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Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

indicate an intention to cross,12
permitting participation with all other FLEX-participating members in attempting to improve or match the BBO
during the BBO Improvement Interval.13
At expiration of the BBO Improvement Interval, the Requesting Member must promptly accept or reject the BBOs;
the Requesting Member has no obligation to accept any FLEX bid or offer.14 RFQs, responsive quotes and completed trades are promptly reported to OPRA and disseminated as an administrative message by the Exchange. As the foregoing process demonstrates, Phlx seeks to maintain a competitive Trading Floor through the administration of its rules which contain processes to ensure that options transactions are exposed in such a way as to permit other floor members an opportunity to participate in price discovery by requiring floor members to seek liquidity in open outcry. For example, the Options 8 rules require one Floor Market Maker to be present in the trading crowd prior to representing an order for execution as a means to expose orders to potential liquidity. As such, separate liquidity assessments by Regulatory staff are not needed.
Fifth, similar to Cboe, the proposed rule change incorporates the concept Member either rejects the BBO or is given a BBO
for less than the entire size requested, all FLEX
participating members other than the Requesting Member will have an opportunity during the BBO
Improvement Interval in which to match, or improve, as applicable, the BBO. At the expiration of any such BBO Improvement Interval, the Requesting Member must promptly accept or reject the BBOs. See Options 8, Section 34c3.
12 If the Requesting Member has indicated an intention to cross or act as principal with respect to any part of the FLEX trade, acceptance of the displayed BBO shall be automatically delayed until the expiration of the BBO Improvement Interval.
Prior to the BBO Improvement Interval, the Requesting Member must indicate at the post the price at which the member expects to trade. In the case of FLEX equity options only whenever the Requesting Member has indicated an intention to cross or act as principal on the trade and has matched or improved the BBO during the BBO
Improvement Interval, the Requesting Member will be permitted to execute the contra side of the trade that is the subject of the RFQs, to the extent of at least 40% of the trade, provided the order is a Public Customer order or an order respecting the Requesting Members firm proprietary account.
Notwithstanding the foregoing, all market participants may effect crossing transactions. See Options 8, Section 34c5.
13 The BBO Improvement Interval means the minimum period of time, to be established by the Exchange, during which members may submit FLEX Quotes to meet or improve the BBO
established during the Request Response Time. See Options 8, Section 34b15.
14 Whenever, following the completion of FLEX
bidding and offering responsive to a given RFQs, the Requesting Member rejects the BBO or the BBO
size exceeds the FLEX transaction size indicated in the RFQs, members may accept the entire order or the unfilled balance of the BBO. See Options 8, Section 34c3.

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that the expiration date is the date on which an executed FLEX option is submitted to the System, which, on Phlx, is the date the FLEX option is reported to OPRA and disseminated as an administrative message through the System 15 by Market Operations staff. A
FLEX option series is available for trading only when exposed in open outcry and, after completion of the RFQ
process, thereafter, Exchange staff manually submits the executed FLEX
option to the System through which it is promptly reported to OPRA and disseminated as an administrative message. For purposes of the definition of the System pursuant to Phlx Rules, the date of submission to the Phlx System is the date on which the executed FLEX option is reported to OPRA.
Technical Amendments The Exchange proposes to amend the rule text utilized to describe the maximum expiration for a FLEX
currency option to conform that language to the terminology proposed herein to describe maximum expirations for FLEX index and equity options. The Exchange would delete the rule text which states, within three years for FLEX currency options, and replace that rule text with the phrase no more than 3 years from the date on which a FLEX currency option is submitted to the System. The Exchange is not amending the term for FLEX currency options.
The Exchange also proposes to add a , after the word Equity in the title of Options 8, Section 34 and amend the term FLEX Order within Options 8, Section 34b6B to FLEX option order to conform the usage of the term throughout Options 8, Section 34. The Exchange proposes to remove ; or within Options 8, Section 34b6A.
Finally, the Exchange proposes two amendments within Options 8, Section 34c to update the name of the post and identify the message sent by the 15 The term System shall mean the automated system for order execution and trade reporting owned and operated by the Exchange which comprises: i An order execution service that enables members to automatically execute transactions in option series; and provides members with sufficient monitoring and updating capability to participate in an automated execution environment; ii a trade reporting service that submits locked-in trades for clearing to a registered clearing agency for clearance and settlement; transmits last-sale reports of transactions automatically to the Options Price Reporting Authority OPRA for dissemination to the public and industry; and provides participants with monitoring and risk management capabilities to facilitate participation in a locked-in trading environment; and iii the data feeds described at Options 3, Section 23. See Options 1, Section 1b57.

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Exchange. To that end, the term FLEX
post is proposed to be changed to Market Operations post and the phrase administrative text message is proposed to be change to administrative message. These proposed changes will update the rule to the current terminology. These proposed amendments do not represent substantive changes to the current FLEX
option process, rather these changes are merely wording changes which continue to reflect the current process without substantive change.
Implementation The Exchange intends to begin implementation of the proposed rule change no earlier than September 13, 2021 and no later than September 30, 2021. The Exchange will issue an Options Trader Alert to Participants to provide notification of the implementation date.
2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6b of the Act,16 in general, and furthers the objectives of Section 6b5 of the Act,17
in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest.
This proposal is intended to simplify the process and permit Phlx members and member organizations to transact FLEX index and equity options with the same expiration terms as Cboe, NYSE
Arca, and NYSE American members.
This amendment would permit all FLEX
equity and index options to have the same maximum 15 year term as other options markets that offer FLEX.18 For the reasons Phlx has articulated below, the Exchange believes this proposal is consistent with the Act.
Expanding the maximum expiration terms to 15 years uniformly for FLEX
index and equity options is consistent with the Act as it will permit transactions which currently trade OTC
to be conducted within an exchange environment. Phlx believes that expanding the eligible term for FLEX
equity and index options, as proposed, is important and necessary to the Exchanges efforts to create products and markets that provide members, member organizations, and investors interested in FLEX-type options with an 16 15

U.S.C. 78fb.
U.S.C. 78fb5.
18 See Cboes Rule 4.21b4, NYSE Arca 5.32O
and NYSE American Rule 903G.
17 15

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