81 FR 35094 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to PIXL Pricing
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 105 (June 1, 2016)
Federal Register Volume 81, Issue 105 (June 1, 2016)
| Page Range | 35094-35098 | |
| FR Document | 2016-12793 |
[Federal Register Volume 81, Number 105 (Wednesday, June 1, 2016)] [Notices] [Pages 35094-35098] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-12793] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77908; File No. SR-Phlx-2016-59] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to PIXL Pricing May 25, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 [[Page 35095]] (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on May 11, 2016, NASDAQ PHLX LLC (``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 Substance of the Proposed Rule Change The Exchange proposes to amend Section IV, Part A of the Pricing Schedule entitled ``PIXL Pricing.'' The text of the proposed rule change is available on the Exchange's Web site at http://nasdaqomxphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this rule change is to amend the PIXL \3\ pricing located in the Pricing Schedule at Section IV, Part A. The Exchange amends the PIXL Pricing to incentivize market participants to direct more PIXL Orders to Phlx. --------------------------------------------------------------------------- \3\ PIXL\SM\ is the Exchange's price improvement mechanism known as Price Improvement XL or PIXL. 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)(F) it represents as agent (``Initiating Order''), provided it submits the PIXL order for electronic execution into the PIXL Auction pursuant to Rule 1080. See Exchange Rule 1080(n). --------------------------------------------------------------------------- Today, the Exchange assesses a $0.07 per contract Initiating Order Fee. If the member or member organization qualifies for the Tier 4 or 5 Customer Rebate \4\ in Section B, the member or member organization will be assessed a discounted Initiating Order Fee of $0.05 per contract for Simple PIXL Orders and $0.03 per contract for Complex \5\ PIXL Orders. The Exchange is proposing to make three changes to the PIXL Pricing. --------------------------------------------------------------------------- \4\ Currently, the Exchange has a Customer Rebate Program consisting of five tiers that pay Customer rebates on three Categories, A, B and C of transactions. A Phlx member qualifies for a certain rebate tier based on the percentage of total national customer volume in multiply-listed options that it transacts monthly on Phlx. The Exchange calculates Customer volume in Multiply Listed Options by totaling electronically-delivered and executed volume, excluding volume associated with electronic Qualified Contingent Cross (``QCC'') Orders, as defined in Exchange Rule 1080(o). In calculating electronically-delivered and executed Customer volume in Multiply Listed Options, the numerator of the equation includes all electronically-delivered and executed Customer volume in Multiply Listed Options. The denominator of that equation includes national customer volume in multiply-listed equity and ETF options volume, excluding SPY. See Section B of the Pricing Schedule. \5\ A Complex Order is any order involving the simultaneous purchase and/or sale of two or more different options series in the same underlying security, priced at a net debit or credit based on the relative prices of the individual components, for the same account, for the purpose of executing a particular investment strategy. Furthermore, a Complex Order can also be a stock-option order, which is an order to buy or sell a stated number of units of an underlying stock or ETF coupled with the purchase or sale of options contract(s). See Exchange Rule 1080, Commentary .07. --------------------------------------------------------------------------- Pricing Change Number 1 The Exchange proposes to assess a $0.05 per contract discounted Initiating Order Fee to members and member organizations that qualify for the Tier 4 or 5 Customer Rebate in Section B, regardless of whether the order is a Simple or Complex PIXL Order. The Initiating Order Fee for Simple PIXL Orders would therefore be assessed the same lower rate when the member or member organization would qualify for this reduced fee. The Exchange proposes to increase the discounted Complex PIXL Initiating Order Fee from $0.03 to $0.05 per contract provided the member or member organization qualifies for Tier 4 or 5 of the Customer Rebate in Section B. Pricing Change Number 2 Additionally, the Exchange proposes a new incentive for members or member organizations that deliver equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and exchange-traded fund (``ETF'') option classes, excluding SPY options,\6\ in a given month to lower their Initiating Order Fee to $0.00 per contract for Complex PIXL Orders. This proposal will offer members submitting Complex PIXL Orders the opportunity to pay no Initiating Order Fee instead of a $0.05 per contract \7\ discounted Complex PIXL Initiating Order Fee if the member qualifies for the incentive. --------------------------------------------------------------------------- \6\ 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. \7\ Today the Complex PIXL Initiating Order Fee for members and member organizations that qualify for the Tier 4 or 5 Customer Rebate in Section B is $0.03 per contract. This proposal increases that fee to $0.05 per contract. --------------------------------------------------------------------------- Pricing Change Number 3 The Exchange also proposes to offer this new incentive to members or member organizations under Common Ownership.\8\ Today, any member or member organization under Common Ownership with another member or member organization that qualifies for a Tier 4 or 5 Customer Rebate in Section B will be assessed a discounted PIXL Initiating Order Fee of $0.05 per contract for Simple PIXL Orders and $0.03 per contract for Complex PIXL Orders. The Exchange proposes that any member or member organization under Common Ownership with another member or member organization that executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF options classes, excluding SPY options, in a given month will be assessed a discounted PIXL Initiating Order Fee of $0.05 for Simple PIXL Orders and $0.00 for Complex PIXL Orders. The Exchange also proposes to increase the discounted Complex PIXL Initiating Order Fee for members or member organizations under Common Ownership that qualify for Customer Rebate Tier 4 or 5 in Section B. With this proposal, any member or member organization under Common Ownership with another member or member organization that qualifies for a Customer Rebate Tier 4 or 5 in Section B will be assessed a discounted Complex PIXL Initiating Order Fee of $0.05 per contract. --------------------------------------------------------------------------- \8\ The term ``Common Ownership'' shall mean members or member organizations under 75% common ownership or control. --------------------------------------------------------------------------- Despite the increase to the discounted Complex PIXL Initiating Order Fee for members and member organizations that qualify for a Customer Rebate Tier 4 or 5 in Section B, the Exchange believes that the increased discounted rate will continue to encourage members to direct more Complex PIXL Orders to the Exchange.\9\ --------------------------------------------------------------------------- \9\ Currently, the Initiating Order Fee for Professional, Firm, Broker-Dealer, Specialist and Market Maker orders that are contra to a Customer PIXL Order will be reduced to $0.00 if the Customer PIXL Order is greater than 399 contracts. The Exchange is not amending this provision. --------------------------------------------------------------------------- [[Page 35096]] 2. Statutory Basis The proposal is consistent with Section 6(b) of the Act,\10\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b). \11\ 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, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ``has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.'' \12\ --------------------------------------------------------------------------- \12\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting Release''). --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \13\ (``NetCoalition'') the D.C. 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.\14\ 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.'' \15\ --------------------------------------------------------------------------- \13\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \14\ See NetCoalition, at 534-535. \15\ 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 percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .'' \16\ 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. --------------------------------------------------------------------------- \16\ Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)). --------------------------------------------------------------------------- Pricing Change Number 1 The Exchange's proposal to increase the discounted Complex PIXL Initiating Order Fee for members and member organizations that qualify for Tier 4 or 5 of the Customer Rebate in Section B from $0.03 to $0.05 per contract is reasonable because the Exchange assesses this discounted same [sic] rate for the Simple PIXL Initiating Order Fee. Furthermore, the Exchange believes that this fee is reasonable because it continues to be lower than the $0.07 per contract Initiating Order Fee for members and member organizations that do not qualify for Tier 4 or 5 of the Customer Rebate in Section B. Finally, the Exchange is offering members and member organizations an opportunity to lower the Complex PIXL Initiating Order Fee to $0.00 per contract provided the member or member organization executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF option classes, excluding SPY options, in a given month. The Exchange's proposal to increase the discounted Complex PIXL Initiating Order Fee for members and member organizations that qualify for Tier 4 or 5 of the Customer Rebate in Section B from $0.03 to $0.05 per contract is equitable and not unfairly discriminatory because the Exchange will apply the proposed fees in a uniform manner to all market participants who qualify for the discounted rate. Further, all market participants are eligible to earn Customer Rebates, transact Complex PIXL Orders and participate in a PIXL Auction. Pricing Change Number 2 The Exchange's proposal to offer members and member organizations an opportunity to pay no Complex PIXL Initiating Order Fee provided they transact equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF option classes, excluding SPY options, in a given month is reasonable because it will encourage market participants to transact Customer volume as well as a greater number of Complex PIXL Orders on the Exchange. Today, members and member organizations may lower their Complex PIXL Order Initiating Order Fees by qualifying for Tiers 4 \17\ or 5 \18\ of the Customer Rebate in Section B. In order to qualify for Section B Customer Rebate Tiers 4 or 5 a member or member organization is required to transact a certain percentage of total National Customer Volume (above 1.60%) in Multiply-Listed options in a month on Phlx to receive a lower Complex PIXL Initiating Order Fee of $0.05 \19\ as compared to the Initiating Order Fee of $0.07 per contract. With this proposal the Exchange offers members and member organizations an opportunity to pay no Initiating Order Fee for Complex PIXL Orders provided they deliver equal to order [sic] greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF options classes, excluding SPY options, in a given month is transacted on Phlx [sic]. The Exchange seeks to encourage market participants to increase the amount of Customer order flow that is directed to Phlx by offering the opportunity to pay no Complex PIXL Initiating Order Fee. In order to qualify for this new incentive, a greater amount of Customer volume is necessary to be transacted than the volume currently required to qualify for the Customer Rebate Tiers 4 and 5 in Section B. --------------------------------------------------------------------------- \17\ Tier 4 requires member and member organizations to transact above 1.60%-2.50% of National Customer Volume in Multiply-Listed Equity and ETF Options. \18\ Tier 5 requires member and member organizations to transact above 2.50% of National Customer Volume in Multiply-Listed Equity and ETF Options. \19\ Today the Complex PIXL Initiating Order Fee for members and member organizations that qualify for the Tier 4 or 5 Customer Rebate in Section B is $0.03 per contract. This proposal increases that fee to $0.05 per contract. --------------------------------------------------------------------------- The Exchange believes that members and member organizations will direct a greater amount of Customer liquidity to Phlx to qualify for a Complex PIXL Initiating Order Fee of $0.00 per contract. 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 offer member and member organizations an opportunity to pay no Complex PIXL Initiating Order Fee provided they transact equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF options classes, excluding SPY options, in a given month is equitable and not unfairly discriminatory because the [[Page 35097]] opportunity to pay no Complex PIXL Initiating Order Fee is available to all market participants. In addition, all market participants are eligible to earn Customer Rebates, transact Complex PIXL Orders and participate in a PIXL Auction. Pricing Change Number 3 The Exchange's proposal to increase the discounted Complex PIXL Initiating Order Fee for members and member organizations under Common Ownership that qualify for Tier 4 or 5 of the Customer Rebate in Section B from $0.03 to $0.05 per contract is reasonable for the same reasons explained herein. It is also reasonable to offer member and member organizations under Common Ownership an opportunity to pay no Complex PIXL Order Initiating Order Fee provided the member or member organization executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF options classes, excluding SPY options, in a given month for the same reasons explained herein. The Exchange believes that applying the same pricing to members under Common Ownership as wholly-owned entities avoids disparate treatment of members that have divided their various business activities between separate corporate entities as compared to members that operate those business activities within a single corporate entity. The Exchange's proposal to increase the discounted Complex PIXL Initiating Order Fee for members and member organizations under Common Ownership that qualify for Tier 4 or 5 of the Customer Rebate in Section B from $0.03 to $0.05 per contract is equitable and not unfairly discriminatory for the same reasons explained herein. It is also equitable and not unfairly discriminatory to offer member and member organizations under Common Ownership an opportunity to pay no Complex PIXL Initiating Order Fee provided the member or member organization executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed Equity and ETF options classes, excluding SPY options, in a given month for the same reasons explained herein. The Exchange believes that its proposed pricing is equitable and not unfairly discriminatory because it permits both wholly owned and common control members and member organizations to be subject to the same pricing for PIXL. 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, that the degree to which fee changes in this market may impose any burden on inter-market competition is extremely limited. Pricing Change Number 1 The Exchange believes that increasing the discounted Complex PIXL Initiating Order Fee for members and member organizations that qualify for Tier 4 or 5 of the Customer Rebate in Section B from $0.03 to $0.05 per contract does not create an undue burden on intra-market competition because the Exchange will apply the proposed fees in a uniform manner to all market participants who qualify for the discounted rate. All market participants are eligible to earn Customer Rebates, transact Complex PIXL Orders and participate in a PIXL auction. Also, encouraging Customer liquidity benefits all market participants by providing more trading opportunities, which attract 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. Pricing Change Number 2 The Exchange believes that it is does not create an undue burden on intra-market competition to offer member and member organizations an opportunity to lower the Complex PIXL Initiating Order Fee to $0.00 per contract provided the member or member organization executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF options classes, excluding SPY options, in a given month because all market participants are eligible to earn Customer Rebates, transact Complex PIXL Orders and participate in a PIXL auction. Also, encouraging Customer liquidity benefits all market participants by providing more trading opportunities, which attract 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. Pricing Change Number 3 The Exchange's proposal to increase the discounted Complex PIXL Initiating Order Fee for members and member organizations under Common Ownership that qualify for Tier 4 or 5 of the Customer Rebate in Section B from $0.03 to $0.05 per contract and the proposal to lower the Complex PIXL Initiating Order Fee to $0.00 per contract provided the member or member organization executes equal to or greater than 3.00% of National Customer Volume in Multiply-Listed equity and ETF options classes, excluding SPY options, in a given month do not create an undue burden on intra-market competition because the pricing subjects both wholly owned and common control members and member organizations to the same pricing for PIXL. The Exchange does not believe that the proposed rule changes to increase the discounted Complex PIXL Initiating Order Fee for members and member organizations, including those under Common Ownership, that qualify for Tier 4 or 5 of the Customer Rebate in Section B from $0.03 to $0.05 per contract and offer a new incentive to reduce the Complex PIXL Initiating Order Fee to $0.00 per contract, including those members under Common Ownership, will impose any burden on intra-market competition not necessary or appropriate in furtherance of the purposes of the Act because all market participants are eligible to earn Customer Rebates, transact Complex PIXL Orders and participate in a PIXL auction. Also, encouraging Customer liquidity benefits all market participants by providing more trading opportunities, which attract 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. [[Page 35098]] 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.\20\ --------------------------------------------------------------------------- \20\ 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. 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-2016-59 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-2016-59. 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 the 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-2016-59 and should be submitted on or before June 22, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\21\ --------------------------------------------------------------------------- \21\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-12793 Filed 5-31-16; 8:45 am] BILLING CODE 8011-01-P
![35094 Federal Register / Vol. 81, No. 105 / Wednesday, June 1, 2016 / Notices
market into DMMs.14 As a result, market The Commission finds that the described above (formerly REMMs)
makers on the NYSE MKT equity market proposed rule change is consistent with would remove a reference to an obsolete
are called DMMs and on the NYSE Section 6(b)(1),19 which requires, among category of member from the Operating
Amex Options LLC (‘‘NYSE Amex other things, that a national securities Agreement. The Commission finds that
Options’’) options market are called exchange be so organized and have the eliminating such an obsolete reference
specialists.15 However, several capacity to carry out the purposes of the would add clarity to the Exchange’s
provisions of the Operating Agreement Act, and to comply, and to enforce rules and be consistent with the public
were not updated and refer only to compliance by its members and persons interest and the protection of investors.
specialists. Accordingly, the Exchange associated with its members, with the Finally, the proposed addition of
proposes to amend Sections 2.02 and provisions of the Act, the rules and references to DMMs in Section 2.02 and
2.03(h)(i) to add references to DMMs. regulation thereunder, and the rules of 2.03(h)(i) of the Operating Agreement
Section 2.02 of the Operating the exchange. In addition, the would more accurately reflect that
Agreement provides that the Board has Commission finds that the proposed specialists in the Exchange’s equity
general supervision over Member rule change is consistent with Section market are now referred to as DMMs
Organizations and over approved 6(b)(3) of the Act,20 which requires, and also would make these sections
persons in connection with their among other things, that the rules of a consistent with Section 2.03(h)(iii)
conduct with or affecting Member national securities exchange assure a (categories of members of the Committee
Organizations. Section 2.02 further fair representation of its members in the for Review), which refers to both DMMs
provides that the Board ‘‘may selection of its directors and and specialists. The proposed addition
disapprove of any member acting as a administration of its affairs. of a reference to DMMs in Section 2.02
specialist or odd lot dealer.’’ The The proposed rule change would would clarify that the Board has general
Exchange proposes to add ‘‘designated remove the requirement that the ICE supervision over all Member
market maker (as defined in Rule 2 of NGC nominate the candidates for Non- Organizations, including the ability to
the Company Rules) (‘DMM’)’’ after Affiliated Directors and instead have the disapprove of any member acting as a
‘‘specialist’’ in Section 2.02. DCRC nominate the candidates for Non- DMM, as well as a specialist or odd lot
Section 2.03(h)(i) sets out the Affiliated Director directly.21 Because dealer. The proposed addition of
categories of individuals that shall be the ICE NGC currently is required to references to DMMs in Section 2.03(h)(i)
represented on the DCRC. The Exchange nominate the candidate recommended would clarify that DMMs, as well as
proposes to add ‘‘or DMM’’ to the to it by the DCRC, this proposed change specialists, are categories of individuals
references to ‘‘specialist’’ in categories would remove an additional step in the that would be represented on the DCRC.
(ii) and (iii), so that they reference both process of nominating candidates for
types of market makers. The changes The Commission finds that the
Non-Affiliated Director positions and foregoing revisions to the Operating
would be consistent with the categories thus may improve the efficiency of the
of members of the Committee for Agreement are consistent with the Act.
nomination process.
Review set forth in Section 2.03(h)(iii), In addition, the proposed rule change IV. Conclusion
which refers to both DMMs and would remove the requirement that the
specialists.16 It is therefore ordered, pursuant to
ICE NGC make the determination of Section 19(b)(2) of the Act,23 that the
Finally, the Exchange proposes to whether persons endorsed to be Petition
make technical and conforming changes proposed rule change (SR–NYSEMKT–
Candidates are eligible to be a Non- 2016–26), as modified by Amendment
to the recitals and signature page of the Affiliated Director, and would have the
Operating Agreement. No. 1 thereto, be, and it hereby is,
Exchange make such determination approved.
III. Discussion and Commission’s instead. The proposed process would
maintain an independent review of the For the Commission, by the Division of
Findings
Trading and Markets, pursuant to delegated
The Commission finds that the eligibility of any Petition Candidates, authority.24
proposed rule change, as modified by while avoiding the potential conflict of
Brent J. Fields,
Amendment No. 1, is consistent with interest that could arise if, for example,
the DCRC were to be responsible for Secretary.
the requirements of Section 6 of the [FR Doc. 2016–12787 Filed 5–31–16; 8:45 am]
Act 17 and the rules and regulations both proposing and nominating
thereunder applicable to a national candidates and making eligibility BILLING CODE 8011–01–P
securities exchange.18 determinations of Petition Candidates
proposed by Member Organizations.
14 See The Commission previously considered SECURITIES AND EXCHANGE
Securities Exchange Act Release Nos.
58705 (October 1, 2008), 73 FR 58995 (October 8. and approved rules of another exchange COMMISSION
2008) (SR–Amex–2008–63) (approval order) and that similarly provide for that exchange
59022 (November 26, 2008), 73 FR 73683 [Release No. 34–77908; File No. SR–Phlx–
(December 3, 2008) (SR–NYSEALTR–2008–10)
to determine the eligibility of proposed
(amending equity rules to conform to NYSE New Petition Candidates.22 2016–59]
Market Model Pilot rules). See also Securities Further, eliminating the requirement
Exchange Act Release No. 58845 (October 24, 2008), that the DCRC include representatives Self-Regulatory Organizations;
73 FR 64379 (October 29, 2008) (SR–NYSE–2008–
from the fourth category of members NASDAQ PHLX LLC; Notice of Filing
46) (approving rule change to create NYSE New and Immediate Effectiveness of
Market Model Pilot).
15 The Exchange operates a marketplace for 19 15 U.S.C. 78f(b)(1). Proposed Rule Change Related to PIXL
sradovich on DSK3TPTVN1PROD with NOTICES
trading options through NYSE Amex Options, a 20 15 U.S.C. 78f(b)(3). Pricing
facility of the Exchange. See Rule 2—Equities (i) & 21 The Commission notes that the DCRC is
(j) (defining DMM) and Rule 927NY (defining appointed by the Board. See Section 2.03(h)(i) of May 25, 2016.
specialist). the Operating Agreement. Pursuant to Section 19(b)(1) of the
16 See note 13, supra, and accompanying text. 22 See supra note 8. See generally Securities
17 15 U.S.C. 78f.
Securities Exchange Act of 1934
Exchange Act Release Nos. 56876 (November 30,
18 The Commission has also considered the 2007), 72 FR 70357 (December 11. 2007) (SR–
23 15 U.S.C. 78s(b)(2).
proposed rule’s impact on efficiency, competition, NASDAQ–2007–068) (approving process for
and capital formation. See 15 U.S.C. 78c(f). electing Member Representative Directors). 24 17 CFR 200.30–3(a)(12).
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2. Statutory Basis dealers’. . . .’’ 16 Although the court Complex PIXL Order Initiating Order
and the SEC were discussing the cash Fees by qualifying for Tiers 4 17 or 5 18
The proposal is consistent with
equities markets, the Exchange believes of the Customer Rebate in Section B. In
Section 6(b) of the Act,10 in general, and
that these views apply with equal force order to qualify for Section B Customer
furthers the objectives of Sections
to the options markets. Rebate Tiers 4 or 5 a member or member
6(b)(4) and 6(b)(5) of the Act,11 in
organization is required to transact a
particular, in that it provides for the Pricing Change Number 1
certain percentage of total National
equitable allocation of reasonable dues, The Exchange’s proposal to increase Customer Volume (above 1.60%) in
fees and other charges among members the discounted Complex PIXL Initiating Multiply-Listed options in a month on
and issuers and other persons using any Order Fee for members and member Phlx to receive a lower Complex PIXL
facility or system which the Exchange organizations that qualify for Tier 4 or Initiating Order Fee of $0.05 19 as
operates or controls, and is not designed 5 of the Customer Rebate in Section B compared to the Initiating Order Fee of
to permit unfair discrimination between from $0.03 to $0.05 per contract is $0.07 per contract. With this proposal
customers, issuers, brokers, or dealers. reasonable because the Exchange the Exchange offers members and
The Commission and the courts have assesses this discounted same [sic] rate member organizations an opportunity to
repeatedly expressed their preference for the Simple PIXL Initiating Order pay no Initiating Order Fee for Complex
for competition over regulatory Fee. Furthermore, the Exchange believes PIXL Orders provided they deliver equal
intervention in determining prices, that this fee is reasonable because it to order [sic] greater than 3.00% of
products, and services in the securities continues to be lower than the $0.07 per National Customer Volume in Multiply-
markets. In Regulation NMS, while contract Initiating Order Fee for Listed equity and ETF options classes,
adopting a series of steps to improve the members and member organizations that excluding SPY options, in a given
current market model, the Commission do not qualify for Tier 4 or 5 of the month is transacted on Phlx [sic]. The
highlighted the importance of market Customer Rebate in Section B. Finally, Exchange seeks to encourage market
forces in determining prices and SRO the Exchange is offering members and participants to increase the amount of
revenues and, also, recognized that member organizations an opportunity to Customer order flow that is directed to
current regulation of the market system lower the Complex PIXL Initiating Phlx by offering the opportunity to pay
‘‘has been remarkably successful in Order Fee to $0.00 per contract no Complex PIXL Initiating Order Fee.
promoting market competition in its provided the member or member In order to qualify for this new
broader forms that are most important to organization executes equal to or greater incentive, a greater amount of Customer
investors and listed companies.’’ 12 than 3.00% of National Customer volume is necessary to be transacted
Likewise, in NetCoalition v. Securities Volume in Multiply-Listed equity and than the volume currently required to
and Exchange Commission 13 ETF option classes, excluding SPY qualify for the Customer Rebate Tiers 4
(‘‘NetCoalition’’) the D.C. Circuit upheld options, in a given month. and 5 in Section B.
the Commission’s use of a market-based The Exchange’s proposal to increase The Exchange believes that members
approach in evaluating the fairness of the discounted Complex PIXL Initiating and member organizations will direct a
market data fees against a challenge Order Fee for members and member greater amount of Customer liquidity to
claiming that Congress mandated a cost- organizations that qualify for Tier 4 or Phlx to qualify for a Complex PIXL
based approach.14 As the court 5 of the Customer Rebate in Section B Initiating Order Fee of $0.00 per
emphasized, the Commission ‘‘intended from $0.03 to $0.05 per contract is contract. Customer liquidity benefits all
in Regulation NMS that ‘market forces, equitable and not unfairly market participants by providing more
rather than regulatory requirements’ discriminatory because the Exchange trading opportunities, which attracts
play a role in determining the market will apply the proposed fees in a Specialists and Market Makers. An
data . . . to be made available to uniform manner to all market increase in the activity of these market
investors and at what cost.’’ 15 participants who qualify for the participants in turn facilitates tighter
Further, ‘‘[n]o one disputes that discounted rate. Further, all market spreads, which may cause an additional
competition for order flow is ‘fierce.’ participants are eligible to earn corresponding increase in order flow
. . . As the SEC explained, ‘[i]n the U.S. Customer Rebates, transact Complex from other market participants. The
national market system, buyers and PIXL Orders and participate in a PIXL Exchange’s proposal to offer member
sellers of securities, and the broker- Auction. and member organizations an
dealers that act as their order-routing Pricing Change Number 2 opportunity to pay no Complex PIXL
agents, have a wide range of choices of Initiating Order Fee provided they
The Exchange’s proposal to offer transact equal to or greater than 3.00%
where to route orders for execution’; members and member organizations an
[and] ‘no exchange can afford to take its of National Customer Volume in
opportunity to pay no Complex PIXL Multiply-Listed equity and ETF options
market share percentages for granted’ Initiating Order Fee provided they
because ‘no exchange possesses a classes, excluding SPY options, in a
transact equal to or greater than 3.00% given month is equitable and not
monopoly, regulatory or otherwise, in of National Customer Volume in
the execution of order flow from broker unfairly discriminatory because the
Multiply-Listed equity and ETF option
classes, excluding SPY options, in a 17 Tier 4 requires member and member
PIXL Order will be reduced to $0.00 if the Customer given month is reasonable because it organizations to transact above 1.60%–2.50% of
PIXL Order is greater than 399 contracts. The
Exchange is not amending this provision.
will encourage market participants to National Customer Volume in Multiply-Listed
transact Customer volume as well as a Equity and ETF Options.
sradovich on DSK3TPTVN1PROD with NOTICES
10 15 U.S.C. 78f(b).
18 Tier 5 requires member and member
11 15 U.S.C. 78f(b)(4) and (5). greater number of Complex PIXL Orders
organizations to transact above 2.50% of National
12 Securities Exchange Act Release No. 51808 on the Exchange. Today, members and Customer Volume in Multiply-Listed Equity and
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) member organizations may lower their ETF Options.
(‘‘Regulation NMS Adopting Release’’). 19 Today the Complex PIXL Initiating Order Fee
13 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
16 Id. at 539 (quoting Securities Exchange Act for members and member organizations that qualify
2010). Release No. 59039 (December 2, 2008), 73 FR for the Tier 4 or 5 Customer Rebate in Section B
14 See NetCoalition, at 534–535.
74770, 74782–83 (December 9, 2008) (SR– is $0.03 per contract. This proposal increases that
15 Id. at 537. NYSEArca–2006–21)). fee to $0.05 per contract.
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![35098 Federal Register / Vol. 81, No. 105 / Wednesday, June 1, 2016 / Notices
C. Self-Regulatory Organization’s those that may be withheld from the Exchange filed Amendment No. 1 to the
Statement on Comments on the public in accordance with the proposed rule change. The Commission
Proposed Rule Change Received From provisions of 5 U.S.C. 552, will be published the proposed rule change, as
Members, Participants, or Others available for Web site viewing and modified by Amendment No. 1, for
No written comments were either printing in the Commission’s Public comment in the Federal Register on
solicited or received. Reference Room, 100 F Street NE., April 11, 2016.5 The Commission
Washington, DC 20549, on official received no comments on the proposed
III. Date of Effectiveness of the business days between the hours of rule change.
Proposed Rule Change and Timing for 10:00 a.m. and 3:00 p.m. Copies of the
Commission Action filing also will be available for Section 19(b)(2) of the Act 6 provides
The foregoing rule change has become inspection and copying at the principal that, within 45 days of the publication
effective pursuant to Section office of the Exchange. All comments of the notice of the filing of a proposed
19(b)(3)(A)(ii) of the Act.20 received will be posted without change; rule change, or within such longer
At any time within 60 days of the the Commission does not edit personal period up to 90 days as the Commission
filing of the proposed rule change, the identifying information from may designate if it finds such longer
Commission summarily may submissions. You should submit only period to be appropriate and publishes
temporarily suspend such rule change if information that you wish to make its reasons for so finding or as to which
it appears to the Commission that such available publicly. the self-regulatory organization
action is: (i) Necessary or appropriate in All submissions should refer to File consents, the Commission shall approve
the public interest; (ii) for the protection Number SR–Phlx–2016–59 and should the proposed rule change, disapprove
of investors; or (iii) otherwise in be submitted on or before June 22, 2016. the proposed rule change, or institute
furtherance of the purposes of the Act. For the Commission, by the Division of proceedings to determine whether the
If the Commission takes such action, the Trading and Markets, pursuant to delegated proposed rule change should be
Commission shall institute proceedings authority.21 disapproved. The Commission is
to determine whether the proposed rule Brent J. Fields, extending this 45-day time period.
should be approved or disapproved. Secretary. The Commission finds that it is
IV. Solicitation of Comments [FR Doc. 2016–12793 Filed 5–31–16; 8:45 am] appropriate to designate a longer period
Interested persons are invited to BILLING CODE 8011–01–P within which to take action on the
submit written data, views, and proposed rule change so that it has
arguments concerning the foregoing, sufficient time to consider the proposed
including whether the proposed rule SECURITIES AND EXCHANGE rule change. Accordingly, pursuant to
change is consistent with the Act. COMMISSION Section 19(b)(2) of the Act,7 the
Comments may be submitted by any of Commission designates July 10, 2016, as
the following methods: [Release No. 34–77910; File No. SR–
NYSEMKT–2016–13] the date by which the Commission
Electronic Comments should approve, disapprove, or institute
Self-Regulatory Organizations; NYSE proceedings to determine whether to
• Use the Commission’s Internet
MKT LLC; Notice of Designation of disapprove the proposed rule change
comment form (http://www.sec.gov/
Longer Period for Commission Action (File No. SR–NYSEMKT–2016–13), as
rules/sro.shtml); or
• Send an email to rule-comments@ on a Proposed Rule Change, as modified by Amendment No. 1.
sec.gov. Please include File Number SR– Modified by Amendment No. 1, To For the Commission, by the Division of
Phlx–2016–59 on the subject line. Amend Rule 955NY(c) by Revising the Trading and Markets, pursuant to delegated
Clearing Member Requirements for authority.8
Paper Comments Entering an Order Into the Electronic
Brent J. Fields,
• Send paper comments in triplicate Order Capture System
Secretary.
to Secretary, Securities and Exchange May 25, 2016. [FR Doc. 2016–12772 Filed 5–31–16; 8:45 am]
Commission, 100 F Street NE.,
On March 22, 2016, NYSE MKT LLC
Washington, DC 20549–1090. BILLING CODE 8011–01–P
(the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed
All submissions should refer to File with the Securities and Exchange
Number SR–Phlx–2016–59. This file Commission (‘‘Commission’’), pursuant
number should be included on the to Section 19(b)(1) of the Securities
subject line if email is used. To help the Exchange Act of 1934 (‘‘Act’’) 1 and Rule
Commission process and review your 19b–4 thereunder,2 a proposed rule
comments more efficiently, please use change to amend Rule 955NY(c) to
only one method. The Commission will change the timing for recording the
post all comments on the Commission’s name of the Clearing Member 3 in the Notice is incorrect and the proper date is March 29,
Internet Web site (http://www.sec.gov/ Electronic Order Capture system
2016.
rules/sro.shtml). (‘‘EOC’’). On March 29, 2016,4 the
5 See Securities Exchange Act Release No. 34–
Copies of the submission, all 77518 (April 5, 2016), 81 FR 21415 (‘‘Notice’’).
subsequent amendments, all written Amendment No. 1 was included in the Notice and
21 17 CFR 200.30–3(a)(12). provided the clarification that the CMTA
statements with respect to the proposed
sradovich on DSK3TPTVN1PROD with NOTICES
1 15 U.S.C. 78s(b)(1). Information and the name of the clearing ATP
rule change that are filed with the 2 17 CFR 240.19b–4.
Holder would be entered into the EOC ‘‘as the
Commission, and all written 3 Rule 900.2NY defines ‘‘Clearing Member’’ as an
events occur and/or during trade reporting
communications relating to the Exchange ATP Holder which has been admitted to procedures which may occur after the
membership in the Options Clearing Corporation
proposed rule change between the pursuant to the provisions of the Rules of the
representation and execution of the order.’’
Commission and any person, other than Options Clearing Corporation.
6 15 U.S.C. 78s(b)(2).
4 The Commission notes that the amendment date 7 Id.
20 15 U.S.C. 78s(b)(3)(A)(ii). of March 30, 2016 in the SR–NYSEMKT–2016–13 8 17 CFR 200.30–3(a)(12).
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Document Created: 2018-02-08 07:27:32
Document Modified: 2018-02-08 07:27:32
| 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 35094 |
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