83 FR 24364 - Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Sections I and II of the Pricing Schedule
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 102 (May 25, 2018)
Federal Register Volume 83, Issue 102 (May 25, 2018)
| Page Range | 24364-24367 | |
| FR Document | 2018-11225 |
[Federal Register Volume 83, Number 102 (Friday, May 25, 2018)] [Notices] [Pages 24364-24367] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-11225] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83295; File No. SR-Phlx-2018-39] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Sections I and II of the Pricing Schedule May 21, 2018. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that on May 10, 2018, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed with the Securities and Exchange Commission (``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\ 15 U.S.C. 78a. \3\ 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 Phlx's Pricing Schedule at Section I, entitled ``Rebates and Fees for Adding and Removing Liquidity in SPY,'' and Section II, entitled ``Multiply Listed Options Fees (Includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed).'' 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 Exchange proposes to amend Phlx's Pricing Schedule at Section I, entitled ``Rebates and Fees for Adding and Removing Liquidity in SPY,'' and Section II, entitled ``Multiply Listed Options Fees (Includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed).'' Specifically, the Exchange proposes to amend a surcharge in Section I, Part B, which applies to options overlying SPY as well as a surcharge in Section II related to Complex Orders in order to further reduce the costs to the Exchange of such transactions. Each surcharge amendment is described below in more detail. Section I, Part B The Exchange proposes to amend Section I, Part B to amend Complex Order \4\ fees for SPY. The Exchange proposes to increase a surcharge of $0.05 per contract, which is currently assessed to Customers \5\ when executing the individual components of their Complex Orders in SPY against Market Maker \6\ or Specialist \7\ quotes that are resting on the Simple Order Book. Today, Customers submit Complex Orders to the Exchange because often, Customers are able to execute such Complex Orders immediately by executing the individual components thereof through interactions with Market Maker and Specialist quotes that rest on the Exchange's Simple Order Book. These Customers benefit from not having to wait for counterparties that are willing to execute against their Complex Orders in the Complex Order Book. The Exchange proposes to increase the surcharge from $0.05 to $0.15 per contract for Customers that execute Complex Orders against Market Maker or Specialist quotes resting on the Simple Order Book.\8\ The Exchange proposes this surcharge increase to reduce further the Exchange's costs for these transactions. Not only does the Exchange receive no fees from Customers for engaging in these transactions,\9\ but the Exchange also pays rebates to the Market Makers and Specialists whose quotes execute against the Customers' Complex Orders.\10\ Pursuant to Section I, Part A of the Exchange's Pricing Schedule, these rebates range from $0.15 to $0.35 per contact. --------------------------------------------------------------------------- \4\ A Complex Order is an order involving the simultaneous purchase and/or sale of two or more different options series in the same underlying security, priced as 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. See Phlx Rule 1098. \5\ The term ``Customer'' applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation which is not for the account of a broker or dealer or for the account of a ``Professional'' (as that term is defined in Rule 1000(b)(14)). \6\ The term ``ROT, SQT and RSQT'' applies to transactions for the accounts of Registered Option Traders (``ROTs''), Streaming Quote Traders (``SQTs''), and Remote Streaming Quote Traders (``RSQTs''). For purposes of the Pricing Schedule, the term ``Market Maker'' will be utilized to describe fees and rebates applicable to ROTs, SQTs and RSQTs. RSQTs may also be referred to as Remote Market Markers (``RMMs''). See Preface to Phlx's Pricing Schedule. \7\ The term ``Specialist'' applies to transactions for the account of a Specialist (as defined in Exchange Rule 1020(a)). A Specialist is an Exchange member registered as an options specialist pursuant to Rule 1020(a). An options Specialist includes a Remote Specialist, which is defined as an options specialist in one or more classes that does not have a physical presence on an Exchange floor and is approved by the Exchange pursuant to Rule 501. \8\ A component of a Complex Order may ``leg'' against a resting order in the Simple Order Book. \9\ Non-Customer market participants pay fees for adding and removing liquidity in Complex Orders as noted in Section I, Part B of the Pricing Schedule, although Customers pay no such fees. \10\ See rebates in Section I, Part A of the Pricing Schedule. --------------------------------------------------------------------------- Section II The Exchange proposes to amend Section II to increase a surcharge assessed to electronic Complex Orders that remove liquidity \11\ from the Complex Order Book and auctions, [[Page 24365]] excluding PIXL,\12\ in Non-Penny Pilot Options (excluding NDX and NDXP).\13\ The Exchange proposes to increase this surcharge for electronically-delivered Complex Orders from $0.10 to $0.12 per contract to reduce further the Exchange's costs for these transactions. Today, Customers pay no Options Transaction Charges in Non-Penny Pilot Options.\14\ The Exchange pays Customer rebates for Complex Orders in Section B of the Pricing Schedule. The Exchange desires to continue to incentivize Customers to interact with Complex Order liquidity by offering those rebates in Section B of the Pricing Schedule. The Exchange believes that while the surcharge is being increased for the Options Transaction Charge in Non-Penny Pilot Options excluding NDX and NDXP, the fees remain competitive as the Exchange does not assess Customers a fee but offers Customers rebates. The surcharge is assessed to Non-Customers.\15\ The Exchange is proposing to add ``Non- Customers'' to footnote 7 of Section II of the Pricing Schedule to make clear that today, Customers do not get assessed a surcharge. The Exchange assesses surcharges to market participants that pay Options Transaction Charges. In this case, only Non-Customer market participants pay an Options Transaction Charge for Non-Penny Pilot Options. Customers are not assessed a surcharge today because they pay no Options Transaction Charge. By [sic] adding the term ``Non- Customer'' into this provision will amend the sentence to make clear that the surcharge is only being assessed to a Non-Customer. --------------------------------------------------------------------------- \11\ The Exchange notes that an order that is received by the trading system first in time shall be considered an order adding liquidity and an order that trades against that order shall be considered an order removing liquidity. \12\ PIXL\SM\ is the Exchange's price improvement mechanism known as Price Improvement XL or PIXL. See Phlx Rule 1087. \13\ Today, this surcharge is not subject to the Monthly Market Maker Cap. Phlx Specialists and Market Makers are subject to a ``Monthly Market Maker Cap'' of $500,000 for: (i) Electronic Option Transaction Charges, excluding surcharges and excluding options overlying NDX and NDXP; and (ii) QCC Transaction Fees (as defined in Exchange Rule 1080(o) and Floor QCC Orders, as defined in 1064(e)). \14\ Non-Customer market participants pay a $0.75 per contract Options Transaction Charge in Non-Penny Pilot Options excluding NDX and NDXP. \15\ The term ``Non-Customer'' applies to transactions for the accounts of Specialists, Market Makers, Firms, Professionals, Broker-Dealers and JBOs. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\16\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\17\ 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. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78f(b). \17\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- Section I, Part B The Exchange's proposal to amend Section I, Part B related to Complex Order fees for SPY to increase the surcharge from $0.05 to $0.15 per contract on Customers that execute Complex Orders against Market Maker or Specialist quotes resting on the Simple Order Book is reasonable because the surcharge would reduce the Exchange's costs associated with these transactions. Each such transaction costs the Exchange between $0.15 and $0.35 per contract in rebates to Market Makers and Specialists. Moreover, it is reasonable to impose this surcharge on Customers because Customers benefit the most from being able to achieve immediate executions of their Complex Orders in the relevant scenario. The Exchange believes that the surcharge is minimal and will not be substantial enough to eliminate or even significantly diminish the benefits to Customers of being able to achieve immediate executions in this manner. Finally, the Exchange notes that all other account categories, Professionals,\18\ Firms,\19\ Broker-Dealers,\20\ Specialists, and Market Makers, pay higher fees when the Complex Order removes liquidity from the Complex Order Book or the Simple Order Book \21\ than Customers would pay under the proposal when they execute their Complex Orders against Simple Orders of Market Makers and Specialists that are resting on the Simple Order Book.\22\ --------------------------------------------------------------------------- \18\ The term ``Professional'' applies to transactions for the accounts of Professionals, as defined in Exchange Rule 1000(b)(14) as any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). \19\ The term ``Firm'' applies to any transaction that is identified by a member or member organization for clearing in the Firm range at OCC. \20\ The term ``Broker-Dealer'' applies to any transaction, which is not subject to any of the other transaction fees applicable within a particular category. \21\ A component of a Complex Order may ``leg'' against a resting order in the Simple Order Book. \22\ See Section I, Part B of the Pricing Schedule. --------------------------------------------------------------------------- The Exchange's proposal to amend Section I, Part B to amend Complex Order fees for SPY to increase the surcharge from $0.05 to $0.15 per contract on Customers that execute Complex Orders against Market Maker or Specialist quotes resting on the Simple Order Book is equitable and not unfairly discriminatory because the Exchange will uniformly apply the fee to all similarly-situated Customers. Even with this increased surcharge, Customers are assessed the least amount per contract for executions in SPY. As noted herein, Customers are not assessed fees for adding and removing liquidity for SPY Complex Orders. With respect to the Simple Market, a Customer is assessed the lowest fee for removing liquidity.\23\ The Exchange believes that it is equitable and not unfairly discriminatory to assess Customers no fees or lower fees because Customer orders bring valuable liquidity to the market, which benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \23\ A component of a Complex Order may ``leg'' against a resting order in the Simple Order Book. --------------------------------------------------------------------------- Section II The Exchange's proposal to amend Section II to increase a surcharge assessed to electronic Complex Orders that remove liquidity from the Complex Order Book and auctions, excluding PIXL, in Non-Penny Pilot Options (excluding NDX and NDXP) from $0.10 to $0.12 per contract is reasonable because it will further offset the cost of paying rebates as provided for in Section I, Part A to Specialists and Market Makers. The Exchange believes that it is reasonable to only assess this surcharge to those orders which remove liquidity from the market because the Exchange wants to continue to encourage market participation and price improvement for those participants that seek to add liquidity on Phlx. The Exchange believes that not assessing the surcharge on PIXL and SPY orders is reasonable. PIXL has its own pricing,\24\ and the Exchange wants to continue to encourage price improvement within PIXL. SPY has its own rebate program separate and apart from Section B.\25\ Limiting the surcharges to electronically-delivered transactions is reasonable because the Section B rebates apply only to electronically-delivered Customer orders. Further, limiting the surcharge to orders entered electronically is [[Page 24366]] equitable and not unfairly discriminatory because the Exchange has expended considerable resources to develop its electronic trading platforms and seeks to recoup the costs of such expenditures. Finally, excluding NDX and NDXP is reasonable because these symbols are currently subject to a surcharge.\26\ The Exchange's proposal to add ``Non-Customers'' to footnote 7 of Section II of the Pricing Schedule is reasonable because today Customers do not get assessed a surcharge. The surcharge is assessed to Non-Customer market participants who pay an Options Transaction Charge for Non-Penny Pilot Options. Customers are not assessed a surcharge today because they pay no Options Transaction Charge. By [sic] adding the term ``Non-Customer'' into this provision will amend the sentence to make clear that the surcharge is only being assessed to a Non-Customer. --------------------------------------------------------------------------- \24\ See Section IV, Part A of the Pricing Schedule. \25\ See Section I of the Pricing Schedule. SPY Pricing is only in Section I. Section II pricing applies to Multiply-Listed Options excluding SPY options. \26\ See Section II of the Pricing Schedule. --------------------------------------------------------------------------- The Exchange's proposal to amend Section II to increase a surcharge assessed to electronic Complex Orders that remove liquidity from the Complex Order Book and auctions, excluding PIXL, in Non-Penny Pilot Options (excluding NDX and NDXP) from $0.10 to $0.12 per contract is equitable and not unfairly discriminatory because the Exchange will uniformly apply this surcharge to all Non-Customer or [sic] market participants that pay an Options Transaction Charge. The Exchange's proposal to add ``Non-Customers'' to footnote 7 of Section II of the Pricing Schedule is equitable and not unfairly discriminatory because Customers are not assessed a surcharge today because they pay no Options Transaction Charge. By [sic] adding the term ``Non-Customer'' into this provision will amend the sentence to make clear that the surcharge is only being assessed to a Non-Customers. The Exchange believes that it is equitable and not unfairly discriminatory to assess no Options Transaction Charge for Non-Penny Pilot Options or surcharge fee because Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. 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. Section I, Part B The Exchange's proposal to amend Section I, Part B to amend Complex Order fees for SPY to increase the surcharge from $0.05 to $0.15 per contract on Customers that execute Complex Orders against Market Maker or Specialist quotes resting on the Simple Order Book does not impose an undue burden on competition because the Exchange will uniformly apply the fee to all similarly-situated Customers. Even with this increased surcharge, Customers are assessed the least amount per contract for executions in SPY. As noted herein, Customers are not assessed fees for adding and removing liquidity for SPY Complex Orders. With respect to the Simple Market, a Customer is assessed the lowest fee for removing liquidity.\27\ The Exchange believes that it is equitable and not unfairly discriminatory to assess Customers no fees or lower fees because Customer orders bring valuable liquidity to the market, which benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \27\ A component of a Complex Order may ``leg'' against a resting order in the Simple Order Book. --------------------------------------------------------------------------- Section II The Exchange's proposal to amend Section II to increase a surcharge assessed to electronic Complex Orders that remove liquidity from the Complex Order Book and auctions, excluding PIXL, in Non-Penny Pilot Options (excluding NDX and NDXP) from $0.10 to $0.12 per contract does not impose an undue burden on competition because the Exchange will uniformly apply this surcharge to all Non-Customer or [sic] market participants that pay an Options Transaction Charge. The Exchange's proposal to add ``Non-Customers'' to footnote 7 of Section II of the Pricing Schedule does not impose an undue burden on competition because Customers are not assessed a surcharge today because they pay no Options Transaction Charge. By [sic] adding the term ``Non-Customer'' into this provision will amend the sentence to make clear that the surcharge is only being assessed to a Non-Customers. The Exchange believes that assessing no Options Transaction Charge for Non-Penny Pilot Options and not assessing a surcharge fee does not impose an undue burden on competition because Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. 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.\28\ --------------------------------------------------------------------------- \28\ 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, [[Page 24367]] 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-2018-39 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-2018-39. 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-2018-39 and should be submitted on or before June 15, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-11225 Filed 5-24-18; 8:45 am] BILLING CODE 8011-01-P
![24364 Federal Register / Vol. 83, No. 102 / Friday, May 25, 2018 / Notices
promptly providing written notice to its overlying equities, ETFs, ETNs and the individual components of their
members whenever FINRA changes a indexes which are Multiply Listed).’’ Complex Orders in SPY against Market
rule that the Exchange has incorporated The text of the proposed rule change Maker 6 or Specialist 7 quotes that are
by reference. is available on the Exchange’s website at resting on the Simple Order Book.
Accordingly, it is ordered, pursuant to http://nasdaqphlx.cchwallstreet.com/, Today, Customers submit Complex
Section 36 of the Exchange Act,19 that at the principal office of the Exchange, Orders to the Exchange because often,
the Exchange is exempt from the rule and at the Commission’s Public Customers are able to execute such
filing requirements of Section 19(b) of Reference Room. Complex Orders immediately by
the Exchange Act solely with respect to II. Self-Regulatory Organization’s executing the individual components
changes to the rules identified in its Statement of the Purpose of, and thereof through interactions with
request that incorporate by reference Statutory Basis for, the Proposed Rule Market Maker and Specialist quotes that
certain FINRA rules that are the result rest on the Exchange’s Simple Order
Change
of changes to such FINRA rules, Book. These Customers benefit from not
provided that the Exchange promptly In its filing with the Commission, the having to wait for counterparties that
provides written notice to its members Exchange included statements are willing to execute against their
whenever FINRA proposes to change a concerning the purpose of and basis for Complex Orders in the Complex Order
rule that the Exchange has incorporated the proposed rule change and discussed Book. The Exchange proposes to
by reference. any comments it received on the increase the surcharge from $0.05 to
proposed rule change. The text of these $0.15 per contract for Customers that
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
statements may be examined at the execute Complex Orders against Market
authority.20 places specified in Item IV below. The Maker or Specialist quotes resting on
Eduardo A. Aleman, Exchange has prepared summaries, set the Simple Order Book.8 The Exchange
forth in sections A, B, and C below, of proposes this surcharge increase to
Assistant Secretary.
the most significant aspects of such reduce further the Exchange’s costs for
[FR Doc. 2018–11226 Filed 5–24–18; 8:45 am]
statements. these transactions. Not only does the
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s Exchange receive no fees from
Statement of the Purpose of, and Customers for engaging in these
SECURITIES AND EXCHANGE Statutory Basis for, the Proposed Rule transactions,9 but the Exchange also
COMMISSION Change pays rebates to the Market Makers and
Specialists whose quotes execute
[Release No. 34–83295; File No. SR–Phlx– 1. Purpose against the Customers’ Complex
2018–39] Orders.10 Pursuant to Section I, Part A
The Exchange proposes to amend
Phlx’s Pricing Schedule at Section I, of the Exchange’s Pricing Schedule,
Self-Regulatory Organizations; Nasdaq these rebates range from $0.15 to $0.35
PHLX LLC; Notice of Filing and entitled ‘‘Rebates and Fees for Adding
and Removing Liquidity in SPY,’’ and per contact.
Immediate Effectiveness of Proposed
Rule Change To Amend Sections I and Section II, entitled ‘‘Multiply Listed Section II
II of the Pricing Schedule Options Fees (Includes options
The Exchange proposes to amend
overlying equities, ETFs, ETNs and
May 21, 2018. Section II to increase a surcharge
indexes which are Multiply Listed).’’
Pursuant to Section 19(b)(1) 1 of the assessed to electronic Complex Orders
Specifically, the Exchange proposes to
Securities Exchange Act of 1934 that remove liquidity 11 from the
amend a surcharge in Section I, Part B,
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Complex Order Book and auctions,
which applies to options overlying SPY
notice is hereby given that on May 10, as well as a surcharge in Section II 6 The term ‘‘ROT, SQT and RSQT’’ applies to
2018, Nasdaq PHLX LLC (‘‘Phlx’’ or related to Complex Orders in order to transactions for the accounts of Registered Option
‘‘Exchange’’) filed with the Securities further reduce the costs to the Exchange Traders (‘‘ROTs’’), Streaming Quote Traders
and Exchange Commission of such transactions. Each surcharge (‘‘SQTs’’), and Remote Streaming Quote Traders
(‘‘RSQTs’’). For purposes of the Pricing Schedule,
(‘‘Commission’’) the proposed rule amendment is described below in more the term ‘‘Market Maker’’ will be utilized to
change as described in Items I, II, and detail. describe fees and rebates applicable to ROTs, SQTs
III below, which Items have been and RSQTs. RSQTs may also be referred to as
prepared by the Exchange. The Section I, Part B Remote Market Markers (‘‘RMMs’’). See Preface to
Phlx’s Pricing Schedule.
Commission is publishing this notice to The Exchange proposes to amend 7 The term ‘‘Specialist’’ applies to transactions for
solicit comments on the proposed rule Section I, Part B to amend Complex the account of a Specialist (as defined in Exchange
change from interested persons. Order 4 fees for SPY. The Exchange Rule 1020(a)). A Specialist is an Exchange member
proposes to increase a surcharge of registered as an options specialist pursuant to Rule
I. Self-Regulatory Organization’s $0.05 per contract, which is currently 1020(a). An options Specialist includes a Remote
Statement of the Terms of Substance of Specialist, which is defined as an options specialist
assessed to Customers 5 when executing in one or more classes that does not have a physical
the Proposed Rule Change presence on an Exchange floor and is approved by
The Exchange proposes to amend 4 A Complex Order is an order involving the the Exchange pursuant to Rule 501.
8 A component of a Complex Order may ‘‘leg’’
Phlx’s Pricing Schedule at Section I, simultaneous purchase and/or sale of two or more
different options series in the same underlying against a resting order in the Simple Order Book.
entitled ‘‘Rebates and Fees for Adding security, priced as a net debit or credit based on the 9 Non-Customer market participants pay fees for
and Removing Liquidity in SPY,’’ and relative prices of the individual components, for the adding and removing liquidity in Complex Orders
amozie on DSK3GDR082PROD with NOTICES1
Section II, entitled ‘‘Multiply Listed same account, for the purpose of executing a as noted in Section I, Part B of the Pricing Schedule,
Options Fees (Includes options particular investment strategy. See Phlx Rule 1098. although Customers pay no such fees.
5 The term ‘‘Customer’’ applies to any transaction 10 See rebates in Section I, Part A of the Pricing
19 15 that is identified by a member or member Schedule.
U.S.C. 78mm.
20 17
organization for clearing in the Customer range at 11 The Exchange notes that an order that is
CFR 200.30–3(a)(76). The Options Clearing Corporation which is not for received by the trading system first in time shall be
1 15 U.S.C. 78s(b)(1).
the account of a broker or dealer or for the account considered an order adding liquidity and an order
2 15 U.S.C. 78a.
of a ‘‘Professional’’ (as that term is defined in Rule that trades against that order shall be considered an
3 17 CFR 240.19b–4. 1000(b)(14)). order removing liquidity.
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![Federal Register / Vol. 83, No. 102 / Friday, May 25, 2018 / Notices 24365
excluding PIXL,12 in Non-Penny Pilot reasonable dues, fees, and other charges unfairly discriminatory because the
Options (excluding NDX and NDXP).13 among members and issuers and other Exchange will uniformly apply the fee
The Exchange proposes to increase this persons using any facility, and is not to all similarly-situated Customers. Even
surcharge for electronically-delivered designed to permit unfair with this increased surcharge,
Complex Orders from $0.10 to $0.12 per discrimination between customers, Customers are assessed the least amount
contract to reduce further the issuers, brokers, or dealers. per contract for executions in SPY. As
Exchange’s costs for these transactions. noted herein, Customers are not
Section I, Part B
Today, Customers pay no Options assessed fees for adding and removing
Transaction Charges in Non-Penny Pilot The Exchange’s proposal to amend liquidity for SPY Complex Orders. With
Options.14 The Exchange pays Customer Section I, Part B related to Complex respect to the Simple Market, a
rebates for Complex Orders in Section B Order fees for SPY to increase the Customer is assessed the lowest fee for
of the Pricing Schedule. The Exchange surcharge from $0.05 to $0.15 per removing liquidity.23 The Exchange
desires to continue to incentivize contract on Customers that execute believes that it is equitable and not
Customers to interact with Complex Complex Orders against Market Maker unfairly discriminatory to assess
Order liquidity by offering those rebates or Specialist quotes resting on the Customers no fees or lower fees because
in Section B of the Pricing Schedule. Simple Order Book is reasonable Customer orders bring valuable liquidity
The Exchange believes that while the because the surcharge would reduce the to the market, which benefits other
surcharge is being increased for the Exchange’s costs associated with these market participants. Customer liquidity
Options Transaction Charge in Non- transactions. Each such transaction benefits all market participants by
Penny Pilot Options excluding NDX and costs the Exchange between $0.15 and providing more trading opportunities,
NDXP, the fees remain competitive as $0.35 per contract in rebates to Market which attracts Specialists and Market
the Exchange does not assess Customers Makers and Specialists. Moreover, it is Makers. An increase in the activity of
a fee but offers Customers rebates. The reasonable to impose this surcharge on these market participants in turn
surcharge is assessed to Non- Customers because Customers benefit facilitates tighter spreads, which may
Customers.15 The Exchange is proposing the most from being able to achieve cause an additional corresponding
to add ‘‘Non-Customers’’ to footnote 7 of immediate executions of their Complex increase in order flow from other market
Section II of the Pricing Schedule to Orders in the relevant scenario. The participants.
make clear that today, Customers do not Exchange believes that the surcharge is
minimal and will not be substantial Section II
get assessed a surcharge. The Exchange
assesses surcharges to market enough to eliminate or even The Exchange’s proposal to amend
participants that pay Options significantly diminish the benefits to Section II to increase a surcharge
Transaction Charges. In this case, only Customers of being able to achieve assessed to electronic Complex Orders
Non-Customer market participants pay immediate executions in this manner. that remove liquidity from the Complex
an Options Transaction Charge for Non- Finally, the Exchange notes that all Order Book and auctions, excluding
other account categories, PIXL, in Non-Penny Pilot Options
Penny Pilot Options. Customers are not
Professionals,18 Firms,19 Broker- (excluding NDX and NDXP) from $0.10
assessed a surcharge today because they
Dealers,20 Specialists, and Market to $0.12 per contract is reasonable
pay no Options Transaction Charge. By
Makers, pay higher fees when the because it will further offset the cost of
[sic] adding the term ‘‘Non-Customer’’
Complex Order removes liquidity from paying rebates as provided for in
into this provision will amend the
the Complex Order Book or the Simple Section I, Part A to Specialists and
sentence to make clear that the
Order Book 21 than Customers would Market Makers. The Exchange believes
surcharge is only being assessed to a
pay under the proposal when they that it is reasonable to only assess this
Non-Customer.
execute their Complex Orders against surcharge to those orders which remove
2. Statutory Basis Simple Orders of Market Makers and liquidity from the market because the
The Exchange believes that its Specialists that are resting on the Exchange wants to continue to
proposal is consistent with Section 6(b) Simple Order Book.22 encourage market participation and
of the Act,16 in general, and furthers the The Exchange’s proposal to amend price improvement for those
Section I, Part B to amend Complex participants that seek to add liquidity
objectives of Sections 6(b)(4) and 6(b)(5)
Order fees for SPY to increase the on Phlx. The Exchange believes that not
of the Act,17 in particular, in that it
surcharge from $0.05 to $0.15 per assessing the surcharge on PIXL and
provides for the equitable allocation of
contract on Customers that execute SPY orders is reasonable. PIXL has its
12 PIXLSM is the Exchange’s price improvement
Complex Orders against Market Maker own pricing,24 and the Exchange wants
mechanism known as Price Improvement XL or or Specialist quotes resting on the to continue to encourage price
PIXL. See Phlx Rule 1087. Simple Order Book is equitable and not improvement within PIXL. SPY has its
13 Today, this surcharge is not subject to the
own rebate program separate and apart
Monthly Market Maker Cap. Phlx Specialists and 18 The term ‘‘Professional’’ applies to transactions
from Section B.25 Limiting the
Market Makers are subject to a ‘‘Monthly Market for the accounts of Professionals, as defined in
Maker Cap’’ of $500,000 for: (i) Electronic Option surcharges to electronically-delivered
Exchange Rule 1000(b)(14) as any person or entity
Transaction Charges, excluding surcharges and that (i) is not a broker or dealer in securities, and transactions is reasonable because the
excluding options overlying NDX and NDXP; and (ii) places more than 390 orders in listed options Section B rebates apply only to
(ii) QCC Transaction Fees (as defined in Exchange per day on average during a calendar month for its electronically-delivered Customer
Rule 1080(o) and Floor QCC Orders, as defined in own beneficial account(s).
1064(e)). 19 The term ‘‘Firm’’ applies to any transaction that
orders. Further, limiting the surcharge
to orders entered electronically is
amozie on DSK3GDR082PROD with NOTICES1
14 Non-Customer market participants pay a $0.75
is identified by a member or member organization
per contract Options Transaction Charge in Non- for clearing in the Firm range at OCC.
Penny Pilot Options excluding NDX and NDXP. 20 The term ‘‘Broker-Dealer’’ applies to any 23 A component of a Complex Order may ‘‘leg’’
15 The term ‘‘Non-Customer’’ applies to against a resting order in the Simple Order Book.
transaction, which is not subject to any of the other
transactions for the accounts of Specialists, Market transaction fees applicable within a particular 24 See Section IV, Part A of the Pricing Schedule.
Makers, Firms, Professionals, Broker-Dealers and category. 25 See Section I of the Pricing Schedule. SPY
JBOs. 21 A component of a Complex Order may ‘‘leg’’
Pricing is only in Section I. Section II pricing
16 15 U.S.C. 78f(b). against a resting order in the Simple Order Book. applies to Multiply-Listed Options excluding SPY
17 15 U.S.C. 78f(b)(4) and (5). 22 See Section I, Part B of the Pricing Schedule. options.
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![24366 Federal Register / Vol. 83, No. 102 / Friday, May 25, 2018 / Notices
equitable and not unfairly of the purposes of the Act. In terms of that remove liquidity from the Complex
discriminatory because the Exchange inter-market competition, the Exchange Order Book and auctions, excluding
has expended considerable resources to notes that it operates in a highly PIXL, in Non-Penny Pilot Options
develop its electronic trading platforms competitive market in which market (excluding NDX and NDXP) from $0.10
and seeks to recoup the costs of such participants can readily favor competing to $0.12 per contract does not impose an
expenditures. Finally, excluding NDX venues if they deem fee levels at a undue burden on competition because
and NDXP is reasonable because these particular venue to be excessive, or the Exchange will uniformly apply this
symbols are currently subject to a rebate opportunities available at other surcharge to all Non-Customer or [sic]
surcharge.26 The Exchange’s proposal to venues to be more favorable. In such an market participants that pay an Options
add ‘‘Non-Customers’’ to footnote 7 of environment, the Exchange must Transaction Charge. The Exchange’s
Section II of the Pricing Schedule is continually adjust its fees to remain proposal to add ‘‘Non-Customers’’ to
reasonable because today Customers do competitive with other exchanges and footnote 7 of Section II of the Pricing
not get assessed a surcharge. The with alternative trading systems that Schedule does not impose an undue
surcharge is assessed to Non-Customer have been exempted from compliance burden on competition because
market participants who pay an Options with the statutory standards applicable Customers are not assessed a surcharge
Transaction Charge for Non-Penny Pilot to exchanges. Because competitors are today because they pay no Options
Options. Customers are not assessed a free to modify their own fees in Transaction Charge. By [sic] adding the
surcharge today because they pay no response, and because market term ‘‘Non-Customer’’ into this
Options Transaction Charge. By [sic] participants may readily adjust their provision will amend the sentence to
adding the term ‘‘Non-Customer’’ into order routing practices, the Exchange make clear that the surcharge is only
this provision will amend the sentence believes that the degree to which fee being assessed to a Non-Customers. The
to make clear that the surcharge is only changes in this market may impose any Exchange believes that assessing no
being assessed to a Non-Customer. burden on competition is extremely Options Transaction Charge for Non-
The Exchange’s proposal to amend limited. Penny Pilot Options and not assessing a
Section II to increase a surcharge surcharge fee does not impose an undue
assessed to electronic Complex Orders Section I, Part B
burden on competition because
that remove liquidity from the Complex The Exchange’s proposal to amend Customer liquidity benefits all market
Order Book and auctions, excluding Section I, Part B to amend Complex participants by providing more trading
PIXL, in Non-Penny Pilot Options Order fees for SPY to increase the opportunities, which attracts Specialists
(excluding NDX and NDXP) from $0.10 surcharge from $0.05 to $0.15 per and Market Makers. An increase in the
to $0.12 per contract is equitable and contract on Customers that execute activity of these market participants in
not unfairly discriminatory because the Complex Orders against Market Maker turn facilitates tighter spreads, which
Exchange will uniformly apply this or Specialist quotes resting on the may cause an additional corresponding
surcharge to all Non-Customer or [sic] Simple Order Book does not impose an increase in order flow from other market
market participants that pay an Options undue burden on competition because participants.
Transaction Charge. The Exchange’s the Exchange will uniformly apply the
proposal to add ‘‘Non-Customers’’ to fee to all similarly-situated Customers. C. Self-Regulatory Organization’s
footnote 7 of Section II of the Pricing Even with this increased surcharge, Statement on Comments on the
Schedule is equitable and not unfairly Customers are assessed the least amount Proposed Rule Change Received From
discriminatory because Customers are per contract for executions in SPY. As Members, Participants, or Others
not assessed a surcharge today because noted herein, Customers are not No written comments were either
they pay no Options Transaction assessed fees for adding and removing solicited or received.
Charge. By [sic] adding the term ‘‘Non- liquidity for SPY Complex Orders. With
Customer’’ into this provision will respect to the Simple Market, a III. Date of Effectiveness of the
amend the sentence to make clear that Customer is assessed the lowest fee for Proposed Rule Change and Timing for
the surcharge is only being assessed to removing liquidity.27 The Exchange Commission Action
a Non-Customers. The Exchange believes that it is equitable and not The foregoing rule change has become
believes that it is equitable and not unfairly discriminatory to assess effective pursuant to Section
unfairly discriminatory to assess no Customers no fees or lower fees because 19(b)(3)(A)(ii) of the Act.28
Options Transaction Charge for Non- Customer orders bring valuable liquidity At any time within 60 days of the
Penny Pilot Options or surcharge fee to the market, which benefits other filing of the proposed rule change, the
because Customer liquidity benefits all market participants. Customer liquidity Commission summarily may
market participants by providing more benefits all market participants by temporarily suspend such rule change if
trading opportunities, which attracts providing more trading opportunities, it appears to the Commission that such
Specialists and Market Makers. An which attracts Specialists and Market action is: (i) Necessary or appropriate in
increase in the activity of these market Makers. An increase in the activity of the public interest; (ii) for the protection
participants in turn facilitates tighter these market participants in turn of investors; or (iii) otherwise in
spreads, which may cause an additional facilitates tighter spreads, which may furtherance of the purposes of the Act.
corresponding increase in order flow cause an additional corresponding If the Commission takes such action, the
from other market participants. increase in order flow from other market Commission shall institute proceedings
participants. to determine whether the proposed rule
B. Self-Regulatory Organization’s
should be approved or disapproved.
amozie on DSK3GDR082PROD with NOTICES1
Statement on Burden on Competition Section II
The Exchange does not believe that IV. Solicitation of Comments
The Exchange’s proposal to amend
the proposed rule change will impose Section II to increase a surcharge Interested persons are invited to
any burden on competition not assessed to electronic Complex Orders submit written data, views, and
necessary or appropriate in furtherance arguments concerning the foregoing,
27 A component of a Complex Order may ‘‘leg’’
26 See Section II of the Pricing Schedule. against a resting order in the Simple Order Book. 28 15 U.S.C. 78s(b)(3)(A)(ii).
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![Federal Register / Vol. 83, No. 102 / Friday, May 25, 2018 / Notices 24367
including whether the proposed rule SECURITIES AND EXCHANGE institutes proceedings under Section
change is consistent with the Act. COMMISSION 19(b)(2)(B) of the Exchange Act 7 to
Comments may be submitted by any of determine whether to approve or
the following methods: [Release No. 34–83293; File No. SR– disapprove the proposed rule change.
CboeBZX–2018–010]
Electronic Comments I. Summary of the Exchange’s
Self-Regulatory Organizations; Cboe Description of the Proposed Rule
• Use the Commission’s internet BZX Exchange, Inc.; Order Instituting Change 8
comment form (http://www.sec.gov/ Proceedings To Determine Whether To
rules/sro.shtml); or The Exchange proposes to adopt BZX
Approve or Disapprove a Proposed Rule 14.11(k), which would govern the
• Send an email to rule-comments@ Rule Change To Adopt BZX Rule
sec.gov. Please include File Number SR– listing and trading of Managed Portfolio
14.11(k) To Permit the Listing and Shares.9 The Exchange also proposes to
Phlx–2018–39 on the subject line. Trading of Managed Portfolio Shares list and trade Shares of the ClearBridge
Paper Comments and To List and Trade Shares of the Appreciation ETF, ClearBridge Large
ClearBridge Appreciation ETF, Cap ETF, ClearBridge Mid Cap Growth
• Send paper comments in triplicate ClearBridge Large Cap ETF, ETF, ClearBridge Select ETF, and
to Secretary, Securities and Exchange ClearBridge Mid Cap Growth ETF, ClearBridge All Cap Value ETF under
Commission, 100 F Street NE, ClearBridge Select ETF, and proposed BZX Rule 14.11(k) (each a
Washington, DC 20549–1090. ClearBridge All Cap Value ETF ‘‘Fund,’’ and collectively the ‘‘Funds’’).
All submissions should refer to File May 21, 2018.
Number SR–Phlx–2018–39. This file A. Description of the Funds
On February 5, 2018, Cboe BZX
number should be included on the The portfolio for each Fund will
Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) consist primarily of long and/or short
subject line if email is used. To help the
filed with the Securities and Exchange positions in U.S. exchange-listed
Commission process and review your
Commission (‘‘Commission’’), pursuant securities and shares issued by other
comments more efficiently, please use
to Section 19(b)(1) of the Securities U.S. exchange-listed exchange-traded
only one method. The Commission will
Exchange Act of 1934 (‘‘Exchange funds (‘‘ETFs’’).10 All exchange-listed
post all comments on the Commission’s
Act’’) 1 and Rule 19b–4 thereunder,2 a equity securities in which the Funds
internet website (http://www.sec.gov/
proposed rule change to adopt BZX Rule will invest will be listed and traded on
rules/sro.shtml). Copies of the
14.11(k) to permit the listing and trading U.S. national securities exchanges.
submission, all subsequent
of Managed Portfolio Shares, and to list
amendments, all written statements 1. ClearBridge Appreciation ETF
and trade shares (‘‘Shares’’) of the
with respect to the proposed rule
ClearBridge Appreciation ETF, The ClearBridge Appreciation ETF
change that are filed with the
ClearBridge Large Cap ETF, ClearBridge will seek to provide long-term
Commission, and all written
Mid Cap Growth ETF, ClearBridge appreciation of shareholders’ capital.
communications relating to the
Select ETF, and ClearBridge All Cap
proposed rule change between the
Value ETF under proposed BZX Rule available at https://www.sec.gov/comments/sr-
Commission and any person, other than
14.11(k). The proposed rule change was cboebzx-2018-010/cboebzx2018010.htm.
those that may be withheld from the 7 15 U.S.C. 78s(b)(2)(B).
published for comment in the Federal
public in accordance with the 8 For a complete description of the Exchange’s
Register on February 20, 2018.3 On
provisions of 5 U.S.C. 552, will be proposal, including a description of the Precidian
April 3, 2018, pursuant to Section ETF Trust II (‘‘Trust’’), see Notice, supra note 3.
available for website viewing and
19(b)(2) of the Exchange Act,4 the 9 Proposed BZX Rule 14.11(k)(3)(A) defines the
printing in the Commission’s Public
Commission designated a longer period term ‘‘Managed Portfolio Share’’ as a security that
Reference Room, 100 F Street NE, (a) represents an interest in a registered investment
within which to approve the proposed
Washington, DC 20549 on official company (‘‘Investment Company’’) organized as an
rule change, disapprove the proposed open-end management investment company or
business days between the hours of
rule change, or institute proceedings to similar entity, that invests in a portfolio of
10:00 a.m. and 3:00 p.m. Copies of the
determine whether to disapprove the securities selected by the Investment Company’s
filing also will be available for investment adviser consistent with the Investment
proposed rule change.5 The Commission
inspection and copying at the principal Company’s investment objectives and policies; (b)
has received four comment letters on is issued in a specified aggregate minimum number
office of the Exchange. All comments
the proposed rule change.6 This order of shares equal to a Creation Unit (as defined in
received will be posted without change. proposed BZX Rule 14.11(k)(3)(C)), or multiples
Persons submitting comments are 1 15 U.S.C. 78s(b)(1). thereof, in return for a designated portfolio of
cautioned that we do not redact or edit 2 17 CFR 240.19b–4.
securities (and/or an amount of cash) with a value
personal identifying information from 3 See Securities Exchange Act Release No. 82705
equal to the next determined net asset value
(‘‘NAV’’); and (c) when aggregated in the same
comment submissions. You should (February 13, 2018), 83 FR 7256 (‘‘Notice’’). specified aggregate number of shares equal to a
submit only information that you wish 4 15 U.S.C. 78s(b)(2).
Redemption Unit (as defined in proposed BZX Rule
5 See Securities Exchange Act Release No. 82984,
to make available publicly. 14.11(k)(3)(D)), or multiples thereof, may be
83 FR 15181 (April 9, 2018). The Commission redeemed at the request of an authorized
All submissions should refer to File designated May 21, 2018, as the date by which the participant, which authorized participant will be
Number SR–Phlx–2018–39 and should Commission shall approve or disapprove, or paid through a confidential account established for
be submitted on or before June 15, 2018. institute proceedings to determine whether to its benefit (‘‘Confidential Account’’) a portfolio of
disapprove, the proposed rule change. securities and/or cash with a value equal to the next
For the Commission, by the Division of 6 See letters to Brent J. Fields, Secretary, determined NAV.
Trading and Markets, pursuant to delegated Commission, from: (1) Todd J. Broms, Chief 10 The Exchange represents that, for purposes of
amozie on DSK3GDR082PROD with NOTICES1
authority.29 Executive Officer, Broms & Company LLC, dated describing the holdings of the Funds, ETFs include
Eduardo A. Aleman, March 13, 2018 (‘‘Broms Letter’’); (2) Simon P. Portfolio Depository Receipts (as described in BZX
Goulet, Co-Founder, Blue Tractor Group, LLC, Rule 14.11(b)); Index Fund Shares (as described in
Assistant Secretary. dated March 19, 2018 (‘‘Blue Tractor Letter I’’); (3) BZX Rule 14.11(c)); and Managed Fund Shares (as
[FR Doc. 2018–11225 Filed 5–24–18; 8:45 am] Terence W. Norman, Founder, Blue Tractor Group, described in BZX Rule 14.11(i)). The ETFs in which
BILLING CODE 8011–01–P
LLC, dated March 20, 2018 (‘‘Blue Tractor Letter a Fund will invest all will be listed and traded on
II’’); and (4) Terence W. Norman, Founder, Blue national securities exchanges. While the Funds may
Tractor Group, LLC, dated May 8, 2018 (‘‘Blue invest in inverse ETFs, the Funds will not invest
29 17 CFR 200.30–3(a)(12). Tractor Letter III’’). The comment letters are in leveraged (e.g., 2X, –2X, 3X, or –3X) ETFs.
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Document Created: 2018-05-25 02:13:14
Document Modified: 2018-05-25 02:13:14
| 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 24364 |
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