81 FR 1976 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Permit Fees
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 9 (January 14, 2016)
Federal Register Volume 81, Issue 9 (January 14, 2016)
| Page Range | 1976-1980 | |
| FR Document | 2016-00569 |
[Federal Register Volume 81, Number 9 (Thursday, January 14, 2016)] [Notices] [Pages 1976-1980] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-00569] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76858; File No. SR-Phlx-2015-109) Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Permit Fees January 8, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on December 30, 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 amend the Exchange's Pricing Schedule at Section VI, entitled ``Membership Fees.'' The Exchange also proposes to correct a reference to The NASDAQ OMX Group, Inc. within the Pricing Schedule. The Exchange purposes to increase certain permit fees. The Exchange's permit fees remain competitive with those of other options Exchanges. While the changes proposed herein are effective upon filing, the Exchange has designated the amendments to become operative on January 4, 2016. The text of the proposed rule change is available on the Exchange's Web site at http://nasdaqomxphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to increase permit fees to allocate its costs to various options market participants, specifically floor participants. The Exchange assesses Permit Fees by market participant. Today, the Exchange assesses the same monthly Permit Fees of $2,300 to Floor Brokers,\3\ Specialists \4\ and Market Makers.\5\ All other market [[Page 1977]] participants (Professionals,\6\ Firms \7\ and Broker-Dealers,\8\ collectively ``Other Market Participants'') are assessed a Permit Fee of $4,000 in a given month, unless the member or member organization or those member organizations under Common Ownership,\9\ execute at least 100 options in a Phlx house account that is assigned to one of the member organizations in a given month, in which case the Permit Fee is $2,300 for that month. The Exchange believes that 100 options in a given month continues to be a reasonable level given the volume of options transacted on Phlx to receive the lower Permit Fee. Also, today, option members and member organizations pay an additional Permit Fee for each sponsored options participant, which fee is the Permit Fee that is assessed to the member or member organization sponsoring the options participant,\10\ of either $2,300 or $4,000. --------------------------------------------------------------------------- \3\ A ``Floor Broker'' is defined in Phlx Rule 1060 as ``[a]n individual who is registered with the Exchange for the purpose, while on the Options Floor, of accepting and executing options orders received from members and member organizations.'' \4\ A ``Specialist'' is an Exchange member who is registered as an options specialist. See Phlx Rule 1020(a). \5\ A ``Market Maker'' includes Registered Options Traders (``ROTs'') (see Rule 1014(b)(i) and (ii)), which includes Streaming Quote Traders (``SQTs'') (see Rule 1014(b)(ii)(A)) and Remote Streaming Quote Traders (``RSQTs'') (see Rule 1014(b)(ii)(B)). An RSQT is defined in Exchange Rule in 1014(b)(ii)(B) as an ROT that is a member affiliated with an Remote Streaming Quote Trader Organization or ``RSQTO'' with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically in options to which such RSQT has been assigned. A RSQTO, which may also be referred to as a Remote Market Making Organization (``RMO''), is a member organization in good standing that satisfies the RSQTO readiness requirements in Rule 507(a). An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT who has received permission from the Exchange to generate and submit option quotations electronically in options to which such SQT is assigned. \6\ 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). \7\ The term ``Firm'' applies to any transaction that is identified by a member or member organization for clearing in the Firm range at The Options Clearing Corporation. \8\ The term ``Broker-Dealer'' applies to any transaction that is not subject to any of the other transaction fees applicable within a particular category. \9\ The term ``Common Ownership'' shall mean members or member organizations under 75% common ownership or control. See Preface to Exchange's Pricing Schedule. \10\ See Exchange Rule 1094 titled Sponsored Participants. A Sponsored Participant may obtain authorized access to the Exchange only if such access is authorized in advance by one or more Sponsoring Member Organizations. Sponsored Participants must enter into and maintain participant agreements with one or more Sponsoring Member Organizations establishing a proper relationship(s) and account(s) through which the Sponsored Participant may trade on the Exchange. --------------------------------------------------------------------------- The Exchange is not amending the Permit Fees for Other Market Participants or the criteria of the lower Permit Fee of $2,300 per month for members and member organizations that execute a certain amount of volume on the Exchange.\11\ --------------------------------------------------------------------------- \11\ A Series A-1 permit shall only be issued to an individual who is a natural person of at least twenty-one (21) years of age. A Series A-1 permit shall only be issued to a corporation who meets the eligibility and application requirements set forth in the By- Laws and Rules, including, without limitation, Rule 972, and no individual shall hold more than a single Series A-1 permit. See Rule 908. All members are required to have a permit. A member organization will be billed for each permit that is affiliated with the member organization. Each Floor Brokers must obtain a permit to transact business on the trading floor. Each Market Maker must obtain a permit to transact business either electronically or on the trading floor. Each member organization must have at least one member qualifying the firm and that one member will be billed a permit. --------------------------------------------------------------------------- The Exchange also proposes to correct a reference to The NASDAQ OMX Group, Inc. within the Pricing Schedule. The amendments are detailed below. Permit Fee AmendmentsThe Exchange proposes to increase the Floor Broker Permit Fee from $2,300 to $3,000 per month. The Exchange proposes to increase the Floor Specialist \12\ and Floor Market Maker \13\ Permit Fee from $2,300 to $4,500 per month. --------------------------------------------------------------------------- \12\ A Floor Specialist is a Specialist that does have a physical presence on the Exchange's trading floor. \13\ A Floor Market Maker is a Market Maker that does have a physical presence on the Exchange's trading floor. --------------------------------------------------------------------------- The Exchange proposes to increase the Permit Fee for Remote Specialists and Remote Market Makers \14\ from $2,300 to $4,000 \15\ and offer Remote Specialists and Remote Market Makers an opportunity to lower the Permit Fee to $2,300 provided the member or member organization, or member organizations under Common Ownership, executes at least 100 options in a Phlx house account that is assigned to one of the member organizations in a given month. --------------------------------------------------------------------------- \14\ Remote Specialists and Remote Market Makers do not have a physical presence on an Exchange floor. \15\ While this Permit fee for Remote Specialists and Remote Market Makers is being increased, today all Remote Specialists and Remote Market Makers qualify for the lower Permit Fee of $2,300. --------------------------------------------------------------------------- The Exchange believes that these increased fees will raise revenue for the Exchange. The Exchange believes that these Permit Fees remain competitive with fees at other options exchanges \16\ and reasonably allocate costs based on Exchange resources consumed by these market participants. --------------------------------------------------------------------------- \16\ See note 25 below. --------------------------------------------------------------------------- Name Change The Exchange proposes to correct a reference to The NASDAQ OMX Group, Inc. within the Pricing Schedule to newly named Nasdaq, Inc. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \17\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act \18\ 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 the Exchange operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f(b). \18\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, for example, the Commission indicated that market forces should generally determine the price of non-core market data because national market system regulation ``has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.'' \19\ Likewise, in NetCoalition v. NYSE Arca, Inc. [sic] \20\ (``NetCoalition'') the DC Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\21\ As the court emphasized, the Commission ``intended in Regulation NMS that `market forces, rather than regulatory requirements' play a role in determining the market data . . . to be made available to investors and at what cost.'' \22\ --------------------------------------------------------------------------- \19\ Securities Exchange Act Release No. 51808 [sic] at 37499 (June 9, 2005) (``Regulation NMS Adopting Release''). \20\ NetCoalition v. NYSE Arca, Inc. [sic] 615 F.3d 525 (D.C. Cir. 2010). \21\ See NetCoalition, at 534. \22\ Id. at 537. --------------------------------------------------------------------------- Further, ``[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percetages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .'' \23\ Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. --------------------------------------------------------------------------- \23\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783). --------------------------------------------------------------------------- Amendments to Permit Fees The Exchange's proposal to increase Floor Broker Permit Fees from $2,300 to $3,000 and Floor Specialist and Floor Market Maker Permit Fees from $2,300 to $4,500 is reasonable because the [[Page 1978]] Exchange incurs costs in operating and maintaining a trading floor that are unique to a floor operation. The Exchange believes it is reasonable to allocate the Exchange's expenses, among the market participants on the trading floor, and raise the floor Permit Fees because of the unique resources consumed by each category of floor market participant and additional floor services. The proposed increase covers the rising facility costs and staffing expenses required to service the floor community, process trading tickets and service the trading floor. The Exchange has not increased these fees in two years. Floor Specialists and Floor Market Makers benefit from the access they have to interact with orders which are made available in open outcry on the trading floor. These market participants may choose to conduct their business either electronically or on the trading floor, unlike Floor Brokers, who have a business model that is naturally tied to the physical trading space. The Exchange offers Specialists and Market Makers a choice on how to conduct business, electronic or floor. The Exchange believes that it is reasonable to assess Floor Specialists and Floor Market Makers the higher floor permits because it is offering different trading experiences to these market participants. The Exchange notes that assessing different Permit Fee rates to different types of market participants is not novel.\24\ Both CBOE and NYSE Arca have different fixed and transaction fees for floor as compared to electronically transmitted orders. Also, the proposed Permit Fees are competitive with fees at other options exchanges. Both CBOE and NYSE Arca assess different fees to Floor Brokers and Market Makers.\25\ --------------------------------------------------------------------------- \24\ The Chicago Board Options Exchange, Incorporated (``CBOE''), the International Securities Exchange, LLC (``ISE'') and Miami International Securities Exchange LLC (``MIAX'') assess different Trading Permit Fees to different market participants. See CBOE's Fees Schedule, ISE's Fee Schedule and MIAX's Fee Schedule. \25\ See CBOE's Fees Schedule. A Market-Maker Trading Permit is $5,500 per month, except for ETH only permits which are $1,000 per month. A Floor Broker Trading Permit is $9,000 per month. An Electronic Access Permit is $1,600 per month, except for ETH only which is $500 per month. There are also other permits for SPX and VIX trading and some waivers apply to ETH for the first permit. See also NYSE Arca, Inc.'s (``NYSE Arca'') Options Trading Participation Rights in NYSE Arca Options Fees and Charges. Floor Brokers on NYSE Arca are assessed a $1,000 per month options trading participant rights (``OTP'') fee for the first OTP and $250 for each additional OTP. NYSE Arca Market Makers are assessed $6,000 for the first OTP and then the OTP fee declines on a scale down to $1,000 for additional OTPs. --------------------------------------------------------------------------- The Exchange's proposal to increase Floor Broker Permit Fees from $2,300 to $3,000 and Floor Specialist and Floor Market Maker from $2,300 to $4,500 is equitable and not unfairly discriminatory because the Exchange seeks to allocate the costs in a fair and equitable manner by assessing fees consistent with the consumption of resources. The differentiation in fees as between electronic trading and floor trading recognizes these different business models. For example, Floor Brokers are registered with the Exchange for the purpose, while on the options floor, of accepting and executing options orders received from members and member organizations.\26\ This type of business model is distinct from that of an electronic trader. Additionally, Floor Specialists and Floor Market Makers have the opportunity to interact with Floor Broker order flow on the Exchange floor and to provide liquidity to the Exchange. The proposed Permit Fee structure recognizes the resources consumed by these market participants on the trading floor. The Exchange is one of only four options exchanges that offer a trading floor environment in addition to the electronic environment. The Exchange is required to staff the trading floor with regulatory personnel and provide a physical infrastructure in addition to other costs which are also incurred to operate an electronic environment. The floor environment offers floor market participants the choice of transacting certain complex transactions, i.e. a Complex Order \27\ with multiple legs, on the trading floor in open outcry or the electronic market. Certain FLEX transactions,\28\ transfers \29\ or accommodation transactions \30\ also lend themselves to the trading floor environment and the Exchange. --------------------------------------------------------------------------- \26\ See Exchange Rule 1060. \27\ A Complex Order is any order involving the simultaneous purchase and/or sale of two or more different options series in the same underlying security, priced at a net debit or credit based on the relative prices of the individual components, for the same account, for the purpose of executing a particular investment strategy. Furthermore, a Complex Order can also be a stock-option order, which is an order to buy or sell a stated number of units of an underlying stock or ETF coupled with the purchase or sale of options contract(s). See Exchange Rule 1080, Commentary .08(a)(i). \28\ See Phlx Rule 1079. \29\ See Phlx Rule 1058. \30\ See Phlx Rule 1059. --------------------------------------------------------------------------- The Exchange believes that the increased Permit Fees to Floor Brokers, Floor Specialists and Floor Market Makers is equitable and not unfairly discriminatory because the Exchange is allocating the additional floor cost to the market participants that benefit from the trading floor. Further, the Exchange believes that it is equitable and not unfairly discriminatory to assess Floor Specialists and Floor Market Makers the higher floor Permit Fees among all floor participants because Specialists and Market Makers may decide to stream remotely or conduct their business on the trading floor in open outcry. These market participants are offered the opportunity to also avail themselves of both means to access the Exchange, whereby they may interact with order floor in the electronic Order Book and/or interact with order floor in the trading crowd on the Exchange's trading floor. This opportunity to conduct their business on the trading floor and access the Exchange through both avenues comes at a cost to the Exchange,\31\ which costs is being allocated to Floor Specialists and Floor Market Makers through higher Permit Fees as compared to Floor Brokers. --------------------------------------------------------------------------- \31\ As noted herein, the Exchange staffs the trading floor with regulatory personnel and provides a physical infrastructure for the trading floor. Surveillances for the floor and electronic environment may also differ. For example, the Exchange monitors Specialist and Market Maker quoting obligations separately for electronic quoting versus floor quoting. --------------------------------------------------------------------------- The Exchange's proposal to increase Permit Fees for Remote Specialists and Remote Market Makers from $2,300 to $4,000 is reasonable because the Exchange is allocating costs differently as between electronic and floor trading. The differentiation in fees as between electronic trading and floor trading recognizes the distinctions in these business models. The Exchange's proposal will also offer Remote Specialists and Remote Market Makers the opportunity to reduce the Permit Fee from $4,000 to $2,300 by directing at least 100 option contracts to the Exchange in a given month.\32\ This proposal allocates costs to each market participants based on their chosen business model. --------------------------------------------------------------------------- \32\ The Exchange believes that 100 options in a given month continues to be a reasonable level given the volume of options transacted on Phlx to receive the lower Permit Fee. --------------------------------------------------------------------------- The Exchange's proposal to increase Permit Fees for Remote Specialists and Remote Market Makers that conduct an electronic business from $2,300 to $4,000 is equitable and not unfairly discriminatory as all electronic market participants will uniformly be assessed a $4,000 a month Permit Fee and will uniformly be offered an opportunity to decrease that Permit Fee to $2,300 by directing at least 100 option contracts in a given month to the Exchange. This liquidity benefits all market participants and in turn brings revenue to the Exchange through transaction fees assessed to these orders. The Exchange believes that assessing different rates for [[Page 1979]] floor market participants as compared to electronic market participants for Permit Fees is equitable and not unfairly discriminatory because of the increasing costs incurred by the Exchange in operating and maintaining the trading floor, which costs have increased over the years. The Exchange believes that it is equitable and not unfairly discriminatory to assess Remote Specialists and Remote Market Makers a lower rate than Floor Specialists and Floor Market Makers. Specialists and Market Makers have the ability to operate an electronic business on the Exchange, as compared to Floor Brokers, who have a business model that is naturally tied to the physical trading space. Floor Specialists and Floor Market Makers desiring to interact with the order flow generated by these Floor Brokers are offered the opportunity to transact business on the trading floor in addition to the electronic market. This opportunity comes at a cost for the Exchange which is being equitably allocated to the consumers of this resource. Name Change The Exchange's proposal to correct the reference to The NASDAQ OMX Group, Inc. within the reference to the trademark PHLX[supreg] to recently renamed Nasdaq, Inc.\33\ is reasonable, equitable and not unfairly discriminatory because the amendment simply updates the name. --------------------------------------------------------------------------- \33\ See Securities Exchange Act Release No. 75421 (July 16, 2015), 80 FR 42136 (July 10, 2015) (SR-BSECC-2015-001; SR-BX-2015- 030; SR-NASDAQ-2015-058; SR-Phlx-2015-46; SR-SCCP-2015-01). --------------------------------------------------------------------------- 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. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. The Exchange's proposal to increase Floor Broker Permit Fees from $2,300 to $3,000 and Floor Specialist and Floor Market Maker from $2,300 to $4,500 does not impose an undue burden on intra-market competition because the Exchange proposes to allocate the costs to floor participants because they consume a greater amount of Exchange resources. The Exchange is required to staff the trading floor with regulatory personnel and provide a physical infrastructure in addition to other costs which are also incurred to operate an electronic environment. The Exchange has incurred increasing costs in operating and maintaining the trading floor, which costs have increased over the years. Specialists and Market Makers have the ability to operate an electronic business on the Exchange, as compared to Floor Brokers, who have a business model that is naturally tied to the physical trading space. Floor Specialists and Floor Market Makers desiring to interact with the order flow generated by these Floor Brokers are offered the opportunity to transact business on the trading floor in addition to the electronic market. This opportunity comes at a cost for the Exchange. The Exchange believes that the increased fee to Floor Specialists and Floor Market Makers does not impose an undue burden on intra-market competition because the Exchange is allocating the additional floor cost to the participants that benefit from such a dual structure. The Exchange's proposal to increase Permit Fees for Remote Specialists and Remote Market Makers from $2,300 to $4,000 does not impose an undue burden on intra-market competition because all electronic market participants will uniformly be assessed a $4,000 a month Permit Fee and will uniformly be offered an opportunity to decrease that fee by directing at least 100 option contracts in a given month. This liquidity benefits all market participants and in turn brings revenue to the Exchange through transaction fees assessed to these orders. The Exchange believes that assessing Remote Specialists and Remote Market Makers a lower rate than Floor Specialists and Floor Market Makers does not impose an undue burden on intra-market competition because Specialists and Market Makers have the ability to operate an electronic business on the Exchange, as compared to Floor Brokers, who have a business model that is naturally tied to the physical trading space. Specialists and Market Makers desiring to interact with the order flow generated by these Floor Brokers are offered the opportunity to transact business on the trading floor in addition to the electronic market. This opportunity comes at a cost for the Exchange. The proposed Permit Fees are competitive with fees at other options exchanges.\34\ If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. --------------------------------------------------------------------------- \34\ See note 25 above. --------------------------------------------------------------------------- Name Change The Exchange's proposal to correct the reference to The NASDAQ OMX Group, Inc. within the reference to the trademark PHLX[supreg] to recently renamed Nasdaq, Inc. does not impose any undue burden on intra-market competition because the amendment simply updates the name. 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.\35\ --------------------------------------------------------------------------- \35\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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. 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. [[Page 1980]] Comments may be submitted by any of the following methods: Electronic Comments Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-Phlx-2015-109 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2015-109. 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-2015-109, and should be submitted on or before February 4, 2016. --------------------------------------------------------------------------- \36\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\36\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-00569 Filed 1-13-16; 8:45 am] BILLING CODE 8011-01-P
![1976 Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices
In addition, the following provisions to the proposed plan between the reference to The NASDAQ OMX Group,
shall be part of this 17d–2 Agreement: Commission and any person, other than Inc. within the Pricing Schedule.
Securities Exchange Act of 1934: those that may be withheld from the The Exchange purposes to increase
Section 15(f) public in accordance with the certain permit fees. The Exchange’s
* * * * * provisions of 5 U.S.C. 552, will be permit fees remain competitive with
available for Web site viewing and those of other options Exchanges. While
III. Date of Effectiveness of the printing in the Commission’s Public the changes proposed herein are
Proposed Plan and Timing for Reference Room, on official business effective upon filing, the Exchange has
Commission Action days between the hours of 10:00 a.m. designated the amendments to become
Pursuant to Section 17(d)(1) of the and 3:00 p.m. Copies of the plan also operative on January 4, 2016.
Act 14 and Rule 17d–2 thereunder,15 will be available for inspection and The text of the proposed rule change
after January 29, 2016, the Commission copying at the principal offices of NSX is available on the Exchange’s Web site
may, by written notice, declare the plan and FINRA. All comments received will at http://nasdaqomxphlx.
submitted by NSX and FINRA, File No. be posted without change; the cchwallstreet.com/, at the principal
4–694, to be effective if the Commission Commission does not edit personal office of the Exchange, and at the
finds that the plan is necessary or identifying information from Commission’s Public Reference Room.
appropriate in the public interest and submissions. You should submit only II. Self-Regulatory Organization’s
for the protection of investors, to foster information that you wish to make Statement of the Purpose of, and
cooperation and coordination among available publicly. All submissions Statutory Basis for, the Proposed Rule
self-regulatory organizations, or to should refer to File Number 4–694 and Change
remove impediments to and foster the should be submitted on or before
development of the national market January 29, 2016. In its filing with the Commission, the
system and a national system for the Exchange included statements
For the Commission, by the Division of concerning the purpose of and basis for
clearance and settlement of securities Trading and Markets, pursuant to delegated
transactions and in conformity with the authority.16 the proposed rule change and discussed
factors set forth in Section 17(d) of the any comments it received on the
Robert W. Errett,
Act. proposed rule change. The text of these
Deputy Secretary.
statements may be examined at the
IV. Solicitation of Comments [FR Doc. 2016–00567 Filed 1–13–16; 8:45 am] places specified in Item IV below. The
BILLING CODE 8011–01–P Exchange has prepared summaries, set
In order to assist the Commission in
determining whether to approve the forth in sections A, B, and C below, of
proposed 17d–2 Plan and to relieve NSX the most significant aspects of such
SECURITIES AND EXCHANGE statements.
of the responsibilities which would be COMMISSION
assigned to FINRA, interested persons A. Self-Regulatory Organization’s
are invited to submit written data, [Release No. 34–76858; File No. SR–Phlx–
2015–109) Statement of the Purpose of, and
views, and arguments concerning the Statutory Basis for, the Proposed Rule
foregoing. Comments may be submitted Self-Regulatory Organizations; Change
by any of the following methods: NASDAQ OMX PHLX LLC; Notice of 1. Purpose
Electronic Comments Filing and Immediate Effectiveness of
Proposed Rule Change To Amend The Exchange proposes to increase
• Use the Commission’s Internet permit fees to allocate its costs to
comment form (http://www.sec.gov/ Permit Fees
various options market participants,
rules/other.shtml); or January 8, 2016. specifically floor participants. The
• Send an email to rule-comments@ Pursuant to Section 19(b)(1) of the Exchange assesses Permit Fees by
sec.gov. Please include File Number 4– Securities Exchange Act of 1934 market participant. Today, the Exchange
694 on the subject line. (‘‘Act’’),1 and Rule 19b–4 thereunder,2 assesses the same monthly Permit Fees
Paper Comments notice is hereby given that on December of $2,300 to Floor Brokers,3 Specialists 4
30, 2015, NASDAQ OMX PHLX LLC and Market Makers.5 All other market
• Send paper comments in triplicate (‘‘Phlx’’ or ‘‘Exchange’’) filed with the
to Secretary, Securities and Exchange Securities and Exchange Commission 3 A ‘‘Floor Broker’’ is defined in Phlx Rule 1060
Commission, Station Place, 100 F Street (‘‘SEC’’ or ‘‘Commission’’) the proposed as ‘‘[a]n individual who is registered with the
NE., Washington, DC 20549–1090. rule change as described in Items I, II,
Exchange for the purpose, while on the Options
Floor, of accepting and executing options orders
All submissions should refer to File and III, below, which Items have been received from members and member
Number 4–694. This file number should prepared by the Exchange. The organizations.’’
be included on the subject line if email Commission is publishing this notice to 4 A ‘‘Specialist’’ is an Exchange member who is
is used. To help the Commission solicit comments on the proposed rule registered as an options specialist. See Phlx Rule
process and review your comments 1020(a).
change from interested persons. 5 A ‘‘Market Maker’’ includes Registered Options
more efficiently, please use only one Traders (‘‘ROTs’’) (see Rule 1014(b)(i) and (ii)),
method. The Commission will post all I. Self-Regulatory Organization’s
which includes Streaming Quote Traders (‘‘SQTs’’)
comments on the Commission’s Internet Statement of the Terms of the Substance (see Rule 1014(b)(ii)(A)) and Remote Streaming
Web site (http://www.sec.gov/rules/ of the Proposed Rule Change Quote Traders (‘‘RSQTs’’) (see Rule 1014(b)(ii)(B)).
An RSQT is defined in Exchange Rule in
mstockstill on DSK4VPTVN1PROD with NOTICES
other.shtml). Copies of the submission, The Exchange proposes to amend the 1014(b)(ii)(B) as an ROT that is a member affiliated
all subsequent amendments, all written Exchange’s Pricing Schedule at Section with an Remote Streaming Quote Trader
statements with respect to the proposed VI, entitled ‘‘Membership Fees.’’ The Organization or ‘‘RSQTO’’ with no physical trading
plan that are filed with the Commission, Exchange also proposes to correct a floor presence who has received permission from
the Exchange to generate and submit option
and all written communications relating quotations electronically in options to which such
16 17 CFR 200.30–3(a)(34). RSQT has been assigned. A RSQTO, which may
14 15 U.S.C. 78q(d)(1). 1 15 U.S.C. 78s(b)(1). also be referred to as a Remote Market Making
15 17 CFR 240.17d–2. 2 17 CFR 240.19b–4. Organization (‘‘RMO’’), is a member organization in
VerDate Sep<11>2014 16:39 Jan 13, 2016 Jkt 238001 PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 E:\FR\FM\14JAN1.SGM 14JAN1](https://thefederalregister.org/doc/81_FR_1985/page/1.svg)
![Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices 1977
participants (Professionals,6 Firms 7 and The Exchange also proposes to correct reasonable dues, fees and other charges
Broker-Dealers,8 collectively ‘‘Other a reference to The NASDAQ OMX among members and issuers and other
Market Participants’’) are assessed a Group, Inc. within the Pricing Schedule. persons using any facility or system
Permit Fee of $4,000 in a given month, The amendments are detailed below. which the Exchange operates or
unless the member or member controls, and is not designed to permit
Permit Fee Amendments
organization or those member unfair discrimination between
organizations under Common • The Exchange proposes to increase customers, issuers, brokers, or dealers.
Ownership,9 execute at least 100 the Floor Broker Permit Fee from $2,300 The Commission and the courts have
options in a Phlx house account that is to $3,000 per month. repeatedly expressed their preference
assigned to one of the member • The Exchange proposes to increase for competition over regulatory
organizations in a given month, in the Floor Specialist 12 and Floor Market intervention in determining prices,
which case the Permit Fee is $2,300 for Maker 13 Permit Fee from $2,300 to products, and services in the securities
that month. The Exchange believes that $4,500 per month. markets. In Regulation NMS, for
100 options in a given month continues • The Exchange proposes to increase example, the Commission indicated that
to be a reasonable level given the the Permit Fee for Remote Specialists market forces should generally
volume of options transacted on Phlx to and Remote Market Makers 14 from determine the price of non-core market
receive the lower Permit Fee. Also, $2,300 to $4,000 15 and offer Remote data because national market system
today, option members and member Specialists and Remote Market Makers regulation ‘‘has been remarkably
organizations pay an additional Permit an opportunity to lower the Permit Fee successful in promoting market
Fee for each sponsored options to $2,300 provided the member or competition in its broader forms that are
participant, which fee is the Permit Fee member organization, or member most important to investors and listed
that is assessed to the member or organizations under Common companies.’’ 19 Likewise, in
member organization sponsoring the Ownership, executes at least 100 NetCoalition v. NYSE Arca, Inc. [sic] 20
options participant,10 of either $2,300 or options in a Phlx house account that is (‘‘NetCoalition’’) the DC Circuit upheld
$4,000. assigned to one of the member the Commission’s use of a market-based
The Exchange is not amending the organizations in a given month. approach in evaluating the fairness of
Permit Fees for Other Market The Exchange believes that these market data fees against a challenge
Participants or the criteria of the lower increased fees will raise revenue for the claiming that Congress mandated a cost-
Permit Fee of $2,300 per month for Exchange. The Exchange believes that based approach.21 As the court
members and member organizations that these Permit Fees remain competitive emphasized, the Commission ‘‘intended
execute a certain amount of volume on with fees at other options exchanges 16 in Regulation NMS that ‘market forces,
the Exchange.11 and reasonably allocate costs based on rather than regulatory requirements’
Exchange resources consumed by these play a role in determining the market
good standing that satisfies the RSQTO readiness market participants. data . . . to be made available to
requirements in Rule 507(a). An SQT is defined in
Exchange Rule 1014(b)(ii)(A) as an ROT who has Name Change investors and at what cost.’’ 22
received permission from the Exchange to generate Further, ‘‘[n]o one disputes that
and submit option quotations electronically in
• The Exchange proposes to correct a competition for order flow is ‘fierce.’
options to which such SQT is assigned. reference to The NASDAQ OMX Group, . . . As the SEC explained, ‘[i]n the U.S.
6 The term ‘‘Professional’’ means any person or Inc. within the Pricing Schedule to national market system, buyers and
entity that (i) is not a broker or dealer in securities, newly named Nasdaq, Inc.
and (ii) places more than 390 orders in listed sellers of securities, and the broker-
options per day on average during a calendar month 2. Statutory Basis dealers that act as their order-routing
for its own beneficial account(s). See Rule agents, have a wide range of choices of
1000(b)(14). The Exchange believes that its
where to route orders for execution’;
7 The term ‘‘Firm’’ applies to any transaction that proposal is consistent with Section 6(b)
[and] ‘no exchange can afford to take its
is identified by a member or member organization of the Act 17 in general, and furthers the
for clearing in the Firm range at The Options market share percetages for granted’
objectives of Sections 6(b)(4) and 6(b)(5)
Clearing Corporation. because ‘no exchange possesses a
8 The term ‘‘Broker-Dealer’’ applies to any of the Act 18 in particular, in that it
monopoly, regulatory or otherwise, in
transaction that is not subject to any of the other provides for the equitable allocation of
transaction fees applicable within a particular
the execution of order flow from broker
category. member organization will be billed for each permit
dealers’. . . .’’ 23 Although the court
9 The term ‘‘Common Ownership’’ shall mean
that is affiliated with the member organization. and the SEC were discussing the cash
members or member organizations under 75% Each Floor Brokers must obtain a permit to transact equities markets, the Exchange believes
common ownership or control. See Preface to business on the trading floor. Each Market Maker that these views apply with equal force
Exchange’s Pricing Schedule. must obtain a permit to transact business either
10 See Exchange Rule 1094 titled Sponsored
electronically or on the trading floor. Each member
to the options markets.
Participants. A Sponsored Participant may obtain organization must have at least one member Amendments to Permit Fees
authorized access to the Exchange only if such qualifying the firm and that one member will be
access is authorized in advance by one or more billed a permit. The Exchange’s proposal to increase
Sponsoring Member Organizations. Sponsored 12 A Floor Specialist is a Specialist that does have
Floor Broker Permit Fees from $2,300 to
Participants must enter into and maintain a physical presence on the Exchange’s trading floor.
participant agreements with one or more $3,000 and Floor Specialist and Floor
13 A Floor Market Maker is a Market Maker that
Sponsoring Member Organizations establishing a does have a physical presence on the Exchange’s
Market Maker Permit Fees from $2,300
proper relationship(s) and account(s) through trading floor. to $4,500 is reasonable because the
which the Sponsored Participant may trade on the 14 Remote Specialists and Remote Market Makers
Exchange.
mstockstill on DSK4VPTVN1PROD with NOTICES
11 A Series A–1 permit shall only be issued to an
do not have a physical presence on an Exchange 19 Securities Exchange Act Release No. 51808
floor. [sic] at 37499 (June 9, 2005) (‘‘Regulation NMS
individual who is a natural person of at least 15 While this Permit fee for Remote Specialists Adopting Release’’).
twenty-one (21) years of age. A Series A–1 permit
shall only be issued to a corporation who meets the and Remote Market Makers is being increased, 20 NetCoalition v. NYSE Arca, Inc. [sic] 615 F.3d
eligibility and application requirements set forth in today all Remote Specialists and Remote Market 525 (D.C. Cir. 2010).
the By-Laws and Rules, including, without Makers qualify for the lower Permit Fee of $2,300. 21 See NetCoalition, at 534.
16 See note 25 below. 22 Id. at 537.
limitation, Rule 972, and no individual shall hold
17 15 U.S.C. 78f(b). 23 Id. at 539 (quoting ArcaBook Order, 73 FR at
more than a single Series A–1 permit. See Rule 908.
All members are required to have a permit. A 18 15 U.S.C. 78f(b)(4) and (5). 74782–74783).
VerDate Sep<11>2014 16:39 Jan 13, 2016 Jkt 238001 PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 E:\FR\FM\14JAN1.SGM 14JAN1](https://thefederalregister.org/doc/81_FR_1985/page/2.svg)
![1980 Federal Register / Vol. 81, No. 9 / Thursday, January 14, 2016 / Notices
Comments may be submitted by any of SECURITIES AND EXCHANGE resubmit the order to the Hybrid System
the following methods: COMMISSION for automatic execution, route the order
[Release No. 34–76857; File No. SR–CBOE– from a booth to a PAR workstation,
Electronic Comments cancel the order, contact the customer
2016–003]
• Use the Commission’s Internet for further instructions, and/or
comment form (http://www.sec.gov/ Self-Regulatory Organizations; otherwise handle the order in
rules/sro.shtml); or Chicago Board Options Exchange, accordance with Exchange Rules and
Incorporated; Notice of Filing and the order’s terms.).
• Send an email to rule-comments@ Immediate Effectiveness of a Proposed (a) Orders may route through the
sec.gov. Please include File Number SR– Rule Change Related to Limit Order order handling system for electronic
Phlx–2015–109 on the subject line. Price Protections for Stock-Option processing in the Hybrid System or to a
Paper Comments Orders designated order management terminal
January 8, 2016. or PAR Workstation in any of the
• Send paper comments in triplicate circumstances described below. Routing
Pursuant to Section 19(b)(1) of the
to Secretary, Securities and Exchange designations may be established based
Securities Exchange Act of 1934 (the
Commission, 100 F Street NE., on various parameters defined by the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
Washington, DC 20549–1090. notice is hereby given that on January 5, Exchange, order entry firm or Trading
All submissions should refer to File 2016, Chicago Board Options Exchange, Permit Holder, as applicable.
Number SR–Phlx–2015–109. This file Incorporated (the ‘‘Exchange’’ or * * * * *
number should be included on the ‘‘CBOE’’) filed with the Securities and (5) Limit Order Price Parameter for
subject line if email is used. To help the Exchange Commission (the Stock-Option Orders: Limit orders
Commission process and review your ‘‘Commission’’) the proposed rule received after a series is opened will be
comments more efficiently, please use change as described in Items I, II, and cancelled if the order is priced at a net
only one method. The Commission will III below, which Items have been debit that is more than an acceptable
post all comments on the Commission’s prepared by the Exchange. The tick distance above the opposite side
Internet Web site (http://www.sec.gov/ Exchange filed the proposal as a ‘‘non- derived net market using the Exchange’s
controversial’’ proposed rule change best bid or offer in the individual series
rules/sro.shtml). Copies of the
pursuant to Section 19(b)(3)(A)(iii) of leg and the national best bid or offer of
submission, all subsequent the Act 3 and Rule 19b–4(f)(6) the stock component comprising the
amendments, all written statements thereunder.4 The Commission is stock-option order or the order is priced
with respect to the proposed rule publishing this notice to solicit at a net credit that is more than an
change that are filed with the comments on the proposed rule change acceptable tick distance below the
Commission, and all written from interested persons. opposite side derived net market based
communications relating to the on the Exchange’s best bid or offer in
proposed rule change between the I. Self-Regulatory Organization’s
Statement of the Terms of Substance of the individual series leg and the
Commission and any person, other than national best bid or offer of the stock
those that may be withheld from the the Proposed Rule Change
component comprising the stock-option
public in accordance with the The Exchange seeks to amend order.
provisions of 5 U.S.C. 552, will be Exchange rules related to limit order
price protections for stock-option For purposes of this subparagraph
available for Web site viewing and (a)(5): An ‘‘acceptable tick distance’’
printing in the Commission’s Public orders. The text of the proposed rule
change is provided below. (which is also referred to as an ‘‘ATD’’),
Reference Room, 100 F Street, NE., as determined by the Exchange on a
Washington, DC 20549 on official (additions are italicized; deletions are
class by class and net premium basis
business days between the hours of [bracketed])
and announced to the Trading Permit
10:00 a.m. and 3:00 p.m. Copies of such * * * * * Holders via Regulatory Circular, shall be
filing also will be available for Chicago Board Options Exchange, no less than 5 minimum net price
inspection and copying at the principal Incorporated increment ticks for stock-option orders.
office of the Exchange. All comments The Exchange may determine on a class
Rules
received will be posted without change; by class basis and announce via
the Commission does not edit personal * * * * * Regulatory Circular whether to apply
identifying information from Rule 6.12. CBOE Hybrid Order Handling paragraph (a)(5) to immediate-or-cancel
submissions. You should submit only System complex orders. The limit order price
information that you wish to make parameter will take precedence over
This rule describes the process for another routing parameter to the extent
available publicly. All submissions routing orders through the Exchange’s
should refer to File Number SR–Phlx– that both are applicable to an incoming
order handling system in classes limit order.
2015–109, and should be submitted on designated for trading on the CBOE
or before February 4, 2016. [(5)] (6) Direct Routing: Orders may
Hybrid System. The order handling
route directly from an order entry firm
For the Commission, by the Division of system is a feature within the Hybrid
for electronic processing or to an order
Trading and Markets, pursuant to delegated System to route orders for automatic
management terminal or a PAR
authority.36 execution, book entry, open outcry, or
workstation based on parameters
mstockstill on DSK4VPTVN1PROD with NOTICES
Robert W. Errett, further handling by a broker, agent, or
prescribed by the order entry firm.
Deputy Secretary.
PAR Official, in a manner consistent
with Exchange Rules and the Act (e.g., [(6)] (7) System Disruptions or
[FR Doc. 2016–00569 Filed 1–13–16; 8:45 am] Malfunctions: Orders will route to an
BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(1). order management terminal designated
2 17 CFR 240.19b–4. by the order entry firm or Trading
3 15 U.S.C. 78s(b)(3)(A)(iii). Permit Holder, or a terminal designated
36 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(6). and maintained by the Exchange as a
VerDate Sep<11>2014 18:58 Jan 13, 2016 Jkt 238001 PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 E:\FR\FM\14JAN1.SGM 14JAN1](https://thefederalregister.org/doc/81_FR_1985/page/5.svg)
Document Created: 2016-01-14 02:50:47
Document Modified: 2016-01-14 02:50:47
| 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 | 81 FR 1976 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR