[Federal Register Volume 86, Number 68 (Monday, April 12, 2021)]
[Notices]
[Pages 19037-19048]
[FR Doc No: 2021-07391]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91488; File No. SR-Phlx-2021-14]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the Phlx
Options Rules at Options 4 Under the Options 4 Title in the Exchanges
Rulebooks Shell Structure

April 6, 2021.
    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 March 24, 2021, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The 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 the Phlx Options Rules (``Phlx
Options'') at Options 4 (Options Listing Rules) under the Options 4
title in the Exchange's rulebook's (``Rulebook'') shell structure.\3\
This proposal also creates a new Options 4C entitled ``U.S. Dollar-
Settled Foreign Currency Options.''
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    \3\ In 2017, the Exchange added a shell structure to its
Rulebook with the purpose of improving efficiency and readability
and to align its rules closer to those of its five sister exchanges,
The Nasdaq Stock Market LLC (``Nasdaq''); Nasdaq BX, Inc.; Nasdaq
ISE, LLC; Nasdaq GEMX, LLC; and Nasdaq MRX, LLC (``Affiliated
Exchanges''). The shell structure currently contains eight (8)
General sections which, once complete, will apply a common set of
rules to the Affiliated Exchanges. See Securities Exchange Act
Release No. 82174 (November 29, 2017), 82 FR 57492 (December 5,
2017) (SR-BX-2017-054).
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    The proposal also amends the rules as relocated to conform
primarily to the equivalent options rules of Nasdaq ISE, LLC, Nasdaq
GEMX, LLC (``GEMX'') and Nasdaq MRX, LLC (``MRX'') (collectively
``ISE'').\4\ The proposal also amends Section1 of Options 1 of the
Options Listing Rules to add several definitions and adds Supplementary
Material to Options 8, Section 30.
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    \4\ The rules of Nasdaq GEMX, LLC and Nasdaq MRX, LLC are
incorporated by reference into the rules of Nasdaq ISE, LLC.
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    The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, 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 the rule text in Options 4 (Options
Listing Rules) under the Options 4 title in the Exchange's Rulebook's
shell structure. For ease of reference and the purposes of this filing,
the relocated rules are herein described as the ``Options Listing
Rules.''
    The amending of the Options Listing Rules is part of the Exchange's
continued effort to promote efficiency and the conformity of its
processes with those of the Affiliated Exchanges,\5\ and its goal of
harmonizing and uniformizing its rules.\6\
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    \5\ Supra note 3.
    \6\ This proposal is similar to the relocation of options rules
at Chapter IV (Securities Traded on NOM) under the Options 4 title
in the Nasdaq rulebook. See Securities Exchange Act Release No.
86022 (June 4, 2019), 84 FR 26912 (June 10, 2019) (SR-NASDAQ-2019-
047).
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    This proposed change is of a non-substantive nature. Moreover, the
amending of the Options Listing Rules will facilitate the use of the
Rulebook by Members \7\ of the Exchange, who are members of other
Affiliated Exchanges; other market participants; and the public in
general. These rules will be amended to reflect the equivalent options
rules in the ISE rulebook, but the changes are of a non-substantive
nature.
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    \7\ As defined by Exchange Rule GENERAL 1 GENERAL PROVISIONS
Section 1(16).
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    The overarching goal is to align Phlx Options rules with those of
ISE. The Exchange is proposing to amend the rules for Phlx Options,
most notably the rule text in the Options Listing Rules concerning
securities traded on Phlx Options, but also adding several definitions
to Section 1 of Options 1. The Exchange desires to align Phlx's Rules
to those of ISE and then, separately, in another rule change seek to
incorporate ISE's rules by reference to Phlx.
    The vast majority of the changes are technical changes and made
throughout the Options Listing Rules. These minor changes are designed
to conform the Phlx Options rules to the equivalent ISE rules, as well
as to increase the clarity of the rules. This includes some
reorganization and renumbering within the Options Listing Rules'
subsections to ensure they remain consistent.
    The proposed changes that do not fit within the description above
are listed below, beginning with changes to Options 1 General
Provisions and

followed by global changes to the Options Listing Rules. The changes
are then broken down by section within the Options Listing Rules.
    Unlike ISE, Phlx has listing rules for U.S. Dollar Settled Foreign
Currency Options or ``FCOs.'' Phlx proposes to relocate the listing
rules related to U.S. Dollar Settled Foreign Currency Options to new
Options 4C in order that it may identically align the remaining rules
to ISE's Options 4 Rules.
Proposed Changes to Options 1 General Provisions
    The Exchange is proposing to add definitions to ``Options 1 Section
1. Applicability, Definitions and References''. Specifically, the terms
``class'' ``series'' and ``underlying security'' will be added to
Section 1(b) as (9), (51), and (60), respectively.\8\ The Exchange is
deleting the definitions for ``class of options'' and ``series of
options and replacing them with the new definition of ``class and
``series''. The Exchange believes that using the definitions for these
terms as defined in the By-Laws of The Options Clearing Corporation
(``OCC'') uniformly across Nasdaq, Inc.'s exchanges will help to align
them. Providing uniform, clear and precise definitions for these terms
will provide consistency, lessen potential confusion and add clarity
for market participants.
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    \8\ See OCC By-Laws Article I--Definitions C.(11); S.(12); and
U.(3), respectively.
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Proposed Changes to the Options Listing Rules
Proposed Changes to Section 1 of Options 1. Applicability, Definitions
and References
    This section will be amended to clarify that the Exchange trades
options contracts, each of which is designated by reference to the
issuer of the underlying security, expiration month or expiration date,
exercise price and type (put or call) and to conform the Phlx Options
rules to the equivalent ISE rules.\9\ The second sentence of this rule
related to foreign currency option contracts is being relocated to new
Options 4C, Section 2(a) without amendment.
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    \9\ See ISE Options Listing Rule Section 1.
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Proposed Changes to Section 2. Rights and Obligations of Holders and
Writers
    This section will be amended with a number of minor changes to
update the numbering and to increase the clarity of the language and to
conform the Phlx Options rules to the equivalent ISE rules.\10\
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    \10\ See ISE Options Listing Rule Section 2.
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Proposed Changes to Section 3. Criteria for Underlying Securities
    Options 4, Section 3 of the Options Listing Rules is being updated
by modifying the existing Rulebook language to reflect the language of
the ISE version of the rule.\11\ Most of the changes in Section 3
simply result from minor changes and reorganization within the section
done to mirror the ISE rule and for greater clarity.
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    \11\ See ISE Options Listing Rule Section 3.
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    Options 4, Section 3(b) of the Options Listing Rules will also
change ``Board of Directors'' to ``the Exchange'' as to who may
establish guidelines to be considered in evaluating potential
underlying securities for Exchange options transactions.
    Current Section 3(c) is being relocated to new Options 4C, Section
3(a) without amendment.
    New Options 4, Section 3(c), which address securities of
restructured companies, reflects the language of the ISE version of the
rule.\12\ This section will now define ``Restructuring Transaction'' as
a spin-off, reorganization, recapitalization, restructuring or similar
corporate transaction, ``Restructure Security'' as an equity security
that a company issues, or anticipates issuing, as the result of a
Restructuring Transaction of the company, ``Original Equity Security''
as a company's equity security that is issued and outstanding prior to
the effective date of a Restructuring Transaction of the company.
``Relevant Percentage'' will be defined as either: (i) Twenty-five
percent (25%), when the applicable measure determined with respect to
the Original Equity Security or the business it represents includes the
business represented by the Restructure Security; or (ii) thirty-three
and one-third percent (33-1/3%), when the applicable measure determined
with respect to the Original Equity Security or the business it
represents excludes the business represented by the Restructure
Security. Additionally, proposed Section 3(c) will include the
``Share'' and ``Number of Shareholder'' guidelines to mirror the
equivalent ISE Options Listing Rule. Also, the current rules related to
``Restructure Security'' in Supplementary Material .05 to Options 4,
Section 3 are being deleted.
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    \12\ Id.
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    Proposed Options 4, Section 3(c)(2) will address determining
whether a Restructure Security satisfies the share guideline set forth
in this Rule. Proposed Options 4, Section 3(c)(3) adds a ``Trading
Volume'' guideline, proposed Options 4, Section 3(c)(4) adds a ``Market
Price'' guideline, and proposed Options 4, Section 3(c)(5) adds a
``Substantiality Test'' for a ``Restructure Security''. Proposed
Options 4, Section 3(c)(6) says that a Restructure Security's aggregate
market value may be determined from ``when issued'' prices, if
available, while proposed Options 4, Section 3(c)(7) says that in
calculating comparative aggregate market values for the purpose of
assessing whether a Restructure Security qualifies to underlie an
option, the Exchange will use the Restructure Security's closing price
on its primary market on the last business day prior to the selection
date or the Restructure Security's opening price on its primary market
on the selection date and shall use the corresponding closing or
opening price of the related Original Equity Security.
    Proposed Options 4, Section 3(c)(8) addresses calculating
comparative asset values and revenues while proposed Options 4, Section
3(c)(9) says that except in the case of a Restructure Security that is
distributed pursuant to a public offering or rights distribution, the
Exchange may not rely upon the trading volume or market price history
of an Original Equity Security, unless it relies upon both of those
measures for that trading day. Proposed Options 4, Section 3(c)(10)
says that once the Exchange commences to rely upon a Restructure
Security's trading volume and market price history for any trading day,
the Exchange may not rely upon the trading volume and market price
history of the security's related Original Equity Security for any
trading day thereafter. Proposed Options 4, Section 3(c)(11) addresses
``When Issued'' trading is prohibited.
    Options 4, Section 3(e) will be amended to say that ``security''
will be broadly interpreted to mean any equity security, as defined in
Rule 3a11-1 under the Exchange Act, which is appropriate for options
trading, and the word ``shares'' will mean the unit of trading of such
security. This will replace Supplementary Material .03 to Options 4,
Section 3, which is being deleted. The remainder of Supplementary
Material .03 to Options 4, Section 3 is being relocated to paragraph
(a) (``the word ``shares'' shall mean the unit of trading such
security'') and paragraph (f) (ADRs). The remainder of Section 3(e)
will be deleted because these provisions relating to determining
whether to list an option that otherwise meets objective listing
criteria are unnecessary and will

now be in line with ISE rules \13\ and those of other affiliated
markets. The Exchange needs to be competitive with other markets and
their ability to list options and these other markets do not have these
requirements. Simply put, the Exchange is harmonizing and uniformizing
Phlx's Options Listing Rules with those of ISE and other affiliated
markets so that it can list securities on its markets in the same
fashion as these other markets.
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    \13\ Id.
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    Proposed Options 4, Section 3(f) will add introductory language for
clarity and say that securities deemed appropriate for options trading
shall include nonconvertible preferred stock issues and American
Depositary Receipts (``ADRs'') if they meet the criteria and guidelines
set forth in the Rule. This rule text is currently in Supplementary
Material .03 to Options 4, Section 3.
    Proposed Options 4, Sections 3(g) and (h) both deal with securities
deemed appropriate for options trading, contain changes reflecting
reorganization and clarifications, including the deletion of language
included elsewhere and language no longer necessary, and copy the
language of the ISE version of the rule.\14\ Proposed Options 4,
Section 3(h)(1) adds language stating that subparagraph (2) applies to
the extent the Exchange-Traded Fund Share is based on international or
global indexes. This language is intended to clarify that subparagraph
(2) does not apply to an Exchange-Traded Fund Shares based on a U.S.
domestic index. The phrase ``if not available or applicable'' added to
Proposed Options 4, Section 3(h)(2)(B), (C), and (D) is intended to
clarify that when component securities are not available, the portfolio
of securities upon which the Exchange-Traded Fund Share is based can be
used instead.
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    \14\ Id.
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    Proposed Section 3(i) will define ``market information sharing
agreement'' by referring back to subparagraph (g)(2), which defines it
as an agreement that would permit the Exchange to obtain trading
information relating to the securities held by the fund including the
identity of the Member of the foreign exchange executing a trade.
    Proposed Section 3(j) will contain changes reflecting
reorganization and clarifications, including the deletion of the
definition of ``Partnership Unit'' as set forth in current
Supplementary Material .08 to Options 4, Section 3, since it is a
remnant from the legacy Exchange exchange-traded fund (``ETF'') listing
rule and is unnecessary since it has never been listed or traded on the
Exchange. It also is not reflected in the ISE rule version being
adopted for this section.\15\
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    \15\ Id.
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    Proposed Section 3(k) will include non-substantive changes and is
intended to reflect the ISE rule version being adopted for this
section.\16\
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    \16\ Id.
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Proposed Changes to Section 4. Withdrawal of Approval of Underlying
Securities
    Options 4, Section 4 of the Options Listing Rules is being updated
by modifying the existing Rulebook language to reflect the language of
the ISE version of the rule.\17\ Overall, the changes in Section 4 are
minor and reorganization within the section is done to mirror the ISE
rule and for greater clarity.
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    \17\ See ISE Options Listing Rule Section 4.
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    Current Supplementary Material .04 to Options 4, Section 4 is being
relocated to Options 4C, Section 4(a) without amendment as this rule
text relates to foreign currency options. Subparagraph (ii) is being
relocated to new Supplementary Material to Options 8, Section 30. The
phrase ``of publicly held principal amount'' is being deleted because
it is extraneous and also not included in the ISE version of the rule.
    Options 4, Section 4(e) is being added, but is not a substantive
change. Aside from the change being consistent with the ISE version of
the rule, Options 4, Section 4(e) memorializes the current practice
regarding notice to customers of withdrawals that is consistent across
all Nasdaq affiliated exchanges. Options 4, Section 4(f) is being
revised to match the corresponding ISE rule and the change is not
substantive and reflects language already included in Options 4,
Section 3(f)(2) and (3).
    In Options 4, Section 4(g) the deletion of ``cease to be an ``NMS
stock'' and the addition of ``are halted or suspended from trading on
their primary market'' does not reflect a substantive change and
matches the corresponding ISE rule. Additionally, it is more
descriptive since it takes into account that this may be temporary and
not permanent.
    Current Supplementary Material .09 to Options 4, Section 3.09
describes inadequate volume delisting, is being deleted. The provision
currently provides,

    .09 Inadequate volume delisting.
    (1) Absent exceptional circumstances, a security initially
approved for options trading may be deemed by the Exchange not to
meet the requirements for continued approval, in which case the
Exchange will not open for trading any additional series of equity
option contracts of the class of options and may determine to delist
the class of options if it meets the following criteria:
    (a) The option has been trading on the Exchange not less than
six (6) months; and
    (b) The Exchange average daily volume (``ADV'') of the entire
class of options over the last six (6) month period was less than
twenty (20) contracts.
    If the option is singly listed only on the Exchange, the
Exchange will cease to add new series and may delist the class of
options when there is no remaining open interest;
    (2) Should the Exchange determine to delist an equity option
pursuant to this Supplementary Material .09, it will notify the Lead
Market Maker to whom the affected option is allocated of the
determination to delist such option not less than ten (10) days
prior to the scheduled delisting date (the ``options delisting
letter'').
    (a) Within two (2) days of receiving an options delisting letter
the affected Lead Market Maker may in writing submit to the person
designated by the Exchange in the options delisting letter the Lead
Market Maker's justification for and/or explanation of the low ADV
in such option and reasons why the Exchange should continue to list
the option (the ``justification letter'');
    (b) The Exchange may, but is not required to, take into account
the information provided in the justification letter in its
determination to delist the option, and will indicate its
determination to delist in writing to the affected Lead Market Maker
that provided the justification letter to the Exchange. The
Exchange's decision to delist the option is exclusively its own and
is not appealable.

    In order to remain competitive with other options markets, the
Exchange proposes to adopt the same obligations for continuance of
trading. With this proposal, the Exchange would eliminate the
requirement that an option must be trading for more than 6 months. The
Exchange notes that this condition is not present on other options
markets such as ISE and Cboe Exchange, Inc. (``Cboe'').\18\ This also
applies to the requirement that the average daily volume of the entire
class of options over the last six (6) month period was less than
twenty (20) contracts. The Exchange notes that Phlx's requirements are
different than other options markets and to remain competitive the
Exchange proposes to adopt the same standards as ISE, GEMX, MRX and
Cboe in order to remain competitive and list similar options as the
other markets.
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    \18\ See ISE Options 4, Section 4 and Cboe Rule 4.4.
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    While the Exchange may in the future determine to delist an option
that is singly listed, the Exchange proposes to remove the rule text
which provides that ``If the option is singly listed only on the
Exchange, the Exchange will cease to add new series and may delist the
class of options when there is no

remaining open interest.'' This rule text does not exist on ISE, GEMX,
MRX and Cboe. The Exchange today provides notification of a delisting
to all members so therefore it is not necessary to retain the
provisions within (b)(2). Also, proposed new Options 4, Section 4(e)
establishes the rules by which the Exchange will announce securities
that have been withdrawn. The rule text within Options 4, Section 4(b),
as amended to conform to ISE rule text, will continue to govern the
continued approval of options on the Exchange.
Proposed Changes to Section 5. Series of Options Contracts Open for
Trading
    Options 4, Section 5 of the Options Listing Rules is being updated
by modifying the existing Rulebook language to reflect the language of
the ISE version of the rule.\19\ Most of the changes in Options 4,
Section 5 simply result from minor changes and reorganization within
the section done to mirror the ISE rule and for greater clarity.
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    \19\ See ISE Options Listing Rule Section 5.
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    Options 4, Section 5(a) of the Options Listing Rules will be
amended to add to note that exercise-price setting parameters adopted
as part of the Options Listing Procedures Plan. In order to mirror the
equivalent ISE rules,\20\ Options 4, Section 5 will be amended to
relocate current rule text to be identical to ISE, Nasdaq Phlx LLC
(``Phlx'') and Nasdaq BX, Inc. (``BX'') rule text. The Exchange
proposes to harmonize its rules to the identical rules of the five
Nasdaq affiliated markets.
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    \20\ Id.
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    The Exchange proposes to amend the rule text currently within Phlx
Options 4, Section 5(a)(i) to mirror ISE. The Exchange proposes to
amend the existing sentence which provides, ``At the commencement of
trading on the Exchange of a particular class of stock or Exchange-
Traded Fund Share options, the Exchange shall open a minimum of one
expiration month and series for each class of options open for trading
on the Exchange.'' The Exchange proposes to instead provide, ``At the
commencement of trading on the Exchange of a particular class of
options, the Exchange shall open a minimum of one (1) series of options
in that class.'' The proposed amendments are non-substantive and seek
to align Phlx's text with ISE's text. The Exchange also proposes to add
a sentence that currently exists within ISE Options 4, Section 5(a)(i)
which provides, ``The exercise price of that series will be fixed at a
price per share, relative to the underlying stock price in the primary
market at about the time that class of options is first opened for
trading on the Exchange.'' Similar language exists within current
Options 4, Section 5(a)(i)(C). The text of Options 4, Section
5(a)(i)(C) is being relocated and modified added to remove the phrase
``of stock or Exchange-Traded Fund Share options opened for trading on
the Exchange'' and otherwise modified to mirror ISE rule text. The
Exchange notes that today, BX and The Nasdaq Options Market LLC
(``NOM'') rules do not contain references to Exchange-Traded Fund
shares. The language as amended is broadly read to include all options
listed on the Exchange.
    The Exchange proposes to amend current Options 4, Section
5(a)(i)(B), which is proposed to be re-lettered as Options 4, Section
5(c), to remove the phrase ``stock or Exchange-Traded Fund Share''
similar to other proposed changes herein. Finally, the rule text within
current Options 4, Section 5(a)(i)(D) is being relocated to new Options
4, Section 8(a) with some amendments discussed in that section.
    Current Options 4, Section 5(a)(ii), which is reserved, is being
deleted.
    Current Options 4, Section 5(a)(iii) and subparagraphs (A)-(E) are
being relocated to proposed new Options 4C, Section 5 without
amendment.\21\
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    \21\ The Exchange notes that Supplementary .06 of Options 4,
Section 5 is also being relocated into proposed new Options 4C,
Section 5 without amendment.
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    The Exchange proposes to relocate current Options 4, Section
5(a)(iv) to proposed Options 4, Section 5(k) and update the rule
citation to Supplementary Material .10 to proposed Options 4, Section
6(b) as that rule text is proposed to be relocated as well.
    The Exchange proposes to relocate and amend rule text within
current Supplementary Material .05 (a)(iii) of Options 4, Section 5 to
proposed Options 4, Section 5(d) to mirror ISE. The Exchange proposes
to instead provide,

    (d) Except as otherwise provided in the Supplementary Material
hereto, the interval between strike prices of series of options on
individual stocks will be:
    (1) $2.50 or greater where the strike price is $25.00 or less;
    (2) $5.00 or greater where the strike price is greater than
$25.00; and
    (3) $10.00 or greater where the strike price is greater than
$200.00.
    The interval between strike prices of series of options on
Exchange-Traded Fund Shares approved for options trading pursuant to
Section 3(h) of this Options 4 shall be fixed at a price per share
which is reasonably close to the price per share at which the
underlying security is traded in the primary market at or about the
same time such series of options is first open for trading on the
Exchange, or at such intervals as may have been established on
another options exchange prior to the initiation of trading on the
Exchange.

    The Exchange notes that the examples are unnecessary. The exception
for $2.50 below $50 will be covered within the $2.50 Strike Program
rules, which are being relocated into proposed Supplementary Material
.02 to Options 4, Section 5. The Exchange also proposes to note,
similar to ISE the intervals between strike prices for Exchange-Traded
Fund shares are noted within proposed new Section 3(h) of Options 4.
This cross citation will provide greater information as to the criteria
for Exchange-Traded Fund shares.
    The Exchange proposes to relocate the rule text within current
Supplementary Material .05 (a)(iv)(C) of Options 4, Section 5 to
proposed Options 4, Section 5(e) without change.
    The Exchange proposes to relocate the rule text within current
Supplementary Material .12 of Options 4, Section 5 to proposed Options
4, Section 5(f) and proposes to add references to Supplementary .01,
.05 and subparagraph (e).
    The Exchange proposes to add rule text within proposed Options 4,
Section 5(g) identical to ISE, which provides, ``The Exchange will open
at least one expiration month for each class of options open for
trading on the Exchange.'' This proposed new sentence will add more
clarity to current listing rules. Today, the Exchange opens at least
one expiration month for each class of options open for trading on the
Exchange.
    The Exchange proposes to relocate the rule text within current
Supplementary Material .05 (a)(v) and (vi) of Options 4, Section 5 to
proposed Options 4, Sections 5(h) and (i), respectively. The rule text
is being moved without change except that within Options 4, Sections
5(h) a citation is being added to Options 4, Section 3(k) for
reference.
    The rule text proposed within Options 4, Section 5(j) is identical
to ISE Options 4, Section 5(j) and provides, ``The interval of strike
prices may be $2.50 in any multiply-traded option class to the extent
permitted on the Exchange by the Commission or once another exchange
trading that option lists strike prices of $2.50 on such options
class.'' The Exchange proposes to adopt similar language to ISE. The
$2.50 Strike Program was adopted in 1995 as a joint pilot program of
the

options exchanges \22\ and expanded and permanently approved in
1998.\23\ As part of that program, each options exchange, however, is
permitted to list options with $2.50 strike price intervals on any
option class that another exchange selects as part of the Program. This
rule text is non-substantive as Phlx may today list options with $2.50
strike price intervals on any option class that another exchange. This
rule text will bring greater clarity to Phlx's listing rules.
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    \22\ See Securities Exchange Act Release No. 35993 (July 19,
1995), 60 FR 38073 (July 25, 1995) (approving File Nos. SR-Phlx-95-
08, SR-Amex-95-12, SR-PSE-95-07, SR-CBOE-95-19, and SR-NYSE-95-12).
    \23\ See Securities Exchange Act Release No. 40662 (November 12,
1998), 63 FR 64297 (November 19, 1998) (approving File Nos. SR-Amex-
98-21, SR-CBOE-98-29, SR-PCX-98-31, and SR-Phlx-98-26).
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    The Exchange described above the relocation of Options 4, Section
5(a)(iv) to proposed Options 4, Section 5(k).
    The Exchange proposes to delete the following current rule text
from Options 4, Section 5, which does not appear in ISE or BX Options
4, Section 5.

    (b) Rotation. On the business day of expiration, or, in the case
of an option contract expiring on a day that is not a business day,
on the business day prior to the expiration date of a particular
series of options, a closing rotation (as defined in Supplementary
Material .01 to Options 3, Section 9) for such series shall commence
at 4:00 p.m. in the case of options on stocks or 4:15 p.m. in the
case of options on designated Exchange-Traded Fund Shares.
    (c) Adjustments. The unit of trading and the exercise price
initially established for option contracts of a particular series
are subject to adjustment in accordance with the rules of The
Options Clearing Corporation. When such adjustment or adjustments
have been determined, announcement thereof shall be made by the
Exchange and, effective as of the time specified in such
announcement, the adjusted unit of trading and the adjusted exercise
price shall be applicable with respect to all subsequent
transactions in such series of options.
    (d) Option contracts shall be subject to adjustments in
accordance with the rules of The Options Clearing Corporation.

    The Exchange notes within Options 4, Section 2 that the rights and
obligations of holders and writers of option contracts of any class of
options dealt in on the Exchange shall be as set forth in the rules of
The Options Clearing Corporation, which contemplates an option contract
expiring on a day that is not a business day and adjustments.
    The Exchange proposes to delete current Supplementary Material .01
to Options 4, Section 5 as each program details the manner in which
series of options may be open. Also, the relocated foreign currency
rules detail how foreign currency may open. This language within
current Supplementary Material .01 to Options 4, Section 5 is
unnecessary.
    The Exchange proposes to relocate Supplementary Material .02 to
Options 4, Section 5 to new Options 4C, Section 5(c) without change.
    Supplementary Material .03 and .04 of Options 4, Section 5, which
are reserved, are being deleted.
    The Exchange proposes to renumber Supplementary Material .05 of
Options 4, Section 5 as .01. The Exchange proposes to re-letter and
renumber this section to conform to ISE's Options 4, Section 5 at
Supplementary Material .01.
    The following changes are being proposed to the $1 Strike Price
Interval Program so that the language mirrors ISE's Options 4, Section
5 at Supplementary Material .01. At new (a) of Options 4, Section 5 at
Supplementary Material .01, the Exchange proposes to add ``Program
Description. The interval between strike prices of series of options on
individual stocks may be $1.00'' to introduce the material which
follows. In a few places ``Strike Program'' is proposed to be changed
to ``Strike Price Interval Program,'' or ``Strike Price Program'' to
mirror ISE rule text. Also, the term ``national'' is added before
``securities exchange'' and the remainder of the proposed amendments
are technical in nature.
    Similar changes are proposed at new (b) of Options 4, Section 5 at
Supplementary Material .01 including the word ``stock'' being changed
to ``security.'' A citation to relocated rule text was made within new
(b)(iii) of Options 4, Section 5 at Supplementary Material .01.
    The Exchange proposes to add ``Long-Term Options Series'' or
``LEAPs'' before new (b)(v) of Options 4, Section 5 at Supplementary
Material .01. Finally, the Exchange proposes to remove ``the Exchange
may grant'' and add the phrase ``may be granted'' to the end of new (d)
of Options 4, Section 5 at Supplementary Material .01 to mirror ISE
rule text in the same location. This change is non-substantive.
    The Exchange proposes to relocate current Supplementary Material
.05(a)(ii) to Options 4, Section 5 to new Supplementary Material .05 to
Options 4, Section 5. The relocation will be explained below.
    The Exchange proposes to delete the phrase ``. . . , except that
strike prices of $2 and $3 shall be permitted within $0.50 of a $2.50
strike price for classes also selected to participate in the $0.50
Strike Program.'' The Exchange separately describes the $0.50 and $2.50
Programs within .05 and .02 of the proposed Supplementary Material to
Options 4, Section 5, respectively. The clause is not necessary within
the $1 Strike Program and currently not contained within the ISE rules
wherein the $1 Strike Program operates in the same manner.
    The Exchange explained above that current Supplementary Material
.05(a)(iii) to Options 4, Section 5 was relocated to Options 4, Section
5(d).
    The Exchange proposes to delete Supplementary Material
.05(a)(iv)(A) to Options 4, Section 5 as proposed Options 4, Section
5(h) will detail the interval between strike prices of series of
options on Index-Linked Securities, as defined in Options 4, Section
3(k)(1), that will be $1 or greater when the strike price is $200 or
less and $5 or greater when the strike price is greater than $200 and
will be consistent with the equivalent ISE rule.
    The Exchange proposes to delete Supplementary Material
.05(a)(iv)(B) to Options 4, Section 5 related to the listing of ``SLV''
\24\ and ``USO'' \25\ Exchange-Traded Fund Shares which currently
provides, ``The interval of strike prices of series of options on SLV
and USO Exchange-Traded Fund Shares will be $.50 or greater where the
strike price is less than $75.'' The Exchange is removing this rule
text as SLV and USO are currently listed pursuant to current
Supplementary Material .12 to Options 4, Section 5, which is being
relocated to new Options 4, Section 5(f). SLV and USO both are used to
calculate volatility indexes (``OVX'' \26\ and ``VXSLV,'' \27\
respectively) and therefore subject to the listing provisions of new
Options 4, Section 5(f). Supplementary Material .05(a)(iv)(B) to
Options 4, Section 5 is therefore unnecessary as SLV and USO would
trade according to these rules.
---------------------------------------------------------------------------

    \24\ The symbol ``SLV'' refers to iShares Silver Trust.
    \25\ The symbol ``USO'' refers to the United States Oil Fund LP.
    \26\ The symbol ``OVX'' refers to the Cboe Crude Oil Volatility
Index.
    \27\ The symbol ``VXSLV'' refers to the CBOE Silver ETF
Volatility Index.
---------------------------------------------------------------------------

    The Exchange noted above that Supplementary Material .05(a)(iv)(C)
to Options 4, Section 5 was relocated to proposed Options 4, Section
5(e). The Exchange also noted that Supplementary Material .05(a)(v) and
(vi) were relocated to Options 4, Section 5(h) and (i), respectively.
    The Exchange proposes to relocate rule text from current
Supplementary Material .05(b) and (b)(i) of Options 5, Section 4 to new
Supplementary

Material .02 to Options 4, Section 5 with the title ``$2.50 Strike
Price Interval Program''. The Exchange proposes to delete Supplementary
Material .05(b)(ii) of Options 4, Section 5 as that language is not
necessary and provided for within The Options Clearing Corporation
Rules.
    The Exchange proposes to relocate rule text from current
Supplementary Material .11 of Options 5, Section 4 to new Supplementary
Material .03 to Options 4, Section 5 with the title ``Short Term
Options Series Program''. The Exchange proposes to add the following
titles, ``Classes,'' ``Expiration,'' ``Initial Series,'' ``Additional
Series,'' and ``Strike Interval,'' before Supplementary Material
.03(a)-(e) of Options 5, Section 4. The Exchange proposes to amend the
rule text to mirror ISE rule text. Within proposed .03(a) the Exchange
proposes to replace the word ``fifty'' with the number ``50'' and the
word ``thirty'' with the number ``30''. The Exchange also proposes to
relocate the word ``may'' in the second sentence. Within proposed
.03(b) the Exchange proposes to remove the words ``on the same class''
at the end of the paragraph. Within proposed .03(c) the Exchange
proposes to add a sentence at the beginning which provides, ``The
Exchange may open up to 30 initial series for each options class that
participates in the Short Term Options Series Program.'' The Exchange
also proposes to replace the number ``7'' with the word ``seven'' and
the number ``3'' in two places with the word ``three''. Within proposed
.03(d) the Exchange proposes to add a new sentence to the end of
Supplementary Material .11(d) of Options 4, Section 5 that provides,
``Notwithstanding any other provisions in this Rule, Short Term Option
Series may be added up to and including on the Short Term Option
Expiration Date for that options series.'' This sentence appears in
ISE's rule in the same location. Finally, rule text from current
Supplementary Material .05(a)(vii) to Options 4, Section 5 is being
relocated to the beginning of proposed .03(e) to provide, ``During the
month prior to expiration of an option class that is selected for the
Short Term Option Series Program pursuant to this Rule (``Short Term
Option''), the strike price intervals for the related non-Short Term
Option (``Related non-Short Term Option'') shall be the same as the
strike price intervals for the Short Term Option.'' \28\ The Exchange
also removes the last sentence of current Supplementary Material .11(e)
of Options 5, Section 4 as that language is repetitive of the first new
sentence.
---------------------------------------------------------------------------

    \28\ This change is non-substantive as the current rule text
within Supplementary Material .11 indicates that Related non-Short
Term Options series shall be opened during the month prior to
expiration of such Related non-Short Term Options series in the same
manner as permitted in Supplementary Material .11 to this Options 4,
Section which is the Short Term Options Series rule text. The
Exchange's amendments are not modifying the Short Term Options
Series rules in any substantive way and Related non-Short Term
Options series will continue to be subject to the same rules.
---------------------------------------------------------------------------

    The Exchange proposes to relocate rule text from Supplementary
Material .08 to Options 4, Section 5 to proposed Supplementary Material
.04 to Options 4, Section 5. The Exchange proposes to add the title
``Expiration'' before current Supplementary Material .08(a) to Options
4, Section 5. The Exchange proposes new language within Supplementary
Material .08(b) to Options 4, Section 5, which is reserved, that
provides, ``The Exchange will not list a Short Term Option Series on an
options class whose expiration coincides with that of a Quarterly
Options Series on that same options class.'' This rule text is
identical to ISE rule text in the same location. The Exchange proposes
to add the title ``Strike Interval'' before Supplementary Material
.04(e) to Options 4, Section 5 which is being related from
Supplementary Material .11(e) of Options 4, Section 5. The Exchange
proposes to delete the word ``Reserved'' after (f) and instead relocate
the Delisting Policy within current Supplementary Material .04(g) to
Options 4, Section 5 to ``f.'' The remainder of the changes to this new
Supplementary Material .04 are technical renumbering changes and
Supplementary Material .04(h) to Options 4, Section 5, which is
reserved, is being deleted.
    As noted above, current Supplementary Material .05(a)(ii) to
Options 4, Section 5 is being relocated to new Supplementary Material
.05 to Options 4, Section 5 with the title ``$0.50 Strike Program.''
The Exchange proposes to add rule text to the beginning of the rule,
which provides, ``The interval of strike prices of series of options on
individual stocks may be'' to introduce the text that follows,
otherwise there are no changes proposed to the current rule text. This
rule text is identical to ISE's rule text in the same location.
    The Exchange proposes to amend current Supplementary Material
.05(c) to Options 4, Section 5 to new Supplementary Material .06 with
the title ``$5 Strike Program.'' The Exchange proposes to begin this
section with new text, which provide, ``The interval of strike prices
may be'' which introduces the rule text. This rule text is identical to
ISE's rule text in the same location.
    The Exchange proposes to relocate current Supplementary Material
.06 to Options 4C, Section 5(a)(1) without change. The Exchange
proposes to relocate current Supplementary Material .07 to Options 4,
Section 5 to the beginning of new Options 4C, Section 5(b) without
change.
    The Exchange noted above that current Supplementary Material .08 to
Options 4, Section 5 was relocated to Supplementary Material .04 to
Options 4, Section 5.
    The Exchange proposes to delete current Supplementary Material .09
to Options 4, Section 5 as the intervals for indexes are noted within
Options 4A and do not need to be discussed in Options 4 which concerns
multiply-listed options.
    The Exchange discusses the relocation of current Supplementary
Material 10 to Options 4, Section 5 within the next section.
    The Exchange relocated current Supplementary Material 11 to Options
4, Section 5 to new Supplementary Material .03 to Options 4, Section 5.
    The Exchange relocated current Supplementary Material 12 to Options
4, Section 5 to new Options 4, Section 5(f).
Proposed Section 6. Select Provisions of Options Listing Procedures
Plan
    Proposed Section 6 of the Options Listing Rules is adopting the
language of the ISE version of the rule \29\ with the revised rule text
not being new, but largely relocated from Supplementary Material .10 of
Options 4, Section 5. This aligns with the goal of harmonizing and
uniformizing Phlx's Options Listing Rules with those of ISE and
providing greater information to market participants.
---------------------------------------------------------------------------

    \29\ See ISE Options Listing Rule Section 6.
---------------------------------------------------------------------------

    Proposed Section 6 of the Options Listing Rules will include Select
Provisions of Options Listing Procedures Plan (``OLPP'') that will
mirror the language in the ISE rules.\30\ Proposed Section 6(a) of the
Options Listing Rules references the quote mitigation strategy that is
codified in the OLPP at http://www.optionsclearing.com/products/options_listing_proceduresplan.pdf.
---------------------------------------------------------------------------

    \30\ Id.
---------------------------------------------------------------------------

    Specifically, proposed Section 6(b) states that the exercise price
of each options series listed by the Exchange is fixed at a price per
share that is reasonably close to the price of the

underlying equity security, ETF or Trust Issued Receipt at or about the
time the Exchange determines to list such series. Proposed subsection
(b)(i) says that except as provide in subparagraphs (ii)-(iv), if the
price of the underlying security is less than or equal to $20, the
Exchange will not list new options series with an exercise price more
than 100% above or below the price of the underlying security. However,
the foregoing restriction will not prohibit the listing of at least
three exercise prices per expiration month in an options class. Except
as provided in Supplementary Material .02(d) to Options 3, Section 5,
if the price of the underlying security is greater than $20, the
Exchange will not list new options series with an exercise price more
than 50% above or below the price of the underlying security.
Subsection (b)(i) also details how to measure the price of the
underlying security.
    Proposed subsection (b)(ii) of Options 4, Section 6 explains that
the series exercise price range limitations contained in subparagraph
(i) above do not apply with regard to the listing of $1 strike prices
in options classes participating in the $1 Strike Program, as well as
the listing of series of Flexible Exchange Options. The Exchange
proposes to add additional rule text to proposed (b)(ii)(1) which
provides, ``Instead, the Exchange shall be permitted to list $1 strike
prices to the fullest extent as permitted under its Rules for the $1
Strike Program. . .'' \31\ This additional rule text is identical to
ISE Options 4, Section 6(b)(ii)(1) and serves to make clear that Phlx
may list $1 strikes pursuant to its rules.
---------------------------------------------------------------------------

    \31\ Current Phlx Supplementary Material .10(b) of Options 4,
Section 5 provides, ``The series exercise price range limitations
contained in subparagraph (a) above do not apply with regard to: (i)
The listing of $1 strike prices in option classes participating in
the $1 Strike Program or (ii) the listing of series of FLEX
options.''
---------------------------------------------------------------------------

    Proposed subsection (b)(iii) says that the Exchange may designate
up to five options classes to which the series exercise price range may
be up to 100% above and below the price of the underlying security and
that such designations will be made on an annual basis and will not be
removed during the calendar year unless the options class is delisted
by the Exchange, in which case it may designate another options class
to replace the delisted class. If a designated options class is
delisted by the Exchange but continues to trade on at least one options
exchange, the options class shall be subject to the limitations on
listing new series set forth in subparagraph (i) above unless
designated by another exchange.
    Proposed subsection (b)(iv) says that if the Exchange that has
designated five options classes pursuant to subparagraph (iii) above
requests that one or more additional options classes be excepted from
the limitations on listing new series set forth in subparagraph (i)
above, the additional options class(es) will be designated upon the
unanimous consent of all exchanges that trade the options class(es). In
addition, at the Exchange's request, the percentage range for the
listing of new series may be increased to more than 100% above and
below the price of the underlying security for an options class, by the
unanimous consent of all exchanges that trade the designated options
class. Exceptions for an additional class or for an increase of the
exercise price range will apply to all standard expiration months
existing at the time of the vote, plus the next standard expiration
month to be added, and also to any non-standard expirations that occur
prior to the next standard monthly expiration.
    Proposed subsection (b)(v) is not being relocated, rather this
provision is new to Phlx.\32\ The provisions of this subparagraph (b)
will not permit the listing of series that are otherwise prohibited by
the Rules of the Exchange or the OLPP. To the extent the Rules of the
Exchange permit the listing of new series that are otherwise prohibited
by the provisions of the OLPP, the provisions of the OLPP will govern.
---------------------------------------------------------------------------

    \32\ Proposed Options 4, Section 6(b)(v) provides, ``(v) The
provisions of this subparagraph (b) shall not permit the listing of
series that are otherwise prohibited by the Rules of the Exchange or
the OLPP. To the extent the Rules of the Exchange permit the listing
of new series that are otherwise prohibited by the provisions of the
OLPP, the provisions of the OLPP shall govern.''
---------------------------------------------------------------------------

    Proposed subsection (b)(vi) says that the Exchange may list an
options series that is listed by another options exchange, provided
that at the time such series was listed it was not prohibited under the
provisions of the OLPP or the rules of the exchange that initially
listed the series.
Proposed Section 7. Adjustments
    Proposed Options 4, Section 7 of the Options Listing Rules is
adopting the language of the ISE version of the rule.\33\ Phlx
currently does not have a similar rule, however Phlx members and member
organizations are subject to the rules of The Options Clearing
Corporation (``OCC'') today as all options are cleared at OCC. Proposed
Section 7 will be amended to say that options contracts will be subject
to adjustments in accordance with the Rules of the Clearing Corporation
that such changes will be effective for all subsequent transactions in
that series at the time specified in the announcement.
---------------------------------------------------------------------------

    \33\ See ISE Options Listing Rule Section 7. Proposed Options 4,
Section 7 provides, ``Options contracts shall be subject to
adjustments in accordance with the Rules of the Clearing
Corporation. When adjustments have been made, the Exchange will
announce that fact, and such changes will be effective for all
subsequent transactions in that series at the time specified in the
announcement.''
---------------------------------------------------------------------------

Proposed Changes to Section 8. Long-Term Options Contracts
    Proposed Options 4, Section 8 of the Options Listing Rules is
adopting the language of the ISE version of the rule.\34\ Current
Options 4, Section 5(a)(i)(D) \35\ is being relocated to new Options 4,
Section 8(a) with some amendments.
---------------------------------------------------------------------------

    \34\ See ISE Options Listing Rule Section 8.
    \35\ Current Options 4, Section 5(a)(i)(D) provides, ``Long Term
Options. The Exchange may list, with respect to any class of stock
or Exchange-Traded Fund Share options series, options having from
twelve up to thirty-nine months from the time they are listed until
expiration. There may be up to ten expiration months for options on
the SPDR[supreg] S&P 500[supreg] exchange-traded fund (the ``SPY
ETF'') and up to six expiration months for options on all other
stocks or Exchange Traded Fund Shares. Strike price interval, bid/
ask differential and continuity rules shall not apply to such
options series until the time to expiration is less than nine
months.''
---------------------------------------------------------------------------

    Proposed Options 4, Section 8(a) of the Options Listing Rules says
that notwithstanding conflicting language in Options 3, Section 5, the
Exchange may list long-term options contracts that expire from twelve
to thirty-nine months from the time they are listed, this is consistent
with current rule text within Options 4, Section 5(a)(i)(D) but
accounts for Options 3, Section 5 which describes entry of orders. It
also specifies that there may be up to ten expiration months for
options on the SPDR[supreg] S&P 500[supreg] ETF and up to six
expiration months for options on all other securities. The new language
utilizes the term ``securities'' instead of stocks or Exchange Traded
Fund Shares. The remainder of proposed Section 8(a) remains the same.
    Proposed Options 4, Section 8(b) is new. The proposed provision
states that after a new long-term options contract series is listed,
that series will be opened for trading either when there is buying or
selling interest, or forty minutes prior to the close, whichever occurs
first and that no quotations will be posted for such options series
until they are opened for trading. This is the case today, however this
specificity is not currently noted in the rules. The addition of this
provision will bring greater specificity to Phlx's Rule and align the
rule text with ISE rule text.

Section 9. Limitation on the Liability of Index Licensors for Options
on Fund Shares
    Proposed Options 4, Section 9 of the Options Listing Rules is
adopting the language of the ISE version of the rule \36\ since it is
not in the current Exchange Rulebook and it will now be consistent with
the ISE rulebook. Proposed Section 9(a) defines the term ``index
licensor'' as any entity that grants the Exchange a license to use one
or more indexes or portfolios in connection with the trading of options
on Exchange-Traded Fund Shares (as defined in Options 4, Section 3(h)).
---------------------------------------------------------------------------

    \36\ See ISE Options Listing Rule Section 9.
---------------------------------------------------------------------------

    Proposed Options 4, Section 9(b) says that no index licensor with
respect to any index or portfolio underlying an option on Exchange-
Traded Fund Shares traded on the Exchange makes any warranty, express
or implied, as to the results to be obtained by any person or entity
from the use of such index or portfolio, any opening, intra-day or
closing value therefor, or any data included therein or relating
thereto, in connection with the trading of any option contract on
Exchange-Traded Fund Shares based thereon or for any other purpose. The
index licensor will obtain information for inclusion in, or for use in
the calculation of, such index or portfolio from sources it believes to
be reliable, but the index licensor does not guarantee the accuracy or
completeness of such index or portfolio, any opening, intra-day or
closing value therefor, or any data included therein or related
thereto. The index licensor disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to any such
index or portfolio, any opening, intra-day or closing value therefor,
any data included therein or relating thereto, or any option contract
on Exchange-Traded Fund Shares based thereon. The index licensor will
have no liability for any damages, claims, losses (including any
indirect or consequential losses), expenses or delays, whether direct
or indirect, foreseen or unforeseen, suffered by any person arising out
of any circumstance or occurrence relating to the person's use of such
index or portfolio, any opening, intra-day or closing value therefor,
any data included therein or relating thereto, or any option contract
on Exchange-Traded Fund Shares based thereon, or arising out of any
errors or delays in calculating or disseminating such index or
portfolio.
Proposed Changes to Section 10. Back-up Trading Arrangements
    Except as noted otherwise, the proposed changes to Options 4,
Section 10 are minor changes that are designed to conform the Phlx
Options rules to the equivalent ISE rules,\37\ as well as to increase
the clarity of the rules, which includes some reorganization and
renumbering within the Options Listing Rules' subsections to ensure
they remain consistent. It is in the interest of the Exchange to have
similar back-up trading arrangements that are harmonized with ISE and
the other affiliated markets in the event that Phlx needs to be hosted,
which are fair and representative of a common understanding.
---------------------------------------------------------------------------

    \37\ See ISE Options Listing Rule Section 10.
---------------------------------------------------------------------------

    For Exchange Exclusively Listed Options, in subsection (a)(iii) a
clarification is made that Phlx members that are trading on Phlx's
facility at the Back-up Exchange (not including members of the Back-up
Exchange who become temporary Members of Phlx pursuant to paragraph
(a)(1)(vi)) will be subject to Phlx rules governing or applying to the
maintenance of a person's or a firm's status as a Member of Phlx.
    Additionally, subsection (a)(v) will be amended to clarify that
Phlx will have the right to designate its Members that will be
authorized to trade Phlx exclusively listed options on Phlx's facility
at the Back-up Exchange and, if applicable, its Member(s) that will be
a lead market maker in those options.
    For Singly Listed Options, proposed Options 4, Section 10(a)(2) is
being amended to make clarifying changes.
    For Multiply Listed Options, proposed Options 4, Section 10(a)(3)
has been added to clarify that the Exchange may enter into arrangements
with a Back-up Exchange to permit Phlx members to conduct trading on a
Back-up Exchange of some or all of the Exchange's multiply listed
options in the event of a Disabling Event. The revised language is
consistent with current Exchange procedures. Such options will trade as
a listing of the Back-up Exchange and in accordance with the rules of
the Back-up Exchange. Such options shall be traded by members of the
Back-up Exchange and by Phlx members selected by Phlx to the extent the
Back-up Exchange can accommodate Exchange members in the capacity of
temporary members of the Back-up Exchange. If the Back-up Exchange is
unable to accommodate all Phlx members that desire to trade multiply
listed options at the Back-up Exchange, Phlx may determine which
members will be eligible to trade such options at the Back-up Exchange.
Proposed Section 10(a)(3) also covers the factors to be considered in
making such determinations.
    For Disabled Exchange Exclusively Listed Options, proposed Options
4, Section 10(b)(1) is being amended to make clarifying changes.
    For Disabled Exchange Singly Listed Options, proposed Options 4,
Section 10(b)(2) is being amended to make clarifying changes and to
delete language pertaining to granting temporary access to any member
of a Disabled Exchange under certain conditions because the Exchange
now addresses this in proposed Options 4, Section 10(b)(3). For
Multiply Listed Options, proposed Options 4, Section 10(b)(3) is new
and is consistent with current Phlx procedures and will clarify that
Phlx may enter into arrangements with a Disabled Exchange to permit the
Disabled Exchange's members to conduct trading on Phlx of some or all
of the Disabled Exchange's multiply listed options in the event of a
Disabling Event.\38\ Such options will trade as a listing of Phlx and
in accordance with Phlx Rules and will be traded by Phlx members and by
members of the Disabled Exchange to the extent Phlx can accommodate
members of the Disabled Exchange in the capacity of temporary members
of Phlx. Options 4, Section 10(b)(2) and (3) will govern in the case of
an unanticipated event and addresses both singly and multiply listed
options. The Exchange believes it is important that the governing rules
are identical across all exchanges for business continuity planning
purposes and it is also intended to discourage the potential for
``shopping'' across the exchanges by a Disabled Exchange's members.
---------------------------------------------------------------------------

    \38\ All options exchanges may list options once they are made
available by the OCC.
---------------------------------------------------------------------------

    Proposed Options 4, Sections 10(c)-(e) are being amended to conform
to ISE and to provide clarity.
    Finally, .01 of the Supplementary Material to Options 4, Section 10
is new and is consistent with Phlx procedures and says that this Rule
reflects back-up trading arrangements that Phlx has entered into or may
enter into with one or more other exchanges and that to the extent that
this Rule provides that another exchange will take certain action, the
Rule is reflecting what that exchange has agreed to do by contractual
agreement with Phlx, but the Rule itself is not binding upon the other
exchange.

Proposed Changes to Section 11. U.S. Dollar-Settled Foreign Currency
Option Closing Settlement Value
    The Exchange is relocating Section 11 of Options 4 to new Options
4C, Section 6 without change.
Proposed Section Options 4C U.S. Dollar-Settled Foreign Currency
Options
    Proposed Section Options 4C of the Options Listing Rules covers
U.S. Dollar-Settled Foreign Currency Options and is comprised of
language relocated from Options 4, along with some added introductory
language added in Section 1 of Options 4C.
Proposed Supplementary Material to Options 8, Section 30
    Proposed .04 to Supplementary Material to Options 8, Section 30 is
new, but is simply text relocated from current Options 4, Section 4(a)
and is not a substantive change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\39\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\40\ 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.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f(b).
    \40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the relocation of its Options Listing
Rules is a non-substantive change and is consistent with similar
filings by the Exchange for the relocation of its rules.\41\ As noted
above, the relocation of the Options Listing Rules is part of the
Exchange's continued effort to promote efficiency and the structural
conformity of its processes with those of the Affiliated Exchanges,\42\
and its goal of harmonizing and uniformizing its rules.\43\
Additionally, the relocation of the Options Listing Rules will
facilitate the use of the Rulebook by Members of the Exchange, who are
members of other Affiliated Exchanges; other market participants; and
the public in general.
---------------------------------------------------------------------------

    \41\ See supra footnote 3.
    \42\ Id.
    \43\ See supra footnote 6.
---------------------------------------------------------------------------

    The majority of the changes are also consistent with the ISE
rulebook and the overarching goal is to align the Phlx Options rules
with those of the ISE.
    The Exchange believe that adding definitions for the terms
``class'', ``series'', and ``underlying security'' to Options 1,
Section 1 of the Phlx rulebook from the OCC By-Laws will help 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 through providing uniform, clear and precise
definitions for these terms and increase consistency, lessen potential
confusion and add clarity for market participants.\44\
---------------------------------------------------------------------------

    \44\ See supra footnote 8.
---------------------------------------------------------------------------

    The Exchange believes that amending Options 4, Section 1 to clarify
that the Exchange trades options contracts and to relocate a sentence
dealing with foreign currency option contracts to Options 4C, Section
2(a) will help 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 through providing clear and
precise language and through relocating certain language will increase
consistency, lessen potential confusion and add clarity for market
participants.
    The Exchange believes that the changes to Options 4, Section 2,
Section 3(a), and Section 3(b) are non-substantive in nature and
removes 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 since the changes are intended to
ease the Members', market participants', and the general public's
navigation and reading of the rules and lessen potential confusion and
add clarity for market participants.
    New Options 4, Section 3(c), which address securities of
restructured companies, reflects the language of the ISE version of the
rule.\45\ The section adds guidelines and definitions, including
``Restructuring Transaction'', ``Restructure Security'', ``Original
Equity Security'', ``Relevant Percentage'', ``market information
sharing agreement'', and deletes the definition of ``Partnership Unit''
since it is a remnant from the legacy Exchange ETF listing rule since
it is unnecessary because it has never been used and also is not
reflected in the ISE rule version being adopted for this section.\46\
The definitional additions coupled with changes reflecting
reorganization and clarifications, including the deletion of language
included elsewhere and language no longer necessary, and to reflect the
language of the ISE version of the rule, the Exchange believes removes
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 since the changes are intended to ease the Members',
market participants', and the general public's navigation and reading
of the rules and lessen potential confusion and add clarity for market
participants.
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    \45\ See ISE Options Listing Rule Section 3.
    \46\ Id.
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    The Exchange believes that the clarification to the term
``security'' in Options 4, Section 3(e) and the deletion of the
remainder of Section 3(e) removes 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 because these
changes add clarity for market participants and removes unnecessary
language that will make this section consistent with the rules of ISE
rules and of other affiliated markets.
    The Exchange believes that the changes to proposed Options 4,
Section 3(f)-(k) (excluding Options 4 Sections (g) and (h) that is a
new and reflects the language of the ISE version of the rule and is
discussed below), which include changes are of a non-substantive nature
that reflect reorganization, definitions and clarifications, removes
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 because these changes are intended to ease the
Members', market participants', and the general public's navigation and
reading of the rules and lessen potential confusion and add clarity for
market participants.
    Proposed Options 4, Sections 3(g) and (h) both deal with securities
deemed appropriate for options trading, contain changes reflecting
reorganization and clarifications, including the deletion of language
included elsewhere and language no longer necessary, and copy the
language of the ISE version of the rule. Proposed Options 4, Section
3(h)(1) is consistent with the Act because it adds language stating
that subparagraph (2) applies to the extent the Exchange-Traded Fund
Share is based on international or global indexes. This language is
intended to clarify that subparagraph (2) does not apply to an
Exchange-Traded Fund Shares based on a U.S. domestic index. The phrase
``if not available or applicable'' added to Proposed Options 4, Section
3(h)(2)(B), (C), and (D) is intended to clarify that when component
securities are not available, the portfolio of securities upon which
the Exchange-Traded Fund Share is based can be used instead.
    The Exchange believes the update to Options 4, Sections 4 and 5
removes impediments to and perfects the

mechanism of a free and open market and a national market system, and,
in general protects investors and the public interest. Overall, these
changes are of a non-substantive nature and either modify, clarify or
relocate the existing Rulebook language to reflect the language of the
ISE version of the rule and are intended to ease the Members', market
participants', and the general public's navigation and reading of the
rules and lessen potential confusion and add clarity for market
participants.
    With respect to the removal of current Supplementary Material .09
to Options 4, Section 3, which describes inadequate volume delisting,
the Exchange believes these amendments are consistent with the Act. In
order to remain competitive with other options markets the Exchange
proposes to adopt the same obligations for continuance of trading. With
this proposal, the Exchange would eliminate the requirement that an
option must be trading for more than 6 months. The Exchange notes that
this condition is not present on other options markets such as ISE and
Cboe.\47\ This also applies to the requirement that the average daily
volume of the entire class of options over the last six (6) month
period was less than twenty (20) contracts. The Exchange notes that
Phlx's requirements are different than other options markets and to
remain competitive the Exchange proposes to adopt the same standards as
ISE, GEMX, MRX and Cboe in order to remain competitive and list similar
options as the other markets. While the Exchange may in the future
determine to delist an option that is singly listed, the Exchange
proposes to remove the rule text which provides that ``If the option is
singly listed only on the Exchange, the Exchange will cease to add new
series and may delist the class of options when there is no remaining
open interest.'' This rule text does not exist on ISE, GEMX, MRX and
Cboe. The Exchange today provides notification of a delisting to all
members so therefore it is not necessary to retain the provisions
within (b)(2). Also, proposed new Options 4, Section 4(e) establishes
the rules by which the Exchange will announce securities that have been
withdrawn. The rule text within Options 4, Section 4(b), as amended to
conform to ISE rule text, will continue to govern the continued
approval of options on the Exchange. The Exchange believes that the
requirements noted within Options 4, Section 4(b) review various
requirements when determining whether an options should continue to be
listed. Among the criteria are: Number of shares, number of holders,
trading volume, and whether the underlying security is an NMS stock,
among others. The Exchange believes that this criteria, which is the
same as the criteria on ISE, GEMX and MRX, will ensure that the
Exchange continues to list options which are in demand and have
adequate liquidity.
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    \47\ See ISE Options 4, Section 3 and Cboe Rule 4.4.
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    Specifically, the Exchange's proposal within proposed .03(c) of
Options 4, Section 5 to add a sentence at the beginning which provides,
``The Exchange may open up to 30 initial series for each options class
that participates in the Short Term Options Series Program'' is
consistent with the Act as this is not a change to Phlx's current
rules. This provision exists today with Phlx's rule within
Supplementary Material .11(a) of Options 4, Section 5.\48\ Also, ISE
has this provision in its rules today. This provision permits Phlx to
remain competitive with listings of other options exchanges with
respect to Short Term Options Series listings.
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    \48\ Supplementary Material .11(a) of Options 4, Section 5
provides, with emphasis added, ``The Exchange may select up to fifty
(50) currently listed option classes on which Short Term Option
Series may be opened on any Short Term Option Opening Date. In
addition to the fifty-option class restriction, the Exchange also
may list Short Term Option Series on any option classes that are
selected by other securities exchanges that employ a similar program
under their respective rules. For each option class eligible for
participation in the Short Term Option Series Program, the Exchange
may open up to thirty (30) Short Term Option Series for each
expiration date in that class. The Exchange may also open Short Term
Option Series that are opened by other securities exchanges in
option classes selected by such exchanges under their respective
short term option rules.''
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    The Exchange believes the update to Options 4, Section 6 removes
impediments to and perfects the mechanism of a free and open market and
a national market system, and, in general protects investors and the
public interest because the changes are mainly of a non-substantive
nature with much of the rule text largely simply being relocated from
Supplementary Material .10 of Options 4, Section 5, including Select
Provisions of OLPP that will mirror the language in the ISE rules, and
is intended to ease the Members', market participants', and the general
public's navigation and reading of the rules and lessen potential
confusion and add clarity for market participants. The Exchange's
proposal to add additional rule text to proposed (b)(ii)(1) which
provides, ``Instead, the Exchange shall be permitted to list $1 strike
prices to the fullest extent as permitted under its Rules for the $1
Strike Program. . .'' will bring greater clarity to Phlx's rule. This
additional rule text is identical to ISE Options 4, Section 6(b)(ii)(1)
and serves to make clear that Phlx may list $1 strikes pursuant to its
rules, which amendment is non-substantive as that is the case today.
Proposed subsection (b)(v) is new to Phlx. The provisions of this
subparagraph (b) will not permit the listing of series that are
otherwise prohibited by the Rules of the Exchange or the OLPP. To the
extent the Rules of the Exchange permit the listing of new series that
are otherwise prohibited by the provisions of the OLPP, the provisions
of the OLPP will govern. While new, this amendment is non-substantive
as this is the case today as Phlx is subject to OLPP.
    The Exchange believes that the changes to proposed Options 4,
Section 7 removes impediments to and perfects the mechanism of a free
and open market and a national market system, and, in general protects
investors and the public interest because the changes are of a non-
substantive nature and intended to reflect the language of the ISE
version of the rule and provide greater information to market
participants about adjustments and is intended to ease the Members',
market participants', and the general public's navigation and reading
of the rules and lessen potential confusion and add clarity for market
participants.
    The Exchange believes that the changes to proposed Options 4,
Section 8 removes impediments to and perfects the mechanism of a free
and open market and a national market system, and, in general protects
investors and the public interest because the changes are mainly of a
non-substantive nature with much of the rule text largely simply being
relocated from current Options 4, Section 5(a)(i)(D) to new Options 4,
Section 8(a) with some minor amendments and is intended to ease the
Members', market participants', and the general public's navigation and
reading of the rules and lessen potential confusion and add clarity for
market participants.
    Specifically with respect to OLPP, proposed Section 8(a) of the
Options Listing Rules states that notwithstanding conflicting language
in Options 3, Section 5, the Exchange may list long-term options
contracts that expire from twelve to thirty-nine months from the time
they are listed, this is consistent with current rule text within
Options 4, Section 5(a)(i)(D) but accounts for Options 3, Section 5
which describes entry of orders. It also specifies that there may be up
to ten expiration months for options on the SPDR[supreg] S&P
500[supreg] ETF and up to six expiration months for options on all

other securities. The new language utilizes the term ``securities''
instead of stocks or Exchange Traded Fund Shares. The remainder of
proposed Section 8(a) remains the same. Proposed Section 8(b) is new.
The proposed provision states that after a new long-term options
contract series is listed, that series will be opened for trading
either when there is buying or selling interest, or forty minutes prior
to the close, whichever occurs first and that no quotations will be
posted for such options series until they are opened for trading. This
is the case today, however this specificity is not currently noted in
the rules. The addition of this provision is consistent with the Act as
it will bring greater specificity to BX's Rule and align the rule text
with ISE rule text.
    The Exchange believes that the changes to proposed Options 4,
Section 9 removes impediments to and perfects the mechanism of a free
and open market and a national market system, and, in general protects
investors and the public interest because the Exchange is adopting the
language of the ISE version of the rule so it will now be consistent
with the ISE rulebook and, as with ISE, the Exchange does not itself do
the calculation. Proposed Section 9 of the Options Listing Rules is
adopting the language of the ISE version of the rule \49\ since it is
not in the current Exchange Rulebook and it will now be consistent with
the ISE rulebook. Proposed Section 9(a) defines the term ``index
licensor.'' Proposed Section 9(b) provides that no index licensor with
respect to any index or portfolio underlying an option on Exchange-
Traded Fund Shares traded on the Exchange makes any warranty, express
or implied, as to the results to be obtained by any person or entity
from the use of such index or portfolio, any opening, intra-day or
closing value therefor, or any data included therein or relating
thereto, in connection with the trading of any option contract on
Exchange-Traded Fund Shares based thereon or for any other purpose. The
disclaimers within proposed Section 9 are consistent with the Act in
that these disclaimers provide market participants with relevant
information as to the liabilities on option contracts on Exchange-
Traded Fund Shares. ISE has the identical language within Options 4,
Section 9.
---------------------------------------------------------------------------

    \49\ See ISE Options Listing Rule Section 9.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is consistent
with section 6(b)(5) of the Act \50\ in that it is designed to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism for a free and open market and a national market
system, and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \50\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    The Exchange believes that the changes to proposed Options 4,
Section 10 are mainly of a non-substantive nature that are designed to
modernize and conform the Phlx Options rules to the equivalent ISE
rules and remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general protects
investors and the public interest because it is in the interest of the
Exchange to have similar back-up trading arrangements that are
harmonized with the ISE and the other affiliated markets, which are
fair and representative of a common understanding. The Exchange
believes it is critical that the governing rules are identical across
all exchanges for business continuity planning purposes and to
discourage the potential for ``shopping'' across the exchanges by a
Disabled Exchange's members.
    The Exchange believes that the relocation of Options 4, Section 11
to new Options 4C, Section 6 without change, as well as the addition of
Options 4C (U.S. Dollar-Settled Foreign Currency Options) in its
entirety which is comprised of language relocated from Options 4 with
some added introductory language, will help 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
through non-substantive changes and reorganization to mirror the ISE
rule and for greater clarity.
    The Exchange believes that the relocation of a portion of Options
4, Section 4(a) to proposed .04 to Supplementary Material to Options 8,
Section 30 will help 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 through non-substantive
changes and reorganization to mirror the ISE rule and for greater
clarity.
    As a result, the Exchange believes that the changes included in
this filing serve 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 since the changes are
intended to organize the Rulebook in a way that it will ease the
Members', market participants', and the general public's navigation and
reading of the rules and lessen potential confusion and add clarity for
market participants.
    With respect to the proposed technical corrections to the rules,
the Exchange believes that these changes are consistent with the Act
because they will prevent investor confusion that may be caused by
including in the Rules incorrect rule citations and defunct rule text.

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 change does not
impose a burden on competition because, as previously stated, it (i) is
of a non-substantive nature, (ii) is intended to harmonize the
structure of the Exchange's rules with those of its Affiliated
Exchanges, and (iii) is intended to organize the Rulebook in a way that
it will ease the Members', market participants', and the general
public's navigation and reading of the rules.
    Consequently, the Exchange does not believe that the proposed
changes implicate competition at all.

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 \51\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\52\
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    \51\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \52\ 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.
---------------------------------------------------------------------------

    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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2021-14 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-2021-14. 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-2021-14 and should be submitted on
or before May 3, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\53\
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    \53\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07391 Filed 4-9-21; 8:45 am]
BILLING CODE 8011-01-P