83 FR 12066 - Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Transaction Fees at Section VIII
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 53 (March 19, 2018)
Federal Register Volume 83, Issue 53 (March 19, 2018)
| Page Range | 12066-12069 | |
| FR Document | 2018-05450 |
[Federal Register Volume 83, Number 53 (Monday, March 19, 2018)] [Notices] [Pages 12066-12069] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-05450] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82865; File No. SR-Phlx-2018-21] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Transaction Fees at Section VIII March 13, 2018. 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 March 1, 2018, Nasdaq 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 Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's transaction fees at Section VIII (NASDAQ PSX fees) of Phlx's Pricing Schedule to remove the current transaction fees for any PSCN order (other than a PSKP order) that receives an execution on NASDAQ PSX (``PSX'') or that is routed away from PSX and receives an execution at an away market. The text of the proposed rule change is available on the Exchange's website at http://nasdaqphlx.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 the proposed rule change is to amend the Exchange's transaction fees at Section VIII of Phlx's Pricing Schedule to remove the current transaction fee for any PSCN order (other than a PSKP order) that receives an execution on PSX or that is routed away from PSX and receives an execution at an away market. Currently, the Exchange assesses a charge of $0.0026 per share executed for PSCN orders,\3\ other than PSKP orders,\4\ that execute on PSX or that are routed to other venues and receive an execution on another venue. By way of comparison, for an order that executes on PSX, the execution fees for non-PSCN orders (including PSKP orders) for all securities that PSX trades that are priced at $1 or more per share range from $0.0028 per share executed to $0.0030 per share executed, depending on where that security is listed and whether the member meets certain established volume thresholds. For orders in securities that are priced at $1 or more per share that are routed to, and execute on other venues, the Exchange charges fees ranging from $0.0000 per share executed to $0.0035 per share executed (including PKSP orders). --------------------------------------------------------------------------- \3\ PSCN is a routing option that is designed to attract users to PSX. An order using the PSCN routing option will check the System for available shares and simultaneously route the remaining shares to destinations on the System routing table. If shares remain unexecuted after routing, they are posted on the book. Once on the book, should the order subsequently be locked or crossed by another market center, the System will not route the order to the locking or crossing market center. See Rule 3315(a)(1)(A)(iv). \4\ PSKP is a form of PSCN, pursuant to which the entering firm instructs the System to bypass any market centers included in the PSCN System routing table that are not posting Protected Quotations within the meaning of Regulation NMS. Id. --------------------------------------------------------------------------- The Exchange introduced the fee for PSCN orders in 2017.\5\ Prior to the 2017 Proposal, a PSCN order that executed on PSX would be assessed a charge ranging from $0.0028-$0.0030 per share executed depending on the applicability of other factors set forth in the Pricing Schedule, e.g., if the order was for a security that was listed on The Nasdaq Stock Market LLC (``Nasdaq''), or if the order was for a security that is listed on the New York Stock Exchange LLC (``NYSE''), and whether the member met the applicable volume thresholds. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 80938 (June 15, 2017), 82 FR 28171 (June 20, 2017) (SR-Phlx-2017-44) (``2017 Proposal''). --------------------------------------------------------------------------- Prior to the 2017 Proposal, a PSCN order that routed to another venue would be charged $0.0030 per share executed at NYSE, $0.0000 per share executed at Nasdaq BX, Inc. (``Nasdaq BX'') and $0.0030 per share executed in other venues. Pursuant to the 2017 Proposal, PSCN orders that execute on a venue other than PSX are charged $0.0026 per share executed. PSKP orders continue to be charged $0.0030 per share executed at NYSE, $0.0000 per share executed at Nasdaq BX, and $0.0030 per share executed in other venues.\6\ --------------------------------------------------------------------------- \6\ In the 2017 Proposal, the Exchange noted that member organizations sending PSCN orders that executed at Nasdaq BX would pay an increased fee of $0.0026 per share executed, instead of the then-current $0.0000 per share executed for those orders. The Exchange stated that this fee increase for PSCN orders that executed on Nasdaq BX would help offset the cost to the Exchange in offering the reduced fees for all other PSCN executions. Id. --------------------------------------------------------------------------- [[Page 12067]] In the 2017 Proposal, the Exchange noted that PSCN is designed to attract users to PSX, and that generally providing a discount to member organizations for PSCN executions will provide a greater incentive to member organizations to use PSX as a venue. The Exchange stated that assessing a lowered rate will encourage member organizations to interact with PSX liquidity, while also encouraging such participants to take advantage of the sophisticated routing functionality offered by PSX. Additionally, since PSCN does not re-route when it is locked or crossed by an away market, the Exchange also believed that increased use of PSCN would also increase displayed liquidity on PSX.\7\ --------------------------------------------------------------------------- \7\ As noted above, the current transaction fee for PSCN orders does not include PSKP orders. When adopting the current transaction fee for PSCN orders (and the corresponding exclusion for PSKP orders), the Exchange noted that it had only limited funds to apply to the PSCN fees, which it was generally reducing. The Exchange noted that PSCN orders route to both venues with protected quotations and venues without protected quotations, which are often low-cost venues, based on the System routing table following the principal of best execution. By contrast, PSKP orders are routed only to venues with protected quotations, which typically assess the Exchange higher fees for execution thereon. Consequently, extending the proposed pricing to PSKP would result in significant cost to the Exchange in comparison to the proposed fee assessed for such executions. See 2017 Proposal, supra note 5. --------------------------------------------------------------------------- Since the adoption of the reduced transaction fee for PSCN orders, the Exchange has not observed a change in the activity of member organizations that would indicate that the reduced PSCN fees are incentivizing member organizations to send additional order flow to the Exchange, or to increase additional displayed liquidity on the Exchange. Accordingly, the Exchange is discontinuing the $0.0026 fee for PSCN orders that execute on PSX or on other venues. With this change, PSCN orders that execute on PSX will revert to the pricing that existed prior to the 2017 Proposal, and will be charged $0.0028-$0.0030 per share executed, depending on other applicable factors, e.g., if the order is for a security that is listed on Nasdaq or NYSE, and whether the member meets the applicable volume thresholds. Similarly, PSCN orders that execute on a venue other than PSX will revert to the pricing that existed prior to the 2017 Proposal, and will be charged $0.0030 per share executed at NYSE, $0.0000 per share executed at Nasdaq BX, and $0.0030 per share executed in other venues. Since the 2017 Proposal excluded PSKP orders from the $0.0026 fee, the transaction fees assessed for PSKP orders will remain the same.\8\ --------------------------------------------------------------------------- \8\ Specifically, the charge for a PSKP order that executes on PSX will range from $0.0028-$0.0030 per share, depending on the applicability of the other relevant factors set forth in the Pricing Schedule. A PSKP order that executes on a venue besides PSX will be charged $0.0030 per share executed at NYSE, $0.0000 per share executed at Nasdaq BX, and $0.0030 per share executed in other venues. Since a PSKP order is a subset of a PSCN order, the proposed change in the Pricing Schedule from ``PSKP'' to ``PSCN'' in the part of the Pricing Schedule relating to routing fees will cover both PSCN and PSKP orders. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\9\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\10\ 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, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78f(b). \10\ 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.'' \11\ --------------------------------------------------------------------------- \11\ 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 \12\ (``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.\13\ 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.'' \14\ --------------------------------------------------------------------------- \12\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \13\ See NetCoalition, at 534-535. \14\ 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'. . . .'' \15\ --------------------------------------------------------------------------- \15\ 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)). --------------------------------------------------------------------------- The Exchange believes that eliminating the current fee of $0.0026 per share executed for PSCN orders that execute on PSX or that execute on other venues is reasonable. The PSCN routing option is designed to attract users to PSX, and the current PSCN transaction fees, by extension, were designed to provide a greater incentive to member organizations to use PSX as a venue. Since the adoption of the current transaction fees for PSCN orders, however, the Exchange has not observed a change in the activity of member organizations that would indicate that the current PSCN fees are incentivizing member organizations to send additional order flow to the Exchange, or to increase additional displayed liquidity on the Exchange. Accordingly, the Exchange believes that it is reasonable to eliminate the current PSCN fees since those fees are not achieving their intended purpose. With respect to orders that execute on PSX, the Exchange further believes the proposal is reasonable because the Pricing Schedule will no longer distinguish between PSCN orders and orders with other routing options. In eliminating the current PSCN fees, the fees for PSCN orders will revert to the fees for PSCN orders prior to the 2017 Proposal. The Exchange has previously stated why it believes those fees are reasonable,\16\ and continues to [[Page 12068]] believe such fees are reasonable. For example, the Exchange continues to believe that the current fees for orders that execute on PSX in securities listed on Nasdaq, NYSE or an exchange other than Nasdaq or NYSE are reasonable because they reflect the costs and benefits provided by the Exchange, including credits to market participants that provide beneficial liquidity to PSX, to the benefit of all of its participants.\17\ Similarly, the Exchange believes that the fees for routing orders to other venues are reasonable because those fees are designed to incentivize member organizations to send orders and quotes to PSX, even if such orders ultimately execute on other venues.\18\ --------------------------------------------------------------------------- \16\ See Securities Exchange Act Release No. 76631 (December 11, 2015), 80 FR 78797 (December 17, 2015) (SR-Phlx-2015-98) (adopting the current fees for transactions on PSX of $0.0029 per share executed in Nasdaq-listed securities, $0.0028 per share executed for NYSE-listed securities, and $0.0028 per share executed for executions in securities listed on exchanges other than Nasdaq and NYSE); Release No. 78027 (June 9, 2016), 81 FR 39078 (June 15, 2016) (SR-Phlx-2016-64) (adopting the current volume thresholds and the ``default'' fee for transactions on PSX of $0.0030 per share executed for orders for all other member organizations that execute on PSX); Release No. 71520 (February 11, 2014), 79 FR 9302 (February 18, 2014) (SR-Phlx-2014-09) and Release No. 74292 (February 18, 2015), 80 FR 9807 (February 24, 2015) (SR-Phlx-2015-14) (adopting the current fee of $0.0000 for PSCN orders that are routed to Nasdaq BX); Release No. 70874 (November 14, 2013), 78 FR 69725 (November 20, 2013) (SR-Phlx-2013-111) (adopting the current fee of $0.0030 per share executed for PSCN orders that are routed to NYSE or to other venues). \17\ See Securities Exchange Act Release No. 76631 (December 11, 2015), 80 FR 78797 (December 17, 2015) (SR-Phlx-2015-98). \18\ See Securities Exchange Act Release No. 70874, November 14, 2013, 78 FR 69725 (November 20, 2013) (SR-Phlx-2013-111). --------------------------------------------------------------------------- Finally, as discussed above, the transaction fees for a PSKP order, which is a subset of a PSCN order, remain unchanged. The Exchange also believes that eliminating the $0.0026 fee for PSCN orders that execute on PSX and on other venues is an equitable allocation and is not unfairly discriminatory. With this change, member organizations that use PSCN orders may pay greater fees (e.g., $0.0029 per share executed for an order in a Nasdaq-listed security that executes on PSX) or lower fees (e.g., $0.0000 per share executed for an order that executes on Nasdaq BX) than pursuant to the current PSCN fees. However, the Exchange will apply the same fee to all similarly situated member organizations, e.g., to all member organizations that execute an order in a Nasdaq-listed security on PSX. With respect to orders that execute on PSX, the Exchange further believes that the proposal is equitable and not unfairly discriminatory because the Pricing Schedule will eliminate the distinction between PSCN orders and orders with other routing options. Further, this change will revert the fees for PSCN orders that execute on PSX and on other venues to their levels prior to the 2017 Proposal. The Exchange has previously stated that it believes those fees are equitable and not unfairly discriminatory,\19\ and continues to believe such fees are equitable and not unfairly discriminatory. Specifically, the Exchange continues to believe that these fees reflect the costs and benefits provided by the Exchange, while also attempting to incentivize order flow to the Exchange. --------------------------------------------------------------------------- \19\ See supra note 16. --------------------------------------------------------------------------- Finally, as discussed above, the transaction fees for a PSKP order, which is a subset of a PSCN order, remain unchanged. 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. In this instance, the proposed changes to the charges assessed to member organizations for the execution of securities do not impose a burden on competition because the Exchange's execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. The Exchange is eliminating the current PSCN fees because the Exchange has not observed that the current PSCN fees achieved their intended effect, i.e., to incentivize member organizations to send additional order flow to the Exchange, or to increase additional displayed liquidity on the Exchange. With the elimination of the current PSCN fees, this change will revert the fees for PSCN orders that execute on PSX and on other venues to their levels prior to the 2017 Proposal. The Exchange has previously stated that it does not believe that the fees in effect prior to the 2017 Proposal impose a burden on competition that is not necessary or appropriate,\20\ and continues to believe that to be the case. Additionally, the Exchange will apply the same fee for PSCN orders to all similarly situated member organizations. --------------------------------------------------------------------------- \20\ See supra note 16. --------------------------------------------------------------------------- With respect to orders that execute on PSX, the Exchange also does not believe that the proposal will impose a burden on competition that is not necessary or appropriate because the Pricing Schedule will eliminate the distinction between PSCN orders and orders with other routing options. Finally, the Exchange does not believe that the proposal will impose a burden on competition that is not necessary or appropriate because, as discussed above, the transaction fees for a PSKP order, which is a subset of a PSCN order, remain unchanged. In sum, 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 member organizations or competing order execution venues to maintain their competitive standing in the financial markets. 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.\21\ --------------------------------------------------------------------------- \21\ 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: [[Page 12069]] Electronic CommentsUse 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-2018-21 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-2018-21. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2018-21 and should be submitted on or before April 9, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\22\ --------------------------------------------------------------------------- \22\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-05450 Filed 3-16-18; 8:45 am] BILLING CODE 8011-01-P
![12066 Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices
All submissions should refer to File 2018, Nasdaq PHLX LLC (‘‘Phlx’’ or PSCN orders,3 other than PSKP orders,4
Number SR–MIAX–2018–08. This file ‘‘Exchange’’) filed with the Securities that execute on PSX or that are routed
number should be included on the and Exchange Commission (‘‘SEC’’ or to other venues and receive an
subject line if email is used. To help the ‘‘Commission’’) the proposed rule execution on another venue. By way of
Commission process and review your change as described in Items I, II, and comparison, for an order that executes
comments more efficiently, please use III below, which Items have been on PSX, the execution fees for non-
only one method. The Commission will prepared by the Exchange. The PSCN orders (including PSKP orders)
post all comments on the Commission’s Commission is publishing this notice to for all securities that PSX trades that are
internet website (http://www.sec.gov/ solicit comments on the proposed rule priced at $1 or more per share range
rules/sro.shtml). Copies of the from $0.0028 per share executed to
change from interested persons.
submission, all subsequent $0.0030 per share executed, depending
amendments, all written statements I. Self-Regulatory Organization’s on where that security is listed and
with respect to the proposed rule Statement of the Terms of Substance of whether the member meets certain
change that are filed with the the Proposed Rule Change established volume thresholds. For
Commission, and all written orders in securities that are priced at $1
communications relating to the The Exchange proposes to amend the or more per share that are routed to, and
proposed rule change between the Exchange’s transaction fees at Section execute on other venues, the Exchange
Commission and any person, other than VIII (NASDAQ PSX fees) of Phlx’s charges fees ranging from $0.0000 per
those that may be withheld from the Pricing Schedule to remove the current share executed to $0.0035 per share
public in accordance with the transaction fees for any PSCN order executed (including PKSP orders).
provisions of 5 U.S.C. 552, will be (other than a PSKP order) that receives The Exchange introduced the fee for
available for website viewing and an execution on NASDAQ PSX (‘‘PSX’’) PSCN orders in 2017.5 Prior to the 2017
printing in the Commission’s Public or that is routed away from PSX and Proposal, a PSCN order that executed on
Reference Room, 100 F Street NE, receives an execution at an away PSX would be assessed a charge ranging
Washington, DC 20549, on official market. from $0.0028–$0.0030 per share
business days between the hours of executed depending on the applicability
10:00 a.m. and 3:00 p.m. Copies of the The text of the proposed rule change of other factors set forth in the Pricing
filing also will be available for is available on the Exchange’s website at Schedule, e.g., if the order was for a
inspection and copying at the principal http://nasdaqphlx.cchwallstreet.com/, security that was listed on The Nasdaq
office of the Exchange. All comments at the principal office of the Exchange, Stock Market LLC (‘‘Nasdaq’’), or if the
received will be posted without change. and at the Commission’s Public order was for a security that is listed on
Persons submitting comments are Reference Room. the New York Stock Exchange LLC
cautioned that we do not redact or edit (‘‘NYSE’’), and whether the member met
II. Self-Regulatory Organization’s the applicable volume thresholds.
personal identifying information from
comment submissions. You should Statement of the Purpose of, and Prior to the 2017 Proposal, a PSCN
submit only information that you wish Statutory Basis for, the Proposed Rule order that routed to another venue
to make available publicly. All Change would be charged $0.0030 per share
submissions should refer to File executed at NYSE, $0.0000 per share
In its filing with the Commission, the executed at Nasdaq BX, Inc. (‘‘Nasdaq
Number SR–MIAX–2018–08 and should
Exchange included statements BX’’) and $0.0030 per share executed in
be submitted on or before April 9, 2018.
concerning the purpose of and basis for other venues. Pursuant to the 2017
For the Commission, by the Division of the proposed rule change and discussed
Trading and Markets, pursuant to delegated Proposal, PSCN orders that execute on
authority.19
any comments it received on the a venue other than PSX are charged
proposed rule change. The text of these $0.0026 per share executed. PSKP
Eduardo A. Aleman,
statements may be examined at the orders continue to be charged $0.0030
Assistant Secretary.
places specified in Item IV below. The per share executed at NYSE, $0.0000 per
[FR Doc. 2018–05453 Filed 3–16–18; 8:45 am]
Exchange has prepared summaries, set share executed at Nasdaq BX, and
BILLING CODE 8011–01–P
forth in sections A, B, and C below, of $0.0030 per share executed in other
the most significant aspects of such venues.6
SECURITIES AND EXCHANGE statements.
3 PSCN is a routing option that is designed to
COMMISSION A. Self-Regulatory Organization’s attract users to PSX. An order using the PSCN
[Release No. 34–82865; File No. SR–Phlx– Statement of the Purpose of, and routing option will check the System for available
shares and simultaneously route the remaining
2018–21] Statutory Basis for, the Proposed Rule shares to destinations on the System routing table.
Change If shares remain unexecuted after routing, they are
Self-Regulatory Organizations; Nasdaq posted on the book. Once on the book, should the
PHLX LLC; Notice of Filing and 1. Purpose order subsequently be locked or crossed by another
Immediate Effectiveness of Proposed market center, the System will not route the order
Rule Change To Amend the The purpose of the proposed rule to the locking or crossing market center. See Rule
change is to amend the Exchange’s 3315(a)(1)(A)(iv).
Transaction Fees at Section VIII 4 PSKP is a form of PSCN, pursuant to which the
transaction fees at Section VIII of Phlx’s
entering firm instructs the System to bypass any
March 13, 2018. Pricing Schedule to remove the current market centers included in the PSCN System
sradovich on DSK3GMQ082PROD with NOTICES
Pursuant to Section 19(b)(1) of the transaction fee for any PSCN order routing table that are not posting Protected
Securities Exchange Act of 1934 (other than a PSKP order) that receives Quotations within the meaning of Regulation NMS.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Id.
an execution on PSX or that is routed 5 See Securities Exchange Act Release No. 80938
notice is hereby given that on March 1, away from PSX and receives an (June 15, 2017), 82 FR 28171 (June 20, 2017) (SR–
execution at an away market. Phlx–2017–44) (‘‘2017 Proposal’’).
19 17 CFR 200.30–3(a)(12). 6 In the 2017 Proposal, the Exchange noted that
1 15 U.S.C. 78s(b)(1). Currently, the Exchange assesses a member organizations sending PSCN orders that
2 17 CFR 240.19b–4. charge of $0.0026 per share executed for executed at Nasdaq BX would pay an increased fee
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![Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices 12067
In the 2017 Proposal, the Exchange BX, and $0.0030 per share executed in Further, ‘‘[n]o one disputes that
noted that PSCN is designed to attract other venues. Since the 2017 Proposal competition for order flow is ‘fierce.’
users to PSX, and that generally excluded PSKP orders from the $0.0026 . . . As the SEC explained, ‘[i]n the U.S.
providing a discount to member fee, the transaction fees assessed for national market system, buyers and
organizations for PSCN executions will PSKP orders will remain the same.8 sellers of securities, and the broker-
provide a greater incentive to member dealers that act as their order-routing
2. Statutory Basis agents, have a wide range of choices of
organizations to use PSX as a venue.
The Exchange stated that assessing a The Exchange believes that its where to route orders for execution’;
lowered rate will encourage member proposal is consistent with Section 6(b) [and] ‘no exchange can afford to take its
organizations to interact with PSX of the Act,9 in general, and furthers the market share percentages for granted’
liquidity, while also encouraging such objectives of Sections 6(b)(4) and 6(b)(5) because ‘no exchange possesses a
participants to take advantage of the of the Act,10 in particular, in that it monopoly, regulatory or otherwise, in
sophisticated routing functionality provides for the equitable allocation of the execution of order flow from broker
offered by PSX. Additionally, since reasonable dues, fees and other charges dealers’. . . .’’ 15
PSCN does not re-route when it is among members and issuers and other The Exchange believes that
locked or crossed by an away market, persons using any facility, and is not eliminating the current fee of $0.0026
the Exchange also believed that designed to permit unfair per share executed for PSCN orders that
increased use of PSCN would also discrimination between customers, execute on PSX or that execute on other
increase displayed liquidity on PSX.7 issuers, brokers, or dealers. venues is reasonable. The PSCN routing
Since the adoption of the reduced The Commission and the courts have option is designed to attract users to
transaction fee for PSCN orders, the repeatedly expressed their preference PSX, and the current PSCN transaction
Exchange has not observed a change in for competition over regulatory fees, by extension, were designed to
the activity of member organizations intervention in determining prices, provide a greater incentive to member
that would indicate that the reduced products, and services in the securities organizations to use PSX as a venue.
PSCN fees are incentivizing member markets. In Regulation NMS, while Since the adoption of the current
organizations to send additional order adopting a series of steps to improve the transaction fees for PSCN orders,
flow to the Exchange, or to increase current market model, the Commission however, the Exchange has not observed
additional displayed liquidity on the highlighted the importance of market a change in the activity of member
Exchange. Accordingly, the Exchange is forces in determining prices and SRO organizations that would indicate that
discontinuing the $0.0026 fee for PSCN revenues and, also recognized that the current PSCN fees are incentivizing
orders that execute on PSX or on other current regulation of the market system member organizations to send
venues. ‘‘has been remarkably successful in additional order flow to the Exchange,
With this change, PSCN orders that promoting market competition in its or to increase additional displayed
execute on PSX will revert to the pricing broader forms that are most important to liquidity on the Exchange. Accordingly,
that existed prior to the 2017 Proposal, investors and listed companies.’’ 11 the Exchange believes that it is
and will be charged $0.0028–$0.0030 Likewise, in NetCoalition v. Securities reasonable to eliminate the current
per share executed, depending on other and Exchange Commission 12 PSCN fees since those fees are not
applicable factors, e.g., if the order is for (‘‘NetCoalition’’) the D.C. Circuit upheld achieving their intended purpose.
the Commission’s use of a market-based With respect to orders that execute on
a security that is listed on Nasdaq or
approach in evaluating the fairness of PSX, the Exchange further believes the
NYSE, and whether the member meets
market data fees against a challenge proposal is reasonable because the
the applicable volume thresholds.
claiming that Congress mandated a cost- Pricing Schedule will no longer
Similarly, PSCN orders that execute
based approach.13 As the court distinguish between PSCN orders and
on a venue other than PSX will revert
emphasized, the Commission ‘‘intended orders with other routing options.
to the pricing that existed prior to the In eliminating the current PSCN fees,
2017 Proposal, and will be charged in Regulation NMS that ‘market forces,
the fees for PSCN orders will revert to
$0.0030 per share executed at NYSE, rather than regulatory requirements’
the fees for PSCN orders prior to the
$0.0000 per share executed at Nasdaq play a role in determining the market
2017 Proposal. The Exchange has
data . . . to be made available to
previously stated why it believes those
of $0.0026 per share executed, instead of the then- investors and at what cost.’’ 14
current $0.0000 per share executed for those orders. fees are reasonable,16 and continues to
The Exchange stated that this fee increase for PSCN 8 Specifically, the charge for a PSKP order that
orders that executed on Nasdaq BX would help executes on PSX will range from $0.0028–$0.0030
15 Id. at 539 (quoting Securities Exchange Act
offset the cost to the Exchange in offering the per share, depending on the applicability of the Release No. 59039 (December 2, 2008), 73 FR
reduced fees for all other PSCN executions. Id. other relevant factors set forth in the Pricing 74770, 74782–83 (December 9, 2008) (SR–
7 As noted above, the current transaction fee for
Schedule. A PSKP order that executes on a venue NYSEArca–2006–21)).
PSCN orders does not include PSKP orders. When besides PSX will be charged $0.0030 per share
16 See Securities Exchange Act Release No. 76631
adopting the current transaction fee for PSCN executed at NYSE, $0.0000 per share executed at (December 11, 2015), 80 FR 78797 (December 17,
orders (and the corresponding exclusion for PSKP Nasdaq BX, and $0.0030 per share executed in other 2015) (SR–Phlx–2015–98) (adopting the current fees
orders), the Exchange noted that it had only limited venues. Since a PSKP order is a subset of a PSCN for transactions on PSX of $0.0029 per share
funds to apply to the PSCN fees, which it was order, the proposed change in the Pricing Schedule executed in Nasdaq-listed securities, $0.0028 per
generally reducing. The Exchange noted that PSCN from ‘‘PSKP’’ to ‘‘PSCN’’ in the part of the Pricing share executed for NYSE-listed securities, and
orders route to both venues with protected Schedule relating to routing fees will cover both $0.0028 per share executed for executions in
quotations and venues without protected PSCN and PSKP orders. securities listed on exchanges other than Nasdaq
quotations, which are often low-cost venues, based and NYSE); Release No. 78027 (June 9, 2016), 81
sradovich on DSK3GMQ082PROD with NOTICES
9 15 U.S.C. 78f(b).
on the System routing table following the principal 10 15 U.S.C. 78f(b)(4) and (5). FR 39078 (June 15, 2016) (SR–Phlx–2016–64)
of best execution. By contrast, PSKP orders are 11 Securities Exchange Act Release No. 51808
(adopting the current volume thresholds and the
routed only to venues with protected quotations, ‘‘default’’ fee for transactions on PSX of $0.0030 per
which typically assess the Exchange higher fees for (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) share executed for orders for all other member
execution thereon. Consequently, extending the (‘‘Regulation NMS Adopting Release’’). organizations that execute on PSX); Release No.
12 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
proposed pricing to PSKP would result in 71520 (February 11, 2014), 79 FR 9302 (February
significant cost to the Exchange in comparison to 2010). 18, 2014) (SR–Phlx–2014–09) and Release No.
13 See NetCoalition, at 534–535.
the proposed fee assessed for such executions. See 74292 (February 18, 2015), 80 FR 9807 (February
2017 Proposal, supra note 5. 14 Id. at 537. Continued
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![Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices 12069
Electronic Comments SECURITIES AND EXCHANGE is $412 per hour,2 resulting in a total
COMMISSION internal cost of compliance for these
• Use the Commission’s internet respondents of $148,320 per year (360
comment form (http://www.sec.gov/ Submission for OMB Review; hours at $412 per hour).
rules/sro.shtml); or Comment Request In addition, approximately 1,144
• Send an email to rule-comments@ broker-dealers 3 must comply with Rule
Upon Written Request, Copies Available
sec.gov. Please include File Number SR– 9b–1. Each of these respondents will
From: Securities and Exchange
Phlx–2018–21 on the subject line. process an average of 3 new customers
Commission, Office of FOIA Services,
for options each week and, therefore,
Paper Comments 100 F Street NE, Washington, DC
will have to furnish approximately 156
20549–2736.
ODDs per year. The postal mailing or
• Send paper comments in triplicate Extension: electronic delivery of the ODD takes
to Secretary, Securities and Exchange Rule 9b–1, SEC File No. 270–429, OMB respondents no more than 30 seconds to
Commission, 100 F Street NE, Control No. 3235–0480.
complete for an annual compliance
Washington, DC 20549–1090. Notice is hereby given that pursuant burden for each of these respondents of
to the Paperwork Reduction Act of 1995 78 minutes or 1.3 hours. Thus, the total
All submissions should refer to File
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the time burden per year for broker-dealers
Number SR–Phlx–2018–21. This file
Securities and Exchange Commission is 1,487 hours (1,144 broker-dealers ×
number should be included on the (‘‘Commission’’) has submitted to the 1.3 hours). The estimated cost for a
subject line if email is used. To help the Office of Management and Budget general clerk of a broker-dealer is $62
Commission process and review your (‘‘OMB’’) a request for approval of per hour,4 resulting in a total internal
comments more efficiently, please use extension of the previously approved cost of compliance for these
only one method. The Commission will collection of information provided for in respondents of $92,194 per year (1,487
post all comments on the Commission’s Rule 9b–1 (17 CFR 240.9b–1), under the hours at $62 per hour).
internet website (http://www.sec.gov/ Securities Exchange Act of 1934 (15 The total time burden for all
rules/sro.shtml). Copies of the U.S.C. 78a et seq.). respondents under this rule (both
submission, all subsequent Rule 9b–1 (17 CFR 240.9b–1) sets options markets and broker-dealers) is
amendments, all written statements forth the categories of information 1,847 hours per year (360 + 1,487), and
with respect to the proposed rule required to be disclosed in an options the total internal cost of compliance is
change that are filed with the disclosure document (‘‘ODD’’) and $240,514 ($148,320 + $92,124).
Commission, and all written requires the options markets to file an An agency may not conduct or
communications relating to the ODD with the Commission 60 days prior sponsor, and a person is not required to
proposed rule change between the to the date it is distributed to investors. respond to, a collection of information
Commission and any person, other than In addition, Rule 9b–1 provides that the under the PRA unless it displays a
those that may be withheld from the ODD must be amended if the currently valid OMB control number.
information in the document becomes The public may view background
public in accordance with the
materially inaccurate or incomplete and documentation for this information
provisions of 5 U.S.C. 552, will be
that amendments must be filed with the collection at the following website:
available for website viewing and Commission 30 days prior to the www.reginfo.gov. Comments should be
printing in the Commission’s Public distribution to customers. Finally, Rule directed to (i) Desk Officer for the
Reference Room, 100 F Street NE, 9b–1 requires a broker-dealer to furnish Securities and Exchange Commission,
Washington, DC 20549, on official to each customer an ODD and any
business days between the hours of amendments, prior to accepting an order 2 SIFMA did its last annual survey in 2013 and
10:00 a.m. and 3:00 p.m. Copies of the to purchase or sell an option on behalf will not resume the survey process. Accordingly,
filing also will be available for of that customer. the $412 figure is based on the 2013 figure ($380)
adjusted by the inflation rate calculated using the
inspection and copying at the principal There are 15 options markets 1 that Bureau of Labor Statistics’ CPI Inflation Calculator.
office of the Exchange. All comments must comply with Rule 9b–1. These The $380 per hour figure for an Attorney is from
received will be posted without change. respondents work together to prepare a SIFMA’s Management & Professional Earnings in
single ODD covering options traded on the Securities Industry 2013, modified by
Persons submitting comments are Commission staff to account for an 1800-hour work-
cautioned that we do not redact or edit each market, as well as amendments to year and multiplied by 5.35 to account for bonuses,
personal identifying information from the ODD. These respondents file firm size, employee benefits and overhead.
comment submissions. You should approximately 3 amendments per year. 3 The estimate of 1,144 broker-dealers required to
submit only information that you wish The staff calculates that the preparation comply with Rule 9b–1 is derived from Item 12 of
and filing of amendments should take the Form BD (OMB Control No. 3235–0012). This
to make available publicly. All estimate may be high as it includes broker-dealers
no more than eight hours per options
submissions should refer to File that engage in only a proprietary business, and as
market. Thus, the total time burden for a result are not required to deliver an ODD, as well
Number SR–Phlx–2018–21 and should
options markets per year is 360 hours as those broker-dealers subject to Rule 9b–1.
be submitted on or before April 9, 2018. (15 options markets × 8 hours per 4 The $62 figure is based on the 2013 figure ($57)
For the Commission, by the Division of amendment × 3 amendments). The adjusted for inflation. See supra note 1. As noted
above, SIFMA did its last annual survey in 2013
Trading and Markets, pursuant to delegated estimated cost for an in-house attorney and will not resume the survey process.
authority.22 Accordingly, the $62 figure is based on the 2013
1 The fifteen options markets are as follows: The figure ($57) adjusted for inflation. The $57 per hour
sradovich on DSK3GMQ082PROD with NOTICES
Eduardo A. Aleman,
fifteen options markets are as follows: BOX Options figure for a General Clerk is from SIFMA’s Office
Assistant Secretary. Exchange LLC, Cboe BZX Exchange, Inc., Cboe C2 Salaries in the Securities Industry 2013, modified
[FR Doc. 2018–05450 Filed 3–16–18; 8:45 am] Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe by Commission staff to account for an 1800-hour
Exchange, Inc., Miami International Securities work-year and multiplied by 2.93 to account for
BILLING CODE 8011–01–P
Exchange LLC, MIAX PEARL, LLC, Nasdaq BX, bonuses, firm size, employee benefits and overhead.
Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq The staff believes that the ODD would be mailed or
MRX, LLC, Nasdaq PHLX LLC, the Nasdaq Options electronically delivered to customers by a general
Market (NOM), NYSE Arca, Inc., and NYSE clerk of the broker-dealer or some other equivalent
22 17 CFR 200.30–3(a)(12). American LLC. position.
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Document Created: 2018-03-17 04:24:47
Document Modified: 2018-03-17 04:24:47
| 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 | 83 FR 12066 |
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