[Federal Register: November 2, 2006 (Volume 71, Number 212)]
[Notices]
[Page 64597-64603]
[DOCID:fr02no06-87]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54652; International Series Release No. 1298; File No.
SR-Phlx-2006-34]

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change and Amendments No. 1 and 2
Relating to U.S. Dollar-Settled Foreign Currency Options

 October 25, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, as amended (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on May 12, 2006, the Philadelphia Stock Exchange,
Inc. (``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. On September 29, 2006, the Exchange filed Amendment No. 1,\3\
and on October 20, 2006, the Exchange filed Amendment No. 2.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Form 19b-4 dated September 29, 2006 (``Amendment No.
1''). Amendment No. 1 replaced the original filing in its entirety.
    \4\ See Form 19b-4 dated October 20, 2006 (``Amendment No. 2'').
Amendment No. 2 replaced the Amendment No. 1 in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Phlx proposes to list U.S. dollar-settled foreign currency
options (``FCOs'') on the British pound and the Euro (together, the
``Currencies''), and to adopt rules and rule amendments to permit the
trading of U.S. dollar-settled FCOs on the Exchange's electronic
trading platform for options, Phlx XL.\5\ The Exchange also proposes to
amend a number of existing rules relating to U.S. dollar-settled FCOs,
and to amend various rules to delete outdated references to the German
mark, Italian lira, Spanish peseta and the French franc.
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    \5\ See Securities Exchange Act Release No. 49832 (June 8,
2004), 69 FR 33442 (June 15, 2004) (SR-Phlx-2003-59).
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    The text of the proposed rule change, as amended, is available on
the Exchange's Web site at http://www.phlx.com, at Phlx's principal

office, 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 Phlx included statements
concerning the purpose of, and basis for, the proposed rule change, as
amended, and discussed any comments it received on the proposed rule
change, as amended. The text of these statements may be examined at the
places specified in Item IV below. The Phlx 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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    According to the Phlx, the purpose of the proposed rule change is
to permit the Exchange to expand its product offerings and revitalize
FCOs by listing and trading U.S. dollar-settled FCOs on the Currencies
on Phlx XL.\6\ The contract specifications, including certain
amendments to the Exchange's existing rules applicable to U.S. dollar-
settled FCOs, and the trading rules for these FCOs are discussed in
detail below.\7\
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    \6\ The Exchange will file a proposed rule change with the
Commission prior to listing U.S. dollar-settled options on any
currencies other than the British pound and the Euro.
    \7\ Existing Phlx rules applicable to FCOs that are not proposed
to be amended in this proposed rule change would remain in effect
and would apply to both physical delivery FCOs and U.S. dollar-
settled FCOs, unless the rule specifically provides otherwise.
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i. Contract Specifications and Amendments to U.S. Dollar-Settled FCO
Rules
    Background. The Exchange has listed and traded physical delivery
FCOs issued by The Options Clearing Corporation (``OCC'') on a number
of currencies since 1982.\8\ For a period of time during the 1990's the
Exchange also listed and traded U.S. dollar-settled FCOs on the German
mark and the Japanese yen.\9\ The U.S. dollar-settled FCOs were known
and marketed as ``Dollar Denominated Delivery'' or ``3D'' FCOs. The
U.S. dollar-settled FCOs were cash-settled, European-style options
issued by OCC that allowed holders to receive U.S. dollars representing
the difference between the current foreign exchange spot price \10\ and
the exercise price of the option. Specifically, upon exercise of an in-
the-money U.S. dollar-settled FCO structured as a call, the holder
received, from OCC, U.S. dollars representing the difference between
the exercise strike price and the closing settlement value of the U.S.
dollar-settled FCO contract multiplied by the number of units of
currency covered by the contract.\11\ For a U.S. dollar-settled FCO
structured as a put, the holder received U.S. dollars representing the
excess of the exercise price over the closing settlement value of the
U.S. dollar-settled FCO contract multiplied by the number of units of
foreign currency covered by the contract. Unlike other Phlx-traded
FCOs, U.S. dollar-settled FCOs that are in-the-money by any amount on
the expiration date would be exercised automatically by OCC, while U.S.
dollar-settled FCOs that are out-of-the-money at expiration would
expire worthless.
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    \8\ Unlike U.S. dollar-settled FCOs, a physical delivery option
on a foreign currency gives its owner the right to receive physical
delivery (if it is a call) or to make physical delivery (if it is a
put) of the underlying foreign currency when the option is
exercised.
    \9\ The Exchange traded U.S. dollar-settled options on German
marks beginning in September 1994. In its order approving German
mark U.S. dollar-settled options, the Commission stated that, in the
future, the listing of additional cash/spot (as they were then
known) FCOs based on different foreign currencies would require
separate 19b-4 filings with the Commission. See Securities Exchange
Act Release No. 33732 (March 8, 1994), 59 FR 12023 (March 15, 1994).
The Exchange commenced trading of U.S. dollar-settled options on the
Japanese yen on February 24, 1997. See Securities Exchange Act
Release No. 36505, International Series Release No. 889 (November
22, 1995), 60 FR 61277 (November 29, 1995). U.S. dollar-settled
German mark options were delisted on January 19, 1999. U.S. dollar-
settled Japanese yen options were delisted on August 23, 1999.
    \10\ The ``spot price'' with respect to an option contract on a
FCO contract means the price for the sale of one foreign currency
for another, quoted by various commercial banks in the interbank
foreign exchange market for the sale of a single unit of such
foreign currency for immediate delivery (which generally means
delivery within two business days following the date on which the
terms of such sale are agreed upon). See Phlx Rule 1000(b)(16).
    \11\ Phlx Rule 1044, Delivery and Payment, is proposed to be
amended to provide that upon exercise of an in-the-money U.S.
dollar-settled FCO structured as a call, the holder receives, from
OCC, U.S. dollars representing the difference between the exercise
strike price and the closing settlement value of the U.S. dollar-
settled FCO contract multiplied by the number of units of currency
covered by the contract. Similarly, for a U.S. dollar-settled FCO
structured as a put, Phlx Rule 1044 provides that the holder
receives U.S. dollars representing the excess of the exercise price
over the closing settlement value of the U.S. dollar-settled FCO
contract multiplied by the number of units of foreign currency
covered by the contract.
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    Proposal. The Exchange now proposes to list and trade U.S. dollar-
settled FCOs on the Currencies on Phlx XL.\12\ The Exchange also
proposes to

amend a number of rules applicable to U.S. dollar-settled FCOs
generally, including the U.S. dollar-settled FCOs on the Currencies, as
well as any other U.S. dollar-settled FCOs that the Exchange may list
in the future.
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    \12\ The Exchange's existing, physical delivery options on the
Currencies would not be affected by this proposal and would continue
to trade as they do today, by open outcry. The Exchange notes,
however, that positions in the U.S. dollar-settled FCOs would be
aggregated with positions in the physical delivery contracts for
purposes of position and exercise limits, as discussed further
below.
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    Contract Size. The contract sizes of the U.S. dollar-settled FCO
contracts on the Currencies would be 10,000 British pounds and 10,000
Euros.\13\
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    \13\ The contract sizes for the physical delivery options on the
Currencies are 31,250 British pounds and 62,500 Euros.
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    Expirations. The Exchange proposes to amend Phlx Rule 1012(a) by
limiting the applicability of paragraph (ii) to physical delivery FCOs,
by renumbering paragraph (iii) as paragraph (iv), and by adding new
paragraph (iii) to provide that U.S. dollar-settled FCO contracts may
be listed with expirations that are the same as the expirations
permitted for equity index options pursuant to Phlx Rule 1101A with the
exception of long term option series and quarterly expiring FCOs which
the Exchange does not propose to list. The Exchange does not anticipate
listing FLEX U.S. dollar-settled foreign currency options at this
time.\14\
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    \14\ Currently, trades may be executed in certain FLEX options
on equities and equity indexes. See Phlx Rule 1079.
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    The Exchange anticipates that, at least initially, it would list
expirations at one, two, three, six, and nine months, and that the
options would be on three of the months from the March, June,
September, December cycle, plus two additional near term months (five
months at all times).\15\ The expiration date for the consecutive and
cycle month options would be 11:59 p.m. Eastern Time on the Saturday
immediately following the third Friday of the expiration month pursuant
to Phlx Rule 1000(b)(21), ``Expiration date,'' as proposed to be
amended.
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    \15\ By way of example, in September, the U.S. dollar-settled
FCOs would have the following months listed: October, November,
December, March, and June.
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    Trading Symbols. The Exchange expects that the symbols for options
on the British Pound and on the Euro would be as follows:

British Pound Trading Symbol--XDB
British Pound Wrap Symbol--BJF

British Pound Settlement Value Symbol--BIJ
British Pound Strike Symbol--BJR
British Pound Wrap Strike Symbol--BVA
Euro Trading Symbol--XDE
Euro Wrap Symbol--EAE
Euro Settlement Value Symbol--EDY
Euro Strike Symbol--EPA
Euro Wrap Strike Symbol--EAY

    Trading Hours. Phlx Rule 101, Hours of Business, would be amended
to provide that U.S. dollar-settled FCOs would trade from 9:30 a.m. to
4 p.m. Eastern Time, Monday through Friday. These trading hours differ
from the trading hours for the physical delivery FCO contracts because
the U.S. dollar-settled FCOs would, unlike the Exchange's physical
delivery FCOs, trade on Phlx XL in much the same way that stock index
options currently trade.\16\ The expiring U.S. dollar-settled FCO
contract would cease trading at 4 p.m. on the day prior to its
expiration day.\17\ Unlike trading in physical delivery FCOs, trading
in U.S. dollar-settled FCOs would not close on bank holidays. If Friday
is an Exchange holiday, the settlement value for U.S. dollar-settled
FCOs would be determined on the basis of the Noon Buying Rate \18\ on
the preceding trading day, which would also be the last day of trading
for the expiring option.
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    \16\ Trading hours for the Exchange's physical delivery FCO
contracts are from 2:30 a.m. to 2:30 p.m. Eastern Time, Monday
through Friday.
    \17\ The Exchange notes that in order to facilitate trading of
the U.S. dollar-settled FCOs on Phlx XL, trading would be permitted
to occur after the settlement value is announced on the day prior to
expiration, as discussed below.
    \18\ The Exchange notes that the Commission has recently
approved listing standards for securities issued by a trust that
represent investors' discrete identifiable and undivided beneficial
ownership interests in non-U.S. currency deposited into the trust.
The trust utilizes the Noon Buying Rate for the calculation of the
Net Asset Value of the trust. See Securities Exchange Act Release
No. 52843 (November 28, 2005), 70 FR 72486 (December 5, 2005) (order
granting accelerated approval of SR-NYSE-2005-65).
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    Settlement Values. The Exchange proposes to change the method of
determining the closing settlement value for U.S. dollar-settled FCOs.
Phlx Rule 1057 would be revised to provide that the closing settlement
value would be the day's announced Noon Buying Rate as determined by
the Federal Reserve Bank of New York on the trading day prior to the
expiration date. If the Noon Buying Rate is not announced by 2 p.m.
Eastern Time, the closing settlement value would be the most recently
announced Noon Buying Rate, unless the Exchange determines to apply an
alternative closing settlement value as a result of extraordinary
circumstances.\19\ The closing settlement value would not be
disseminated through the Options Price Reporting Authority (``OPRA''),
but would be posted on the Exchange's Web site, where it would be
publicly available to all visitors to the Exchange's Web site on an
equal basis, without the need to enter any kind of password to access
the settlement value. The Exchange would not disclose the settlement
value to any person or group of persons other than employees of the
Exchange who need to know prior to posting the value on the Exchange's
Web site.
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    \19\ Id.
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    Position and Exercise Limits. For purposes of position and exercise
limits, positions in U.S. dollar-settled FCO contracts would be
aggregated with positions in the physical delivery contracts. The
position limits and exercise limits for the U.S. dollar-settled FCOs
would be the same as the position and exercise limits for the physical
delivery contracts pursuant to Phlx Rules 1001 and 1002. However, Phlx
Rule 1001, Position Limits, would be amended to provide that each Euro
U.S. dollar-settled option contract would count as one-sixth of a
contract for purposes of position and exercise limits.\20\ Similarly,
each British pound U.S. dollar-settled option contract would count as
one-third of a contract for purposes of position and exercise
limits.\21\ The other aggregation principles in Phlx Rule 1001 would
continue to apply.
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    \20\ According to the Exchange, each U.S. dollar-settled Euro
option contract would be treated as one-sixth of a contract for
position and exercise limit purposes because the cash-settled Euro
option contract is roughly one-sixth of the size of the physical
delivery contract.
    \21\ The cash-settled British pound option contract is roughly
one-third of the size of the physical delivery contract.
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    Strike Prices. The Exchange proposes to initially list exercise
strike prices for each expiration around the current spot price at
half-cent ($.005) intervals up to five percent on each side.\22\ Thus,
if the spot price initially were at 1.0000, the Exchange would list
strikes in $.005 intervals up to 1.0500 and down to .9500 for a total
of twenty-one strike prices available for trading. The Exchange would
not list any strike prices at intervals other than these $.005
intervals.\23\ New strikes may be added

during the life of the option in accordance with Phlx Rule
1012(a)(iii).\24\ New Commentary Section .06 would be added to Phlx
Rule 1012 to specify that strike prices on the Euro and British pound
cash-settled option would be listed at half-cent intervals. Text
regarding the setting of exercise prices is being moved from paragraph
(ii) to new Commentary Section .07 because it would be applicable not
only to physical delivery FCOs but to U.S. dollar-settled FCOs as well.
Options Floor Procedure Advice F-18, Expiration Month and Strike
Prices--Selective Quoting Facility, is proposed to be amended to limit
its applicability (including applicability of the Selective Quoting
Facility) to physical delivery FCOs.\25\
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    \22\ To determine foreign currency spot prices, the Exchange
receives contributor bank quotes from a vendor in real-time and
takes the average of the various quotes.
    \23\ To facilitate trading on Phlx XL, strike prices would be
expressed without reference to the first two decimal places. Minimum
quoting increments and maximum quote spreads would also reflect this
convention (see below for a fuller discussion of minimum increments
and maximum quote spreads). For example, assuming that the actual
spot value of the Euro is $1.00, a strike could be listed at $1.0050
and would be expressed as $100.50. Similarly, the minimum quoting
increment would be $.0005, expressed as $.05. Bids could be made
$1.0045, expressed as $100.45, $1.0040, expressed as $100.40, and so
forth. Offers could be made at $1.0055, expressed as $100.55, at
$1.0060, expressed as $100.60, and so forth. Maximum quote spread
parameters would be $.0025, expressed as $.25. Thus, a market maker
could bid $1.0030, expressed as $100.30, and offer at $1.0055,
expressed as $100.55. Prior to commencement of trading of U.S.
dollar-settled options on the Currencies as proposed herein, the
Exchange intends to issue an informational memorandum to members and
member organizations which explains this strike price and quoting
convention.
    \24\ Phlx Rule 1012(a)(iv) provides in part that ``[a]dditional
series of options of the same class may be opened for trading on the
Exchange as the market price of the underlying stock or Exchange-
Traded Fund Share or the underlying foreign currency, as the case
may be, moves substantially from the initial exercise price or
prices.'' As the spot price for U.S. dollar settled FCO moves, the
Exchange would list new strike prices that, at the time of listing,
do not exceed the spot price by more than 5% and are not less than
the spot price by 5%. For example, if at the time of initial listing
the spot price of the Euro is at 1.0000, the strike prices the
Exchange would list would be .9500 to 1.0500. If the spot price then
moves to 1.0500, the Exchange may list additional strikes at the
following prices: 1.0550 to 1.1000. In that event, the Exchange
would delist any previously-listed series outside of the current ten
percent band that have no open interest.
    \25\ The selective quoting facility establishes criteria to
determine whether the bid/ask quotation for each FCO series is
eligible for transmission to OPRA for off-floor dissemination to
securities data vendors. When the Exchange designates a particular
foreign currency option series as a ``non-update strike,'' its
quotes are not made available for continuous dissemination to the
public throughout the trading day. See Phlx Rule 1012, Commentary
.04. The selective quoting facility, implemented in 1994, was
intended to reduce the number of strike prices continuously being
updated and disseminated, thus resulting in more timely and accurate
foreign currency options quote displays. As noted above, however,
the selective quoting facility would be limited to physical delivery
FCOs and would not apply to U.S. dollar-settled FCOs.
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    Bids and Offers--Premium. Under Phlx Rule 1033, Bids and Offers--
Premium, bids and offers in U.S. dollar-settled FCOs on the Currencies
must be made in terms of U.S. dollars per unit of the underlying
foreign currency. However, the first two decimal places would be
omitted from all bid and offer quotations for the British pound and for
the Euro. Therefore, for example, a bid of .50 for an option contract
on the Euro would represent a bid to pay .005 per Euro--i.e., a bid of
$50.00--for an option contract having a unit of trading of 10,000
Euros. Phlx Rule 1034(a) would be revised to provide that the minimum
increment for U.S. dollar-settled FCOs quoting under $3.00 would be
$.0005 per unit of the foreign currency, expressed as .05 per unit of
the foreign currency, which equals a $5.00 minimum increment per
contract consisting of 10,000 Euros or 10,000 British pounds.\26\ The
minimum increment for U.S. dollar-settled FCOs quoting at $3.00 or
higher would be $.0010 per unit of the foreign currency, expressed as
.10 per unit of the foreign currency, which equals a $10.00 minimum
increment per contract consisting of 10,000 Euros or 10,000 British
pounds.\27\
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    \26\ By way of example, if the spot price of the Euro is at
$1.0255 and an investor purchases the December Euro $1.2500
(expressed as $125.00) Call at a premium of $.0075 (expressed as
$.75) and then sells the December Euro $1.2500 Call at a premium of
$.0095 (expressed as $.95), the investor's profit would be $.0020
per Euro. The investor's profit would be $.0020 multiplied by 10,000
Euros (the size of the contract) for a total of $20.00.
    \27\ The Exchange has determined to set the minimum quoting
increment at $.0005 (expressed as $.05) per Euro for the U.S.
dollar-settled FCOs rather than at the $.0001 (expressed as $.01)
per Euro minimum quoting increment that currently applies to the
Exchange's physical delivery FCOs because the Phlx XL trading system
would not accommodate quoting in increments of $.0001 (expressed as
$.01, or otherwise). So, for example, while a bid of $.0075 per Euro
in the physical delivery FCO can be improved by quoting at $.0076, a
bid of $.0075 per Euro in the U.S. dollar-settled FCO can only be
improved by quoting no less than $.0080. The minimum increment per
contract in the physical delivery Euro option, if it were the same
size as the U.S. dollar-settled Euro option, would thus be $1.00
($.0001 multiplied by the contract size of 10,000 Euros), while the
minimum increment per contract in the U.S. dollar-settled contract
would be $5.00 ($.0005 multiplied by the contract size of 10,000
Euros).
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    Margin. The U.S. dollar-settled FCOs would have the same customer
margin requirements as are provided for the existing FCOs pursuant to
Phlx Rule 722, Margin Accounts, Commentary .16.\28\ The Exchange
calculates the margin requirements for each foreign currency underlying
U.S. dollar-settled FCO separately, rather than determining one margin
level for all foreign currencies based upon the historical pricing
information for all foreign currencies together. The Exchange informs
members and the public of the margin levels for each currency option
immediately following the quarterly reviews described in Commentary .16
to Phlx Rule 722.
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    \28\ Pursuant to Phlx Rule 722, Commentary .16, the Exchange
calculates the margin requirement for customers that assume short
FCO positions by adding a percentage of the current market value of
the underlying foreign currency contract to the option premium price
less an adjustment for the out-of-the-money amount of the option
contract. On a quarterly calendar basis, the Exchange reviews five-
day price changes over the preceding three-year period for each
underlying currency and sets the add-on percentage at a level which
would have covered those price changes at least 97.5% of the time
(the ``confidence level''). If the results of subsequent reviews
show that the current margin level provides a confidence level below
97%, the Exchange increases the margin requirement for that
individual currency up to a 98% confidence level. If the confidence
level is between 97% and 97.5%, the margin level would remain the
same but would be subject to monthly follow-up reviews until the
confidence level exceeds 97.5% for two consecutive months. If during
the course of the monthly follow-up reviews, the confidence level
drops below 97%, the margin level is increased to a 98% level and if
it exceeds 97.5% for two consecutive months, the currency is taken
off monthly reviews and is put back on the quarterly review cycle.
If the currency exceeds 98.5%, the margin level is reduced to a 98%
confidence level during the most recent three year period. Finally,
in order to account for large price movements outside the
established margin level, if the quarterly review shows that the
currency had a price movement, either positive or negative, greater
than two times the margin level during the most recent three year
period, the margin requirement is set at a level to meet a 99%
confidence level (``Extreme Outlier Test'').
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ii. Phlx XL Trading Rules for U.S. Dollar-Settled FCOs
    As noted above, the Exchange is proposing that U.S. dollar-settled
FCOs trade on Phlx XL, the Exchange's electronic trading platform for
options. Currently, all Phlx equity and equity index options also trade
on Phlx XL. According to the Exchange, Phlx XL enables market makers to
electronically deliver streaming quotes on or off the floor, producing
tighter and deeper markets. Additionally, the Exchange believes that
trading U.S. dollar-settled FCOs on Phlx XL would enable the Exchange
to improve electronic access for customers, broker dealers and market
makers while leveraging the advantages of a floor-based environment.
Options order-flow providing firms would be able to direct their U.S.
dollar-settled FCO orders to the Exchange liquidity provider of their
choice under the Exchange's directed order flow program. Exchange
specialists, on-floor market makers known as Streaming Quote Traders
(``SQTs''),\29\ and remote market makers known as Remote Streaming
Quote Traders (``RSQTs'') \30\ who stream their

U.S. dollar-settled FCO quotes to the Exchange would be eligible to
participate in the directed order flow program. Specialists in U.S.
dollar-settled FCOs, like specialists in equity and equity index
options, would also be eligible to participate in the Exchange's
enhanced specialist participation programs which provide a type of
exception to the Exchange's parity rules, allocating to the specialist
a greater than equal share of the portion of an order that is divided
among the specialist and any ``controlled accounts'' (i.e., any account
controlled by or under common control with a broker-dealer, such as a
specialist or an SQT) that are on parity.\31\ By contrast, priority and
parity rules for options on physical delivery foreign currency options
are set forth in Phlx Rule 1014(h), which generally is a price-time
priority rule without regard to account types. Once a bid or offer in
physical delivery FCOs establishes priority, no bid-offer may gain
parity at that price during that trading session until at least ten
percent of the size of the previous bid-offer or 100 contracts,
whichever is greater, trades.
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    \29\ An SQT is an ROT who has received permission from the
Exchange to generate and submit option quotations electronically
through AUTOM in eligible options to which such SQT is assigned. An
SQT may only submit such quotations while such SQT is physically
present on the floor of the Exchange. See Exchange Rule
1014(b)(ii)(A).
    \30\ An RSQT is an ROT that is a member or member organization
with no physical trading floor presence who has received permission
from the Exchange to generate and submit option quotations
electronically through AUTOM in eligible options to which such RSQT
has been assigned. An RSQT may only submit such quotations
electronically from off the floor of the Exchange. See Exchange Rule
1014(b)(ii)(B).
    \31\ The Exchange currently has several Enhanced Specialist
Participation programs, embodied in Phlx Rule 1014(g). These
programs establish specified percentages as the Enhanced Specialist
Participation, depending on the category of option. Currently, the
specialist in physical delivery FCOs is not entitled to a
``specialist enhancement,'' although such a program was once in
effect.
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    The Exchange proposes to amend a number of rules that currently
govern the trading of equity and equity index options that trade as
``Streaming Quote Options'' on Phlx XL to extend the coverage of those
rules to U.S. dollar-settled FCOs as well.\32\ In general, the Exchange
proposes to make the necessary rule changes to permit U.S. dollar-
settled FCOs to trade much in the same manner as equity index options,
which are also U.S. dollar-settled products.\33\
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    \32\ Phlx Rule 1080(k) provides that the Options Committee may,
on an issue-by-issue basis, determine the specific issues in which
SQTs may generate and submit option quotations if such SQT is
physically present on the Exchange floor, and RSQTs may generate and
submit option quotations from off the floor of the Exchange,
electronically. Such issues shall be known as ``Streaming Quote
Options.'' As noted above, however, the Exchange's current physical
delivery FCOs would continue to trade as they do today. They would
not be migrated to Phlx XL, and the trading rules which the Exchange
is proposing to amend today to govern trading of U.S. dollar-settled
FCOs on Phlx XL would not apply to physical delivery FCOs.
    \33\ In the event of system wide trading halts in equity and
equity index options required by Exchange Rule 133 (the ``circuit
breaker'' rule), Trading Halts Due to Extraordinary Market
Volatility, trading in U.S. dollar-settled FCO also would be halted.
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    Phlx Rule 1080, Philadelphia Stock Exchange Automated Options
Market (AUTOM) and Automatic Execution System (AUTO-X), would be
amended to include U.S. dollar-settled FCOs as a product that may be
traded on Phlx XL as a Streaming Quote Option. In contrast, physical
delivery FCOs have always traded on the Exchange by open outcry only,
without automated order delivery or execution (as have 3D FCOs in the
past). Instead, floor brokers accept and execute orders. In addition,
the limit order book is manually maintained by the specialist, rather
than electronically like on Phlx XL. Though physical delivery FCOs
would continue to trade by open outcry, U.S. dollar-settled FCOs would
now trade on Phlx XL. Like equity options and equity index options,
U.S. dollar-settled FCOs would trade on Phlx XL beginning at 9:30 a.m.
through the end of the trading day at 4 p.m. The text of Phlx Rule 1080
would be amended to provide that U.S. dollar-settled FCOs would
generally trade in the same manner as an equity option or an index
option.\34\ The proposed amendments reflect that the Foreign Currency
Options Committee would have decision-making authority in certain
instances with respect to these new products (rather than the Options
Committee, which oversees the trading of equity and equity index
options on Phlx XL). Conforming changes are proposed to Options Floor
Procedure Advice A-13, Auto-Execution Engagement/Disengagement
Responsibility.
---------------------------------------------------------------------------

    \34\ The Exchange's Equity Options AutoQuote System is an
options price quote calculator and quote generator used by
specialists in equity options. It incorporates pricing model data,
which generate automatic pricing of option series based on a number
of factors, including the value of the underlying stock. The
Exchange would not provide an autoquote system for specialists in
U.S. dollar-traded FCOs trading on Phlx XL. Rule 1080, Commentary
.01, would be revised to reflect that the Auto-Quote system applies
to equity and equity index options, but not to U.S. dollar-settled
FCOs. Options Floor Procedure Advice F-17, FCO Trades to be Effected
in the Pit, is proposed to be amended so that it applies only to
physical delivery FCOs.
---------------------------------------------------------------------------

    Phlx Rule 1014, Obligations and Restrictions Applicable to
Specialists and Registered Options Traders, would be amended to make
clear that the obligations and restrictions applicable to specialists
and registered options traders (``ROTs'') trading equity index options
now would generally apply to specialists and ROTs in U.S. dollar-
settled FCOs.\35\ Currently, some of those same obligations, such as,
for example, bid/ask differentials and affirmative market making
obligations and restrictions, apply to the trading of physical delivery
FCOs. Though specialists and ROTs in physical delivery FCOs would
remain subject to these obligations and restrictions, specialists and
ROTs in U.S. dollar-settled FCOs would now be subject to obligations
and restrictions similar to those that apply to equity and equity index
option specialists and ROTs. For example, while Phlx Rule 1014(c)(ii)
prescribes bid/ask differentials for specialists and ROTs in physical
delivery FCOs, Phlx Rule 1014(c)(i), as revised, would prescribe the
bid/ask differentials for both equity options (in subsection (a)) and
U.S. dollar-settled FCOs (in subsection (b)). The bid/ask differentials
for equity options and the bid/ask differentials for U.S. dollar-
settled FCOs, as expressed, would be the same.\36\ The bid/ask
differential rules for U.S. dollar-settled FCOs would be amended to
resemble those applicable to equity options in order to facilitate
trading on the Phlx XL system by the system's current users who are
accustomed to the existing bid/ask differentials applicable to equity
options.
---------------------------------------------------------------------------

    \35\ However, Phlx Rule 1014(c)(i)(B), which provides for a
maximum option price change with exceptions based upon the price of
the underlying security, would not apply to U.S. dollar-settled
FCOs. The Exchange does not have a maximum option price change rule
that applies to physical delivery FCOs and is not proposing a
maximum option price change rule for U.S. dollar-settled FCOs.
    \36\ See Phlx Rule 1034, Minimum Increments, which would be
amended to require the first two decimal places to be disregarded in
expressing quotes for U.S. dollar-settled options on the Euro and
the British pound.
---------------------------------------------------------------------------

    Like Phlx Rule 1080, Phlx Rule 1014 would be amended to reflect
that the Foreign Currency Options Committee would have decision-making
authority in certain instances with respect to these new products.
Proposed amendments to Phlx Rule 1014 also would limit existing
provisions of Phlx Rule 1014 currently applicable to FCO contracts to
physical delivery FCOs. Conforming changes are proposed to Options
Floor Procedure Advices B-6, Priority of Options Orders for Equity
Options and Index Options by Account Type, B-7, Time Priority of Bids/
Offers in Foreign Currency Options, and F-6, Option Quote Parameters.
    Phlx Rule 1016, Block Transactions in Foreign Currency Options,
would be revised to limit block trades to physical delivery FCOs. The
block trading rule currently enables market participants to execute
large-size FCO orders in an orderly fashion at a price that may not be
the best bid or offer for that particular FCO, but is the best price
available for executing a block trade in such FCO.

The procedure permits this limited exception to the existing priority
and precedence rules of the Exchange while continuing to protect
smaller customer orders and orders that constitute the ``best market''
or best bid or offer. However, in order to take advantage of the block
execution procedure, Phlx Rule 1016 requires a floor broker with a
block order to quote the market in a particular FCO, announce that a
block quotation for a specified number of contracts over 1,000 is
sought, and ascertain from the trading crowd the best price at which
the entire order can be executed. Trading of U.S. dollar-settled FCOs
on Phlx XL by SQTs and RSQTs which stream quotes into the system makes
execution of block trades pursuant to the procedures required by Phlx
Rule 1016 impractical for that product.\37\ Phlx Rule 1017, Openings in
Options, governs the Exchange's fully automated opening system for
options traded on Phlx XL as part of the Phlx XL system.\38\ Phlx Rule
1017 is proposed to be amended to reflect that U.S. dollar-settled FCOs
would be opened using the automated opening system, subject to certain
adjustments to current processes because FCO openings, unlike openings
of equity and index options, would not depend upon the opening of
trading in an underlying cash market.\39\ Currently, openings in FCOs
have been conducted pursuant to Phlx Rule 1047, Commentary .01,
utilizing one of the types of trading rotations listed there.
Specifically, in addition to consulting his pricing and quotation
tools, the specialist manually checks the limit order book and with
floor brokers, and then opens each FCO for trading and sends out
opening quotes in each series, which may include executing opening
trades. Though physical delivery FCO will continue to open in this
fashion, U.S. dollar-settled FCO would now open largely in the same way
as equity and equity index options. Phlx Rule 1017 would provide that
Phlx XL would accept orders and quotes in U.S. dollar-settled FCOs
beginning no later than one hour before market opening, and that the
specialist assigned in the particular U.S. dollar-settled FCO must
enter opening quotes not later than 30 seconds after market
opening.\40\ It would provide that in certain circumstances an
anticipated opening price would be calculated if the quotes of at least
two Phlx XL participants have been submitted within two minutes of
market opening (or such shorter time as determined by the FCO Committee
and disseminated to membership via Exchange circular), as opposed to
within two minutes of the opening trade or quote on the primary market
for the underlying security, as is the case for equity options.
Finally, it would provide that the system would not open a series of
U.S. dollar-settled FCO if the opening price is not within an
acceptable range (as determined by the FCO Committee and announced to
Exchange members and member organizations by way of Exchange circular).
In addition, Phlx Rule 1017 would be amended to clarify its application
to index options by inserting reference to ``underlying securities
constituting 100% of the index value.'' The rule currently refers to
the opening of the ``underlying security,'' which makes sense with
respect to equity options, but not index options. Conforming changes
are proposed to Options Floor Procedure Advices A-12, Opening
Rotations, and A-14, Equity Option and Index Option Opening Parameters.
Phlx Rule 1063, Responsibilities of Floor Brokers, is being amended to
provide that the Floor Broker Management System currently employed with
respect to equity and equity index options would also be required to be
used for U.S. dollar-settled FCO.\41\ As amended, the rule would limit
the ``electronic audit trail'' procedures currently applicable to FCOs
to physical delivery FCOs only. Conforming changes are proposed to
Options Floor Procedure Advice C-2, Options Floor Broker Management
System.
---------------------------------------------------------------------------

    \37\ However, Phlx Rule 1033(a)(ii), which would apply to U.S.
dollar-settled FCOs, provides in relevant part that ``[i]n response
to a floor broker's solicitation of a single bid or offer, the
members of a trading crowd (including the specialist and ROTs) may
discuss, negotiate and agree upon the price or prices at which an
order of a size greater than the AUTO-X guarantee can be executed at
that time, or the number of contracts that could be executed at a
given price or prices * * *.''
    \38\ For a description of the automated opening system, see
Securities Exchange Act Release Nos. 52667 (October 25, 2005), 70 FR
65953 (November 1, 2005) (SR-Phlx-2005-25), and 53242 (February 7,
2006), 71 FR 7604 (February 13, 2006) (SR-Phlx-2006-11).
    \39\ Currently, with respect to automated openings in an
Industry or Market Index conducted pursuant to Phlx Rule 1017, the
specialist may engage the automated opening system to open such
options when underlying securities representing 50% of the current
index value of all the securities underlying the index have opened
for trading on the primary market. The system automatically opens
all index options when underlying securities representing 100% of
the current index value of all the securities underlying the index
have opened for trading on the primary market. Because the spot
foreign currency market, on the other hand, has no opening on a
primary market, the rules for automated opening of U.S. dollar-
settled FCOs would differ from those governing equity index option
openings.
    \40\ Market opening, as with equity and equity index options, is
normally at 9:30 a.m. Eastern Time.
    \41\ The Options Floor Broker Management System is a component
of AUTOM designed to enable Floor Brokers and/or their employees to
enter, route and report transactions stemming from options orders
received on the Exchange. The Options Floor Broker Management System
also is designed to establish an electronic audit trail for options
orders represented and executed by Floor Brokers on the Exchange,
such that the audit trial provides an accurate, time-sequenced
record of electronic and other orders, quotations and transactions
on the Exchange, beginning with the receipt of an order by the
Exchange, and further documenting the life of the order through the
process of execution, partial execution, or cancellation of that
order. See Phlx Rule 1080, Commentary .06.
---------------------------------------------------------------------------

    Phlx Rule 1069, Customized Foreign Currency Options, is proposed to
be revised to limit applicability of the rule to physical delivery FCO.
U.S. dollar settled FCOs would not be eligible to trade on a customized
basis.
    Futures on the British pound and the Euro, as well as options on
such futures are traded on the CME (both exchange pit trading and
GLOBEX trading). Euro Currency Trust Shares and British Pound Sterling
Shares trade on NYSE and on NYSE Arca. The Exchange represented that,
to the best of the Exchange's knowledge, these U.S. markets are the
primary trading markets in the world for exchange-traded futures,
options on futures and trust shares on these currencies. The Phlx
represented that it is able to obtain information regarding trading in
the Euro Currency Trust Shares, British Pound Sterling Shares, Euro and
British Pound options, and Euro and British Pound futures and options
on futures through Phlx members, in connection with such members'
proprietary or customer trades which they effect on any relevant
market.\42\ The Phlx represented that it may obtain trading information
via the Intermarket Surveillance Group (``ISG'') from other exchanges
who are members or affiliates of the ISG. Specifically, the Phlx can
obtain such information from the NYSE and NYSE Arca in connection with
shares of the Euro Currency Trust and the CurrencyShares\TM\ British
Pound Sterling Trust trading on the NYSE and NYSE Arca, and from the
CME and LIFFE in connection with Euro and Pound futures trading on
those exchanges.\43\ Additionally, pursuant to Phlx Rule 1022,
Securities Accounts and Orders of Specialists and Registered Options
Traders, specialists and ROTs are required to identify all accounts
maintained for foreign currency trading in which the specialist or ROT
engages in trading activity or over which he exercises investment
discretion, and no

specialist or ROT may engage in foreign currency trading in any account
not reported pursuant to the rule. Further, Phlx Rule 1022 provides
that every specialist and ROT must make available to the Phlx upon
request all books, records and other information relating to
transactions for their own account or accounts of associated persons
with respect to the foreign currency underlying U.S. dollar-settled
FCOs, including transactions in the cash market as well as the futures,
options and options on futures markets. Phlx Rule 1022(d) is proposed
to be amended to add transactions in ``other foreign currency
derivatives'' to the list of currency related transactions with respect
to which specialists and ROTs must provide information to the Exchange.
---------------------------------------------------------------------------

    \42\ See Equity Floor Procedure Advice F-8 and Options Floor
Procedure F-8, Failure to Comply with an Exchange Inquiry.
    \43\ NYSE and NYSE Arca are members of ISG. CME and LIFFE are
affiliate members of ISG.
---------------------------------------------------------------------------

    Exchange rules designed to protect public customers trading in FCOs
would apply. Specifically, under paragraph (b) of Phlx Rule 1024,
``Conduct of Accounts Open for Trading,'' members are prohibited from
accepting a customer order to purchase or write a U.S. dollar-settled
FCO unless such customer's account has been specially approved in
writing by a designated Foreign Currency Options Principal of the
member for transactions in FCOs. Additionally, Phlx Rule 1026,
``Suitability,'' is designed to ensure that options, including U.S.
dollar-settled FCO, are sold only to customers capable of evaluating
and bearing the risks associated with trading in the instruments.
Finally, under Phlx Rule 1027, ``Discretionary Accounts,'' members are
permitted to exercise discretionary power with respect to trading U.S.
dollar-settled FCOs in a customer's account only if the member has
received prior written authorization from the customer and the account
has been accepted in writing by a designated Foreign Currency Options
Principal. In addition, under Phlx Rule 1027, the Foreign Currency
Options Principal or a Registered Options Principal must approve and
initial each discretionary U.S. dollar-settled FCO on the day the order
is entered.\44\ Phlx Rules 1025, Supervision of Accounts, 1026,
Suitability, 1028, Confirmations, and 1029, Delivery of Options
Disclosure Documents, also would apply to trading in U.S. dollar-
settled FCO.
---------------------------------------------------------------------------

    \44\ See supra note 8.
---------------------------------------------------------------------------

    Finally, the Exchange represents that it has adequate systems
capacity to process quotations and trades in the proposed U.S. dollar-
settled FCO.
iii. Deletion of Outdated References to the German Mark, the French
Franc, the Spanish Peseta and the Italian Lira
    Finally, as a housekeeping matter, the Exchange proposes to delete
outdated references to the German mark, the Italian lira, the Spanish
peseta and the French franc from a number of Exchange rules regarding
FCOs that were once listed on those currencies.\45\ In that regard, the
Exchange is proposing to amend Phlx Rule 722, Margin Accounts; Phlx
Rule 1000, Applicability, Definitions and References; Phlx Rule 1001,
Position Limits; Phlx Rule 1009, Criteria for Underlying Securities;
Phlx Rule 1014, Obligations and Restrictions Applicable to Specialists
and Registered Options Traders; Phlx Rule 1033, Bids And Offers--
Premium; Phlx Rule 1034, Minimum Increments; Phlx Rule 1069, Customized
Foreign Currency Options; Phlx Rule 1079, FLEX Index and Equity
Options; and Options Floor Procedure Advice B-7, Time Priority of Bids/
Offers in Foreign Currency Options.
---------------------------------------------------------------------------

    \45\ On January 1, 1999, the European Union introduced the Euro
which replaced the national currencies of a number of countries
including Germany, Italy, Spain and France that qualified for
inclusion in European Monetary Union. On January 1, 1999, these
countries began to use the Euro along with their existing currencies
(``legacy currencies''). At that point, the legacy currencies became
units of the Euro and continued to constitute legal tender in their
respective countries of origin until 2002. In 2002, the legacy
currencies ceased to be units of the Euro, and the Euro became the
sole medium of exchange of the participating member states. The Phlx
began trading the Euro FCO in January 1999. See Securities Exchange
Act Release No. 40953 (January 15, 1999), 64 FR 3734 (January 25,
1999) (SR-Phlx-99-01).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \46\ in general, and furthers the objectives of Section
6(b)(5) of the Act \47\ in particular, in that it is designed to
promote just and equitable principles of trade; 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 of a free and open market and a national market system; and,
in general, to protect investors and the public interest by providing
FCO users who do not necessarily need to exchange currency at
settlement with an alternative U.S. dollar-settled FCO in an electronic
trading venue.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b).
    \47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change will impose no
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others

    The Exchange has neither solicited nor received comments on this
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be 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 e-mail to<EMAIL_ADDRESS>Please include

File Number SR-Phlx-2006-34 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Phlx-2006-34. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent

amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for inspection and copying in the Commission's Public
Reference Room. Copies of such filing also will be available for
inspection and copying at the principal office of Phlx. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2006-34 and should be
submitted on or before November 24, 2006.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\48\
---------------------------------------------------------------------------

    \48\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E6-18451 Filed 11-1-06; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Notices]
[Page 17650]
[FR Doc No: 2013-06598]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings

    Take notice that the Commission has received the following Natural
Gas Pipeline Rate and Refund Report filings:

Filings Instituting Proceedings

    Docket Numbers: RP12-955-000.
    Applicants: CenterPoint Energy--Mississippi River T.
    Description: MRT Test Period Update Filing.
    Filed Date: 3/15/13.
    Accession Number: 20130315-5127.
    Comments Due: 5 p.m. ET 3/27/13.

    Docket Numbers: RP13-685-000.
    Applicants: Alliance Pipeline L.P.
    Description: March 19-31 2013 Auction to be effective 3/19/2013.
    Filed Date: 3/15/13.
    Accession Number: 20130315-5145.
    Comments Due: 5 p.m. ET 3/27/13.

    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00
p.m. Eastern time on the specified comment date. Protests may be
considered, but intervention is necessary to become a party to the
proceeding.

Filings in Existing Proceedings

    Docket Numbers: RP13-529-002.
    Applicants: Guardian Pipeline, L.L.C.
    Description: NAESB 2.0 Modification II to be effective 4/1/2013.
    Filed Date: 3/15/13.
    Accession Number: 20130315-5046.
    Comments Due: 5 p.m. ET 3/27/13.

    Docket Numbers: RP13-530-002.
    Applicants: Midwestern Gas Transmission Company.
    Description: NAESB 2.0 Modification II to be effective 4/1/2013.
    Filed Date: 3/15/13.
    Accession Number: 20130315-5045.
    Comments Due: 5 p.m. ET 3/27/13.

    Docket Numbers: RP13-531-002.
    Applicants: OkTex Pipeline Company, L.L.C.
    Description: NAESB 2.0 Modification II to be effective 4/1/2013.
    Filed Date: 3/15/13.
    Accession Number: 20130315-5043.
    Comments Due: 5 p.m. ET 3/27/13.

    Docket Numbers: RP13-532-002.
    Applicants: Viking Gas Transmission Company.
    Description: NAESB 2.0 Modification II to be effective 4/1/2013.
    Filed Date: 3/15/13.
    Accession Number: 20130315-5033.
    Comments Due: 5 p.m. ET 3/27/13.

    Any person desiring to protest in any of the above proceedings must
file in of accordance with Rule 211 of the Commission's Regulations (18
CFR 385.211) on or before 5:00 p.m. Eastern time on the specified
comment date.
    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, and service can be found at:
http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other
information, call<PHONE_NUMBER> (toll free). For TTY, call (202) 502-
8659.

    Dated March 18, 2013.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2013-06598 Filed 3-21-13; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 78, Number 124 (Thursday, June 27, 2013)]
[Notices]
[Pages 38769-38770]
[FR Doc No: 2013-15348]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69822; File No. SR-NYSEMKT-2013-58]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Replacing References to
``Principle Executive'' With References to ``Principal Executive'' in
the Exchange's Rules

June 21, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') and Rule 19b-4 thereunder, notice is hereby given that on
June 20, 2013, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') filed
with the Securities and Exchange Commission (the ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to replace references to ``principle
executive'' with references to ``principal executive'' in the
Exchange's rules. The text of the proposed rule change is available on
the Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
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 those 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 parts 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 replace references to ``principle
executive'' with references to ``principal executive'' in the
Exchange's rules.
    Currently, certain equities rules (Rules 98--Equities, 104T--
Equities, 105--Equities, 113--Equities, 122--Equities, 123--Equities,
309--Equities, 344--Equities) and certain disciplinary rules applicable
to the Exchange's equities and options markets (Rules 475, 476, and 477
in Section 9A of the Office Rules) contain references to ``principle
executive.'' The Exchange proposes to replace these references with
references to ``principal executive.'' The term ``principal executive''
appears in over 40 other Exchange rules, and references to ``principle
executive'' are simply misspellings. In addition, certain of the
Exchange's rules are based on the rules of its affiliate, the New York
Stock Exchange (``NYSE''), and the NYSE uses the term ``principal
executive'' exclusively. The purpose of the proposal is to make the
terminology in the Exchange's rules more consistent.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with

Section 6(b) of the Act,\1\ in general, and furthers the objectives of
Section 6(b)(5) of the Act,\2\ in particular, because it promotes just
and equitable principles of trade, removes impediments to and perfects
the mechanism of a free and open market and a national market system,
and, in general, helps to protect investors and the public interest by
implementing consistent terminology throughout the Exchange's rules.
The Exchange further believes that the proposal removes impediments to
and perfects the mechanism of a free and open market by ensuring that
member organizations, regulators, and the public can more easily
understand and navigate the Exchange's rules.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78f(b).
    \2\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change is not
designed to address any competitive issue but rather would implement
consistent terminology throughout the Exchange's rules, thereby
reducing confusion, and making the Exchange's rules easier to
understand and navigate.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

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

    A proposed rule change filed under Rule 19b-4(f)(6) \5\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\6\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. Granting the waiver
allows the Exchange to correct a typographical error immediately,
thereby eliminating any confusion generated by the mistake without
delay. Therefore, the Commission hereby waives the 30-day operative
delay and designates the proposal operative upon filing.\7\
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
    \7\ For purposes only of waiving the 30-day operative delay, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \8\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \8\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEMKT-2013-58 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2013-58. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2013-58 and should
be submitted on or before July 18, 2013.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2013-15348 Filed 6-26-13; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 15 (Wednesday, January 25, 2017)]
[Notices]
[Pages 8462-8464]
[FR Doc No: 2017-01616]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79838; File No. SR-BatsEDGX-2017-05]

Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice
of Filing and Order Granting Accelerated Approval of a Proposed Rule
Change to EDGX Rule 21.19, Bats Auction Mechanism, as it Applies to the
Equity Options Platform

January 18, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on January 13, 2017, Bats EDGX Exchange, Inc. (the ``Exchange''
or ``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons and, for the reasons discussed below, is
approving the proposal on an accelerated basis.
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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 filed a proposal for the Exchange's equity options
platform (``EDGX Options'') concerning a price improvement mechanism
operated by EDGX Options, the Bats Auction Mechanism (``BAM'' or ``BAM
Auction''), which was recently approved by the Commission.\3\ A
specific aspect of BAM is currently operating on a pilot basis
(``Pilot''), which is set to expire on January 18, 2017.\4\ The Pilot
concerns the fact that there is no minimum size requirement for orders
to be eligible for a BAM Auction, as described below. The Exchange
seeks to make the Pilot permanent but does not propose any other
changes to BAM.
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    \3\ See Securities Exchange Act Release No. 79718 (January 3,
2017) (SR-BatsEDGX-2016-41).
    \4\ See id.
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    The text of the proposed rule change is available at the Exchange's
Web site at www.bats.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to make permanent an aspect of BAM
that is operating as a Pilot by removing Interpretation and Policy .05
from Rule 21.19.
Background
    The Exchange proposed BAM in September of 2016 as a price
improvement mechanism on the Exchange.\5\ The Proposal was amended by
the Exchange on December 15, 2016,\6\ and approved, as amended, on
January 3, 2017.\7\ BAM Auctions were launched on the Exchange
effective January 4, 2017. BAM includes functionality in which a Member
(an ``Initiating Member'') may electronically submit for execution an
order it represents as agent on behalf of a Priority Customer,\8\
broker dealer, or any other person or entity (``Agency Order'') against
principal interest or against any other order it represents as agent
(an ``Initiating Order'') provided it submits the Agency Order for
electronic execution into the BAM Auction pursuant Rule 21.19. All
options traded on EDGX Options are eligible for BAM.
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    \5\ See Securities Exchange Act Release No. 78988 (September 29,
2016), 81 FR 69172 (October 5, 2016) (SR-BatsEDGX-2016-41)
(``Proposal'').
    \6\ See supra, note 3; see also SR-BatsEDGX-2016-41 Amendment
No. 1, available at: http://www.bats.com/us/options/regulation/rule_filings/edgx/.
    \7\ See supra, note 3.
    \8\ The term ``Priority Customer'' means any person or entity
that is not: (A) A broker or dealer in securities; or (B) a
Professional. The term ``Priority Customer Order'' means an order
for the account of a Priority Customer. See Rule 16.1(a)(45). A
``Professional'' is any person or entity that: (A) is not a broker
or dealer in securities; and (B) places more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s). All Professional orders shall be
appropriately marked by Options Members. See Rule 16.1(a)(46).
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Pilot Program
    One component of BAM as approved by the Commission is currently
operating as a Pilot, which is set to expire on January 18, 2017. The
Pilot concerns that there is no minimum size requirement for orders to
be eligible for a BAM Auction. The Exchange now seeks to remove
Interpretation and Policy .05 from Rule 21.19 so that the Pilot may
operate on a permanent basis.
    Pursuant to the Pilot, there is no minimum size requirement for
orders to be eligible for a BAM Auction. During this Pilot, the
Exchange agreed to submit certain data, periodically as required by the
Commission, to provide supporting evidence that, among other things,
there is meaningful competition for all size orders and that there is
an active and liquid market functioning on the Exchange outside of the
Auction mechanism. The Exchange proposed to adopt this provision on a
pilot basis based on the fact that multiple other options exchanges
have a similar provision with respect to their own price improvement
mechanisms and such provisions have been operating on a pilot basis.\9\
Although the Exchange only recently launched BAM and does not yet have
meaningful data to analyze pursuant to the Pilot, the Exchange is
proposing to make the Pilot permanent based on the recent filings by
multiple other options exchanges to make analogous provisions
permanent.\10\ The

Exchange believes that BAM is sufficiently similar to these processes
that there is no need to continue the Pilot in light of the recent
filings to operate similar processes on a permanent basis. In
particular, based on the rules discussed in additional detail below as
well as the results of similar mechanisms operated by several other
options exchanges, the Exchange believes that there will be meaningful
competition in BAM for auctions of all sizes, that there will continue
to be an active and liquid market functioning on the Exchange outside
of the auction mechanism, and that there will be opportunities for
price improvement for orders executed through BAM.
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    \9\ See, e.g., Securities Exchange Act Release Nos. 53222
(February 3, 2006), 71 FR 7089 (February 10, 2006) (SR-CBOE-2005-60)
(order approving the CBOE AIM price improvement mechanism, including
that there is no minimum size requirement on a pilot basis); 73590
(November 13, 2014), 79 FR 68919 (November 19, 2014) (SR-MIAX-2014-
56) (order approving the MIAX PRIME price improvement mechanism,
including that there is no minimum size requirement on a pilot
basis); 76301 (October 29, 2015), 80 FR 68347 (November 4, 2015)
(SR-BX-2015-032) (order approving the NASDAQ BX PRISM price
improvement mechanism, including that there is no minimum size
requirement on a pilot basis).
    \10\ See, e.g., Securities Exchange Act Release Nos. 79499
(December 7 2016), 81 FR 90012 (December 13, 2016) (SR-CBOE-2016-
084) (proposal to modify the CBOE AIM price improvement mechanism
including the proposal to make the process permanent, specifically
that there is no minimum size requirement); 79500 (December 7,
2016), 81 FR 90030 (December 13, 2016) (SR-MIAX-2016-46) (proposal
to modify the MIAX PRIME price improvement mechanism including the
proposal to make the process permanent, specifically that there is
no minimum size requirement); 79465 (December 5, 2016), 81 FR 79465
[sic] (December 9, 2016) (SR-BX-2016-063) (proposal to modify
certain aspects of the NASDAQ BX PRISM price improvement mechanism
including the proposal to make the process permanent, including that
there is no minimum size requirement).
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    The Exchange believes BAM process will promote meaningful
competition because it is open to all Members of the Exchange and,
thus, all Members will have an equal opportunity to respond with their
best prices during a BAM Auction. Since the Exchange considers all
interest present in the Exchange's system, and not solely BAM
responses, for execution against Agency Orders, those participants who
are not explicit responders to a BAM Auction will expect executions via
BAM as well.\11\ Further, once an Initiating Member has submitted an
Agency Order for processing in a BAM Auction, such Agency Order may not
be modified or cancelled.\12\ In addition, the Exchange believes there
will be meaningful competition because an Initiating Order may not be a
solicited order for the account of any market maker on EDGX Options
(``Options Market Maker'') assigned in the affected series on the
Exchange.\13\ Thus, such Options Market Makers assigned in the affected
series will presumably be actively quoting in such series, and
participate in BAM as unrelated orders, and/or will be responding to
BAM Auctions in such series.
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    \11\ See Exchange Rule 21.19(b)(3).
    \12\ See Exchange Rule 21.19(b)(1)(A).
    \13\ See Exchange Rule 21.19(a)(6).
---------------------------------------------------------------------------

    Similarly, the Exchange believes there will continue to be an
active and liquid market functioning on the Exchange outside of the
auction mechanism for the same reason noted above, namely that an
Initiating Order may not be a solicited order for the account of an
Options Market Maker.\14\ In addition, resting quotes and orders that
were at a price that is equal to the NBBO on the opposite side of the
market from the Agency Order (``Priority Orders'') would have priority
up to their size in the NBBO at the time an Auction is initiated
(``Initial NBBO'') at each price level at or better than such Initial
NBBO after Priority Customer and the Initiating Member have received
allocations.\15\ Thus, the concept of Priority Orders is intended to
incentivize active participation on the EDGX Options order book outside
of BAM Auctions.
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    \14\ See id.
    \15\ See Exchange Rule 21.19(b)(4)(B)(iii).
---------------------------------------------------------------------------

    Finally, the Exchange believes that there will be opportunities for
price improvement for orders executed through BAM, including for
smaller sized Agency Orders when the difference between the NBB and NBO
is $0.01. Pursuant to BAM, if any Agency Order is for less than 50
option contracts and the difference between the NBB and NBO is $0.01,
the Initiating Member must stop the entire Agency Order at one minimum
price improvement increment better than the NBBO, which increment shall
be determined by the Exchange but may not be smaller than $0.01.\16\
Thus, even for an Agency Order that may be less likely to receive price
improvement as compared to other Agency Orders, namely a smaller order
when the spread is one penny wide, the rules of BAM require that such
order will receive price improvement.
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    \16\ See Exchange Rule 21.19(a)(1)(A).
---------------------------------------------------------------------------

    Based on the foregoing, the Exchange believes it is appropriate to
continue the no minimum size requirement on a permanent basis.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\17\ In particular,
the proposal is consistent with Section 6(b)(5) of the Act \18\ because
it would promote just and equitable principles of trade, remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that BAM, including the Pilot,
results in increased liquidity available at improved prices, with
competitive final pricing out of the Initiating Member's complete
control. The Exchange believes that BAM promotes and fosters
competition and affords the opportunity for price improvement to more
options contracts. The Exchange believes that allowing BAM to continue
without a minimum size requirement is consistent with the Act based on
similar pilots operated by other options exchanges with respect to
similar price improvement mechanisms and the recent filings to operate
such mechanisms and certain aspects thereof on a permanent basis.\19\
In addition, the Exchange believes that the rules governing BAM, as
adopted, will ensure: (i) That there is meaningful competition in BAM
for auctions of all sizes; \20\ (ii) that there continues to be an
active and liquid market functioning on the Exchange outside of the
auction mechanism; \21\ and (iii) that there will be opportunities for
price improvement for orders executed through BAM.\22\ The Exchange
notes that this proposal does not propose any new policies or
provisions that are unique or unproven, but instead relates to the
continuation of a program that briefly operated on a pilot basis.
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    \19\ See supra, note 10.
    \20\ See supra, notes 11-13 and accompanying text.
    \21\ See supra, notes 14-15 and accompanying text.
    \22\ See supra, note 16 and accompanying text.
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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 that is not necessary or appropriate
in furtherance of the purposes of the Act. In this regard, the Exchange
notes that the rule change is being proposed in order to continue BAM
without a minimum size requirement. BAM itself was a competitive
response to analogous programs offered by other options exchanges but
was only recently approved and launched. At the same time, other
options exchanges that have been operating similar price improvement
mechanisms for longer periods of time recently filed to operate such
mechanisms on a permanent basis, including with regard to the fact that
such mechanisms to not have a minimum size requirement.\23\
Accordingly, the Exchange's proposal to operate BAM without a minimum
size requirement is a competitive proposal and the Exchange believes
this proposed rule change is necessary to permit fair competition among
the options exchanges.
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    \23\ See supra, note 10.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written

comments from members or other interested parties.

III. 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-BatsEDGX-2017-05 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-BatsEDGX-2017-05.
This file number should be included on the subject line if email is
used. To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE., Washington, DC 20549 on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
BatsEDGX-2017-05, and should be submitted on or before February 15,
2017.

IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange
and, in particular, with Section 6(b) of the Act.\24\ In particular,
the Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\25\ which requires, among other things,
that the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect customers, issuers, brokers and dealers.
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    \24\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \25\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that BAM is designed to provide customers with
an opportunity for price improvement to orders, including orders of
fewer than 50 contracts. The Commission also notes that BAM currently
requires price improvement for Agency Orders of fewer than 50 contracts
when the NBBO has a bid/ask differential of $0.01, a situation in which
an Agency Order may be less likely to receive price improvement due to
the limited spread.\26\ In addition, the Commission notes that BAM is
designed to encourage competition and promote an active and liquid
market outside of BAM. Specifically, the Commission notes that the
Exchange's rules provide for broad participation in BAM,\27\ promote
market maker participation by prohibiting an Initiating Order from
being a solicited order for the account of a market maker assigned in
the affected series,\28\ and encourage competitive quoting outside BAM
by providing Priority Order status in a BAM Auction.\29\ Finally, the
Commission notes that the rules governing EDGX's BAM are similar to
those governing auction mechanisms operating at other options
exchanges.\30\ Thus, the Commission has determined to approve the
Exchange's proposal to approve the Pilot on a permanent basis.
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    \26\ See Exchange Rule 21.19(a)(1)(A). Other options exchanges
with price improvement auctions have provided data to the Commission
demonstrating that such orders receive relatively small amounts of
price improvement. See, e.g., Securities Exchange Act Release No.
79465 (December 5, 2016), 81 FR 89167, 89169 (December 9, 2016) (SR-
BX-2016-063).
    \27\ See, e.g., Exchange Rule 21.19(b)(3).
    \28\ See Exchange Rule 21.19(a)(6).
    \29\ See Exchange Rule 21.19(b)(4)(B)(iii).
    \30\ See, e.g., CBOE Rule 6.74A and Chapter VI, Section 9 of the
BX Options Rules. These rules have also been operating on a pilot
basis, which the exchanges have similarly proposed to make
permanent. See supra note 10. The Commission notes that, in
conjunction with EDGX's proposal, it is approving comparable pilot
programs in effect on other options exchanges. See e.g., Securities
Exchange Act Release No. 79812 (January 17, 2017) (SR-BOX-2016-58).
---------------------------------------------------------------------------

    The Exchange has requested that the Commission find good cause for
approving the proposed rule change prior to the 30th day after
publication of the notice thereof in the Federal Register. The Exchange
stated that accelerated approval of its proposal would allow the
applicable rules to remain in effect following the expiration of the
Pilot on January 18, 2017, which would provide certainty to members of
the Exchange because it will allow BAM to continue on the Exchange
uninterrupted. For this reason, the Commission believes that good cause
exists for accelerated approval of the proposed rule change.
Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\31\ to approve the proposed rule change prior to
the 30th day after the date of publication of the notice of filing
thereof in the Federal Register.
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    \31\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\32\ that the proposed rule change (SR-BatsEDGX-2017-05) be, and
hereby is, approved on an accelerated basis.
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    \32\ 15 U.S.C. 78s(b)(2).
    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-01616 Filed 1-24-17; 8:45 am]
 BILLING CODE 8011-01-P