacity. See Options 3, Section 23(a)(2).
\7\ Also of note, All-or-None Orders are non-routable and the
Acceptable Trade Range protection in Options 3, Section 15(a) is not
applied to All-Or-None Orders. See Options 7, Section 7(b)(5).
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Proposal
At this time, the Exchange proposes to amend All-or-None Orders so
that they may only be submitted by a Public Customer as an Immediate-
or-Cancel Order. With this proposed change, All-or-None Orders would no
longer rest on the order book. Upon entry, an All-or-None Order would
be executed in its
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entirety or it will cancel if it cannot execute. Other options markets
require All-or-None Orders to be Immediate-or-Cancel such as Nasdaq
GEMX, LLC.\8\
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\8\ See Nasdaq GEMX, LLC (``GEMX'') Options 3, Section 7(c). See
Securities Exchange Act Release No. 80102 (February 24, 2017), 82 FR
12381 (March 2, 2017) (Notice of Filing and Immediate Effectiveness
of Proposed Rule Change Related to All-or-None Orders). See also
GEMX, Nasdaq MRX, LLC (``MRX''), and Nasdaq ISE, LLC (``ISE'')
Options 3, Section 7(c), The Nasdaq Options Market LLC (``NOM'')
Options 3, Section 7(a)(8) and Nasdaq BX, Inc. (``BX'') Options 3,
Section 7(a)(7). GEMX, MRX, ISE, NOM and BX have All-or-None Orders
that are Immediate-or-Cancel.
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The Exchange proposes to amend the order type description in
Options 3, Section 7(b)(5) to state, ``An All-or-None Order is a Limit
Order or Market Order that is to be executed in its entirety or not at
all. An All-or None Order may only be submitted by a Public Customer as
an Immediate-or-Cancel Order.'' As is the case today, the Acceptable
Trade Range protection in Options 3, Section 15(a) is not applied to
All-Or-None Orders. Further, the All-or-None Order type in Options 8,
Section 32(b)(3) may only be submitted by a Public Customer. The
Exchange proposes to add a new sentence in Options 8, Section 32(b)(3)
that would state, ``Further, pursuant to Options 8, Section 39, A-3, an
All-or-None Order has no standing respecting executions in the trading
crowd except with respect to other All-or-None Orders. When represented
in the trading crowd, All-or-None Orders are not included as part of
the bid or offer.'' The Exchange believes the new sentence, which
references existing language in Options 8, Section 39, A-3, will bring
greater clarity to the All-or-None Order type description.
The Exchange proposes to also remove rule text about All-or-None
Orders as a Non-Displayed Contingency Order in Options 3, Section
7(b)(5)(i). The Exchange proposes to add a new Options 3, Section
7(b)(4)(C) that states, ``A Stop Order is a non-displayed, contingency
order until elected,'' in order to preserve the current rule text
related to Stop Orders at Options 3, Section 7(b)(5)(i).
As a result of the proposed amendment to the All-or-None Order
type, Phlx proposes to remove rule text regarding All-or-None Orders in
various other rules. Since All-or-None Orders will not rest on the
order book, it is not considered for purposes of Legging Orders and
therefore the rule text within Options 3, Section 7(b)(10)(2) and (4)
related to All-or-None Orders is being removed. Additionally, the
Exchange proposes a technical amendment to re-letter Options 3, Section
7(b)(1) (1)-(4) as (A)-(D).
Since All-or-None Orders will not rest on the order book as
proposed, those orders would be treated the same as all other
Immediate-or-Cancel Orders in the Opening Process and, therefore, do
not need to be separately described in Options 3, Section 8. The
Exchange proposes to remove specific references to All-or-None Orders
in Options 3, Section 8(b), (h) and (k)(C)(6).
All-or-None Orders do not need to be excluded from the internal
PBBO in Options 3, Section 10, which describes the Exchange's
allocation process, because All-or-None Orders will not rest on the
order book with this proposed amendment. The Exchange proposes to
remove the language concerning All-or-None Orders from Options 3,
Section 10(a)(1)(B), (C), and (D)(i) and (ii).
As proposed, Public Customers All-or None Orders, similar to all
other Public Customer Orders which are Immediate-or-Cancel Orders, will
not be considered for purposes of checking the order book prior to
executing a Qualified Contingent Cross Order since they will not rest
on the order book. Therefore, the Exchange proposes to remove the
language within Supplementary Material .01 to Options 3, Section 12 and
Options 8, Section 30 concerning All-or-None Orders.
As proposed, All-or None Orders will not be considered when
checking the order book to start a PIXL Auction or to allocate the PIXL
Order at the end of the PIXL Auction because All-or-None Orders will
not rest on the order book. Therefore, the Exchange proposes to remove
the language within Options 3, Section 13(a)(2) and (f) related to All-
or-None Orders on the order book.
As amended, All-or-None Orders will be treated in the same manner
as other Immediate-or-Cancel Orders with respect to a Complex Opening
Process and a Complex Order Live Auction. Also, All-or-None Orders will
not rest on the order book and are not considered for purposes of
legging into the simple order book. Therefore, the Exchange is removing
language concerning All-or-None Orders within Options 3, Section
14(d)(ii)(C), (e)(vi)(A)(1), (e)(viii)(C)(3), and (f)(iii)(A) because
All-or-None Orders do not need to be treated differently.
For purposes of the PHLX Orders feed, All-or-None Orders will be
treated the same as all other Immediate-or-Cancel Orders and not
displayed on the PHLX Orders feed. Options 3, Section 23(a)(2) is being
amended to remove All-or-None Orders from the feed description.
Since All-or-None Orders will not rest on the order book the
Exchange proposes to amend Options 5, Section 4(a), 4(a)(iii)(C)(3),
(5), (7) and (9), concerning Routing, to remove references to the
exclusion of All-or-None Orders from the PBBO and their partial
exclusion from the internal PBBO.
The Exchange proposes to remove the following pricing from Options
7, Section 3, Rebates and Fees for Adding and Removing Liquidity in
SPY, ``The Cancellation Fee for each cancelled electronically delivered
Professional \9\ AON order will continue to apply to the SPY. The
Cancellation Fee will not apply for each cancelled electronically
delivered Customer order in SPY.'' Today, only Public Customers may
submit All-or-None Orders.\10\ In 2019, Phlx amended its All-or-None
Order type to offer it only to Public Customers and no longer offer the
order type to Professionals.\11\ This pricing should have been removed
in 2019, as Professionals could no longer enter All-or-None Orders
after the 2019 amendment.
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\9\ The term ``Professional'' means any person or entity that
(i) is not a broker or dealer in securities, and (ii) places more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). Member
organizations must indicate whether orders are for Professionals.
See Options 1, Section 1(b)(45).
\10\ See Options 3, Section 7(b)(5).
\11\ See Securities Exchange Act Release No. 85262 (March 7,
2019), 84 FR 9192 (March 13, 2019) (SR-Phlx-2019-03).
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Implementation
The Exchange proposes to implement this rule proposal before
January 31, 2024. The Exchange will announce the implementation date in
an Options Trader Alert to provide notice to members and member
organizations.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of section
6(b)(5) of the Act,\13\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal is appropriate and
reasonable, because the time-in-force designation of Immediate-Or-
Cancel will offer members and member organizations certainty with
respect to their order handling. Today, All-or-None Orders are executed
in price-time priority among all Public Customer orders if the size
contingency can be met, but otherwise
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have no priority on the order book. With this proposal, an All-Or-None
Order will either execute immediately or be cancelled back to the
member or member organization. This proposal would remove uncertainty
with respect to the manner in which these orders would be handled in
the order book by cancelling back an All-Or-None Order if it cannot be
immediately executed in its entirety. This proposal would harmonize
Phlx's All-or-None Order type across its various options markets.\14\
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\14\ See GEMX, MRX, ISE Options 3, Section 7(c), NOM Options 3,
Section 7(a)(8) and BX Options 3, Section 7(a)(7). GEMX, MRX, ISE,
NOM and BX have All-or-None Orders that are Immediate-or-Cancel.
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The Exchange notes that members and member organizations are aware
of this proposed change.\15\
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\15\ See Options Trader Alert 2023-17. The Exchange has not
received any feedback from members or member organizations regarding
the change to the All-or-None Order as a result of the Options
Trader Alert. Further, the Exchange reached out to member
organizations about the All-or-None change and, based on those
conversations, the Exchange does not believe that member
organizations have any concerns with the proposed change.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change will impact the intense competition that
exists in the options market. With this change, no market participant
would be able to submit an All-Or-None Order without a time-in-force
designation of Immediate-Or-Cancel. The Exchange believes the All-Or-
None Order type, as proposed, will continue to offer members and member
organizations a competitive alternative for submitting orders for
execution. Furthermore, the proposed rule changes align the Exchange's
System functionality across the Nasdaq affiliated options exchanges
that have all-or-none order types.\16\
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\16\ See supra note 14.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to section 19(b)(3)(A)(iii) of the Act \17\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is 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 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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1260677e773f717d7f7f777c6661526177713c757d64"><span class="__cf_email__" data-cfemail="6715120b024a04080a0a020913142714020449000811">[email protected]</span></a>. Please include
file number SR-Phlx-2023-34 on the subject line.
Paper Comments
<bullet> 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-2023-34. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-Phlx-2023-34 and should be
submitted on or before September 12, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17976 Filed 8-21-23; 8:45 am]
BILLING CODE 8011-01-P
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