80_FR_13691 80 FR 13641 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Customer Rebate Program, Multiply Listed Options, PIXL Pricing

80 FR 13641 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Customer Rebate Program, Multiply Listed Options, PIXL Pricing

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 50 (March 16, 2015)

Page Range13641-13646
FR Document2015-05857

Federal Register, Volume 80 Issue 50 (Monday, March 16, 2015) 
[Federal Register Volume 80, Number 50 (Monday, March 16, 2015)]
[Notices]
[Pages 13641-13646]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-05857]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74460; File No. SR-Phlx-2015-21]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Customer Rebate Program, Multiply Listed Options, PIXL Pricing

March 10, 2015.
    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 February 26, 2015, NASDAQ OMX PHLX LLC (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to modify the Phlx Pricing Schedule 
(``Pricing Schedule''). Specifically, the Exchange proposes to amend 
pricing in Section B, entitled ``Customer Rebate Program,'' Section II, 
entitled ``Multiply Listed Options Fees,'' \3\ and Section IV, Part A, 
entitled ``PIXL Pricing,'' \4\ of the Pricing Schedule. The Exchange 
proposes these amendments in order to: (i) Establish a cap on rebates 
specifically for electronic Simple PIXL and Complex \5\ PIXL Orders and 
not pay rebates when electronic \6\ Customer \7\ Complex PIXL Orders 
execute against electronic Complex PIXL Initiating Orders; (ii) 
increase the assessment of fees for electronic Firm \8\ Simple Orders 
underlying options in AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and 
XLF; \9\ (iii) increase the assessment of fees for electronic Complex 
Orders for Professionals,\10\ Firms and Broker-Dealers; \11\ (iv) 
increase the assessment of fees for adding liquidity in Penny Pilot 
Options \12\ for Specialists \13\ and Market Makers; \14\ (v) clarify 
that the fee for Specialists and Market Makers that have reached their 
Monthly Market Maker Cap \15\ in a non-complex electronic auction will 
include transactions which execute against an order for which the 
Exchange broadcast an order exposure alert; (vi) amend the Initiating 
Order Fee for Simple PIXL and Complex PIXL Initiating Orders; and (vii) 
amend the requirements to receive the PIXL Initiating Order Fee 
discount to require a member or member organization under Common 
Ownership \16\ to qualify for a Tier 4 or Tier 5 Customer Rebate in 
Section B of the Pricing Schedule.
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    \3\ This includes options overlying equities, exchange traded 
funds (``ETFs''), exchange traded notes (``ETNs'') and indexes which 
are Multiply Listed.
    \4\ PIXL\SM\ is the Exchange's price improvement mechanism known 
as Price Improvement XL or PIXL. See Rule 1080(n).
    \5\ A Complex Order is any order involving the simultaneous 
purchase and/or sale of two or more different options series in the 
same underlying security, priced at a net debit or credit based on 
the relative prices of the individual components, for the same 
account, for the purpose of executing a particular investment 
strategy. Furthermore, a Complex Order can also be a stock-option 
order, which is an order to buy or sell a stated number of units of 
an underlying stock or ETF coupled with the purchase or sale of 
options contract(s). See Exchange Rule 1080, Commentary .08(a)(i) 
[sic].
    \6\ A transaction resulting from an order that was 
electronically delivered utilizes Phlx XL. See Exchange Rules 1014 
and 1080. Electronically delivered orders do not include orders 
transacted on the Exchange floor. A transaction resulting from an 
order that is non-electronically-delivered is represented on the 
trading floor by a floor broker. See Exchange Rule 1063. All orders 
will be either electronically or non-electronically delivered.
    \7\ The term ``Customer'' defines a person or entity that is 
neither a broker-dealer nor a direct or indirect affiliate of a 
broker-dealer, and includes a ``Professional'' as defined in Rule 
1000(b)(14). See Securities Exchange Act Release Nos. 66755 (April 
6, 2012), 77 FR 22037 (April 12, 2012) (SR-Phlx-2012-42) (notice of 
filing and immediate effectiveness).
    \8\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at The Options Clearing Corporation.
    \9\ AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF are 
currently Penny Pilot options (together ``certain Penny Options''). 
The $ 0.27 per contract pricing proposed herein is symbol-specific 
and will continue to apply to these symbols whether or not they are 
deleted from or added to the Penny Pilot.
    \10\ The term ``Professional'' means any person or entity that 
(i) is not a broker or dealer in securities, and (ii) places more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Rule 
1000(b)(14).
    \11\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \12\ The Penny Pilot was established in January 2007 and was 
last extended in 2014. See Securities Exchange Act Release Nos. 
55153 (January 23, 2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-
2006-74) (notice of filing and approval order establishing Penny 
Pilot); and 73688 (November 25, 2014), 79 FR 71484 (December 2, 
2014) (SR-Phlx-2014-77) (notice of filing and immediate 
effectiveness extending the Penny Pilot through June 30, 2015). All 
Penny Pilot Options listed on the Exchange can be found at http://www.nasdaqtrader.com/Micro.aspx?id=phlx.
    \13\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \14\ A ``Market Maker'' includes Registered Options Traders 
(Rule 1014(b)(i) and (ii)), which includes Streaming Quote Traders 
(see Rule 1014(b)(ii)(A)) and Remote Streaming Quote Traders (see 
Rule 1014(b)(ii)(B)). Directed Participants are also market makers.
    \15\ Specialists and Market Makers are subject to a ``Monthly 
Market Maker Cap'' of $500,000 for: (i) Electronic and floor Option 
Transaction Charges; (ii) QCC Transaction Fees (as defined in 
Exchange Rule 1080(o) and Floor QCC Orders, as defined in 1064(e)); 
and (iii) fees related to an order or quote that is contra to a PIXL 
Order or specifically responding to a PIXL auction [sic]. The 
trading activity of separate Specialist and Market Maker member 
organizations is aggregated in calculating the Monthly Market Maker 
Cap if there is Common Ownership between the member organizations. 
All dividend, merger, short stock interest, reversal and conversion, 
jelly roll and box spread strategy executions (as defined in Section 
II) are excluded from the Monthly Market Maker Cap.
    \16\ The term ``Common Ownership'' shall mean members or member 
organizations under 75% common ownership or control.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.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 IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of this filing is to modify the Pricing Schedule to 
specifically amend fees in Section B, entitled ``Customer Rebate 
Program,'' Section II, entitled ``Multiply Listed Options Fees,'' and 
Section IV, Part A, entitled ``PIXL Pricing.'' The Exchange proposes

[[Page 13642]]

various amendments to the Pricing Schedule as described below.
Section B--Customer Rebate Program
    Currently, the Exchange has a Customer Rebate Program consisting of 
five tiers that pays Customer rebates on two categories, A and B,\17\ 
of transactions. A Phlx member qualifies for a certain rebate tier 
based on the percentage of total national customer volume in Multiply 
Listed equity and ETFs options classes, excluding SPY Options that it 
transacts monthly on Phlx. The Exchange calculates Customer volume in 
Multiply Listed Options (including SPY options) by totaling 
electronically-delivered and executed volume, excluding volume 
associated with electronic Qualified Contingent Cross Orders,\18\ as 
defined in Exchange Rule 1080(o).\19\ The Exchange proposes, as 
discussed below, to establish a cap for Simple PIXL Orders (Category A) 
and Complex PIXL Orders (Category B) rebates. Also, the Exchange is 
proposing to not offer rebates when Customer Complex PIXL Orders 
execute against Complex PIXL Initiating Orders for Category B rebates.
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    \17\ Category A and Category B rebates are described below.
    \18\ A QCC Order is comprised of an order to buy or sell at 
least 1000 contracts that is identified as being part of a qualified 
contingent trade, as that term is defined in Rule 1080(o)(3), 
coupled with a contra-side order to buy or sell an equal number of 
contracts. The QCC Order must be executed at a price at or between 
the National Best Bid and Offer and be rejected if a Customer order 
is resting on the Exchange book at the same price. A QCC Order shall 
only be submitted electronically from off the floor to the PHLX XL 
II System. See Rule 1080(o). See also Securities Exchange Act 
Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR-
Phlx-2011-47) (a rule change to establish a QCC Order to facilitate 
the execution of stock/option Qualified Contingent Trades (``QCTs'') 
that satisfy the requirements of the trade through exemption in 
connection with Rule 611(d) of the Regulation NMS).
    \19\ Members and member organizations under common ownership may 
aggregate their Customer volume for purposes of calculating the 
Customer Rebate Tiers and receiving rebates. Common ownership means 
members or member organizations under 75% common ownership or 
control.
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    Currently, a Category A Customer rebate is paid to members 
executing electronically-delivered Customer Simple Orders in Penny 
Pilot Options and Customer Simple Orders in Non-Penny Pilot Options in 
Section II symbols. Rebates are paid on Customer PIXL Orders in Section 
II symbols that execute against non-Initiating Order interest. In the 
instance where member organizations qualify for Tier 4 or higher in the 
Customer Rebate Program, Customer PIXL Orders that execute against a 
PIXL Initiating Order are paid a rebate of $0.14 per contract. Today 
there is no rebate cap. The Exchange proposes to establish a cap for 
Category A rebates as follows: rebates on Customer PIXL Orders will be 
capped at 4,000 contracts per order for Simple PIXL Orders. The 
Exchange believes that the Category A rebates will continue to 
encourage members to send Customer liquidity to Phlx despite the cap on 
PIXL Simple Order rebates at the proposed 4,000 contracts.
    Currently, a Category B rebate is paid to members executing 
electronically-delivered Customer Complex Orders in Penny Pilot Options 
and Non-Penny Pilot Options in Section II symbols. Rebates are paid on 
Customer PIXL Complex Orders in Section II symbols that execute against 
non-Initiating Order interest. In the instance where member 
organizations qualify for Tier 4 or higher in the Customer Rebate 
Program, Customer Complex PIXL Orders that execute against a Complex 
PIXL Initiating Order are paid a rebate of $0.17 per contract. The 
Category B rebate is not paid when an electronically-delivered Customer 
Complex Order, including Customer Complex PIXL Order, executes against 
another electronically-delivered Customer Complex Order. Today there is 
no rebate cap. The Exchange proposes to establish a cap for Category B 
Customer Complex Order rebates as follows: rebates on Customer PIXL 
Orders will be capped at 4,000 contracts per order leg for Complex PIXL 
Orders. The Exchange believes that the Category B rebates will continue 
to encourage members to send Customer liquidity to Phlx despite the cap 
on PIXL Complex Order rebates at the proposed 4,000 contracts per order 
leg.
    The Exchange also proposes to amend the rule change to specify that 
Category B Customer Complex PIXL Orders that execute against a Complex 
PIXL Initiating Order will not be paid a rebate. As noted above, the 
Category B rebate is not paid when an electronically-delivered Customer 
Complex Order, including Customer Complex PIXL Order, executes against 
another electronically-delivered Customer Complex Order, which includes 
a Complex PIXL Initiating Order.
Section II--Multiply Listed Options
    The Exchange proposes to amend the discounted amount that is 
currently assessed to a Firm for electronic orders in certain Penny 
Options. Today, the Exchange assesses a Firm a $0.48 per contract 
Options Transaction Charge for electronic transactions in Penny Pilot 
Options and a $0.70 per contract Options Transaction Charge for Non-
Penny Pilot Options. The Exchange also offers a discount to Firms 
transacting electronic Simple Orders in certain Penny Options of $0.25 
per contract. The Exchange is proposing to increase the discount fee 
from $0.25 to $0.27 per contract,\20\ resulting in a higher effective 
fee. Despite the increase in the discount fee, the Exchange believes 
that Firms will continue to be incentivized to transact volume in these 
symbols.
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    \20\ The fee reduction today is only applicable to Penny Pilot 
Options as all of the symbols, AAPL, BAC, EEM, FB, FXI, IWM, QQQ, 
TWTR, VXX and XLF, are Penny Pilot symbols.
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    The Exchange proposes to increase the discount fee for electronic 
Complex Orders to Professionals, Broker-Dealers and Firms in Penny and 
Non-Penny Pilot Options regarding electronic Complex Orders. Today, 
Professionals, Broker-Dealers and Firms are offered the opportunity to 
reduce Options Transaction Charges in Penny Pilot Complex Orders from 
$0.48 to $0.30 per contract and to reduce Options Transaction Charges 
in Non-Penny Pilot Complex Orders from $0.70 to $0.30 per contract. The 
Exchange is proposing to increase the discount fee for Professionals, 
Firms and Broker-Dealers from $0.30 to $0.35 per contract when 
transacting electronic Complex Orders, resulting in a higher effective 
fee. Despite the increase in the discount fee, the Exchange believes 
that this discount will continue to incentivize Professionals, Firms 
and Broker-Dealers to transact electronic Complex Order volume. The 
Exchange believes that the proposed discount fee, although higher, will 
continue to incentivize Professionals, Broker-Dealers and Firms to send 
order flow to the Exchange.
    Currently, Specialists and Market Makers are subject to a ``Monthly 
Market Maker Cap'' of $500,000 for: (i) Electronic and floor Option 
Transaction Charges; and (ii) QCC Transaction Fees (as defined in 
Exchange Rule 1080(o) and Floor QCC Orders, as defined in 1064(e)). The 
trading activity of separate Specialist and Market Maker member 
organizations are aggregated in calculating the Monthly Market Maker 
Cap if there is Common Ownership between the member organizations. All 
dividend, merger, short stock interest, reversal and conversion, jelly 
roll and box spread strategy executions \21\ are excluded from the 
Monthly Market Maker Cap. Specialists or Market Makers that (i) are on 
the contra-side of an electronically-delivered and executed Customer 
order, excluding responses to a PIXL auction; and (ii) have reached the 
Monthly Market Maker

[[Page 13643]]

Cap are currently assessed fees per contract as follows: $0.00 per 
contract Fee for Adding Liquidity in Penny Pilot Options; $0.17 per 
contract Fee for Removing Liquidity in Penny Pilot Options; $0.17 per 
contract in Non-Penny Pilot Options; and $0.17 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and, 
for purposes of this fee, the opening process. A Complex electronic 
auction includes, but is not limited to, the Complex Order Live Auction 
(``COLA'').
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    \21\ See descriptions of these strategies in Section II of the 
Pricing Schedule.
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    The Exchange proposes to increase the Fee for Adding Liquidity in 
Penny Pilot Options, when a Specialist or Market Maker is on the 
contra-side of an electronically-delivered and executed Customer order, 
excluding responses to a PIXL auction, and has reached the Monthly 
Market Maker Cap, from $0.00 to $0.05 per contract. The Exchange also 
proposes to make it clear that transactions which execute against an 
order for which the Exchange broadcast an order exposure alert will be 
subject to the existing fee of $0.17 per contract in a non-Complex 
electronic auction.\22\ This rule change should add greater clarity to 
the Pricing Schedule.\23\
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    \22\ The $0.17 per contract fee that exists today is not 
changed, and the proposal in respect of the fee is only for 
electronic auction.
    \23\ The Exchange broadcasts orders on the Phlx Book by issuing 
order exposure alerts to all Phlx XL II participants and market 
participants that subscribe to certain data feeds. See Securities 
Exchange Act Release Nos. 68517 (December 21, 2012), 77 FR 77134 
(December 31, 2012) (SR-Phlx-2012-136) (notice of filing and 
immediate effectiveness relating to distribution of auction 
messages); and 68593 [sic] (January 31, 2013), 78 FR 8633 (February 
6, 2013) (SR-Phlx-2013-06) (notice of filing and immediate 
effectiveness to clarify when an order is adding or removing 
liquidity and discussing order alerts). The Exchange notes that 
there is currently an exposure alert provision in the Pricing 
Schedule, albeit for fees and rebates regarding SPY (Section I).
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Section IV, Part A--PIXL Pricing
    Currently, PIXL pricing for Initiating Orders is located in 
subsection IV, Part A (Other Transaction Fees) of the Pricing Schedule. 
Today, the Initiating Order Fee is $0.07 per contract or $0.05 per 
contract if Customer Rebate Program Threshold Volume defined in Section 
B is greater than 100,000 contracts per day in a month. The Exchange 
proposes, as discussed below, to continue to assess the $0.07 
Initiating Order Fee. The Exchange proposes, where the member or member 
organization qualifies for the Tier 4 or 5 Customer Rebate in Section 
B, to asses [sic] a $0.05 Simple PIXL Order Fee; and to indicate that 
where the member or member organization qualifies for the Tier 4 or 5 
Customer Rebate in Section B it will assess a $0.03 Complex PIXL Order 
Fee. The Exchange also proposes to amend the qualifier for the 
discounted fees.
    With respect to the qualifier, today, for an Initiating Order there 
is a fee of $0.07 per contract or $0.05 per contract if the Customer 
Rebate Program Threshold Volume defined in Section B is greater than 
100,000 contracts per day in a month.\24\ The Initiating Order Fee for 
non-Customers, including Professionals, Firms, Broker-Dealers, 
Specialists and Market Makers, that have orders contra to a Customer 
PIXL Order is reduced to $0.00 if the Customer PIXL Order is greater 
than 399 contracts. The Exchange proposes to continue to assess an 
Initiating Order Fee of $0.07 per contract, but proposes, where the 
member or member organization qualifies for the Tier 4 or 5 Customer 
Rebate in Section B, to instead assess an Initiating Order Fee of $0.05 
per contract for Simple PIXL Orders and a new lower Initiating Order 
Fee of $0.03 per contract for Complex PIXL Orders. The Exchange also 
proposes to amend the qualifier to receive the $0.07 [sic] per contract 
Initiating Order Fee to require a member to qualify for the Tier 4 or 5 
Customer Rebate in Section B of the Pricing Schedule, instead of 
today's requirement that a member's Customer Rebate Program Threshold 
Volume, as defined in Section B of the Pricing Schedule, must be 
greater than 100,000 contracts per day in a month.\25\ Tier 4 and 5 of 
the Customer Rebate Schedule in Section B provides the highest relative 
rebates in the five tier Customer Rebate Program, in particular where 
the percentage thresholds of national customer volume in multiply-
listed equity and ETF Options classes, excluding SPY Options (monthly), 
are also the highest. In making these proposals, the Exchange continues 
to incentivize members to execute Customer liquidity on the Exchange.
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    \24\ Any member or member organization under Common Ownership 
with another member or member organization that qualifies for a 
Customer Rebate Tier discount in Section B receives the PIXL 
Initiating Order discount of $0.05 per contract.
    \25\ Moreover, any member or member organization under Common 
Ownership with another member or member organization that qualifies 
for a Customer Rebate Tier 4 or 5 rebate in Section B will receive 
the PIXL Initiating Order discount as described in Section IV of the 
Pricing Schedule.
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2. Statutory Basis
    The Exchange believes that its proposal to amend the Pricing 
Schedule is consistent with Section 6(b) of the Act \26\ in general, 
and furthers the objectives of Section 6(b)(4) and (b)(5) of the Act 
\27\ in particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system which Phlx operates or 
controls, and is not designed to permit unfair discrimination between 
market participants to whom the Exchange's fees and rebates are 
applicable.
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    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(4), (5).
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Section B--Customer Rebates
    The Exchange believes that capping rebates on electronic Customer 
PIXL Simple Orders at 4,000 contracts per order for Category A or 4,000 
contracts per order leg for Customer Complex PIXL Orders for Category B 
is reasonable because it will, with the cap, allow the Exchange to 
continue to attract Customer liquidity to the Exchange. Customer orders 
bring valuable liquidity to the market which liquidity benefits other 
market participants. Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
Specialists and Market Makers. An increase in the activity of these 
market participants in turn facilitates tighter spreads, which may 
cause an additional corresponding increase in order flow from other 
market participants. Additionally, the Chicago Board Options Exchange 
Incorporated (``CBOE'') similarly caps AIM transactions at 1,000 
contracts.\28\
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    \28\ See CBOE's Fees Schedule. Credits on Customer orders 
executed electronically in AIM are capped at 1,000 contracts per 
order for simple executions and 1,000 contracts per leg for complex 
executions.
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    The Exchange believes that capping rebates on electronic Customer 
PIXL Simple Orders at 4,000 contracts per order for Category A or 4,000 
contracts per order leg for Complex PIXL Orders for Category B is 
equitable and not unfairly discriminatory because these amendments to 
Category A and Category B apply uniformly to all market participants to 
whom Category A and Category B apply.
    The Exchange believes also that it is reasonable to no longer offer 
a $0.17 per contract rebate for Customer Complex PIXL Orders that 
execute against a Complex PIXL Initiating Order because the Exchange 
believes this rebate incentive is no longer necessary for this 
particular service to increase order flow to the Exchange.
    The Exchange's proposal to no longer offer a $0.17 per contract 
rebate for Customer Complex PIXL Orders that execute against a Complex 
PIXL Initiating is equitable and not unfairly discriminatory because 
the Exchange

[[Page 13644]]

will not pay such a rebate to any market participant.
Section II--Multiply Listed Options
    The Exchange believes that increasing the assessment for Firms 
executing electronic Simple Orders in certain Penny Options from $0.25 
to $0.27 per contract is reasonable because the Exchange would continue 
to offer a discount to Firms which will continue to attract liquidity. 
This benefits all market participants by providing more trading 
opportunities, which attracts Specialists and Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. In 
addition, this fee is consistent with fees associated with Miami 
International Securities Exchange LLC (``MIAX'').\29\ Despite the 
increase from $0.25 to $0.27 per contract, the Exchange believes that 
Firms will continue to be incentivized to send volume to the Exchange.
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    \29\ See MIAX's Fee Schedule. MIAX assesses firms a $0.27 per 
contract fee for transactions in Penny classes. This fee is assessed 
to an EEM that enters an order that is executed for an account 
identified by the EEM for clearing in the OCC ``Firm'' range.
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    The Exchange believes that increasing the assessment for Firms 
executing electronic Simple Orders, and thereby offering a smaller 
discount, in certain Penny Options \30\ from $0.25 to $0.27 per 
contract is equitable and not unfairly discriminatory because it 
applies uniformly to all Firms. Further, the proposed amendment will 
continue to allow the Exchange to incentivize Firms to send electronic 
Simple Orders in these symbols to the Exchange and because pricing by 
symbol is a common practice on many U.S. options exchanges \31\ as a 
means to incentive order flow to be sent to an exchange for execution. 
The Exchange believes it is reasonable to continue to use a pricing 
reduction to provide additional opportunities for members to increase 
their participation in the market. The Exchange's fees will be 
competitive with fees at other options markets. Although the Exchange 
will still be assessing Firms more than Customers (which do not pay the 
Option Transaction Charge in Penny Pilot or in non-Penny Pilot 
options), Customer order flow enhances liquidity on the Exchange for 
the benefit of all market participants and benefits all market 
participants by providing more trading opportunities, which attracts 
Specialists and Market Makers. An increase in the activity of these 
market participants in turn facilitates tighter spreads, which may 
cause an additional corresponding increase in order flow from other 
market participants. Although Firms will still be charged more for 
Penny Pilot Options than Specialists and Market Makers who are charged 
$0.22, Specialists and Market Makers have obligations to the market and 
regulatory requirements, which normally do not apply to other market 
participants.\32\ They have obligations to make continuous markets, 
engage in a course of dealings reasonably calculated to contribute to 
the maintenance of a fair and orderly market, and not make bids or 
offers or enter into transactions that are inconsistent with a course 
of dealings. Finally, as proposed, Firms will be charged only $0.27 in 
these particular Penny Pilot Option symbols, which is less than the 
Professional and Broker-Dealer charge of $0.48 (for Penny Pilot 
Options). Moreover, the proposed differential does not misalign 
pricing, in that Firms already benefit from certain pricing advantages 
that Broker-Dealers do not also enjoy (for example, the Firm Monthly 
Fee Cap).\33\ The proposed fee reduction that will apply to Firms but 
not to Broker-Dealers is equitable and not unfairly discriminatory for 
the same reasons that the Firm Monthly Fee Cap which applies to Firms 
and not to Broker-Dealers is equitable and not unfairly discriminatory. 
The fee reduction proposed herein, like the Monthly Firm Fee Cap, 
provides an incentive for Firms to transact order flow on the Exchange, 
which order flow brings increased liquidity to the Exchange for the 
benefit of all Exchange participants. To the extent the purpose of the 
proposed Firm fee reduction is achieved, all the Exchange's market 
participants, including Broker-Dealers, should benefit from the 
improved market liquidity. Further, competitive forces are influencing 
the price reduction in these symbols for Firm orders.
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    \30\ All of the symbols, AAPL, BAC, EEM, FB, FXI, IWM, QQQ, 
TWTR, VXX and XLF, are currently Penny Pilot Options. This fee 
discount is only available on these symbols and therefore not 
available for Non-Penny Pilot Options.
    \31\ See, e.g., the International Securities Exchange LLC 
(``ISE'') Schedule of Fees.
    \32\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
    \33\ Firms are subject to a maximum fee of $75,000 (``Monthly 
Firm Fee Cap''). Firm Floor Option Transaction Charges and QCC 
Transaction Fees, in the aggregate, for one billing month may not 
exceed the Monthly Firm Fee Cap per member organization when such 
members are trading in their own proprietary account. All dividend, 
merger, and short stock interest strategy executions (as defined in 
Section II of the Pricing Schedule) are excluded from the Monthly 
Firm Fee Cap. Reversal and conversion, jelly roll and box spread 
strategy executions (as defined in Section II) are included in the 
Monthly Firm Fee Cap. QCC Transaction Fees are included in the 
calculation of the Monthly Firm Fee Cap. See Section II of the 
Pricing Schedule.
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    The Exchange believes it is reasonable to increase the assessment 
applicable to Professionals, Broker-Dealers and Firms that transact 
Electronic Complex Orders from $0.30 to $0.35 per contract, thereby 
reducing the discount, because this discount will continue to attract 
liquidity and benefit all market participants by providing more trading 
opportunities, which attracts Specialists and Market Makers. The 
Exchange's fees will continue to remain competitive with fees at other 
options markets.\34\ Today, a Professional, Firm and Broker-Dealer are 
assessed the highest electronic Options Transaction Charges in Penny 
Pilot Options of $0.48 per contract, as compared to other market 
participants. Despite the fee increase, the proposal will allow the 
Exchange to incentivize these market participants by offering the 
opportunity to lower Options Transaction Charges as described herein.
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    \34\ See the NASDAQ Options Market LLC's (``NOM'') pricing at 
Chapter XV of NOM's Rulebook.
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    The Exchange believes it is equitable and not unfairly 
discriminatory to increase the assessment applicable to Professionals, 
Broker-Dealers and Firms that transact Electronic Complex Orders from 
$0.30 to $0.35 per contract because the Exchange will assess 
Professionals, Broker-Dealers and Firms the same electronic Options 
Transaction Charges in Penny Pilot Options. The Exchange does not 
assess Customers an electronic Options Transaction Charge in Penny 
Pilot Options because Customer order flow enhances liquidity on the 
Exchange for the benefit of all market participants. Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attracts Specialists and Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
Specialists and Market Makers are assessed lower electronic Options 
Transaction Charges in Penny Pilot Options as compared to 
Professionals, Broker-Dealers and Firms because they have obligations 
to the market and regulatory requirements, which normally do not apply 
to other market participants.\35\ They have obligations to make 
continuous markets, engage in a course of dealings reasonably 
calculated to contribute to

[[Page 13645]]

the maintenance of a fair and orderly market, and not make bids or 
offers or enter into transactions that are inconsistent with a course 
of dealings. The proposed differentiation as between Customers, 
Specialists and Market Makers and other market participants recognizes 
the differing contributions made to the liquidity and trading 
environment on the Exchange by these market participants.
---------------------------------------------------------------------------

    \35\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
---------------------------------------------------------------------------

    The Exchange believes that increasing the assessment from $0.00 to 
$0.05 per contract rebate for Adding Liquidity in Penny Pilot Options 
is reasonable when Specialists or Market Makers are on the contra-side 
of an electronically-delivered and executed Customer order, excluding 
responses to a PIXL auction; and have reached the Monthly Market Maker 
Cap. This is because Specialists and Market Makers will continue to pay 
a lower fee as compared to other market participants and should be 
incentivized to continue to add liquidity.
    The Exchange believes that increasing the assessment from $0.00 to 
$0.05 per contract rebate for Adding Liquidity in Penny Pilot Options 
is equitable and not unfairly discriminatory when Specialists or Market 
Makers are on the contra-side of an electronically-delivered and 
executed Customer order, excluding responses to a PIXL auction; and 
have reached the Monthly Market Maker Cap. This is because Specialists 
and Market Makers are assessed lower electronic order fees as compared 
to Professionals, Broker-Dealers and Firms because they have 
obligations to the market and regulatory requirements, which normally 
do not apply to other market participants.\36\
---------------------------------------------------------------------------

    \36\ Id.
---------------------------------------------------------------------------

    The Exchange believes that clarifying that transactions which 
execute against an order for which the Exchange broadcast an order 
exposure alert in an electronic auction is also subject to the $0.17 
per contract fee is reasonable, equitable and not unfairly 
discriminatory because the Exchange is not proposing to amend the 
manner in which the fee is applied, but rather provide additional 
clarity to market participants that responses to an order exposure 
alert shall be treated by the Exchange in a similar manner as other 
auctions for purposes of applying this fee.
Section IV, Part A--PIXL Pricing
    Today, the Exchange assesses an Initiating Order Fee of $0.07 per 
contract or $0.05 per contract for Simple PIXL Orders. The Exchange 
believes that its proposal to adopt an alternative of $0.03 per 
contract for Complex PIXL Orders (with the qualifier that a Customer 
must qualify for the Tier 4 or 5 Customer Rebate in Section B of the 
Pricing Schedule) is reasonable. This is because the Exchange believes 
this additional incentive will further incentivize members to send 
price improving seeking orders to PIXL as well as bring additional 
liquidity to the Exchange in an effort to earn the Initiating Order 
discount. Amending the qualifier from 100,000 contracts to qualifying 
for a Tier 4 and Tier 5 Customer rebate is reasonable because this 
simply establishes a different metric that requires members that desire 
to earn the discounted PIXL pricing to send additional Customer order 
flow to the Exchange with the new qualifier. The Exchange notes that in 
order to remain competitive, the Exchange must implement fees and 
rebates that are competitive with pricing at other options exchanges 
that offer a similar auction opportunity. The PIXL electronic auction 
represents an increasingly important and crucial segment of options 
trading. The goal is creating and increasing incentives to attract 
orders to the Exchange that will, in turn, benefit all market 
participants through increased liquidity at the Exchange. The proposal 
is designed to continue to incentivize market participants to send 
liquidity to the Exchange. The Exchange believes that in addition to 
currently assessing an Initiating Order of $0.07 per contractor [sic] 
today, its proposal to adopt an alternative fee of $0.03 per contract 
for Complex PIXL Orders (with the qualifier that a Customer must 
qualify for the Tier 4 or 5 Customer Rebate in Section B of the Pricing 
Schedule), and a $0.05 per contract for Simple PIXL Orders (with the 
qualifier that a Customer must qualify for the Tier 4 or 5 Customer 
Rebate in Section B of the Pricing Schedule), is equitable and not 
unfairly discriminatory. The volume discount will be applied uniformly 
to all according to liquidity brought to the Exchange by non-Customers. 
The Exchange would offer all market participants, other than Customers 
who are not assessed an Initiating Order Fee, an incentive to transact 
large sized orders in PIXL. The Exchange believes that the proposal 
will continue to attract liquidity, which benefits market participants 
and provides the opportunity for increased order interaction on the 
Exchange.
    The Exchange desires to incentivize members and member 
organizations, through the Exchange's rebate and fee structure, to 
select Phlx as a venue for bringing liquidity and trading by offering 
competitive pricing. Such competitive, differentiated pricing exists 
today on other options exchanges. The Exchange's goal is creating and 
increasing incentives to attract orders to the Exchange that will, in 
turn, benefit all market participants through increased liquidity at 
the Exchange.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Customer Rebate Program 
amendments in Section B of the Pricing Schedule do not create an undue 
burden on competition because the caps applicable to PIXL Orders will 
apply uniformly to all market participants. The Exchange's proposal to 
increase the assessment for Firms executing electronic Simple Orders in 
certain Penny Options from $0.25 to $0.27 per contract does not place 
an undue burden on competition, rather this reduction will continue to 
attract liquidity which benefits all market participants by providing 
more trading opportunities, which attracts Specialists and Market 
Makers. In addition, this fee is consistent with fees assessed by 
MIAX.\37\
---------------------------------------------------------------------------

    \37\ See MIAX's Fee Schedule. MIAX assesses firms a $0.27 per 
contract fee for transactions in Penny classes. This fee is assessed 
to an EEM that enters an order that is executed for an account 
identified by the EEM for clearing in the OCC ``Firm'' range.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to increase the assessment 
applicable to Professionals, Broker-Dealers and Firms that transact 
Electronic Complex Orders from $0.30 to $0.35 per contract, thereby 
reducing the discount, because this discount will continue to attract 
liquidity and benefit all market participants by providing more trading 
opportunities, which attracts Specialists and Market Makers. The 
Exchange's fees will continue to remain competitive with fees at other 
options markets.\38\ Today, a Professional, Firm and Broker-Dealer are 
assessed the highest electronic Options Transaction Charges in Penny 
Pilot Options of $0.48 per contract, as compared to other market 
participants. Despite the fee increase, the proposal will allow the 
Exchange to incentivize market participants by offering the opportunity 
to lower Options Transaction Charges as described herein.
---------------------------------------------------------------------------

    \38\ See the NOM pricing at Chapter XV of NOM's Rulebook.
---------------------------------------------------------------------------

    The Exchange believes its proposal to increase the assessment 
applicable to Professionals, Broker-Dealers and Firms that transact 
Electronic Complex Orders

[[Page 13646]]

from $0.30 to $0.35 per contract does not create an undue burden on 
competition because the Exchange will continue to offer a discount to 
these market participants that pay the highest Penny Pilot Options 
transaction fees. The Exchange does not assess Customers an electronic 
Options Transaction Charge in Penny Pilot Options because Customer 
order flow enhances liquidity on the Exchange for the benefit of all 
market participants. Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
Specialists and Market Makers. An increase in the activity of these 
market participants in turn facilitates tighter spreads, which may 
cause an additional corresponding increase in order flow from other 
market participants. Specialists and Market Makers are assessed lower 
electronic Options Transaction Charges in Penny Pilot Options as 
compared to Professionals, Broker-Dealers and Firms because they have 
obligations to the market and regulatory requirements, which normally 
do not apply to other market participants.\39\
---------------------------------------------------------------------------

    \39\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
---------------------------------------------------------------------------

    The Exchange's proposal to increase the fee assessment from $0.00 
to $0.05 per contract rebate for Adding Liquidity in Penny Pilot 
Options when Specialists or Market Makers are on the contra-side of an 
electronically-delivered and executed Customer order, excluding 
responses to a PIXL auction, and have reached the Monthly Market Maker 
Cap, is reasonable. This is because Specialists and Market Makers do 
not create an undue burden on competition because market makers have 
obligations to the market and regulatory requirements, which normally 
do not apply to other market participants.\40\
---------------------------------------------------------------------------

    \40\ Id.
---------------------------------------------------------------------------

    The Exchange's proposal to clarify that transactions which execute 
against an order for which the Exchange broadcast an order exposure 
alert in an electronic auction does not create an undue burden on 
competition. This amendment will bring additional clarity to the fees.
    The Exchange believes that the proposed new volume discount for 
PIXL Fees creates additional opportunity for incentivizing 
Professionals, Firms, Broker-Dealers, Specialists and Market Makers to 
bring additional liquidity to the market. The Exchange believes that 
effectively assessing lower fees or paying rebates when a market 
participant brings a certain amount of Customer orders creates 
competition among market participants to remove liquidity from the Phlx 
Book. This competition does not create an undue burden on competition 
but rather offers all market participants the opportunity to receive 
the benefit of the pricing when transacting options. Also, providing an 
ability to earn greater discounts incentivizes order flow into the 
auction.
    The Exchange operates in a highly competitive market, comprised of 
twelve exchanges, in which market participants can easily and readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or rebates to be inadequate. 
Accordingly, the fees that are assessed and the rebates paid by the 
Exchange, as described in the proposal, are influenced by these robust 
market forces and therefore must remain competitive with fees charged 
and rebates paid by other venues and therefore must continue to be 
reasonable and equitably allocated to those members that opt to direct 
orders to the Exchange rather than competing venues.
    The proposed fees are designed to ensure a fair and reasonable use 
of Exchange resources by allowing the Exchange to recoup costs while 
continuing to attract liquidity and offer connectivity at competitive 
rates to Exchange members and member organizations.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\41\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 protected]. Please include 
File Number SR-Phlx-2015-21 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2015-21. 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 
a.m. and 3 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-Phlx-2015-21, and should be 
submitted on or before April 6, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-05857 Filed 3-13-15; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 13641 improve the function or lessen the costs Orders and not pay rebates when Maker Cap 15 in a non-complex and burdens of the SAR? electronic 6 Customer 7 Complex PIXL electronic auction will include Orders execute against electronic transactions which execute against an Ted Wackler, Complex PIXL Initiating Orders; (ii) order for which the Exchange broadcast Deputy Chief of Staff and Assistant Director. an order exposure alert; (vi) amend the increase the assessment of fees for [FR Doc. 2015–05906 Filed 3–13–15; 8:45 am] Initiating Order Fee for Simple PIXL electronic Firm 8 Simple Orders BILLING CODE 3710–F5–P underlying options in AAPL, BAC, and Complex PIXL Initiating Orders; EEM, FB, FXI, IWM, QQQ, TWTR, VXX and (vii) amend the requirements to and XLF; 9 (iii) increase the assessment receive the PIXL Initiating Order Fee SECURITIES AND EXCHANGE of fees for electronic Complex Orders for discount to require a member or COMMISSION Professionals,10 Firms and Broker- member organization under Common [Release No. 34–74460; File No. SR–Phlx– Dealers; 11 (iv) increase the assessment Ownership 16 to qualify for a Tier 4 or 2015–21] of fees for adding liquidity in Penny Tier 5 Customer Rebate in Section B of Pilot Options 12 for Specialists 13 and the Pricing Schedule. Self-Regulatory Organizations; Market Makers; 14 (v) clarify that the fee The text of the proposed rule change NASDAQ OMX PHLX LLC; Notice of for Specialists and Market Makers that is available on the Exchange’s Web site Filing and Immediate Effectiveness of have reached their Monthly Market at http:// Proposed Rule Change Relating to nasdaqomxphlx.cchwallstreet.com/, at Customer Rebate Program, Multiply the purchase or sale of options contract(s). See the principal office of the Exchange, and Listed Options, PIXL Pricing Exchange Rule 1080, Commentary .08(a)(i) [sic]. at the Commission’s Public Reference 6 A transaction resulting from an order that was Room. March 10, 2015. electronically delivered utilizes Phlx XL. See Pursuant to Section 19(b)(1) of the Exchange Rules 1014 and 1080. Electronically II. Self-Regulatory Organization’s Securities Exchange Act of 1934 (the delivered orders do not include orders transacted Statement of the Purpose of, and on the Exchange floor. A transaction resulting from ‘‘Act’’),1 and Rule 19b–4 thereunder,2 an order that is non-electronically-delivered is Statutory Basis for, the Proposed Rule notice is hereby given that on February represented on the trading floor by a floor broker. Change 26, 2015, NASDAQ OMX PHLX LLC See Exchange Rule 1063. All orders will be either In its filing with the Commission, the (‘‘Phlx’’ or ‘‘Exchange’’) filed with the electronically or non-electronically delivered. 7 The term ‘‘Customer’’ defines a person or entity Exchange included statements Securities and Exchange Commission that is neither a broker-dealer nor a direct or concerning the purpose of and basis for (‘‘SEC’’ or ‘‘Commission’’) the proposed indirect affiliate of a broker-dealer, and includes a the proposed rule change and discussed rule change as described in Items I, II, ‘‘Professional’’ as defined in Rule 1000(b)(14). See any comments it received on the and III below, which Items have been Securities Exchange Act Release Nos. 66755 (April 6, 2012), 77 FR 22037 (April 12, 2012) (SR–Phlx– proposed rule change. The text of these prepared by the Exchange. The 2012–42) (notice of filing and immediate statements may be examined at the Commission is publishing this notice to effectiveness). places specified in Item IV below. The solicit comments on the proposed rule 8 The term ‘‘Firm’’ applies to any transaction that Exchange has prepared summaries, set change from interested persons. is identified by a member or member organization forth in sections A, B, and C below, of for clearing in the Firm range at The Options I. Self-Regulatory Organization’s Clearing Corporation. the most significant aspects of such Statement of the Terms of the Substance 9 AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, statements. of the Proposed Rule Change VXX and XLF are currently Penny Pilot options (together ‘‘certain Penny Options’’). The $ 0.27 per A. Self-Regulatory Organization’s The Exchange proposes to modify the contract pricing proposed herein is symbol-specific Statement of the Purpose of, and Phlx Pricing Schedule (‘‘Pricing and will continue to apply to these symbols Statutory Basis for, the Proposed Rule whether or not they are deleted from or added to Schedule’’). Specifically, the Exchange the Penny Pilot. Change proposes to amend pricing in Section B, 10 The term ‘‘Professional’’ means any person or entitled ‘‘Customer Rebate Program,’’ 1. Purpose entity that (i) is not a broker or dealer in securities, Section II, entitled ‘‘Multiply Listed and (ii) places more than 390 orders in listed The purpose of this filing is to modify Options Fees,’’ 3 and Section IV, Part A, options per day on average during a calendar month for its own beneficial account(s). See Rule the Pricing Schedule to specifically entitled ‘‘PIXL Pricing,’’ 4 of the Pricing 1000(b)(14). amend fees in Section B, entitled Schedule. The Exchange proposes these 11 The term ‘‘Broker-Dealer’’ applies to any ‘‘Customer Rebate Program,’’ Section II, amendments in order to: (i) Establish a transaction which is not subject to any of the other entitled ‘‘Multiply Listed Options Fees,’’ cap on rebates specifically for electronic transaction fees applicable within a particular and Section IV, Part A, entitled ‘‘PIXL category. Simple PIXL and Complex 5 PIXL 12 The Penny Pilot was established in January Pricing.’’ The Exchange proposes 2007 and was last extended in 2014. See Securities 1 15 U.S.C. 78s(b)(1). Exchange Act Release Nos. 55153 (January 23, 15 Specialists and Market Makers are subject to a 2 17 CFR 240.19b–4. 2007), 72 FR 4553 (January 31, 2007) (SR–Phlx– ‘‘Monthly Market Maker Cap’’ of $500,000 for: (i) 3 This includes options overlying equities, 2006–74) (notice of filing and approval order Electronic and floor Option Transaction Charges; exchange traded funds (‘‘ETFs’’), exchange traded establishing Penny Pilot); and 73688 (November 25, (ii) QCC Transaction Fees (as defined in Exchange notes (‘‘ETNs’’) and indexes which are Multiply 2014), 79 FR 71484 (December 2, 2014) (SR–Phlx– Rule 1080(o) and Floor QCC Orders, as defined in Listed. 2014–77) (notice of filing and immediate 1064(e)); and (iii) fees related to an order or quote 4 PIXLSM is the Exchange’s price improvement effectiveness extending the Penny Pilot through that is contra to a PIXL Order or specifically mechanism known as Price Improvement XL or June 30, 2015). All Penny Pilot Options listed on responding to a PIXL auction [sic]. The trading PIXL. See Rule 1080(n). the Exchange can be found at http:// activity of separate Specialist and Market Maker 5 A Complex Order is any order involving the www.nasdaqtrader.com/Micro.aspx?id=phlx. member organizations is aggregated in calculating Rmajette on DSK2VPTVN1PROD with NOTICES 13 A Specialist is an Exchange member who is the Monthly Market Maker Cap if there is Common simultaneous purchase and/or sale of two or more different options series in the same underlying registered as an options specialist pursuant to Rule Ownership between the member organizations. All security, priced at a net debit or credit based on the 1020(a). dividend, merger, short stock interest, reversal and relative prices of the individual components, for the 14 A ‘‘Market Maker’’ includes Registered Options conversion, jelly roll and box spread strategy same account, for the purpose of executing a Traders (Rule 1014(b)(i) and (ii)), which includes executions (as defined in Section II) are excluded particular investment strategy. Furthermore, a Streaming Quote Traders (see Rule 1014(b)(ii)(A)) from the Monthly Market Maker Cap. Complex Order can also be a stock-option order, and Remote Streaming Quote Traders (see Rule 16 The term ‘‘Common Ownership’’ shall mean which is an order to buy or sell a stated number 1014(b)(ii)(B)). Directed Participants are also market members or member organizations under 75% of units of an underlying stock or ETF coupled with makers. common ownership or control. VerDate Sep<11>2014 14:09 Mar 13, 2015 Jkt 235001 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1

13642 Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices various amendments to the Pricing there is no rebate cap. The Exchange Penny Pilot Options. The Exchange also Schedule as described below. proposes to establish a cap for Category offers a discount to Firms transacting A rebates as follows: rebates on electronic Simple Orders in certain Section B—Customer Rebate Program Customer PIXL Orders will be capped at Penny Options of $0.25 per contract. Currently, the Exchange has a 4,000 contracts per order for Simple The Exchange is proposing to increase Customer Rebate Program consisting of PIXL Orders. The Exchange believes the discount fee from $0.25 to $0.27 per five tiers that pays Customer rebates on that the Category A rebates will contract,20 resulting in a higher effective two categories, A and B,17 of continue to encourage members to send fee. Despite the increase in the discount transactions. A Phlx member qualifies Customer liquidity to Phlx despite the fee, the Exchange believes that Firms for a certain rebate tier based on the cap on PIXL Simple Order rebates at the will continue to be incentivized to percentage of total national customer proposed 4,000 contracts. transact volume in these symbols. volume in Multiply Listed equity and Currently, a Category B rebate is paid The Exchange proposes to increase ETFs options classes, excluding SPY to members executing electronically- the discount fee for electronic Complex Options that it transacts monthly on delivered Customer Complex Orders in Orders to Professionals, Broker-Dealers Phlx. The Exchange calculates Customer Penny Pilot Options and Non-Penny and Firms in Penny and Non-Penny volume in Multiply Listed Options Pilot Options in Section II symbols. Pilot Options regarding electronic (including SPY options) by totaling Rebates are paid on Customer PIXL Complex Orders. Today, Professionals, electronically-delivered and executed Complex Orders in Section II symbols Broker-Dealers and Firms are offered the volume, excluding volume associated that execute against non-Initiating Order opportunity to reduce Options with electronic Qualified Contingent interest. In the instance where member Transaction Charges in Penny Pilot Cross Orders,18 as defined in Exchange organizations qualify for Tier 4 or higher Complex Orders from $0.48 to $0.30 per Rule 1080(o).19 The Exchange proposes, in the Customer Rebate Program, contract and to reduce Options as discussed below, to establish a cap Customer Complex PIXL Orders that Transaction Charges in Non-Penny Pilot for Simple PIXL Orders (Category A) execute against a Complex PIXL Complex Orders from $0.70 to $0.30 per and Complex PIXL Orders (Category B) Initiating Order are paid a rebate of contract. The Exchange is proposing to rebates. Also, the Exchange is proposing $0.17 per contract. The Category B increase the discount fee for to not offer rebates when Customer rebate is not paid when an Professionals, Firms and Broker-Dealers Complex PIXL Orders execute against electronically-delivered Customer from $0.30 to $0.35 per contract when Complex PIXL Initiating Orders for Complex Order, including Customer transacting electronic Complex Orders, Category B rebates. Complex PIXL Order, executes against resulting in a higher effective fee. Currently, a Category A Customer another electronically-delivered Despite the increase in the discount fee, rebate is paid to members executing Customer Complex Order. Today there the Exchange believes that this discount electronically-delivered Customer is no rebate cap. The Exchange proposes will continue to incentivize Simple Orders in Penny Pilot Options to establish a cap for Category B Professionals, Firms and Broker-Dealers and Customer Simple Orders in Non- Customer Complex Order rebates as to transact electronic Complex Order Penny Pilot Options in Section II follows: rebates on Customer PIXL volume. The Exchange believes that the symbols. Rebates are paid on Customer Orders will be capped at 4,000 contracts proposed discount fee, although higher, PIXL Orders in Section II symbols that per order leg for Complex PIXL Orders. will continue to incentivize execute against non-Initiating Order The Exchange believes that the Category Professionals, Broker-Dealers and Firms interest. In the instance where member B rebates will continue to encourage to send order flow to the Exchange. organizations qualify for Tier 4 or higher members to send Customer liquidity to Currently, Specialists and Market in the Customer Rebate Program, Phlx despite the cap on PIXL Complex Makers are subject to a ‘‘Monthly Customer PIXL Orders that execute Order rebates at the proposed 4,000 Market Maker Cap’’ of $500,000 for: (i) against a PIXL Initiating Order are paid contracts per order leg. Electronic and floor Option Transaction a rebate of $0.14 per contract. Today The Exchange also proposes to amend Charges; and (ii) QCC Transaction Fees the rule change to specify that Category (as defined in Exchange Rule 1080(o) 17 Category A and Category B rebates are B Customer Complex PIXL Orders that and Floor QCC Orders, as defined in described below. execute against a Complex PIXL 1064(e)). The trading activity of separate 18 A QCC Order is comprised of an order to buy Initiating Order will not be paid a Specialist and Market Maker member or sell at least 1000 contracts that is identified as being part of a qualified contingent trade, as that rebate. As noted above, the Category B organizations are aggregated in term is defined in Rule 1080(o)(3), coupled with a rebate is not paid when an calculating the Monthly Market Maker contra-side order to buy or sell an equal number of electronically-delivered Customer Cap if there is Common Ownership contracts. The QCC Order must be executed at a Complex Order, including Customer between the member organizations. All price at or between the National Best Bid and Offer and be rejected if a Customer order is resting on the Complex PIXL Order, executes against dividend, merger, short stock interest, Exchange book at the same price. A QCC Order another electronically-delivered reversal and conversion, jelly roll and shall only be submitted electronically from off the Customer Complex Order, which box spread strategy executions 21 are floor to the PHLX XL II System. See Rule 1080(o). includes a Complex PIXL Initiating excluded from the Monthly Market See also Securities Exchange Act Release No. 64249 (April 7, 2011), 76 FR 20773 (April 13, 2011) (SR– Order. Maker Cap. Specialists or Market Phlx–2011–47) (a rule change to establish a QCC Makers that (i) are on the contra-side of Order to facilitate the execution of stock/option Section II—Multiply Listed Options an electronically-delivered and Qualified Contingent Trades (‘‘QCTs’’) that satisfy The Exchange proposes to amend the executed Customer order, excluding the requirements of the trade through exemption in discounted amount that is currently responses to a PIXL auction; and (ii) Rmajette on DSK2VPTVN1PROD with NOTICES connection with Rule 611(d) of the Regulation NMS). assessed to a Firm for electronic orders have reached the Monthly Market Maker 19 Members and member organizations under in certain Penny Options. Today, the common ownership may aggregate their Customer Exchange assesses a Firm a $0.48 per 20 The fee reduction today is only applicable to volume for purposes of calculating the Customer contract Options Transaction Charge for Penny Pilot Options as all of the symbols, AAPL, Rebate Tiers and receiving rebates. Common BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and ownership means members or member electronic transactions in Penny Pilot XLF, are Penny Pilot symbols. organizations under 75% common ownership or Options and a $0.70 per contract 21 See descriptions of these strategies in Section control. Options Transaction Charge for Non- II of the Pricing Schedule. VerDate Sep<11>2014 14:09 Mar 13, 2015 Jkt 235001 PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1

Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 13643 Cap are currently assessed fees per Complex PIXL Order Fee. The Exchange the Act 27 in particular, in that it contract as follows: $0.00 per contract also proposes to amend the qualifier for provides for the equitable allocation of Fee for Adding Liquidity in Penny Pilot the discounted fees. reasonable dues, fees and other charges Options; $0.17 per contract Fee for With respect to the qualifier, today, among members and issuers and other Removing Liquidity in Penny Pilot for an Initiating Order there is a fee of persons using any facility or system Options; $0.17 per contract in Non- $0.07 per contract or $0.05 per contract which Phlx operates or controls, and is Penny Pilot Options; and $0.17 per if the Customer Rebate Program not designed to permit unfair contract in a non-Complex electronic Threshold Volume defined in Section B discrimination between market auction, including the Quote Exhaust is greater than 100,000 contracts per day participants to whom the Exchange’s auction and, for purposes of this fee, the in a month.24 The Initiating Order Fee fees and rebates are applicable. opening process. A Complex electronic for non-Customers, including Section B—Customer Rebates auction includes, but is not limited to, Professionals, Firms, Broker-Dealers, the Complex Order Live Auction Specialists and Market Makers, that The Exchange believes that capping (‘‘COLA’’). have orders contra to a Customer PIXL rebates on electronic Customer PIXL The Exchange proposes to increase Order is reduced to $0.00 if the Simple Orders at 4,000 contracts per the Fee for Adding Liquidity in Penny Customer PIXL Order is greater than 399 order for Category A or 4,000 contracts Pilot Options, when a Specialist or contracts. The Exchange proposes to per order leg for Customer Complex Market Maker is on the contra-side of an continue to assess an Initiating Order PIXL Orders for Category B is reasonable electronically-delivered and executed Fee of $0.07 per contract, but proposes, because it will, with the cap, allow the Customer order, excluding responses to where the member or member Exchange to continue to attract a PIXL auction, and has reached the organization qualifies for the Tier 4 or Customer liquidity to the Exchange. Monthly Market Maker Cap, from $0.00 5 Customer Rebate in Section B, to Customer orders bring valuable liquidity to $0.05 per contract. The Exchange also instead assess an Initiating Order Fee of to the market which liquidity benefits proposes to make it clear that $0.05 per contract for Simple PIXL other market participants. Customer transactions which execute against an Orders and a new lower Initiating Order liquidity benefits all market participants order for which the Exchange broadcast Fee of $0.03 per contract for Complex by providing more trading an order exposure alert will be subject PIXL Orders. The Exchange also opportunities, which attracts Specialists to the existing fee of $0.17 per contract proposes to amend the qualifier to and Market Makers. An increase in the in a non-Complex electronic auction.22 receive the $0.07 [sic] per contract activity of these market participants in This rule change should add greater Initiating Order Fee to require a member turn facilitates tighter spreads, which clarity to the Pricing Schedule.23 to qualify for the Tier 4 or 5 Customer may cause an additional corresponding Rebate in Section B of the Pricing increase in order flow from other market Section IV, Part A—PIXL Pricing Schedule, instead of today’s participants. Additionally, the Chicago Currently, PIXL pricing for Initiating requirement that a member’s Customer Board Options Exchange Incorporated Orders is located in subsection IV, Part Rebate Program Threshold Volume, as (‘‘CBOE’’) similarly caps AIM A (Other Transaction Fees) of the defined in Section B of the Pricing transactions at 1,000 contracts.28 Pricing Schedule. Today, the Initiating Schedule, must be greater than 100,000 The Exchange believes that capping Order Fee is $0.07 per contract or $0.05 contracts per day in a month.25 Tier 4 rebates on electronic Customer PIXL per contract if Customer Rebate Program and 5 of the Customer Rebate Schedule Simple Orders at 4,000 contracts per Threshold Volume defined in Section B in Section B provides the highest order for Category A or 4,000 contracts is greater than 100,000 contracts per day relative rebates in the five tier Customer per order leg for Complex PIXL Orders in a month. The Exchange proposes, as Rebate Program, in particular where the for Category B is equitable and not discussed below, to continue to assess percentage thresholds of national unfairly discriminatory because these the $0.07 Initiating Order Fee. The customer volume in multiply-listed amendments to Category A and Category Exchange proposes, where the member equity and ETF Options classes, B apply uniformly to all market or member organization qualifies for the excluding SPY Options (monthly), are participants to whom Category A and Tier 4 or 5 Customer Rebate in Section also the highest. In making these Category B apply. B, to asses [sic] a $0.05 Simple PIXL proposals, the Exchange continues to The Exchange believes also that it is Order Fee; and to indicate that where incentivize members to execute reasonable to no longer offer a $0.17 per the member or member organization Customer liquidity on the Exchange. contract rebate for Customer Complex qualifies for the Tier 4 or 5 Customer PIXL Orders that execute against a Rebate in Section B it will assess a $0.03 2. Statutory Basis Complex PIXL Initiating Order because The Exchange believes that its the Exchange believes this rebate 22 The $0.17 per contract fee that exists today is proposal to amend the Pricing Schedule incentive is no longer necessary for this not changed, and the proposal in respect of the fee is only for electronic auction. is consistent with Section 6(b) of the particular service to increase order flow 23 The Exchange broadcasts orders on the Phlx Act 26 in general, and furthers the to the Exchange. Book by issuing order exposure alerts to all Phlx XL objectives of Section 6(b)(4) and (b)(5) of The Exchange’s proposal to no longer II participants and market participants that offer a $0.17 per contract rebate for subscribe to certain data feeds. See Securities Exchange Act Release Nos. 68517 (December 21, 24 Any member or member organization under Customer Complex PIXL Orders that 2012), 77 FR 77134 (December 31, 2012) (SR-Phlx- Common Ownership with another member or execute against a Complex PIXL 2012–136) (notice of filing and immediate member organization that qualifies for a Customer Initiating is equitable and not unfairly Rmajette on DSK2VPTVN1PROD with NOTICES effectiveness relating to distribution of auction Rebate Tier discount in Section B receives the PIXL Initiating Order discount of $0.05 per contract. discriminatory because the Exchange messages); and 68593 [sic] (January 31, 2013), 78 FR 25 Moreover, any member or member organization 8633 (February 6, 2013) (SR-Phlx-2013–06) (notice of filing and immediate effectiveness to clarify under Common Ownership with another member or 27 15U.S.C. 78f(b)(4), (5). when an order is adding or removing liquidity and member organization that qualifies for a Customer 28 SeeCBOE’s Fees Schedule. Credits on discussing order alerts). The Exchange notes that Rebate Tier 4 or 5 rebate in Section B will receive Customer orders executed electronically in AIM are there is currently an exposure alert provision in the the PIXL Initiating Order discount as described in capped at 1,000 contracts per order for simple Pricing Schedule, albeit for fees and rebates Section IV of the Pricing Schedule. executions and 1,000 contracts per leg for complex regarding SPY (Section I). 26 15 U.S.C. 78f(b). executions. VerDate Sep<11>2014 14:09 Mar 13, 2015 Jkt 235001 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1

13644 Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices will not pay such a rebate to any market participants by providing more trading forces are influencing the price participant. opportunities, which attracts Specialists reduction in these symbols for Firm and Market Makers. An increase in the orders. Section II—Multiply Listed Options The Exchange believes it is reasonable activity of these market participants in The Exchange believes that increasing turn facilitates tighter spreads, which to increase the assessment applicable to the assessment for Firms executing may cause an additional corresponding Professionals, Broker-Dealers and Firms electronic Simple Orders in certain increase in order flow from other market that transact Electronic Complex Orders Penny Options from $0.25 to $0.27 per participants. Although Firms will still from $0.30 to $0.35 per contract, thereby contract is reasonable because the be charged more for Penny Pilot Options reducing the discount, because this Exchange would continue to offer a than Specialists and Market Makers who discount will continue to attract discount to Firms which will continue are charged $0.22, Specialists and liquidity and benefit all market to attract liquidity. This benefits all Market Makers have obligations to the participants by providing more trading market participants by providing more market and regulatory requirements, opportunities, which attracts Specialists trading opportunities, which attracts which normally do not apply to other and Market Makers. The Exchange’s fees Specialists and Market Makers. An market participants.32 They have will continue to remain competitive increase in the activity of these market obligations to make continuous markets, with fees at other options markets.34 participants in turn facilitates tighter engage in a course of dealings Today, a Professional, Firm and Broker- spreads, which may cause an additional reasonably calculated to contribute to Dealer are assessed the highest corresponding increase in order flow the maintenance of a fair and orderly electronic Options Transaction Charges from other market participants. In market, and not make bids or offers or in Penny Pilot Options of $0.48 per addition, this fee is consistent with fees enter into transactions that are contract, as compared to other market associated with Miami International inconsistent with a course of dealings. participants. Despite the fee increase, Securities Exchange LLC (‘‘MIAX’’).29 Finally, as proposed, Firms will be the proposal will allow the Exchange to Despite the increase from $0.25 to $0.27 charged only $0.27 in these particular incentivize these market participants by per contract, the Exchange believes that Penny Pilot Option symbols, which is offering the opportunity to lower Firms will continue to be incentivized less than the Professional and Broker- Options Transaction Charges as to send volume to the Exchange. Dealer charge of $0.48 (for Penny Pilot described herein. The Exchange believes that increasing Options). Moreover, the proposed The Exchange believes it is equitable the assessment for Firms executing differential does not misalign pricing, in and not unfairly discriminatory to electronic Simple Orders, and thereby that Firms already benefit from certain increase the assessment applicable to offering a smaller discount, in certain pricing advantages that Broker-Dealers Professionals, Broker-Dealers and Firms Penny Options 30 from $0.25 to $0.27 do not also enjoy (for example, the Firm that transact Electronic Complex Orders per contract is equitable and not Monthly Fee Cap).33 The proposed fee from $0.30 to $0.35 per contract because unfairly discriminatory because it reduction that will apply to Firms but the Exchange will assess Professionals, applies uniformly to all Firms. Further, not to Broker-Dealers is equitable and Broker-Dealers and Firms the same the proposed amendment will continue not unfairly discriminatory for the same electronic Options Transaction Charges to allow the Exchange to incentivize reasons that the Firm Monthly Fee Cap in Penny Pilot Options. The Exchange Firms to send electronic Simple Orders which applies to Firms and not to does not assess Customers an electronic in these symbols to the Exchange and Broker-Dealers is equitable and not Options Transaction Charge in Penny because pricing by symbol is a common unfairly discriminatory. The fee Pilot Options because Customer order practice on many U.S. options reduction proposed herein, like the flow enhances liquidity on the exchanges 31 as a means to incentive Monthly Firm Fee Cap, provides an Exchange for the benefit of all market order flow to be sent to an exchange for incentive for Firms to transact order participants. Customer liquidity benefits execution. The Exchange believes it is flow on the Exchange, which order flow all market participants by providing reasonable to continue to use a pricing brings increased liquidity to the more trading opportunities, which reduction to provide additional Exchange for the benefit of all Exchange attracts Specialists and Market Makers. opportunities for members to increase participants. To the extent the purpose An increase in the activity of these their participation in the market. The market participants in turn facilitates of the proposed Firm fee reduction is Exchange’s fees will be competitive tighter spreads, which may cause an achieved, all the Exchange’s market with fees at other options markets. additional corresponding increase in participants, including Broker-Dealers, Although the Exchange will still be order flow from other market should benefit from the improved assessing Firms more than Customers participants. Specialists and Market market liquidity. Further, competitive (which do not pay the Option Makers are assessed lower electronic Transaction Charge in Penny Pilot or in 32 See Rule 1014 titled ‘‘Obligations and Options Transaction Charges in Penny non-Penny Pilot options), Customer Restrictions Applicable to Specialists and Pilot Options as compared to order flow enhances liquidity on the Registered Options Traders.’’ Professionals, Broker-Dealers and Firms Exchange for the benefit of all market 33 Firms are subject to a maximum fee of $75,000 because they have obligations to the participants and benefits all market (‘‘Monthly Firm Fee Cap’’). Firm Floor Option market and regulatory requirements, Transaction Charges and QCC Transaction Fees, in the aggregate, for one billing month may not exceed which normally do not apply to other 29 See MIAX’s Fee Schedule. MIAX assesses firms the Monthly Firm Fee Cap per member organization market participants.35 They have a $0.27 per contract fee for transactions in Penny when such members are trading in their own obligations to make continuous markets, classes. This fee is assessed to an EEM that enters proprietary account. All dividend, merger, and engage in a course of dealings Rmajette on DSK2VPTVN1PROD with NOTICES an order that is executed for an account identified short stock interest strategy executions (as defined by the EEM for clearing in the OCC ‘‘Firm’’ range. in Section II of the Pricing Schedule) are excluded reasonably calculated to contribute to 30 All of the symbols, AAPL, BAC, EEM, FB, FXI, from the Monthly Firm Fee Cap. Reversal and IWM, QQQ, TWTR, VXX and XLF, are currently conversion, jelly roll and box spread strategy 34 See the NASDAQ Options Market LLC’s Penny Pilot Options. This fee discount is only executions (as defined in Section II) are included (‘‘NOM’’) pricing at Chapter XV of NOM’s available on these symbols and therefore not in the Monthly Firm Fee Cap. QCC Transaction Rulebook. available for Non-Penny Pilot Options. Fees are included in the calculation of the Monthly 35 See Rule 1014 titled ‘‘Obligations and 31 See, e.g., the International Securities Exchange Firm Fee Cap. See Section II of the Pricing Restrictions Applicable to Specialists and LLC (‘‘ISE’’) Schedule of Fees. Schedule. Registered Options Traders.’’ VerDate Sep<11>2014 14:09 Mar 13, 2015 Jkt 235001 PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1

Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 13645 the maintenance of a fair and orderly Orders (with the qualifier that a offering competitive pricing. Such market, and not make bids or offers or Customer must qualify for the Tier 4 or competitive, differentiated pricing exists enter into transactions that are 5 Customer Rebate in Section B of the today on other options exchanges. The inconsistent with a course of dealings. Pricing Schedule) is reasonable. This is Exchange’s goal is creating and The proposed differentiation as between because the Exchange believes this increasing incentives to attract orders to Customers, Specialists and Market additional incentive will further the Exchange that will, in turn, benefit Makers and other market participants incentivize members to send price all market participants through recognizes the differing contributions improving seeking orders to PIXL as increased liquidity at the Exchange. made to the liquidity and trading well as bring additional liquidity to the B. Self-Regulatory Organization’s environment on the Exchange by these Exchange in an effort to earn the Statement on Burden on Competition market participants. Initiating Order discount. Amending the The Exchange believes that increasing qualifier from 100,000 contracts to The Exchange does not believe that the assessment from $0.00 to $0.05 per qualifying for a Tier 4 and Tier 5 the proposed rule change will impose contract rebate for Adding Liquidity in Customer rebate is reasonable because any burden on competition not Penny Pilot Options is reasonable when this simply establishes a different metric necessary or appropriate in furtherance Specialists or Market Makers are on the that requires members that desire to of the purposes of the Act. The contra-side of an electronically- earn the discounted PIXL pricing to Customer Rebate Program amendments delivered and executed Customer order, send additional Customer order flow to in Section B of the Pricing Schedule do excluding responses to a PIXL auction; the Exchange with the new qualifier. not create an undue burden on and have reached the Monthly Market The Exchange notes that in order to competition because the caps applicable Maker Cap. This is because Specialists remain competitive, the Exchange must to PIXL Orders will apply uniformly to and Market Makers will continue to pay implement fees and rebates that are all market participants. The Exchange’s a lower fee as compared to other market competitive with pricing at other proposal to increase the assessment for participants and should be incentivized options exchanges that offer a similar Firms executing electronic Simple to continue to add liquidity. auction opportunity. The PIXL Orders in certain Penny Options from The Exchange believes that increasing electronic auction represents an $0.25 to $0.27 per contract does not the assessment from $0.00 to $0.05 per increasingly important and crucial place an undue burden on competition, contract rebate for Adding Liquidity in segment of options trading. The goal is rather this reduction will continue to Penny Pilot Options is equitable and not attract liquidity which benefits all creating and increasing incentives to unfairly discriminatory when market participants by providing more attract orders to the Exchange that will, Specialists or Market Makers are on the trading opportunities, which attracts in turn, benefit all market participants contra-side of an electronically- Specialists and Market Makers. In through increased liquidity at the delivered and executed Customer order, addition, this fee is consistent with fees Exchange. The proposal is designed to excluding responses to a PIXL auction; assessed by MIAX.37 continue to incentivize market The Exchange believes it is reasonable and have reached the Monthly Market participants to send liquidity to the to increase the assessment applicable to Maker Cap. This is because Specialists Exchange. The Exchange believes that in Professionals, Broker-Dealers and Firms and Market Makers are assessed lower addition to currently assessing an that transact Electronic Complex Orders electronic order fees as compared to Initiating Order of $0.07 per contractor from $0.30 to $0.35 per contract, thereby Professionals, Broker-Dealers and Firms [sic] today, its proposal to adopt an reducing the discount, because this because they have obligations to the alternative fee of $0.03 per contract for discount will continue to attract market and regulatory requirements, Complex PIXL Orders (with the qualifier liquidity and benefit all market which normally do not apply to other that a Customer must qualify for the participants by providing more trading market participants.36 Tier 4 or 5 Customer Rebate in Section opportunities, which attracts Specialists The Exchange believes that clarifying B of the Pricing Schedule), and a $0.05 and Market Makers. The Exchange’s fees that transactions which execute against per contract for Simple PIXL Orders will continue to remain competitive an order for which the Exchange (with the qualifier that a Customer must with fees at other options markets.38 broadcast an order exposure alert in an qualify for the Tier 4 or 5 Customer Today, a Professional, Firm and Broker- electronic auction is also subject to the Rebate in Section B of the Pricing Dealer are assessed the highest $0.17 per contract fee is reasonable, Schedule), is equitable and not unfairly electronic Options Transaction Charges equitable and not unfairly discriminatory. The volume discount in Penny Pilot Options of $0.48 per discriminatory because the Exchange is will be applied uniformly to all contract, as compared to other market not proposing to amend the manner in according to liquidity brought to the participants. Despite the fee increase, which the fee is applied, but rather Exchange by non-Customers. The the proposal will allow the Exchange to provide additional clarity to market Exchange would offer all market incentivize market participants by participants that responses to an order participants, other than Customers who offering the opportunity to lower exposure alert shall be treated by the are not assessed an Initiating Order Fee, Options Transaction Charges as Exchange in a similar manner as other an incentive to transact large sized described herein. auctions for purposes of applying this orders in PIXL. The Exchange believes The Exchange believes its proposal to fee. that the proposal will continue to attract increase the assessment applicable to Section IV, Part A—PIXL Pricing liquidity, which benefits market Professionals, Broker-Dealers and Firms Today, the Exchange assesses an participants and provides the that transact Electronic Complex Orders Rmajette on DSK2VPTVN1PROD with NOTICES Initiating Order Fee of $0.07 per opportunity for increased order contract or $0.05 per contract for Simple interaction on the Exchange. 37 See MIAX’s Fee Schedule. MIAX assesses firms PIXL Orders. The Exchange believes The Exchange desires to incentivize a $0.27 per contract fee for transactions in Penny members and member organizations, classes. This fee is assessed to an EEM that enters that its proposal to adopt an alternative an order that is executed for an account identified of $0.03 per contract for Complex PIXL through the Exchange’s rebate and fee by the EEM for clearing in the OCC ‘‘Firm’’ range. structure, to select Phlx as a venue for 38 See the NOM pricing at Chapter XV of NOM’s 36 Id. bringing liquidity and trading by Rulebook. VerDate Sep<11>2014 14:09 Mar 13, 2015 Jkt 235001 PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1

13646 Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices from $0.30 to $0.35 per contract does among market participants to remove arguments concerning the foregoing, not create an undue burden on liquidity from the Phlx Book. This including whether the proposed rule competition because the Exchange will competition does not create an undue change is consistent with the Act. continue to offer a discount to these burden on competition but rather offers Comments may be submitted by any of market participants that pay the highest all market participants the opportunity the following methods: Penny Pilot Options transaction fees. to receive the benefit of the pricing Electronic Comments The Exchange does not assess when transacting options. Also, Customers an electronic Options providing an ability to earn greater • Use the Commission’s Internet Transaction Charge in Penny Pilot discounts incentivizes order flow into comment form (http://www.sec.gov/ Options because Customer order flow the auction. rules/sro.shtml); or enhances liquidity on the Exchange for The Exchange operates in a highly • Send an email to rule-comments@ the benefit of all market participants. competitive market, comprised of sec.gov. Please include File Number SR– Customer liquidity benefits all market twelve exchanges, in which market Phlx–2015–21 on the subject line. participants by providing more trading participants can easily and readily opportunities, which attracts Specialists direct order flow to competing venues if Paper Comments and Market Makers. An increase in the they deem fee levels at a particular • Send paper comments in triplicate activity of these market participants in venue to be excessive or rebates to be to Brent J. Fields, Secretary, Securities turn facilitates tighter spreads, which inadequate. Accordingly, the fees that and Exchange Commission, 100 F Street may cause an additional corresponding are assessed and the rebates paid by the NE., Washington, DC 20549–1090. increase in order flow from other market Exchange, as described in the proposal, participants. Specialists and Market are influenced by these robust market All submissions should refer to File Makers are assessed lower electronic forces and therefore must remain Number SR–Phlx–2015–21. This file Options Transaction Charges in Penny competitive with fees charged and number should be included on the Pilot Options as compared to rebates paid by other venues and subject line if email is used. To help the Professionals, Broker-Dealers and Firms therefore must continue to be reasonable Commission process and review your because they have obligations to the and equitably allocated to those comments more efficiently, please use market and regulatory requirements, members that opt to direct orders to the only one method. The Commission will which normally do not apply to other Exchange rather than competing venues. post all comments on the Commission’s market participants.39 The proposed fees are designed to Internet Web site (http://www.sec.gov/ The Exchange’s proposal to increase ensure a fair and reasonable use of rules/sro.shtml). Copies of the the fee assessment from $0.00 to $0.05 Exchange resources by allowing the submission, all subsequent per contract rebate for Adding Liquidity Exchange to recoup costs while amendments, all written statements in Penny Pilot Options when Specialists continuing to attract liquidity and offer with respect to the proposed rule or Market Makers are on the contra-side connectivity at competitive rates to change that are filed with the of an electronically-delivered and Exchange members and member Commission, and all written executed Customer order, excluding organizations. communications relating to the responses to a PIXL auction, and have proposed rule change between the C. Self-Regulatory Organization’s Commission and any person, other than reached the Monthly Market Maker Cap, Statement on Comments on the is reasonable. This is because those that may be withheld from the Proposed Rule Change Received From public in accordance with the Specialists and Market Makers do not Members, Participants, or Others create an undue burden on competition provisions of 5 U.S.C. 552, will be because market makers have obligations No written comments were either available for Web site viewing and to the market and regulatory solicited or received. printing in the Commission’s Public requirements, which normally do not Reference Room, 100 F Street NE., III. Date of Effectiveness of the apply to other market participants.40 Washington, DC 20549 on official Proposed Rule Change and Timing for The Exchange’s proposal to clarify business days between the hours of 10 Commission Action that transactions which execute against a.m. and 3 p.m. Copies of such filing an order for which the Exchange The foregoing rule change has become also will be available for inspection and broadcast an order exposure alert in an effective pursuant to Section copying at the principal office of the electronic auction does not create an 19(b)(3)(A)(ii) of the Act.41 At any time Exchange. All comments received will undue burden on competition. This within 60 days of the filing of the be posted without change; the amendment will bring additional clarity proposed rule change, the Commission Commission does not edit personal to the fees. summarily may temporarily suspend identifying information from The Exchange believes that the such rule change if it appears to the submissions. You should submit only proposed new volume discount for PIXL Commission that such action is information that you wish to make Fees creates additional opportunity for necessary or appropriate in the public available publicly. All submissions incentivizing Professionals, Firms, interest, for the protection of investors, should refer to File Number SR–Phlx– Broker-Dealers, Specialists and Market or otherwise in furtherance of the 2015–21, and should be submitted on or Makers to bring additional liquidity to purposes of the Act. If the Commission before April 6, 2015. the market. The Exchange believes that takes such action, the Commission shall For the Commission, by the Division of effectively assessing lower fees or institute proceedings to determine Trading and Markets, pursuant to delegated whether the proposed rule should be Rmajette on DSK2VPTVN1PROD with NOTICES paying rebates when a market authority.42 participant brings a certain amount of approved or disapproved. Brent J. Fields, Customer orders creates competition IV. Solicitation of Comments Secretary. Interested persons are invited to [FR Doc. 2015–05857 Filed 3–13–15; 8:45 am] 39 See Rule 1014 titled ‘‘Obligations and Restrictions Applicable to Specialists and submit written data, views, and BILLING CODE 8011–01–P Registered Options Traders.’’ 40 Id. 41 15 U.S.C. 78s(b)(3)(A)(ii). 42 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 14:09 Mar 13, 2015 Jkt 235001 PO 00000 Frm 00133 Fmt 4703 Sfmt 9990 E:\FR\FM\16MRN1.SGM 16MRN1


Document Created: 2018-02-21 09:37:32
Document Modified: 2018-02-21 09:37:32
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 13641 
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