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Options 11 Minor Rule Plan Violations
Section 1. Lead Market Maker as Market Maker

Lead Market Makers who are also Market Makers shall not have their Lead Market Maker activity included in the calculation for required trading as a Market Maker.

FINE SCHEDULE

Fine not applicable

Adopted Feb. 3, 2020 (20-03).

Section 2. Option Quote Parameters

When bidding and/or offering in equity option or index option issues, the following parameters should be utilized on the opening:

Current Option Bid

Maximum Quote Spread

Less than $2.00

.25

$2.00 to less than $5.00

.40

$5.00 to less than $10.00

.50

$10.00 to less than $20.00

.80

$20.00 and greater

1

After the opening, options trading on the System may be quoted electronically with a difference not to exceed $5 between the bid and offer regardless of the price of the bid. The $5 bid/ask differentials only apply following the opening rotation in each security (i.e., the bid/ask differentials specified above shall apply during the opening).

The bid/ask differentials stated above shall not apply to in-the-money series where the market for the underlying security is wider than the differentials set forth above. For such series, the bid/ask differential may be as wide as the quotation for the underlying security on the primary market, or its decimal equivalent rounded up to the nearest minimum increment.

Foreign Currency Options

When bidding and/or offering in U.S. dollar-settled foreign currency option issues, the following parameters should be utilized on the opening:

Current Option Bid

Maximum Quote Spread

Less than $2.00

.25

$2.00 to less than $5.00

.40

$5.00 to less than $10.00

.50

$10.00 to less than $20.00

.80

$20.00 and greater

1

After the opening, options trading on the System may be quoted electronically with a difference not to exceed $5 between the bid and offer regardless of the price of the bid. The $5 bid/ask differentials only apply following the opening rotation in each security (i.e., the bid/ask differentials specified above shall apply during the opening).

The bid/ask differential as stated above shall apply to all listed series, including the longest term, except for the two longest term series open for trading in the Euro options and long-term foreign currency options.

Relief

Relief from the established bid/ask differentials may be granted upon the receipt of an approval of an Options Exchange Official.

Batching

The Exchange may aggregate individual violations and treat such violations as a single offense.

FINE SCHEDULE (Implemented on a one-year running calendar basis)

1st Occurrence

Warning letter

2nd Occurrence

Warning letter

3rd Occurrence

Warning letter

4th Occurrence

$250.00

5th Occurrence

$500.00

6th Occurrence

$1,000.00

7th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

Section 3. Failure to Comply with an Exchange Inquiry

Each member, member organization or associated person is required to promptly comply with any request of information made by the Exchange in connection with any regulatory inquiry, investigation or examination relating to the Exchange's disciplinary jurisdiction or regulatory obligations.

For the purposes of this Advice, information received within ten (10) business days from the date of the original request shall be deemed to meet the requirement of prompt compliance, except, for purposes of Exchange requests, information received within two business days from the date of the original request shall be deemed to meet the requirement of prompt compliance.

The Exchange may under extenuating circumstances grant extensions to allow for responses beyond the allotted requirement. Requests for extensions must be submitted in writing to the appropriate department, prior to the due date of the outstanding request. Each additional request for information not furnished within the allotted time periods may be considered a separate occurrence for purposes of the fine schedule below.

FINE SCHEDULE (Implemented on a three-year running calendar basis)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

Section 4. Affiliations

(i) Affiliations must be filed in writing with the Exchange's Membership Department as provided by General 3, Section 11.

FINE SCHEDULE (Implemented on a three-year running calendar basis)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

Section 5. Unusual Market Conditions

In the interest of maintaining a fair and orderly market under unusual market conditions for one or more classes of options, an Options Exchange Official may determine that the level of trading activities or the existence of unusual market conditions is such that the Exchange is incapable of collecting, processing, and making available to quotation vendors the data for a subject security required to be made available pursuant to the SEC Quote rule in a manner that accurately reflects the current market on the Exchange. The Exchange shall immediately notify all specified persons of such a determination. Regular trading procedures shall be resumed when an Options Exchange Official determines that the conditions supporting that declaration no longer exist.

FINE SCHEDULE

Fine not applicable

Adopted Feb. 3, 2020 (20-03).

Section 6. Supervisory Procedures Relating to ITSFEA

(a) Member organizations must maintain written supervisory procedures as required by the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA). Such procedures must be reasonably designed to prevent the misuse of material, non-public information by employees.

(b) In addition to the requirements under ITSFEA, the Exchange herein institutes basic minimum standards for incorporation into ITSFEA-related written supervisory procedures for all member organizations. The requirements enumerated below must be included and, together with all related additional written supervisory procedures maintained in accordance with paragraph (a) above, must receive approval by the Exchange. These requirements are not intended to supersede, or be presumed to fulfill, the requirements of ITSFEA. These requirements are instead set forth as separate requirements of the Exchange.

In the instance where a member organization is subject to written supervisory procedures relating to ITSFEA, imposed by another self regulatory organization which is its designated examining authority ("DEA"), the Exchange requirements set forth in paragraph (b) of this Advice will not apply.

(1) Each new employee of the organization shall be furnished with a copy of the most current version of the Exchange's "Notice of Insider Trading" (Notice), or a document substantially similar to the Notice approved by the DEA for use in this connection. Within ten business days from the first date of employment with the Unit, each new employee must sign and return the Notice to the employer. By his signature on the Notice, the employee attests to having carefully read the Notice and agrees to appropriately supply the employer Firm with all trading accounts for which such person maintains a beneficial interest, including all personal and household accounts of the employee. Also, by his signature on the Notice, each new employee ensures that delivery of all related account statements will be made directly from the Firm(s) maintaining the account to the employer.

(2) Each Unit must complete the Exchange's "ITSFEA Accounts List," comprising all accounts submitted in connection with paragraph (1) above and all proprietary accounts of the Unit. Updates to the list must be made within one month of any change and each completed version of the list must be maintained for no less than three years by the Unit.

(3) Each month a supervisory person of the Unit is required to make a reasonable review of all activities from the account statements of those accounts reflected on the ITSFEA Accounts List with a view toward identifying the possible misuse of material non-public information. A report must be made promptly to the Exchange's Regulatory staff in the event that any such unusual profits are so identified.

Failure to properly maintain the ITSFEA Accounts List, or to conduct related reviews required by this Advice, may result in the issuance of fines in accordance with the schedule below.

FINE SCHEDULE (Implemented on a three-year running calendar basis)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

Section 7. Minor Infractions of Position/Exercise Limits and Hedge Exemptions

(a) Minor violations of the Exchange's position and exercise limits (Options 9, Section 13 - Position Limits, Options 9, Section 15 - Exercise Limits, Option 4A, Section 6 - Position Limits, and Options 4A, Section 10 - Exercise Limits) which do not exceed such limits by more than 5% may result in the issuance of a fine in accordance with section (a) of the fine schedule below.

In addition, when a position limit exemption for a specific period has lapsed without the position either being brought into compliance or a new exemption granted, a fine in accordance with section (a) of the fine schedule below may be issued.

Other violations of the position and exercise limit are subject to review by the Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement in accordance with those procedures set forth under the Rule 8000 and 9000 Series.

(b) Automatic hedge exemptions are available for stock option positions. Specifically, each option of a stock option position hedged by 100 shares of stock or securities convertible into such stock, is exempted from having to be included in the aggregation count for the purposes of the position and exercise limits. The exemption is limited, however, to an amount of option contracts no greater than twice the standard limit of the respective option. Permissible hedges are provided below:

long stock, short call

long stock, long put

short stock, long call

short stock, short put

(1) When utilizing a hedge exemption, a report of the position must be received by the Exchange's Regulatory staff in a manner prescribed by the Exchange no later than the close of business following the day the exemption is availed upon. Failure to provide the Exchange with a hedge exemption form as required may result in the issuance of a fine in accordance with section (b)(i) of the fine schedule below.

(2) Hedge exemptions apply for only as long as the hedge is maintained. In any instance where the stock side to a hedge exemption is decreased, the appropriate number of options must be liquidated prior to or simultaneous with the corresponding decrease in any stock position utilized to provide an automatic option hedge exemption. Failure to appropriately reduce the respective option position following such a decrease in the stock position such that the position limit does not exceed the limit by more than 5% may result in the issuance of a fine in accordance with section (b)(ii) of the fine schedule below. Instances where the resulting position exceeds established limits by more than 5% are subject to review by the Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement in accordance with those procedures set forth under the Rule 8000 and 9000 Series.

FINE SCHEDULE (Implemented on a two-year running calendar basis)

(a)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4Th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

(b)

(i)

1st Occurrence

$250.00

2nd Occurrence

$500.00

3rd Occurrence

$1,000.00

4th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

(ii)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

Section 8. Clearing Agents' Responsibility for Carrying Positions in Market Maker Accounts

A member organization of this Exchange which is also a clearing member of OCC carrying accounts for Lead Market Makers and Market Makers/market makers is required to take reasonable steps to ensure that only those positions in Exchange listed options which are eligible for exempt credit treatment are carried in the market functions account. Any transaction on another Exchange in an option that is also listed on the Exchange is covered by this Advice. Reasonable steps include the adoption and implementation of procedures designed to detect any pattern of activity in contravention of this Advice.

FINE SCHEDULE (Implemented on a three-year running calendar basis)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

FINE SCHEDULE

Fine not applicable

Adopted Feb. 3, 2020 (20-03).

Section 9. Options Exchange Official Rulings

Options Exchange Officials are empowered to render rulings on the trading floor to resolve trading disputes occurring on and respecting activities on the trading floor. All rulings rendered by Options Exchange Officials are effective immediately and must be complied with promptly. Failure to promptly comply with a ruling concerning a trading dispute may result in referral to the Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement. Failure to promptly comply with other rulings issued pursuant to Order and Decorum Regulations or Floor Procedure Advices and not concerning a trading dispute may result in an additional violation. Options Exchange Officials need not render decisions in any instance where the request for a ruling was not made within a reasonable period of time. An Options Exchange Official should not render a decision or authorize a citation where such Options Exchange Official was involved in or affected by the dispute, as well as in any situation where the Options Exchange Official is not able to objectively and fairly render a decision.

Options Exchange Officials shall endeavor to be prompt in rendering decisions. However, in any instance where an Options Exchange Official has determined that the benefits of further discovery as to the facts and circumstances of any matter under review outweigh the monetary risks of a delayed ruling, the Options Exchange Official may determine to delay rendering the ruling until such time as that further discovery is completed. In issuing decisions for the resolution of trading disputes, Options Exchange Officials shall institute the course of action deemed by the ruling Options Exchange Official to be more fair to all parties under the circumstances at the time. An Options Exchange Official may direct the execution of an order on the floor, or adjust the transaction terms or participants to an executed order on the floor. However, an Options Exchange Official may nullify a transaction if they determine the transaction to have been in violation of Options 2, Section 4 (Obligations of Market Makers) or Options 8, Section 24 (Bids And Offers-Premium).

Exchange staff may determine that an Options Exchange Official is ineligible to participate in a particular ruling where it appears that such Options Exchange Official has a conflict of interest. For purposes of this Rule, and without limitation, a conflict of interest exists where an Options Exchange Official: (a) is directly or indirectly affiliated with a party seeking an Options Exchange Official ruling; (b) is a participant or is directly or indirectly affiliated with a participant in a transaction that is the subject of an Options Exchange Official ruling; (c) is a debtor or creditor of a party seeking an Options Exchange Official ruling; or (d) is an immediate family member of a party seeking an Options Exchange Official ruling. Exchange staff may consider other circumstances, on a case-by-case basis, in determining the eligibility or ineligibility of a particular Options Exchange Official to participate in a particular ruling due to a conflict of interest.

All Options Exchange Official rulings concerning the adjustment and nullification of transactions are reviewable by the Exchange Review Council.

(1) Regulatory staff must be advised within 15 minutes of an Options Exchange Official's ruling that a party to such ruling has determined to appeal from such ruling to the Exchange Review Council. The Exchange may establish the procedures for the submission of a request for a review of an Options Exchange Official ruling. Options Exchange Official rulings concerning the nullification or adjustment of transactions may be sustained, overturned or modified by the Exchange Review Council. In making a determination, the Exchange Review Council may consider facts and circumstances not available to the ruling Options Exchange Official as well as action taken by the parties in reliance on the Options Exchange Official's ruling (e.g., cover, hedge and related trading activity).

(2) All decisions made by the Exchange Review Council in connection with initial rulings on requests for relief and with the review of an Options Exchange Official ruling pursuant to Options 8, Section 35(d) shall be documented in writing and maintained by the Exchange in accordance with the record keeping requirements set forth in the Exchange Act, as amended, and the rules thereunder.

(3) A member or member organization seeking the Exchange Review Council review of an Options Exchange Official ruling shall be assessed a fee of $250.00 for each Options Exchange Official ruling to be reviewed that is sustained and not overturned or modified by the Exchange Review Council.

(4) Decisions of the Exchange Review Council concerning the review of Options Exchange Official rulings relating to the nullification or adjustment of transactions shall be final and may not be appealed to the Exchange's Board of Directors.

(5) Failure to promptly comply with an Options Exchange Official or Exchange Review Council decision under this Rule may result in referral to the Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement.

FINE SCHEDULE

Section 10. Failure to Provide Notification of Changes in Business Operations

Any member organization for which the Exchange is the Designated Examining Authority ("DEA") shall provide prior written notification to the Exchange or its designee of any change in the business operations of such member organization which would cause the member organization to be subject to additional or modified net capital requirements, examination schedules or other registration, examination or regulatory requirements.

For the purposes of this Advice, the appropriate time frame for notification is at least 10 business days prior to the change in business operations.

FINE SCHEDULE (Implemented on a three year running calendar basis)

1st Occurrence

$250.00

2nd Occurrence

$500.00

3rd Occurrence

$1,000.00

4th and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

Section 11. Failure to Timely Submit Amendments to Form U4, Form U5 and Form BD

Any member organization that is required to file Form U4, Form U5 or Form BD pursuant to Exchange Rules or the Exchange Act and the rules promulgated thereunder, is required to amend the applicable Form U4, Form U5 or Form BD to keep such forms current at all times. Member organizations and participant organizations shall amend Form U4, Form U5 or Form BD not later than thirty (30) days after the filer knew or should have known of the facts which gave rise to the need for the amendment.

FINE SCHEDULE (Implemented on a running 12 month period)

1st Occurrence

$500.00

2nd Occurrence

$1,000.00

3rd Occurrence

$2,000.00

4th and Thereafter

Sanction is discretionary with Phlx Regulation Department or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

Section 12. Violations of Exercise and Exercise Advice Rules for Noncash-Settled Equity Option Contracts

Any member who fails to submit to the Exchange in a timely manner pursuant to Options 6B, Section 1, or an exercise instruction relating to the exercise or nonexercise of a noncash-settled equity option shall be subject to the following fines:

FINE SCHEDULE (Implemented on a running 24 month period)

Individual

Member Organization

1st Occurrence

$500.00

$1,000.00

2nd Occurrence

$1,000.00

$2,500.00

Subsequent Occurrence And Thereafter

$2,500.00

$5,000.00

Adopted Feb. 3, 2020 (20-03).

Section 13. Index Option Exercise Advices

In accordance with the provisions of Options 4A, Section 15, all Lead Market Makers, Market Makers, customers and Firms must complete an exercise advice when exercising any American style index option contract(s) and exercise the amount of option contracts indicated on the exercise advice.

Lead Market Makers, Market Makers, customers and Firms must time stamp and submit the completed exercise advice to Exchange staff at the Surveillance Post or in the trading crowd no later than five minutes after the close of trading on the day of the exercise with respect to any American style index option traded on the Exchange. Exercise advices for index options are not required on (a) the business day prior to expiration in series expiring on a day other than a business day or (b) the expiration day in series expiring on a business day.

Those Firms utilizing the electronic systems of The Options Clearing Corporation to meet the time requirements of this Advice must transmit to The Options Clearing Corporation index exercise instructions according to the time frames described above.

The fine schedule below provides sanctions for infractions of the index option exercise advice procedures which are minor in nature. Any violation of the procedure which has been deemed serious by the Exchange will be referred directly to the Exchange's Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement where stronger sanctions may result.

FINE SCHEDULE (Implemented on a two-year running calendar basis)

1st Occurrence

$250.00

2nd Occurrence

$500.00

3rd Occurrence

$1,000.00

4th Occurrence and Thereafter

Sanction is discretionary with Phlx Regulation Department, Department of Market Regulation, or Department of Enforcement

Adopted Feb. 3, 2020 (20-03).

 
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