80 FR 15850 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Pricing Schedule's Preface and Sections I, II and IV
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 57 (March 25, 2015)
Federal Register Volume 80, Issue 57 (March 25, 2015)
| Page Range | 15850-15857 | |
| FR Document | 2015-06710 |
[Federal Register Volume 80, Number 57 (Wednesday, March 25, 2015)] [Notices] [Pages 15850-15857] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-06710] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74531; File No. SR-Phlx-2015-25] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Pricing Schedule's Preface and Sections I, II and IV March 19, 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 March 11, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- 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: (1) The Preface to the Pricing Schedule to include a reference to a Non-Customer; (2) amend the Customer \3\ Simple Order Fee for Removing Liquidity in Section I, entitled ``Rebates and Fees for Adding and Removing Liquidity in SPY'' as well as certain PIXL \4\ executions in options overlying SPY; \5\ (3) amend a Firm \6\ fee in Section II, entitled ``Multiply Listed Options Fees,'' \7\ as well as certain pricing applicable to Specialists \8\ and Market Makers; \9\ (4) amend PIXL pricing in Section IV, Part A entitled ``PIXL Pricing,'' and FLEX pricing in Section IV, Part B, entitled ``FLEX Transaction Fees'' of the Pricing Schedule. --------------------------------------------------------------------------- \3\ The term ``Customer'' applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation (``OCC'') which is not for the account of broker or dealer or for the account of a ``professional'' (as that term is defined in Rule 1000(b)(14)). \4\ PIXL\SM\ is the Exchange's price improvement mechanism known as Price Improvement XL or PIXL. See Rule 1080(n). \5\ Options overlying Standard and Poor's Depositary Receipts/ SPDRs (``SPY'') are based on the SPDR exchange-traded fund, which is designed to track the performance of the S&P 500 Index. \6\ The term ``Firm'' applies to any transaction that is identified by a member or member organization for clearing in the Firm range at OCC. \7\ This includes options overlying equities, exchange traded funds (``ETFs''), exchange traded notes (``ETNs'') and indexes which are Multiply Listed. \8\ A Specialist is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a). \9\ 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. --------------------------------------------------------------------------- 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. [[Page 15851]] 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 the Preface, Section I, entitled ``Rebates and Fees for Adding and Removing Liquidity in SPY,'' Section II, entitled ``Multiply Listed Options Fees,'' and Section IV, Part A, entitled ``PIXL Pricing'' and Part B entitled ``FLEX Transaction Fees.'' The Exchange proposes various amendments to the Pricing Schedule as described below. Preface The Exchange proposes to amend the Preface of the Pricing Schedule to add a defined term, ``Non-Customer.'' The Exchange proposes to state that a Non-Customer refers to transactions for the accounts of Specialists, Market Makers, Firms, Professionals,\10\ Broker-Dealers \11\ and JBOs.\12\ The Exchange believes that adding this reference to the Preface will assist members and member organizations to better understand references to the term ``Non-Customer'' in the Pricing Schedule when pricing is applied to market participants other than a Customer. --------------------------------------------------------------------------- \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 term ``Joint Back Office'' or ``JBO'' applies to any transaction that is identified by a member or member organization for clearing in the Firm range at OCC and is identified with an origin code as a JBO. A JBO will be priced the same as a Broker- Dealer. A JBO participant is a member, member organization or non- member organization that maintains a JBO arrangement with a clearing broker-dealer (``JBO Broker'') subject to the requirements of Regulation T Section 220.7 of the Federal Reserve System as further discussed at Exchange Rule 703. --------------------------------------------------------------------------- Section I Rebates and Fees for Adding and Removing Liquidity in SPY The Exchange is proposing to amend the Customer Simple Order Fees for Removing Liquidity in Section I applicable to transactions overlying SPY. The Exchange currently assesses Customers a $0.43 per contract Fee for Removing Liquidity in SPY Simple Orders and Specialists, Market Makers, Firms, Broker-Dealers and Professionals are assessed a $0.49 per contract Fee for Removing Liquidity in SPY Simple Orders. The Exchange is proposing to increase the Customer Fee for Removing Liquidity in SPY Simple Orders from $0.43 to $0.44 per contract. Despite the increased fee, Customers will continue to be assessed a lower Fee for Removing Liquidity in SPY Simple Orders as compared to other market participants. The Exchange also proposes to amend PIXL fees in SPY in Section I of the Pricing Schedule. Today, when a PIXL Order is contra to other than the Initiating Order,\13\ the PIXL Order will be assessed $0.00 per contract, unless the order is a Customer, in which case the Customer will receive a rebate of $0.38 per contract. All other contra parties to the PIXL Order, other than the Initiating Order, will be assessed a Fee for Removing Liquidity of $0.38 per contract or will receive the Rebate for Adding Liquidity.\14\ The Exchange is proposing to increase the amount that all other contra parties to the PIXL Order, other than the Initiating Order, will be assessed to remove liquidity from $0.38 to $0.42 per contract. These contra parties will continue to be entitled to receive the Rebate for Adding Liquidity, as is the case today. Despite, the increase [the Exchange] believes that its current SPY PIXL fees remain competitive. --------------------------------------------------------------------------- \13\ A member may electronically submit for execution an order it represents as agent on behalf of a public customer, broker- dealer, or any other entity (``PIXL Order'') against principal interest or against any other order (except as provided in Rule 1080(n)(i)(E)) it represents as agent (``Initiating Order'') provided it submits the PIXL order for electronic execution into the PIXL Auction (``Auction'') pursuant to Rule 1080. See Exchange Rule 1080(n). Non-Initiating Order interest could be a PIXL Auction Responder or a resting order or quote that was on the Phlx book prior to the auction. \14\ The Exchange offers Specialists and Maker Makers a $0.20 per contract Simple Order Rebate for Adding Liquidity in SPY. --------------------------------------------------------------------------- For clarity, the Exchange is also proposing to add the word ``Non- Customer'' to the Pricing Schedule in Section I, when describing all other contra parties for purposes of the PIXL Order fees. Section II--Multiply Listed Options The Exchange proposes to continue provide a reduction to the Firm Options Transaction fee in Penny Pilot Options \15\ and Non-Penny Pilot Options for electronic Simple Orders in Apple Inc. (``AAPL''), Bank of America Corporation (``BAC''), iShares MSCI Emerging Markets ETF (``EEM''), Facebook, Inc. (``FB''), iShares China Large-Cap ETF (``FXI''), iShares Russell 2000 ETF (``IWM''), PowerShares QQQ Trust (``QQQ''), Twitter, Inc. (``TWTR''), iPath S&P 500 VIX Short-Term Futures ETF (``VXX'') and Financial Select Sector SPDR Fund (``XLF''). The current fee of $0.27 per contract, which is discounted as compared to the Options Transaction Fee in Section II, will be increased to $0.34 per contract. This proposed fee is lower than the $0.48 per contract fee Firm electronic Penny Pilot Options Transaction Charge in Section II of the Pricing Schedule.\16\ Despite the increase in this fee, the Exchange believes that Firms will continue to be incentivized to transact volume in these aforementioned symbols as the fee continues to be discounted. --------------------------------------------------------------------------- \15\ The Penny Pilot was established in January 2007 and was last extended to June 30, 2015. See Securities and Exchange Release No. 73688 (November 25, 2014), 79 FR 71484 (December 2, 2014) (SR- Phlx-2014-77). \16\ See Section II of the Pricing Schedule. AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF are currently Penny Pilot Options (together ``certain Penny Options''). The $0.34 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 from the Penny Pilot Options Program. --------------------------------------------------------------------------- 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) Qualified Contingent Cross or ``QCC'' Transaction Fees.\17\ 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 \18\ between the member organizations. All dividend, merger, short stock interest, reversal and conversion, jelly roll and box spread strategy executions \19\ are excluded from the Monthly Market Maker Cap. Today, 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 Cap are currently assessed fees per contract as follows: $0.05 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 [[Page 15852]] (``COLA'').\20\ Transactions which execute against an order for which the Exchange broadcast an order exposure alert are subject to this fee. --------------------------------------------------------------------------- \17\ QCC Orders are defined in Exchange Rule 1080(o) and Floor QCC Orders are defined in 1064(e)). \18\ Common Ownership shall mean members or member organizations under 75% common ownership or control. \19\ See descriptions of these strategies in Section II of the Pricing Schedule. \20\ A Complex electronic auction includes, but is not limited to, the Complex Order Live Auction (``COLA''). --------------------------------------------------------------------------- The Exchange proposes to increase the $0.17 per contract Fee for Removing Liquidity in Penny Pilot Options to $0.18 per contract; the $0.17 per contract in Non-Penny Pilot Options to $0.18 per contract; and the $0.17 per contract in a non-Complex electronic auction to $0.18 per contract, provided a Specialist or Market Maker is on the contra- side of an electronically-delivered and executed Customer order and has reached the Monthly Market Maker Cap. Despite these increases, the Exchange believes that Specialists and Market Makers will continue to be encouraged to transact orders on the market because the fees are still discounted.\21\ --------------------------------------------------------------------------- \21\ Specialists and Market Makers that do not meet the requirements specified herein are subject to the Options Transaction Charges in Section II of the Pricing Schedule. --------------------------------------------------------------------------- Section IV, Part A--PIXL Pricing PIXL pricing for Initiating Orders is located in subsection IV, Part A, entitled ``Other Transaction Fees'' of the Pricing Schedule. Today, the Initiating Order Fee is $0.07 per contract. If the member or member organization qualifies for the Tier 4 or 5 Customer Rebate in Section B of the Pricing Schedule, the member or member organization will be assessed $0.05 per contract for Simple PIXL Orders and $0.03 per contract for Complex PIXL Orders. Any member or member organization under Common Ownership with another member or member organization that qualifies for a Customer Rebate Tier 4 or 5 discount in Section B of the Pricing Schedule will receive the PIXL Initiating Order discount. The Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order is reduced to $0.00 if the Customer PIXL Order is greater than 399 contracts. Today, for PIXL Order Executions in Section II, Multiply Listed Options, when a PIXL Order is contra to a PIXL Auction Responder, a Customer PIXL Order will be assessed $0.00 per contract, other market participants will be assessed $0.30 per contract in Penny Pilot Options or $0.38 per contract in Non-Penny Pilot Options. A Responder will be assessed $0.30 per contract in Penny Pilot Options or $0.38 per contract in Non-Penny Pilot Options, unless the Responder is a Customer, in which case the fee will be $0.00 per contract. The Exchange is proposing to amend fees when a PIXL Order is contra to a PIXL Auction Responder for Multiply Listed Options. A Customer PIXL Order will continue to be assessed $0.00 per contract and other market participants will continue to be assessed $0.30 per contract in Penny Pilot Options or $0.38 per contract in Non-Penny Pilot Options in Multiply Listed Options. The Exchange proposes to continue to assess a Responder that is a Specialist or Market Maker a $0.30 per contract fee in Penny Pilot Options and an increased $0.40 per contract (today this fee is $0.38 per contract) fee in Non-Penny Pilot Options. Other Non- Customer Responders (Professionals, Firms and Broker-Dealers) will be assessed an increased fee in Penny Pilot Options of $0.48 per contract and an increased fee of $0.70 per contract in Non-Penny Pilot Options.\22\ A Responder that is a Customer will continue to be assessed $0.00 per contract in Penny and Non-Penny Pilot Options. Despite the increases in certain PIXL fees, the Exchange believes that its fee remain competitive. --------------------------------------------------------------------------- \22\ Today, these market participants are assessed a $0.30 per contract Penny Pilot Option fee and a $0.38 per contract Non-Penny Pilot Option fee. --------------------------------------------------------------------------- The Exchange is also proposing to capitalize certain terms for consistency within the text of the Pricing Schedule and utilize the term ``Non-Customer''. Section IV, Part B--FLEX Transaction Fees The Exchange proposes to amend its FLEX Multiply Listed Options pricing in Section IV, Part B, entitled ``FLEX Transaction Fees'' of the Pricing Schedule. Customers will continue to be assessed no fee for transacting FLEX Options.\23\ Today, all other market participants, Professionals, Specialists, Market Makers, Broker-Dealers and Firms, or ``Non-Customers,'' are assessed a fee of $0.15 per contract when transacting FLEX Options.\24\ The Exchange is proposing to increase this fee from $0.15 to $0.25 contract. The Exchange will continue to apply the Monthly Firm Fee Cap,\25\ Monthly Market Maker Cap, and the Options Surcharge in PHLX/KBW Bank Index (``BKX''), options on the one- tenth value of the Nasdaq 100 Index traded under the symbol MNX (``MNX'') and options on the Nasdaq 100 Index traded under the symbol NDX (``NDX'') described in Section II.\26\ No other fees described in Section II apply to Section IV, B of the Pricing Schedule. The Exchange will continue to waive FLEX transaction fees for a Firm executing facilitation orders pursuant to Exchange Rule 1064 when such members are trading in their own proprietary account. The pricing in Section III, entitled ``Singly Listed Options'' will continue to apply to FLEX Singly Listed Options, as is the case today.\27\ --------------------------------------------------------------------------- \23\ FLEX options are only executed on the Exchange's trading floor and are not executed electronically on the Exchange. \24\ FLEX Option fees today are not in addition to Options Transaction Charges. \25\ Firms are subject to a maximum fee of $75,000 (``Monthly Firm Fee Cap''). Firm Floor Option Transaction Charges and QCC Transaction Fees, as defined in this section above, 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) are excluded from the Monthly Firm Fee Cap. Reversal and conversion 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 Pricing. \26\ Today, the Exchange pays an Options Surcharge in BKX of $0.10 per contract for all market participants, except Customers. Also, the Exchange pays an Options Surcharge in MNX and NDX of $0.20 per contract for all market participants, except Customers. See Section II of the Pricing Schedule. \27\ Section III pricing includes options overlying currencies, equities, ETFs, ETNs treasury securities and indexes not listed on another exchange. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal to amend the Pricing Schedule is consistent with Section 6(b) of the Act \28\ in general, and furthers the objectives of Section 6(b)(4) and (b)(5) of the Act \29\ 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. --------------------------------------------------------------------------- \28\ 15 U.S.C. 78f(b). \29\ 15 U.S.C. 78f(b)(4), (5). --------------------------------------------------------------------------- Preface The Exchange's proposal to amend the Preface of the Pricing Schedule to add a defined term, ``Non-Customer'' is reasonable because it makes clear what is meant by the term ``Non-Customer,'' which refers to transactions for the accounts of Specialists, Market Makers, Firms, Professionals, Broker-Dealers and JBOs. The Exchange's proposal to amend the Preface of the Pricing Schedule to add a defined term, ``Non-Customer'' is equitable and not unfairly discriminatory because the addition of the term ``Non- Customer'' to the Preface [[Page 15853]] will provide consistency to the meaning of the term as utilized throughout the Pricing Schedule. Section I--Rebates and Fees for Adding and Removing Liquidity in SPY The Exchange's proposal to amend the Customer SPY Simple Order Fees for Removing Liquidity in Section I of the Pricing Schedule to increase the fee from $0.43 to $0.44 per contract is reasonable because, despite the increase, the Exchange believes the fee will continue to encourage a greater number of market participants to remove Customer liquidity in SPY on Phlx because the proposed rate of $0.44 per contract is lower than transactions in SPY at some competitor or affiliated options exchanges.\30\ Customer orders bring valuable liquidity to the market which liquidity benefits other market participants. --------------------------------------------------------------------------- \30\ See the NASDAQ Options Market LLC's (``NOM'') pricing at Chapter XV of NOM's Rulebook. --------------------------------------------------------------------------- The Exchange's proposal to amend the Customer SPY Simple Order Fees for Removing Liquidity in Section I of the Pricing Schedule to increase the fee from $0.43 to $0.44 per contract is equitable and not unfairly discriminatory because Customers will continue to be assessed the lowest Fees for Removing Liquidity in SPY Simple Orders.\31\ 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. --------------------------------------------------------------------------- \31\ Other market participants are assessed a $0.49 per contract Fees for Removing Liquidity in SPY Simple Orders. --------------------------------------------------------------------------- The Exchange's proposal to amend PIXL fees in SPY to increase the amount that all other Non-Customer contra parties to the PIXL Order, other than the Initiating Order, will be assessed to remove liquidity from $0.38 to $0.42 per contract is reasonable because despite the increase in the fee, the Exchange believes this pricing will continue to incentivize market participants to transact a greater number of SPY options. The Exchange will continue to assess no fee when a PIXL Order is contra to other than an Initiating Order in SPY. Customers will continue to receive a rebate of $0.38 per contract when the PIXL Order is contra to other than the Initiating Order. The Exchange is increasing the Fee for Removing Liquidity for Non-Customer contra- parties to the PIXL Order in SPY, other than the Initiating Order, to $0.42 per contract, which is still lower than the $0.49 per contract Fee for Removing Liquidity that is assessed for Simple Orders in SPY.\32\ SPY options are currently the most actively traded options class and therefore the Exchange believes that incentivizing Non- Customers (Professionals, Firms, Broker-Dealers, Specialists and Market Makers) to remove liquidity in SPY options by offering a lower rate as compared to the $0.49 per contract Simple Order Fee for Removing Liquidity in SPY will benefit all market participants by providing incentives for price improvement, such as this reduction in the Fee for Removing Liquidity. --------------------------------------------------------------------------- \32\ See Section I of the Pricing Schedule. --------------------------------------------------------------------------- The Exchange's proposal to amend PIXL fees in SPY to increase the amount that all other contra parties to the PIXL Order, other than the Initiating Order, will be assessed to remove liquidity from $0.38 to $0.42 per contract is equitable and not unfairly discriminatory because the Exchange will be assessing the same Fees for Removing Liquidity for SPY PIXL options to all Non-Customer market participants provided they meet the aforementioned criteria. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. Creating incentives for Non- Customer market participants to remove liquidity benefits all market participants through increased liquidity at the Exchange. A higher percentage of SPY Orders in PIXL leads to increased auctions and better opportunities for price improvement. The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to add clarifying rule text to the Pricing Schedule with respect to identifying Non-Customers. Section II--Multiply Listed Options The Exchange's proposal to increase the Firm electronic Simple Order fee in AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF from $0.27 to $0.34 per contract is reasonable because it will continue to incentivize Firms to send electronic Simple Orders in these symbols to the Exchange by offering a rate lower than at other options exchanges.\33\ Today Firms pay a discounted fee ($0.27 per contract compared to the Firm electronic Multiply Listed Options $0.48 per contract fee). Pricing by symbol is a common practice on many U.S. options exchanges as a means to incentive order flow to be sent to an exchange for execution.\34\ --------------------------------------------------------------------------- \33\ See the NASDAQ Options Market LLC's (``NOM'') pricing at Chapter XV of NOM's Rulebook. See also NYSE Arca, Inc. (``NYSE Arca'') Fees and Charges. The non-customer remove fee for Penny Pilot issues is $0.49 per contract. \34\ See International Securities Exchange LLC's (``ISE'') Schedule of Fees. --------------------------------------------------------------------------- The Exchange's proposal to increase the Firm electronic Simple Order fee in AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF from $0.27 to $0.34 per contract is equitable and not unfairly discriminatory. The Exchange will continue to assess Firms higher fees as compared to Customers.\35\ 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. Firms will continue to assessed higher Options Transaction Charges as compared to Specialists and Market Makers,\36\ because Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\37\ 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. --------------------------------------------------------------------------- \35\ Customers do not pay Options Transaction Charges in Multiply Listed Options. See Section II of the Pricing Schedule. \36\ Specialists and Market Makers are assessed an electronic Penny Pilot Options Transaction Charge of $0.22 per contract. See Section II of the Pricing Schedule. \37\ See Rule 1014 titled ``Obligations and Restrictions Applicable to Specialists and Registered Options Traders.'' --------------------------------------------------------------------------- Finally, as proposed, Firms will be assessed a $0.34 per contract electronic fee for electronic Simple Orders in these symbols, which is a lower fee as compared to Professionals and Broker-Dealers.\38\ The Exchange believes that the proposed fee differential between Firms and Professionals and Broker-Dealers is equitable and not unfairly discriminatory because it is similar to the pricing offered by another options exchange.\39\ Moreover, the proposed [[Page 15854]] differential does not misalign pricing, in that Firms already benefit from certain pricing advantages that Professionals and Broker-Dealers do not also enjoy (for example, the Firm Monthly Fee Cap).\40\ The proposed fee reduction, which will apply to Firms, but not to Professionals and 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 Professionals and 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 Professionals and Broker-Dealers, should benefit from the improved market liquidity. Further, competitive forces are influencing the price reduction in these symbols for Firm orders. --------------------------------------------------------------------------- \38\ Professionals and Broker-Dealers are assessed a $0.48 per contract electronic Penny Pilot Options Transaction Charge, except for electronic Complex Orders, which are assessed $0.35 per contract. See Section II of the Pricing Schedule. \39\ MIAX Options Exchange (``MIAX'') assesses non-member Broker-Dealers a $0.45 [sic] per contract standard options transaction fee and a Firm is assessed a $0.37 per contract standard options transaction fee. See MIAX's Fee Schedule. \40\ 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. --------------------------------------------------------------------------- The Exchange desires to incentivize Firms that receive reduced rates at other options exchanges to select Phlx as a venue by offering competitive pricing to these market participants. Such competitive, differentiated pricing exists today on other options exchanges.\41\ The Chicago Board Options Exchange, Incorporated (``CBOE'') has a differential as between Clearing Trading Permit Holder Proprietary participants (the equivalent of Firm on Phlx) and other non-Customer, non-market maker participants of $0.10 per contract in electronic Penny Pilot Options and $0.25 [sic] per contract in Non-Penny Pilot Options.\42\ Further, CBOE assesses Broker-Dealers/Professionals/Non- Trading Permit Holder Market Makers between $0.35-$0.44 per contract for SPX executions (a singly listed CBOE proprietary product) versus the Clearing Trading Permit Holder Proprietary (the equivalent of Firm on Phlx) who is assessed between $0.25-$0.01 per contract in SPX for a maximum differential of $0.43 per contract in a CBOE proprietary product.\43\ Phlx's differential as between a Firm on the one hand and other non-Customer, non-Specialist/Market Makers on the other is not as wide as CBOE's pricing and moreover a competitive offering given current pricing differentials on other options exchange such as the MIAX \44\ and CBOE. --------------------------------------------------------------------------- \41\ CBOE assesses a reduced fee to Clearing Trading Permit Holder Proprietary (Clearing Trading Permit Holder Proprietary clears in the Firm range at The Options Clearing Corporation (``OCC'')) participants of $0.35 per contract for electronic Penny and Non-Penny Pilot options. CBOE assesses Broker-Dealers/ Professionals/Non-Trading Permit Holder Market Makers a $0.45 per contact fee for electronic Penny Pilot Options and a $0.65 per contract fee for electronic Non-Penny Pilot Options classes. See CBOE's Fee Schedule. Specifically, see note 11 for clearing explanation and also Regulatory Circular RG13-038. \42\ See CBOE's Fees Schedule. \43\ Id. \44\ See note 39 above. --------------------------------------------------------------------------- The Exchange believes there is nothing impermissible about Phlx offering a discount solely to a Firm, this practice is consistent with the above examples and longstanding differentials between Firms, other Broker-Dealers and Professionals. The options exchanges have differentiated between: Retail customers and professional customers; broker/dealers clearing in the ``Firm'' range at OCC and broker/dealers registered as market makers and away market makers; early-adopting market makers; and many others. The Commission has also permitted price differentiation based on whether an order is processed manually versus electronically. The proposal is consistent with previously established pricing proposals accepted by the Commission. The Exchange believes that amending the fees assessed to Specialists and Market Makers that 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 because the Exchange desires to continue to incentivize Specialists and Market Makers by offering a discount once these conditions are met. While the Exchange is increasing the transaction fees which Specialists and Market Makers must pay if they 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 from $0.17 to $0.18 per contract for removing liquidity in Penny Pilot Options, Non-Penny Pilot Options and in non-Complex electronic auctions, including the Quote Exhaust auction and the opening process, the Exchange continues to offer these market participants the ability to obtain these lower fees as compared to other market participants. The Exchange believes that amending the fees assessed to Specialists and Market Makers that 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 equitable and not unfairly discriminatory because Specialists and Market Makers serve an important role on the Exchange with regard to order interaction and they provide liquidity in the marketplace. Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\45\ In addition, the proposed fees would apply only in certain circumstances where the Market Maker or Specialist is not otherwise subject to transaction fees, because the Monthly Market Maker Cap has been reached, and specifically on the contra-side of an electronically-delivered Customer order. --------------------------------------------------------------------------- \45\ See note 37. --------------------------------------------------------------------------- Section IV, Part A--PIXL Pricing The Exchange believes it is reasonable, equitable and not unfairly discriminatory to amend the PIXL Fees in Section IV, Part A, when responding to a PIXL auction for the below reasons. First, with respect to Penny Pilot Options, Specialists and Market Makers Responders will continue to be assessed a $0.30 per contract fee in Penny Pilot Options. The Exchange is proposing to increase the fee from $0.30 to $0.48 per contract for other Non-Customers (Firms, Professionals and Broker-Dealers) transacting Penny Pilot Options. The differential as between Specialists and Market Makers and other Non- Customers is reasonable because Specialists and Market Makers are assessed a $0.30 per contract Responder fee for Penny Pilot Options electronic transactions plus the Payment for Order Flow \46\ for a total of fee of $0.55 per contract for responding to auctions involving a Customer. PFOF fees are not paid by other market participants. In addition, Specialists and Market Makers comprise the majority of PIXL Responders on Phlx. Other Non-Customer Responders (Firms, Professionals and Broker-Dealers) will [[Page 15855]] now be assessed an increased fee of $0.48 per contract rate in Penny Pilot Options (today they pay a $0.38 per contract fee) when contra to a PIXL Order. The Exchange believes that market participants will continue to be encouraged to respond to PIXL auctions, despite the increased fees, because the Exchange's Penny Pilot Options fees for Responders remain competitive. The proposed Non-Customer fees are lower than fees assessed to Non-Customers by other options exchanges.\47\ --------------------------------------------------------------------------- \46\ The Payment for Order Flow (``PFOF'') Program assesses fees to Specialists and Market Makers resulting from Customer orders. Specialists and Market Makers pat [sic] a $0.25 per contract PFOF for Customer Penny Pilot Options orders. \47\ See NYSE MKT Inc. (``NYSE Amex'') Fees and Charges. Specifically, the RFR Response Penny Pilot Option Fee (Non-Customer) is $0.55 per contract for the CUBE auction. CUBE is NYSE Amex's electronic price improvement auction for options. This mechanism is similar to the PIXL auction. MIAX assesses a Responder to the Prime Auction a per contract Penny Pilot fee of $0.45 per contract to all market participants (including priority customer). PRIME is MIAX's electronic price improvement auction for options. This mechanism is similar to the PIXL auction. --------------------------------------------------------------------------- The proposed increase of $0.18 per contract (current $0.30 fee, which is proposed to be increased to $0.48 per contract) for the Penny Pilot Option fee to respond to a PIXL auction for Firms, Professionals and Broker-Dealers is equitable and not unfairly discriminatory because all Firms, Professionals and Broker-Dealers are treated in a uniform manner. These participants will all be subject to this fee of $0.48 per contract. Customers will continue to be assessed no fee, as is the case today and Specialists and Market Makers will receive lower prices because they have obligations to the market and regulatory requirements, which normally do not apply to other market participants in the continuous market, and as such the Exchange continues to believe these market participants (Specialists and Market Makers) should receive certain discounts in auctions.\48\ --------------------------------------------------------------------------- \48\ See note 37. --------------------------------------------------------------------------- Second, with respect to Non-Penny Pilot Options fees, while Specialists and Market Makers Responders will be assessed an increased fee of $0.40 per contract in Non-Penny Pilot Options (today the fee is $0.38 per contract), this $0.40 per contract fee will continue to be lower as compared to the proposed Non-Penny Pilot Options fee of $0.70 per contract for other Non-Customer market participants (Firms, Professionals and Broker-Dealers). The differential as between Specialist and Market Makers and other Non-Customers is reasonable because Specialists and Market Makers are assessed the $0.40 per contract Responder fee for electronic Non-Penny Pilot Options transactions plus the PFOF \49\ for a total fee of $1.10 for responding to auctions involving a Customer order. PFOF fees are not paid by other market participants. In addition, Specialists and Market Makers comprise the majority of PIXL Responders on Phlx. Other Non-Customer Responders (Firms, Professionals and Broker-Dealers) will now be assessed an increased fee of $0.70 per contract fee in Non-Penny Pilot Options (today they pay $0.38 per contract fee) when contra to a PIXL Order. These are the same fees that these market participants (Professionals, Firms and Broker-Dealers) are assessed today for transacting electronic orders in Multiply Listed Non-Penny Pilot Options.\50\ In addition, other options exchanges have much higher fees for auctions.\51\ --------------------------------------------------------------------------- \49\ Specialists and Market Makers pay PFOF of $0.70 per contract for Non-Penny Pilot Options electronic Customer orders. See Section II of the Pricing Schedule. \50\ See Section II in the Pricing Schedule. \51\ See NYSE MKT Inc. (``NYSE Amex'') Fees and Charges. Specifically, the RFR Response Non-Penny Pilot Option Fee (Non- Customer) is $0.90 per contract for the CUBE auction. CUBE is NYSE Amex's electronic price improvement auction for options. This mechanism is similar to the PIXL auction. MIAX assesses a Responder to the Prime Auction a per contract Non-Penny Pilot fee of $0.90 per contract to all market participants (including priority customer). PRIME is MIAX's electronic price improvement auction for options. This mechanism is similar to the PIXL auction. --------------------------------------------------------------------------- The proposed increase of $0.32 per contract (current $0.38 fee, which is proposed to be $0.70 per contract) for the Non-Penny Pilot Option fee to respond to a PIXL auction for Firms, Professionals and Broker-Dealers is equitable and not unfairly discriminatory because all Firms, Professionals and Broker-Dealers are treated in a uniform manner. These market participants will all be subject to this fee of $0.70 per contract. Customers will continue to be assessed no fee, as is the case today and Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants in the continuous market and as such the Exchange continues to believe these market participants (Specialists and Market Makers) should receive certain discounts in auctions.\52\ The proposed increased fee from $0.38 to $0.40 per contract for Specialists and Market Makers in Non-Penny Pilot Options when responding to a PIXL auction is equitable and not unfairly discriminatory because as noted these market participants have obligations to the marketplace.\53\ --------------------------------------------------------------------------- \52\ See note 37. \53\ Id. --------------------------------------------------------------------------- The Exchange believes that widening the differential as between the Initiating Order Fee and the Specialist or Market Maker contra party to the PIXL Order ($0.07 (presuming no discount) vs. $0.40 per contract for Non-Penny Pilot Options) as compared to the cost to transact a PIXL Order today for a Specialist or Market Maker ($0.07 vs. $0.38 per contract) is equitable and not unfairly discriminatory for the reasons below. Similarly, the Exchange believes that widening the differential as between the Initiating Order Fee and the Professional, Firm or Broker-Dealer contra party to the PIXL Order ($0.07 (presuming no discount) vs. $0.48 per contract for Penny Pilot Options and $0.70 per contract for Non-Penny Pilot Options) as compared to the cost to transact a PIXL Order today for a Specialist or Market Maker ($0.07 per contract vs. $0.38 per contract) [sic] is equitable and not unfairly discriminatory for the reasons below. Today, MIAX assesses a Responder to the Prime Auction a per contract Penny Pilot fee of $0.45 per contract to all market participants (including priority customer) and a Non-Penny Pilot fee of $0.90 per contract to all market participants (including priority customer). PRIME is MIAX's electronic price improvement auction for options.\54\ This mechanism is similar to the PIXL auction. The differential for transactions on MIAX today is $0.05 for a Prime Order (similar to the Phlx Initiating Order) versus $0.45/$0.90 per contract for Penny/Non-Penny Pilot Options. MIAX's differential is equal to or substantially greater than Phlx's proposed differential in PIXL. --------------------------------------------------------------------------- \54\ See Securities Exchange Act Release No. 72943 (August 28, 2014), 79 FR 52785 (September 4, 2014) (SR-MIAX-2014-45). --------------------------------------------------------------------------- While the proposed fees would increase the differential between Non-Customer market participants that initiated the PIXL auction and Non-Customer market participants responding to the PIXL auction, the Exchange believes that despite the fee differential market participants will continue to be encouraged to transact a greater number of PIXL Orders because the fees are competitive with or similar to those offered at competing options exchanges. The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to add clarifying rule text to the Pricing Schedule with respect to identifying Non-Customers. Section IV, Part B--FLEX Transaction Fees The Exchange's proposal to increase the FLEX Transaction Fees for Multiply [[Page 15856]] Listed Options for Professionals, Specialists, Market Makers, Broker- Dealers and Firms from $0.15 to $0.25 per contract is reasonable because the proposed per contract fee would be the same as other fees assessed to Non-Customers, except Specialists and Market Makers, for transaction executed on the trading floor.\55\ FLEX Options are transacted on the Exchange's trading floor and the process is not automated. Exchange staff processes requests for FLEX Orders and the costs associated with the Exchange's trading floor have risen over the years. The Exchange believes that this increase will assist the Exchange in offsetting costs while keeping such costs competitive with other markets. Customers will continue to not be assessed a Flex Transaction Fee for transactions in Multiply Listed Options. --------------------------------------------------------------------------- \55\ Specialists and Market Makers are assessed $0.30 per contract for transactions executed on the trading floor, except in FLEX Options. Professionals, Broker-Dealers and Firms pay $0.25 per contract floor Options Transaction Charges. See Section II of the Pricing Schedule. --------------------------------------------------------------------------- The Exchange's proposal to increase the FLEX Transaction Fees for Multiply Listed Options for Professionals, Specialists, Market Makers, Broker-Dealers and Firms from $0.15 to $0.25 per contract is equitable and not unfairly discriminatory because the Exchange is assessing the same fees for FLEX transactions in Multiply Listed Options to all market participants, except Customers. Customers traditionally are not assessed transaction fees because Customer orders bring valuable liquidity to the market. The Exchange believes that the cost to transact FLEX Options remains competitive with costs at other options Exchanges.\56\ --------------------------------------------------------------------------- \56\ See CBOE's Fees Schedule. --------------------------------------------------------------------------- The Exchange believes that utilizing the new term ``Non-Customer'' in the FLEX pricing as opposed to Professionals Specialists, Market Makers, Broker-Dealers and Firms is reasonable, equitable and not unfairly discriminatory because it adds greater clarity to the Pricing Schedule. 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 Exchange's proposal to add the term ``Non-Customer'' to the Preface of the Pricing Schedule does not impose an undue burden on competition. The Exchange's proposal to increase the Simple Order Customer Fee for Removing Liquidity in SPY does not misalign the fees related to Customer as compared to Non-Customer orders. Today, Customers have lower fees because 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. The Exchange's proposal to amend the SPY PIXL fees to increase the fees applicable to Non-Customers that are contra to a PIXL Order, other than the Initiating Order, when removing liquidity does not impose any undue burden on competition as all market participants, except Customers will be assessed the same increased fee. Customer orders bring valuable liquidity to the market. The Exchange's proposal to increase the Firm electronic Simple Order fee from $0.27 to $0.34 per contract in AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF will not impose an unnecessary or inappropriate burden on competition because the proposed $0.34 per contract fee assessed to Firms, which is lower than fees assessed Professionals and Broker-Dealers, is similar to rates offered by other options exchanges.\57\ Firms will continue to pay higher Options Transaction Charges as compared to Customers, who bring liquidity to the market, and Specialists and Market Makers, who have obligations.\58\ Finally, as proposed, Firms will be assessed a $0.34 per contract electronic fee for electronic Simple Orders in these symbols, which is a lower fee as compared to Professionals and Broker- Dealers.\59\ The Exchange believes that the proposed fee differential between Firms and Professionals and Broker-Dealers is equitable and not unfairly discriminatory because it is similar to the pricing offered by another options exchange.\60\ Moreover, the proposed differential does not misalign pricing with respect to Professionals and Broker-Dealers because Firms already benefit from certain pricing advantages that Professionals and Broker-Dealers do not also enjoy (for example, the Firm Monthly Fee Cap).\61\ The proposed fee reduction, which will apply to Firms, but not to Professionals and Broker-Dealers, does not impose an undue burden on competition because the fee reduction 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 Professionals and Broker-Dealers, should benefit from the improved market liquidity. Further, competitive forces are influencing the price reduction in these symbols for Firm orders. --------------------------------------------------------------------------- \57\ See the NASDAQ Options Market LLC's (``NOM'') pricing at Chapter XV of NOM's Rulebook. \58\ See note 37. \59\ Professionals and Broker-Dealers are assessed a $0.48 per contract electronic Penny Pilot Options Transaction Charge, except for electronic Complex Orders, which are assessed $0.35 per contract. See Section II of the Pricing Schedule. \60\ See note 39. \61\ See Section II of the Pricing Schedule. --------------------------------------------------------------------------- The Exchange's proposal for Specialists and Market Makers to pay certain reduced fees after they have satisfied the obligations related to the Monthly Market Maker Cap, in all Penny Pilot Options, provided they have added liquidity, if they are on the contra-side of an electronically-delivered and executed Customer order, excluding responses to a PIXL auction does not provide an undue burden on competition. As noted above Specialists and Market Makers have burdensome quoting obligations to the market that do not apply to Customers, Professionals, Firms and Broker-Dealers.\62\ Specialists and Market Makers serve an important role on the Exchange with regard to order interaction and they provide liquidity in the marketplace. The proposed differentiation as between Specialists and Market Makers as compared to other market participants recognizes the differing contributions made to the trading environment on the Exchange by these market participants. For these reasons noted above, the Exchange does not believe that offering Specialists and Market Makers the opportunity to cap fees in certain symbols imposes an undue burden on competition. --------------------------------------------------------------------------- \62\ See note 37. --------------------------------------------------------------------------- The Exchange's proposal to increase PIXL Auction Responder fees for Specialists and Market Makers from $0.38 to $0.40 per contract in Non- Penny Pilot Options and for Professionals, Firms and Broker-Dealers from $0.30 to $0.48 per contract in Penny Pilot Options and from $0.38 to $0.70 per contract in Non-Penny Pilot Options does not create an undue burden on competition because all Professionals, Broker-Dealers and Firms are being treated in a uniform manner and the proposed rates are lower than the fees assessed at MIAX and NYSE [[Page 15857]] Amex when responding to a price improvement auction.\63\ With respect to Specialists and Market Makers, these market participants are assessed PFOF when contra to an electronically-delivered Customer order, while other market participants are not assessed such fees.\64\ The Exchange does not believe the pricing changes will provide a competitive advantage for Specialists and Market Makers as compared to other Non-Customer market participants (i.e., Professionals, Broker- Dealers and Firms), with respect to intra-market competition. Specialists and Markets would continue to be assessed lower rates as compared to these market participants. Further, with respect to inter- market competition, the Exchange believes that the proposed change will enhance the competiveness of the Exchange relative to other exchanges that offer their own electronic crossing mechanism. Other market participants will pay the same Options Transaction Charges as they pay today for all other Multiply Listed Options transactions that are not transacted within the PIXL auction. --------------------------------------------------------------------------- \63\ See notes 47 and 51. \64\ See Section II of the Pricing Schedule. --------------------------------------------------------------------------- The Exchange's proposal to increase the FLEX Transaction Fees for Multiply Listed Options for Professionals, Specialists, Market Makers, Broker-Dealers and Firms from $0.15 to $0.25 per contract does not create an undue burden on competition because the Exchange is assessing the same fees for FLEX transactions in Multiply Listed Options on all market participants, except Customers. Customers traditionally are not assessed transaction fees because Customer orders bring valuable liquidity to the market. 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. 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.\65\ 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. --------------------------------------------------------------------------- \65\ 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 CommentsUse 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-2015-25 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-2015-25. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2015-25, and should be submitted on or before April 15, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\66\ --------------------------------------------------------------------------- \66\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-06710 Filed 3-24-15; 8:45 am] BILLING CODE 8011-01-P
![15850 Federal Register / Vol. 80, No. 57 / Wednesday, March 25, 2015 / Notices
proposed rule change to their short term those that may be withheld from the the Pricing Schedule to include a
option series programs. For this reason, public in accordance with the reference to a Non-Customer; (2) amend
the Commission believes that the provisions of 5 U.S.C. 552, will be the Customer 3 Simple Order Fee for
proposed rule change presents no novel available for Web site viewing and Removing Liquidity in Section I,
issues and that waiver of the 30-day printing in the Commission’s Public entitled ‘‘Rebates and Fees for Adding
operative delay is consistent with the Reference Room, 100 F Street NE., and Removing Liquidity in SPY’’ as well
protection of investors and the public Washington, DC 20549, on official as certain PIXL 4 executions in options
interest. Therefore, the Commission business days between the hours of overlying SPY; 5 (3) amend a Firm 6 fee
designates the proposed rule change to 10:00 a.m. and 3:00 p.m. Copies of the in Section II, entitled ‘‘Multiply Listed
be operative upon filing.21 filing also will be available for Options Fees,’’ 7 as well as certain
At any time within 60 days of the inspection and copying at the principal pricing applicable to Specialists 8 and
filing of the proposed rule change, the office of the Exchange. All comments Market Makers; 9 (4) amend PIXL
Commission summarily may received will be posted without change; pricing in Section IV, Part A entitled
temporarily suspend such rule change if the Commission does not edit personal ‘‘PIXL Pricing,’’ and FLEX pricing in
it appears to the Commission that such identifying information from Section IV, Part B, entitled ‘‘FLEX
action is necessary or appropriate in the submissions. You should submit only
Transaction Fees’’ of the Pricing
public interest, for the protection of information that you wish to make
investors, or otherwise in furtherance of Schedule.
available publicly. All submissions
the purposes of the Act. If the should refer to File Number SR– The text of the proposed rule change
Commission takes such action, the NYSEMKT–2015–16 and should be is available on the Exchange’s Web site
Commission shall institute proceedings submitted on or before April 15, 2015. at http://
to determine whether the proposed rule For the Commission, by the Division of nasdaqomxphlx.cchwallstreet.com/, at
should be approved or disapproved. Trading and Markets, pursuant to delegated the principal office of the Exchange, and
authority.22 at the Commission’s Public Reference
IV. Solicitation of Comments
Brent J. Fields, Room.
Interested persons are invited to
Secretary. II. Self-Regulatory Organization’s
submit written data, views and
[FR Doc. 2015–06717 Filed 3–24–15; 8:45 am] Statement of the Purpose of, and
arguments concerning the foregoing,
including whether the proposed rule BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule
change is consistent with the Act. Change
Comments may be submitted by any of
SECURITIES AND EXCHANGE In its filing with the Commission, the
the following methods:
COMMISSION Exchange included statements
Electronic Comments concerning the purpose of and basis for
[Release No. 34–74531; File No. SR–Phlx–
• Use the Commission’s Internet 2015–25] the proposed rule change and discussed
comment form (http://www.sec.gov/ any comments it received on the
rules/sro.shtml); or Self-Regulatory Organizations; proposed rule change. The text of these
• Send an email to rule-comments@ NASDAQ OMX PHLX LLC; Notice of statements may be examined at the
sec.gov. Please include File Number SR– Filing and Immediate Effectiveness of places specified in Item IV below. The
NYSEMKT–2015–16 on the subject line. Proposed Rule Change Relating to the Exchange has prepared summaries, set
Pricing Schedule’s Preface and forth in sections A, B, and C below, of
Paper Comments Sections I, II and IV the most significant aspects of such
• Send paper comments in triplicate statements.
to Secretary, Securities and Exchange March 19, 2015.
Commission, 100 F Street NE., Pursuant to Section 19(b)(1) of the
3 The term ‘‘Customer’’ applies to any transaction
Washington, DC 20549–1090. Securities Exchange Act of 1934 (the
that is identified by a member or member
All submissions should refer to File ‘‘Act’’),1 and Rule 19b–4 thereunder,2 organization for clearing in the Customer range at
Number SR–NYSEMKT–2015–16. This notice is hereby given that on March 11, The Options Clearing Corporation (‘‘OCC’’) which
file number should be included on the 2015, NASDAQ OMX PHLX LLC is not for the account of broker or dealer or for the
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the account of a ‘‘professional’’ (as that term is defined
subject line if email is used. To help the in Rule 1000(b)(14)).
Commission process and review your Securities and Exchange Commission 4 PIXLSM is the Exchange’s price improvement
comments more efficiently, please use (‘‘SEC’’ or ‘‘Commission’’) the proposed mechanism known as Price Improvement XL or
only one method. The Commission will rule change as described in Items I, II, PIXL. See Rule 1080(n).
post all comments on the Commission’s and III below, which Items have been 5 Options overlying Standard and Poor’s
prepared by the Exchange. The Depositary Receipts/SPDRs (‘‘SPY’’) are based on
Internet Web site (http://www.sec.gov/ the SPDR exchange-traded fund, which is designed
rules/sro.shtml). Copies of the Commission is publishing this notice to to track the performance of the S&P 500 Index.
submission, all subsequent solicit comments on the proposed rule 6 The term ‘‘Firm’’ applies to any transaction that
amendments, all written statements change from interested persons. is identified by a member or member organization
for clearing in the Firm range at OCC.
with respect to the proposed rule I. Self-Regulatory Organization’s 7 This includes options overlying equities,
change that are filed with the Statement of the Terms of the Substance exchange traded funds (‘‘ETFs’’), exchange traded
Commission, and all written of the Proposed Rule Change notes (‘‘ETNs’’) and indexes which are Multiply
communications relating to the Listed.
rljohnson on DSK3VPTVN1PROD with NOTICES
The Exchange proposes to modify the 8 A Specialist is an Exchange member who is
proposed rule change between the Phlx Pricing Schedule (‘‘Pricing registered as an options specialist pursuant to Rule
Commission and any person, other than Schedule’’). Specifically, the Exchange 1020(a).
9 A ‘‘Market Maker’’ includes Registered Options
21 For purposes only of waiving the 30-day
proposes to amend: (1) The Preface to
Traders (Rule 1014(b)(i) and (ii)), which includes
operative delay, the Commission has also Streaming Quote Traders (see Rule 1014(b)(ii)(A))
22 17 CFR 200.30–3(a)(12).
considered the proposed rule’s impact on and Remote Streaming Quote Traders (see Rule
1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See 1014(b)(ii)(B)). Directed Participants are also market
15 U.S.C. 78c(f). 2 17 CFR 240.19b–4. makers.
VerDate Sep<11>2014 15:26 Mar 24, 2015 Jkt 235001 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 E:\FR\FM\25MRN1.SGM 25MRN1](https://thefederalregister.org/doc/80_FR_15907/page/1.svg)
![Federal Register / Vol. 80, No. 57 / Wednesday, March 25, 2015 / Notices 15851
A. Self-Regulatory Organization’s Liquidity in SPY Simple Orders from iPath S&P 500 VIX Short-Term Futures
Statement of the Purpose of, and $0.43 to $0.44 per contract. Despite the ETF (‘‘VXX’’) and Financial Select
Statutory Basis for, the Proposed Rule increased fee, Customers will continue Sector SPDR Fund (‘‘XLF’’). The current
Change to be assessed a lower Fee for Removing fee of $0.27 per contract, which is
Liquidity in SPY Simple Orders as discounted as compared to the Options
1. Purpose
compared to other market participants. Transaction Fee in Section II, will be
The purpose of this filing is to modify The Exchange also proposes to amend increased to $0.34 per contract. This
the Pricing Schedule to specifically PIXL fees in SPY in Section I of the proposed fee is lower than the $0.48 per
amend the Preface, Section I, entitled Pricing Schedule. Today, when a PIXL
‘‘Rebates and Fees for Adding and contract fee Firm electronic Penny Pilot
Order is contra to other than the
Removing Liquidity in SPY,’’ Section II, Options Transaction Charge in Section
Initiating Order,13 the PIXL Order will
entitled ‘‘Multiply Listed Options Fees,’’ be assessed $0.00 per contract, unless II of the Pricing Schedule.16 Despite the
and Section IV, Part A, entitled ‘‘PIXL the order is a Customer, in which case increase in this fee, the Exchange
Pricing’’ and Part B entitled ‘‘FLEX the Customer will receive a rebate of believes that Firms will continue to be
Transaction Fees.’’ The Exchange $0.38 per contract. All other contra incentivized to transact volume in these
proposes various amendments to the parties to the PIXL Order, other than the aforementioned symbols as the fee
Pricing Schedule as described below. Initiating Order, will be assessed a Fee continues to be discounted.
Preface for Removing Liquidity of $0.38 per Currently, Specialists and Market
contract or will receive the Rebate for Makers are subject to a ‘‘Monthly
The Exchange proposes to amend the Adding Liquidity.14 The Exchange is Market Maker Cap’’ of $500,000 for: (i)
Preface of the Pricing Schedule to add proposing to increase the amount that
a defined term, ‘‘Non-Customer.’’ The Electronic and floor Option Transaction
all other contra parties to the PIXL Charges; and (ii) Qualified Contingent
Exchange proposes to state that a Non- Order, other than the Initiating Order,
Customer refers to transactions for the Cross or ‘‘QCC’’ Transaction Fees.17 The
will be assessed to remove liquidity
accounts of Specialists, Market Makers, trading activity of separate Specialist
from $0.38 to $0.42 per contract. These
Firms, Professionals,10 Broker-Dealers 11 and Market Maker member
contra parties will continue to be
and JBOs.12 The Exchange believes that entitled to receive the Rebate for Adding organizations are aggregated in
adding this reference to the Preface will Liquidity, as is the case today. Despite, calculating the Monthly Market Maker
assist members and member the increase [the Exchange] believes that Cap if there is Common Ownership 18
organizations to better understand its current SPY PIXL fees remain between the member organizations. All
references to the term ‘‘Non-Customer’’ competitive. dividend, merger, short stock interest,
in the Pricing Schedule when pricing is For clarity, the Exchange is also reversal and conversion, jelly roll and
applied to market participants other proposing to add the word ‘‘Non- box spread strategy executions 19 are
than a Customer. Customer’’ to the Pricing Schedule in excluded from the Monthly Market
Section I Rebates and Fees for Adding Section I, when describing all other Maker Cap. Today, Specialists or Market
and Removing Liquidity in SPY contra parties for purposes of the PIXL Makers that (i) are on the contra-side of
Order fees. an electronically-delivered and
The Exchange is proposing to amend executed Customer order, excluding
the Customer Simple Order Fees for Section II—Multiply Listed Options
responses to a PIXL auction; and (ii)
Removing Liquidity in Section I The Exchange proposes to continue
have reached the Monthly Market Maker
applicable to transactions overlying provide a reduction to the Firm Options
SPY. The Exchange currently assesses Cap are currently assessed fees per
Transaction fee in Penny Pilot
Customers a $0.43 per contract Fee for Options 15 and Non-Penny Pilot Options contract as follows: $0.05 per contract
Removing Liquidity in SPY Simple for electronic Simple Orders in Apple Fee for Adding Liquidity in Penny Pilot
Orders and Specialists, Market Makers, Inc. (‘‘AAPL’’), Bank of America Options; $0.17 per contract Fee for
Firms, Broker-Dealers and Professionals Corporation (‘‘BAC’’), iShares MSCI Removing Liquidity in Penny Pilot
are assessed a $0.49 per contract Fee for Emerging Markets ETF (‘‘EEM’’), Options; $0.17 per contract in Non-
Removing Liquidity in SPY Simple Facebook, Inc. (‘‘FB’’), iShares China Penny Pilot Options; and $0.17 per
Orders. The Exchange is proposing to Large-Cap ETF (‘‘FXI’’), iShares Russell contract in a non-Complex electronic
increase the Customer Fee for Removing 2000 ETF (‘‘IWM’’), PowerShares QQQ auction, including the Quote Exhaust
Trust (‘‘QQQ’’), Twitter, Inc. (‘‘TWTR’’), auction and, for purposes of this fee, the
10 The term ‘‘professional’’ means any person or opening process. A Complex electronic
entity that (i) is not a broker or dealer in securities, 13 A member may electronically submit for
auction includes, but is not limited to,
and (ii) places more than 390 orders in listed execution an order it represents as agent on behalf
options per day on average during a calendar month of a public customer, broker-dealer, or any other
the Complex Order Live Auction
for its own beneficial account(s). See Rule entity (‘‘PIXL Order’’) against principal interest or
1000(b)(14). against any other order (except as provided in Rule 16 See Section II of the Pricing Schedule. AAPL,
11 The term ‘‘Broker-Dealer’’ applies to any 1080(n)(i)(E)) it represents as agent (‘‘Initiating BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and
transaction which is not subject to any of the other Order’’) provided it submits the PIXL order for XLF are currently Penny Pilot Options (together
transaction fees applicable within a particular electronic execution into the PIXL Auction ‘‘certain Penny Options’’). The $0.34 per contract
category. (‘‘Auction’’) pursuant to Rule 1080. See Exchange pricing proposed herein is symbol specific and will
12 The term ‘‘Joint Back Office’’ or ‘‘JBO’’ applies Rule 1080(n). Non-Initiating Order interest could be continue to apply to these symbols whether or not
to any transaction that is identified by a member or a PIXL Auction Responder or a resting order or
they are deleted from or added from the Penny Pilot
member organization for clearing in the Firm range quote that was on the Phlx book prior to the
Options Program.
rljohnson on DSK3VPTVN1PROD with NOTICES
at OCC and is identified with an origin code as a auction.
17 QCC Orders are defined in Exchange Rule
14 The Exchange offers Specialists and Maker
JBO. A JBO will be priced the same as a Broker-
Makers a $0.20 per contract Simple Order Rebate 1080(o) and Floor QCC Orders are defined in
Dealer. A JBO participant is a member, member
for Adding Liquidity in SPY. 1064(e)).
organization or non-member organization that
18 Common Ownership shall mean members or
maintains a JBO arrangement with a clearing 15 The Penny Pilot was established in January
broker-dealer (‘‘JBO Broker’’) subject to the 2007 and was last extended to June 30, 2015. See member organizations under 75% common
requirements of Regulation T Section 220.7 of the Securities and Exchange Release No. 73688 ownership or control.
Federal Reserve System as further discussed at (November 25, 2014), 79 FR 71484 (December 2, 19 See descriptions of these strategies in Section
Exchange Rule 703. 2014) (SR–Phlx–2014–77). II of the Pricing Schedule.
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![Federal Register / Vol. 80, No. 57 / Wednesday, March 25, 2015 / Notices 15853
will provide consistency to the meaning contract, which is still lower than the common practice on many U.S. options
of the term as utilized throughout the $0.49 per contract Fee for Removing exchanges as a means to incentive order
Pricing Schedule. Liquidity that is assessed for Simple flow to be sent to an exchange for
Orders in SPY.32 SPY options are execution.34
Section I—Rebates and Fees for Adding
currently the most actively traded The Exchange’s proposal to increase
and Removing Liquidity in SPY
options class and therefore the the Firm electronic Simple Order fee in
The Exchange’s proposal to amend Exchange believes that incentivizing AAPL, BAC, EEM, FB, FXI, IWM, QQQ,
the Customer SPY Simple Order Fees Non-Customers (Professionals, Firms, TWTR, VXX and XLF from $0.27 to
for Removing Liquidity in Section I of Broker-Dealers, Specialists and Market $0.34 per contract is equitable and not
the Pricing Schedule to increase the fee Makers) to remove liquidity in SPY unfairly discriminatory. The Exchange
from $0.43 to $0.44 per contract is options by offering a lower rate as will continue to assess Firms higher fees
reasonable because, despite the compared to the $0.49 per contract as compared to Customers.35 Customer
increase, the Exchange believes the fee Simple Order Fee for Removing order flow enhances liquidity on the
will continue to encourage a greater Liquidity in SPY will benefit all market Exchange for the benefit of all market
number of market participants to participants by providing incentives for participants and benefits all market
remove Customer liquidity in SPY on price improvement, such as this participants by providing more trading
Phlx because the proposed rate of $0.44 reduction in the Fee for Removing opportunities, which attracts Specialists
per contract is lower than transactions Liquidity. and Market Makers. An increase in the
in SPY at some competitor or affiliated The Exchange’s proposal to amend activity of these market participants in
options exchanges.30 Customer orders PIXL fees in SPY to increase the amount turn facilitates tighter spreads, which
bring valuable liquidity to the market that all other contra parties to the PIXL may cause an additional corresponding
which liquidity benefits other market Order, other than the Initiating Order, increase in order flow from other market
participants. will be assessed to remove liquidity participants. Firms will continue to
The Exchange’s proposal to amend from $0.38 to $0.42 per contract is assessed higher Options Transaction
the Customer SPY Simple Order Fees equitable and not unfairly Charges as compared to Specialists and
for Removing Liquidity in Section I of discriminatory because the Exchange Market Makers,36 because Specialists
the Pricing Schedule to increase the fee will be assessing the same Fees for and Market Makers have obligations to
from $0.43 to $0.44 per contract is Removing Liquidity for SPY PIXL the market and regulatory requirements,
equitable and not unfairly options to all Non-Customer market which normally do not apply to other
discriminatory because Customers will participants provided they meet the market participants.37 They have
continue to be assessed the lowest Fees aforementioned criteria. Customer
for Removing Liquidity in SPY Simple obligations to make continuous markets,
liquidity benefits all market participants engage in a course of dealings
Orders.31 Customer liquidity benefits all by providing more trading
market participants by providing more reasonably calculated to contribute to
opportunities, which attracts Specialists the maintenance of a fair and orderly
trading opportunities, which attracts and Market Makers. Creating incentives
Specialists and Market Makers. An market, and not make bids or offers or
for Non-Customer market participants to enter into transactions that are
increase in the activity of these market remove liquidity benefits all market
participants in turn facilitates tighter inconsistent with a course of dealings.
participants through increased liquidity Finally, as proposed, Firms will be
spreads, which may cause an additional at the Exchange. A higher percentage of
corresponding increase in order flow assessed a $0.34 per contract electronic
SPY Orders in PIXL leads to increased
from other market participants. fee for electronic Simple Orders in these
auctions and better opportunities for
The Exchange’s proposal to amend symbols, which is a lower fee as
price improvement.
PIXL fees in SPY to increase the amount The Exchange believes that it is compared to Professionals and Broker-
that all other Non-Customer contra reasonable, equitable and not unfairly Dealers.38 The Exchange believes that
parties to the PIXL Order, other than the discriminatory to add clarifying rule the proposed fee differential between
Initiating Order, will be assessed to text to the Pricing Schedule with respect Firms and Professionals and Broker-
remove liquidity from $0.38 to $0.42 per to identifying Non-Customers. Dealers is equitable and not unfairly
contract is reasonable because despite discriminatory because it is similar to
the increase in the fee, the Exchange Section II—Multiply Listed Options the pricing offered by another options
believes this pricing will continue to The Exchange’s proposal to increase exchange.39 Moreover, the proposed
incentivize market participants to the Firm electronic Simple Order fee in
34 See International Securities Exchange LLC’s
transact a greater number of SPY AAPL, BAC, EEM, FB, FXI, IWM, QQQ,
(‘‘ISE’’) Schedule of Fees.
options. The Exchange will continue to TWTR, VXX and XLF from $0.27 to 35 Customers do not pay Options Transaction
assess no fee when a PIXL Order is $0.34 per contract is reasonable because Charges in Multiply Listed Options. See Section II
contra to other than an Initiating Order it will continue to incentivize Firms to of the Pricing Schedule.
in SPY. Customers will continue to send electronic Simple Orders in these 36 Specialists and Market Makers are assessed an
receive a rebate of $0.38 per contract symbols to the Exchange by offering a electronic Penny Pilot Options Transaction Charge
of $0.22 per contract. See Section II of the Pricing
when the PIXL Order is contra to other rate lower than at other options Schedule.
than the Initiating Order. The Exchange exchanges.33 Today Firms pay a 37 See Rule 1014 titled ‘‘Obligations and
is increasing the Fee for Removing discounted fee ($0.27 per contract Restrictions Applicable to Specialists and
Liquidity for Non-Customer contra- compared to the Firm electronic Registered Options Traders.’’
38 Professionals and Broker-Dealers are assessed a
parties to the PIXL Order in SPY, other Multiply Listed Options $0.48 per
rljohnson on DSK3VPTVN1PROD with NOTICES
$0.48 per contract electronic Penny Pilot Options
than the Initiating Order, to $0.42 per contract fee). Pricing by symbol is a Transaction Charge, except for electronic Complex
Orders, which are assessed $0.35 per contract. See
30 See the NASDAQ Options Market LLC’s 32 SeeSection I of the Pricing Schedule. Section II of the Pricing Schedule.
(‘‘NOM’’) pricing at Chapter XV of NOM’s 33 Seethe NASDAQ Options Market LLC’s 39 MIAX Options Exchange (‘‘MIAX’’) assesses
Rulebook. (‘‘NOM’’) pricing at Chapter XV of NOM’s non-member Broker-Dealers a $0.45 [sic] per
31 Other market participants are assessed a $0.49 Rulebook. See also NYSE Arca, Inc. (‘‘NYSE Arca’’) contract standard options transaction fee and a Firm
per contract Fees for Removing Liquidity in SPY Fees and Charges. The non-customer remove fee for is assessed a $0.37 per contract standard options
Simple Orders. Penny Pilot issues is $0.49 per contract. transaction fee. See MIAX’s Fee Schedule.
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![15854 Federal Register / Vol. 80, No. 57 / Wednesday, March 25, 2015 / Notices
differential does not misalign pricing, in electronic Penny Pilot Options and Complex electronic auctions, including
that Firms already benefit from certain $0.25 [sic] per contract in Non-Penny the Quote Exhaust auction and the
pricing advantages that Professionals Pilot Options.42 Further, CBOE assesses opening process, the Exchange
and Broker-Dealers do not also enjoy Broker-Dealers/Professionals/Non- continues to offer these market
(for example, the Firm Monthly Fee Trading Permit Holder Market Makers participants the ability to obtain these
Cap).40 The proposed fee reduction, between $0.35–$0.44 per contract for lower fees as compared to other market
which will apply to Firms, but not to SPX executions (a singly listed CBOE participants.
Professionals and Broker-Dealers, is proprietary product) versus the Clearing The Exchange believes that amending
equitable and not unfairly Trading Permit Holder Proprietary (the the fees assessed to Specialists and
discriminatory for the same reasons that equivalent of Firm on Phlx) who is Market Makers that are on the contra-
the Firm Monthly Fee Cap which assessed between $0.25–$0.01 per side of an electronically-delivered and
applies to Firms and not to contract in SPX for a maximum executed Customer order, excluding
Professionals and Broker-Dealers is differential of $0.43 per contract in a responses to a PIXL auction; and have
equitable and not unfairly CBOE proprietary product.43 Phlx’s reached the Monthly Market Maker Cap
discriminatory. The fee reduction differential as between a Firm on the is equitable and not unfairly
proposed herein, like the Monthly Firm one hand and other non-Customer, non- discriminatory because Specialists and
Fee Cap, provides an incentive for Firms Specialist/Market Makers on the other is Market Makers serve an important role
to transact order flow on the Exchange, not as wide as CBOE’s pricing and on the Exchange with regard to order
which order flow brings increased moreover a competitive offering given interaction and they provide liquidity in
liquidity to the Exchange for the benefit current pricing differentials on other the marketplace. Specialists and Market
of all Exchange participants. To the options exchange such as the MIAX 44 Makers have obligations to the market
extent the purpose of the proposed Firm and CBOE. and regulatory requirements, which
fee reduction is achieved, all the The Exchange believes there is normally do not apply to other market
Exchange’s market participants, nothing impermissible about Phlx participants.45 In addition, the proposed
including Professionals and Broker- offering a discount solely to a Firm, this fees would apply only in certain
Dealers, should benefit from the practice is consistent with the above circumstances where the Market Maker
improved market liquidity. Further, examples and longstanding differentials or Specialist is not otherwise subject to
competitive forces are influencing the between Firms, other Broker-Dealers transaction fees, because the Monthly
price reduction in these symbols for and Professionals. The options Market Maker Cap has been reached,
Firm orders. exchanges have differentiated between: and specifically on the contra-side of an
The Exchange desires to incentivize Retail customers and professional electronically-delivered Customer order.
Firms that receive reduced rates at other customers; broker/dealers clearing in
Section IV, Part A—PIXL Pricing
options exchanges to select Phlx as a the ‘‘Firm’’ range at OCC and broker/
venue by offering competitive pricing to dealers registered as market makers and The Exchange believes it is
these market participants. Such away market makers; early-adopting reasonable, equitable and not unfairly
competitive, differentiated pricing exists market makers; and many others. The discriminatory to amend the PIXL Fees
today on other options exchanges.41 The Commission has also permitted price in Section IV, Part A, when responding
Chicago Board Options Exchange, differentiation based on whether an to a PIXL auction for the below reasons.
Incorporated (‘‘CBOE’’) has a differential order is processed manually versus First, with respect to Penny Pilot
electronically. The proposal is Options, Specialists and Market Makers
as between Clearing Trading Permit
consistent with previously established Responders will continue to be assessed
Holder Proprietary participants (the
pricing proposals accepted by the a $0.30 per contract fee in Penny Pilot
equivalent of Firm on Phlx) and other
Commission. Options. The Exchange is proposing to
non-Customer, non-market maker
The Exchange believes that amending increase the fee from $0.30 to $0.48 per
participants of $0.10 per contract in
the fees assessed to Specialists and contract for other Non-Customers
40 Firms are subject to a maximum fee of $75,000 Market Makers that are on the contra- (Firms, Professionals and Broker-
(‘‘Monthly Firm Fee Cap’’). Firm Floor Option side of an electronically-delivered and Dealers) transacting Penny Pilot
Transaction Charges and QCC Transaction Fees, in executed Customer order, excluding Options. The differential as between
the aggregate, for one billing month may not exceed
responses to a PIXL auction, and have Specialists and Market Makers and
the Monthly Firm Fee Cap per member organization other Non-Customers is reasonable
when such members are trading in their own reached the Monthly Market Maker Cap
proprietary account. All dividend, merger, and is reasonable because the Exchange because Specialists and Market Makers
short stock interest strategy executions (as defined desires to continue to incentivize are assessed a $0.30 per contract
in Section II of the Pricing Schedule) are excluded
Specialists and Market Makers by Responder fee for Penny Pilot Options
from the Monthly Firm Fee Cap. Reversal and electronic transactions plus the Payment
conversion, jelly roll and box spread strategy offering a discount once these
executions (as defined in Section II) are included conditions are met. While the Exchange for Order Flow 46 for a total of fee of
in the Monthly Firm Fee Cap. QCC Transaction is increasing the transaction fees which $0.55 per contract for responding to
Fees are included in the calculation of the Monthly
Specialists and Market Makers must pay auctions involving a Customer. PFOF
Firm Fee Cap. See Section II of the Pricing fees are not paid by other market
Schedule. if they are on the contra-side of an
41 CBOE assesses a reduced fee to Clearing electronically-delivered and executed participants. In addition, Specialists and
Trading Permit Holder Proprietary (Clearing Customer order, excluding responses to Market Makers comprise the majority of
Trading Permit Holder Proprietary clears in the a PIXL auction and have reached the PIXL Responders on Phlx. Other Non-
Firm range at The Options Clearing Corporation Customer Responders (Firms,
rljohnson on DSK3VPTVN1PROD with NOTICES
(‘‘OCC’’)) participants of $0.35 per contract for Monthly Market Maker Cap from $0.17
electronic Penny and Non-Penny Pilot options. to $0.18 per contract for removing Professionals and Broker-Dealers) will
CBOE assesses Broker-Dealers/Professionals/Non- liquidity in Penny Pilot Options, Non-
45 See note 37.
Trading Permit Holder Market Makers a $0.45 per Penny Pilot Options and in non-
contact fee for electronic Penny Pilot Options and 46 The Payment for Order Flow (‘‘PFOF’’) Program
a $0.65 per contract fee for electronic Non-Penny assesses fees to Specialists and Market Makers
42 See CBOE’s Fees Schedule.
Pilot Options classes. See CBOE’s Fee Schedule. resulting from Customer orders. Specialists and
43 Id.
Specifically, see note 11 for clearing explanation Market Makers pat [sic] a $0.25 per contract PFOF
and also Regulatory Circular RG13–038. 44 See note 39 above. for Customer Penny Pilot Options orders.
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![Federal Register / Vol. 80, No. 57 / Wednesday, March 25, 2015 / Notices 15855
now be assessed an increased fee of PFOF 49 for a total fee of $1.10 for The Exchange believes that widening
$0.48 per contract rate in Penny Pilot responding to auctions involving a the differential as between the Initiating
Options (today they pay a $0.38 per Customer order. PFOF fees are not paid Order Fee and the Specialist or Market
contract fee) when contra to a PIXL by other market participants. In Maker contra party to the PIXL Order
Order. The Exchange believes that addition, Specialists and Market Makers ($0.07 (presuming no discount) vs.
market participants will continue to be comprise the majority of PIXL $0.40 per contract for Non-Penny Pilot
encouraged to respond to PIXL auctions, Responders on Phlx. Other Non- Options) as compared to the cost to
despite the increased fees, because the Customer Responders (Firms, transact a PIXL Order today for a
Exchange’s Penny Pilot Options fees for Professionals and Broker-Dealers) will Specialist or Market Maker ($0.07 vs.
Responders remain competitive. The now be assessed an increased fee of $0.38 per contract) is equitable and not
proposed Non-Customer fees are lower $0.70 per contract fee in Non-Penny unfairly discriminatory for the reasons
than fees assessed to Non-Customers by Pilot Options (today they pay $0.38 per below. Similarly, the Exchange believes
other options exchanges.47 contract fee) when contra to a PIXL that widening the differential as
The proposed increase of $0.18 per Order. These are the same fees that between the Initiating Order Fee and the
contract (current $0.30 fee, which is these market participants (Professionals, Professional, Firm or Broker-Dealer
proposed to be increased to $0.48 per Firms and Broker-Dealers) are assessed contra party to the PIXL Order ($0.07
contract) for the Penny Pilot Option fee today for transacting electronic orders in (presuming no discount) vs. $0.48 per
to respond to a PIXL auction for Firms, Multiply Listed Non-Penny Pilot contract for Penny Pilot Options and
Professionals and Broker-Dealers is Options.50 In addition, other options $0.70 per contract for Non-Penny Pilot
equitable and not unfairly exchanges have much higher fees for Options) as compared to the cost to
discriminatory because all Firms, auctions.51 transact a PIXL Order today for a
The proposed increase of $0.32 per Specialist or Market Maker ($0.07 per
Professionals and Broker-Dealers are
contract (current $0.38 fee, which is contract vs. $0.38 per contract) [sic] is
treated in a uniform manner. These
proposed to be $0.70 per contract) for equitable and not unfairly
participants will all be subject to this fee
the Non-Penny Pilot Option fee to discriminatory for the reasons below.
of $0.48 per contract. Customers will
respond to a PIXL auction for Firms, Today, MIAX assesses a Responder to
continue to be assessed no fee, as is the
Professionals and Broker-Dealers is the Prime Auction a per contract Penny
case today and Specialists and Market
equitable and not unfairly Pilot fee of $0.45 per contract to all
Makers will receive lower prices
discriminatory because all Firms, market participants (including priority
because they have obligations to the Professionals and Broker-Dealers are
market and regulatory requirements, customer) and a Non-Penny Pilot fee of
treated in a uniform manner. These $0.90 per contract to all market
which normally do not apply to other market participants will all be subject to
market participants in the continuous participants (including priority
this fee of $0.70 per contract. Customers customer). PRIME is MIAX’s electronic
market, and as such the Exchange will continue to be assessed no fee, as
continues to believe these market price improvement auction for
is the case today and Specialists and options.54 This mechanism is similar to
participants (Specialists and Market Market Makers have obligations to the
Makers) should receive certain the PIXL auction. The differential for
market and regulatory requirements, transactions on MIAX today is $0.05 for
discounts in auctions.48 which normally do not apply to other a Prime Order (similar to the Phlx
Second, with respect to Non-Penny market participants in the continuous Initiating Order) versus $0.45/$0.90 per
Pilot Options fees, while Specialists and market and as such the Exchange contract for Penny/Non-Penny Pilot
Market Makers Responders will be continues to believe these market Options. MIAX’s differential is equal to
assessed an increased fee of $0.40 per participants (Specialists and Market or substantially greater than Phlx’s
contract in Non-Penny Pilot Options Makers) should receive certain proposed differential in PIXL.
(today the fee is $0.38 per contract), this discounts in auctions.52 The proposed While the proposed fees would
$0.40 per contract fee will continue to increased fee from $0.38 to $0.40 per increase the differential between Non-
be lower as compared to the proposed contract for Specialists and Market Customer market participants that
Non-Penny Pilot Options fee of $0.70 Makers in Non-Penny Pilot Options initiated the PIXL auction and Non-
per contract for other Non-Customer when responding to a PIXL auction is Customer market participants
market participants (Firms, equitable and not unfairly responding to the PIXL auction, the
Professionals and Broker-Dealers). The discriminatory because as noted these Exchange believes that despite the fee
differential as between Specialist and market participants have obligations to differential market participants will
Market Makers and other Non- the marketplace.53 continue to be encouraged to transact a
Customers is reasonable because greater number of PIXL Orders because
Specialists and Market Makers are 49 Specialists and Market Makers pay PFOF of
the fees are competitive with or similar
assessed the $0.40 per contract $0.70 per contract for Non-Penny Pilot Options
electronic Customer orders. See Section II of the to those offered at competing options
Responder fee for electronic Non-Penny Pricing Schedule. exchanges. The Exchange believes that
Pilot Options transactions plus the 50 See Section II in the Pricing Schedule.
it is reasonable, equitable and not
51 See NYSE MKT Inc. (‘‘NYSE Amex’’) Fees and
unfairly discriminatory to add clarifying
47 See NYSE MKT Inc. (‘‘NYSE Amex’’) Fees and Charges. Specifically, the RFR Response Non-Penny
Pilot Option Fee (Non-Customer) is $0.90 per
rule text to the Pricing Schedule with
Charges. Specifically, the RFR Response Penny
Pilot Option Fee (Non-Customer) is $0.55 per contract for the CUBE auction. CUBE is NYSE respect to identifying Non-Customers.
contract for the CUBE auction. CUBE is NYSE Amex’s electronic price improvement auction for
Section IV, Part B—FLEX Transaction
rljohnson on DSK3VPTVN1PROD with NOTICES
Amex’s electronic price improvement auction for options. This mechanism is similar to the PIXL
options. This mechanism is similar to the PIXL auction. MIAX assesses a Responder to the Prime Fees
auction. MIAX assesses a Responder to the Prime Auction a per contract Non-Penny Pilot fee of $0.90
Auction a per contract Penny Pilot fee of $0.45 per per contract to all market participants (including The Exchange’s proposal to increase
contract to all market participants (including priority customer). PRIME is MIAX’s electronic the FLEX Transaction Fees for Multiply
priority customer). PRIME is MIAX’s electronic price improvement auction for options. This
price improvement auction for options. This mechanism is similar to the PIXL auction. 54 See Securities Exchange Act Release No. 72943
mechanism is similar to the PIXL auction. 52 See note 37.
(August 28, 2014), 79 FR 52785 (September 4, 2014)
48 See note 37. 53 Id. (SR–MIAX–2014–45).
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![Federal Register / Vol. 80, No. 57 / Wednesday, March 25, 2015 / Notices 15857
Amex when responding to a price C. Self-Regulatory Organization’s those that may be withheld from the
improvement auction.63 With respect to Statement on Comments on the public in accordance with the
Specialists and Market Makers, these Proposed Rule Change Received From provisions of 5 U.S.C. 552, will be
market participants are assessed PFOF Members, Participants, or Others available for Web site viewing and
when contra to an electronically- No written comments were either printing in the Commission’s Public
delivered Customer order, while other solicited or received. Reference Room, 100 F Street NE.,
market participants are not assessed Washington, DC 20549 on official
III. Date of Effectiveness of the business days between the hours of
such fees.64 The Exchange does not
Proposed Rule Change and Timing for 10:00 a.m. and 3:00 p.m. Copies of such
believe the pricing changes will provide Commission Action
a competitive advantage for Specialists filing also will be available for
and Market Makers as compared to The foregoing rule change has become inspection and copying at the principal
other Non-Customer market participants effective pursuant to Section office of the Exchange. All comments
19(b)(3)(A)(ii) of the Act.65 At any time received will be posted without change;
(i.e., Professionals, Broker-Dealers and
within 60 days of the filing of the the Commission does not edit personal
Firms), with respect to intra-market
proposed rule change, the Commission identifying information from
competition. Specialists and Markets summarily may temporarily suspend submissions. You should submit only
would continue to be assessed lower such rule change if it appears to the information that you wish to make
rates as compared to these market Commission that such action is available publicly. All submissions
participants. Further, with respect to necessary or appropriate in the public should refer to File Number SR–Phlx–
inter-market competition, the Exchange interest, for the protection of investors, 2015–25, and should be submitted on or
believes that the proposed change will or otherwise in furtherance of the before April 15, 2015.
enhance the competiveness of the purposes of the Act. If the Commission For the Commission, by the Division of
Exchange relative to other exchanges takes such action, the Commission shall Trading and Markets, pursuant to delegated
that offer their own electronic crossing institute proceedings to determine authority.66
mechanism. Other market participants whether the proposed rule should be Brent J. Fields,
will pay the same Options Transaction approved or disapproved. Secretary.
Charges as they pay today for all other IV. Solicitation of Comments [FR Doc. 2015–06710 Filed 3–24–15; 8:45 am]
Multiply Listed Options transactions
that are not transacted within the PIXL Interested persons are invited to BILLING CODE 8011–01–P
auction. submit written data, views, and
arguments concerning the foregoing,
The Exchange’s proposal to increase including whether the proposed rule SECURITIES AND EXCHANGE
the FLEX Transaction Fees for Multiply change is consistent with the Act. COMMISSION
Listed Options for Professionals, Comments may be submitted by any of
Specialists, Market Makers, Broker- Sunshine Act Meeting.
the following methods:
Dealers and Firms from $0.15 to $0.25 Notice is hereby given, pursuant to
Electronic Comments
per contract does not create an undue the provisions of the Government in the
burden on competition because the • Use the Commission’s Internet Sunshine Act, Public Law 94–409, that
Exchange is assessing the same fees for comment form (http://www.sec.gov/ the Securities and Exchange
FLEX transactions in Multiply Listed rules/sro.shtml); or Commission will hold an Open Meeting
• Send an email to rule-comments@ on Wednesday, March 25, 2015 at 10:00
Options on all market participants,
sec.gov. Please include File Number SR– a.m., in the Auditorium, Room L–002.
except Customers. Customers
Phlx–2015–25 on the subject line. The subject matter of the Open
traditionally are not assessed
transaction fees because Customer Paper Comments Meeting will be:
• The Commission will consider
orders bring valuable liquidity to the • Send paper comments in triplicate whether to propose amendments to Rule
market. to Brent J. Fields, Secretary, Securities 15b9–1 (Exemption for Certain
The Exchange operates in a highly and Exchange Commission, 100 F Street Exchange Members) under the
competitive market, comprised of NE., Washington, DC 20549–1090. Securities Exchange Act of 1934.
twelve exchanges, in which market All submissions should refer to File • The Commission will consider
participants can easily and readily Number SR–Phlx–2015–25. This file whether to adopt rules and forms
direct order flow to competing venues if number should be included on the related to the offer and sale of securities
they deem fee levels at a particular subject line if email is used. To help the pursuant to Section 3(b) of the
venue to be excessive or rebates to be Commission process and review your Securities Act of 1933 to implement
inadequate. Accordingly, the fees that comments more efficiently, please use Section 401 of the Jumpstart Our
are assessed and the rebates paid by the only one method. The Commission will Business Startups Act.
post all comments on the Commission’s The duty officer determined that no
Exchange, as described in the proposal,
Internet Web site (http://www.sec.gov/ earlier notice thereof was possible.
are influenced by these robust market
rules/sro.shtml). Copies of the At times, changes in Commission
forces and therefore must remain
submission, all subsequent priorities require alterations in the
competitive with fees charged and amendments, all written statements scheduling of meeting items.
rebates paid by other venues and with respect to the proposed rule For further information and to
rljohnson on DSK3VPTVN1PROD with NOTICES
therefore must continue to be reasonable change that are filed with the ascertain what, if any, matters have been
and equitably allocated to those Commission, and all written added, deleted, or postponed, please
members that opt to direct orders to the communications relating to the contact:
Exchange rather than competing venues. proposed rule change between the The Office of the Secretary at (202)
Commission and any person, other than 551–5400.
63 See notes 47 and 51.
64 See Section II of the Pricing Schedule. 65 15 U.S.C. 78s(b)(3)(A)(ii). 66 17 CFR 200.30–3(a)(12).
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Document Created: 2018-02-21 09:49:20
Document Modified: 2018-02-21 09:49:20
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 15850 |
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