83 FR 2834 - Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Pricing for NDXP
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 13 (January 19, 2018)
Federal Register Volume 83, Issue 13 (January 19, 2018)
| Page Range | 2834-2839 | |
| FR Document | 2018-00856 |
[Federal Register Volume 83, Number 13 (Friday, January 19, 2018)] [Notices] [Pages 2834-2839] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-00856] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82499; File No. SR-Phlx-2018-02] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Pricing for NDXP January 12, 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 January 3, 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 [[Page 2835]] 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 Pricing Schedule to add pricing for P.M.-settled options on broad-based indexes with nonstandard expiration dates for a period of twelve months, which the Commission recently approved.\3\ --------------------------------------------------------------------------- \3\ See Securities and Exchange Act Release No. 82341 (December 15, 2017), 82 FR 60651 (December 21, 2017) (SR-Phlx-2017-79). --------------------------------------------------------------------------- While changes to the Pricing Schedule pursuant to this proposal are effective upon filing, the Exchange has designated these changes to be operative on January 4, 2018. 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 recently received approval to list P.M.-settled options on broad-based indexes with nonstandard expiration dates on a twelve month pilot basis, beginning on December 15, 2017.\4\ This pilot permits both Weekly Expirations and End of Month expirations similar to those of the A.M.-settled broad-based index options, except that the exercise settlement value will be based on the index value derived from the closing prices of component stocks.\5\ The Exchange proposes to list these aforementioned options, commencing on January 4, 2017, with the symbol ``NDXP.'' --------------------------------------------------------------------------- \4\ Id. \5\ Id. --------------------------------------------------------------------------- Specifically, the Exchange proposes to adopt the current index pricing applicable to NDX \6\ today to NDXP. --------------------------------------------------------------------------- \6\ NDX represents options on the Nasdaq 100[supreg] Index and is traded under the symbol NDX (``NDX''). --------------------------------------------------------------------------- Customer Rebate Today, Customer Rebates in Section B of the Pricing Schedule are not paid on NDX in any Category. However, NDX will count toward the volume requirement to qualify for a Customer \7\ Rebate Tier. The Exchange proposes to apply the same pricing for NDXP as it relates to Customer Rebates. The Exchange believes that this will continue to encourage market participants to add Customer liquidity on Phlx. --------------------------------------------------------------------------- \7\ The term ``Customer'' or (``C'') applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (``OCC'') and which is not for the account of broker or dealer or for the account of a ``Professional'' (as that term is defined in Chapter I, Section 1(a)(48)). --------------------------------------------------------------------------- Transaction Charges in Section II Today, electronic and floor Options Transaction Charges for NDX are $0.75 per contract for all Non-Customers. No transaction charge for NDX applies to Customers. A $0.25 per contract \8\ surcharge is assessed to Non-Customers in NDX. The Exchange proposes these options transaction charges for NDXP. Today, a $0.10 per contract surcharge will be assessed to electronic Complex Orders that remove liquidity from the Complex Order Book and auctions, excluding PIXL, in Non-Penny Pilot Options (excluding NDX). This exclusion would apply likewise to NDXP. --------------------------------------------------------------------------- \8\ The Exchange proposes to add the words ``per contract'' to note 5 in Section II of the Pricing Schedule to make clear that the surcharge is assessed on a per contract basis. --------------------------------------------------------------------------- Today, 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 (ii) QCC Transaction Fees (as defined in Exchange Rule 1080(o) and Floor QCC Orders, as defined in 1064(e)). NDXP would likewise be excluded. Firms are subject to a maximum fee of $75,000 (``Monthly Firm Fee Cap''). Firm Floor Option Transaction Charges and QCC Transaction Fees, in the aggregate, for one billing month will not exceed the Monthly Firm Fee Cap per member organization when such members are trading in their own proprietary accounts. All dividend, merger, and short stock interest strategy executions (as defined in this Section II) are excluded from the Monthly Firm Fee Cap. NDX Options Transactions are excluded from the Monthly Firm Fee Cap. NDXP will likewise be excluded. The Firm Floor Options Transaction Charges will be waived for members executing facilitation orders pursuant to Exchange Rule 1064 when such members are trading in their own proprietary accounts (including Cabinet Options Transaction Charges). The Firm Floor Options Transaction Charges will be waived for the buy side of a transaction if the same member or its affiliates under Common Ownership represent both sides of a Firm transaction when such members are trading in their own proprietary accounts. In addition, the Broker-Dealer Floor Options Transaction Charge (including Cabinet Options Transaction Charges) will be waived for members executing facilitation orders pursuant to Exchange Rule 1064 when such members would otherwise incur this charge for trading in their own proprietary accounts contra to a Customer (``BD-Customer Facilitation''), if the member's BD-Customer Facilitation average daily volume (including both FLEX and non-FLEX transactions) exceeds 10,000 contracts per day in a given month. NDX Options Transactions are excluded from each of the waivers set forth in the above paragraph. NDXP will likewise be excluded from the waivers. Marketing Fees No Marketing Fees are assessed on transactions in NDX. NDXP will likewise be excluded. PIXL Pricing Options overlying NDX are not subject to Section IV.A.--PIXL Pricing. NDX transactions in PIXL will be subject to Section II pricing. NDXP will not be subject to PIXL Pricing, similar to NDX, NDXP will be subject to the Section II pricing noted herein. FLEX Transaction Fees The Monthly Firm Fee Cap, Monthly Market Maker Cap, Strategy Caps and the Options Surcharge described in Section II of the Pricing Schedule apply to FLEX Transaction Fees for NDX and will likewise apply to NDXP in the same manner. Market Access and Routing Subsidy (``MARS'') MARS Payment [sic] are made to Phlx members that have System Eligibility and have routed the requisite number of Eligible Contracts daily in a month, [[Page 2836]] which were executed on Phlx. Options overlying NDX are not considered Eligible Contracts. NDXP will not be considered Eligible Contracts. The Exchange believes that the above-referenced pricing for NDX continues to be competitive and attract volume to Phlx. The Exchange believes that the proposed pricing is suitable because NDXP represent similar options on the same underlying, the Nasdaq 100[supreg] Index. 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 DC Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\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\ Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. --------------------------------------------------------------------------- \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)). --------------------------------------------------------------------------- Customer Rebate The Exchange's proposal to not pay the Customer Rebates in Section I of the Pricing Schedule on NDXP and count NDXP volume toward qualifying for a Customer Rebate Tier, similar to NDX, is reasonable because the Exchange desires to calculate and pay rebates on NDXP in a similar manner to NDX. NDX and NDXP represent similar options on the same underlying, the Nasdaq 100[supreg] Index. Further, it is reasonable to not pay Customer Rebates on NDXP in any Category (A, B or C) because this index will be exclusively listed on Nasdaq exchanges only.\16\ The original intent of the Customer Rebate Program was to pay rebates on electronically-delivered Multiply-Listed Options. By definition, NDXP will not be a Multiply-Listed Option. The Exchange does not desire to pay rebates on NDXP because of its exclusivity. The Exchange believes it is reasonable to continue to count NDXP in the total volume to qualify a market participant for a Customer Rebate. However, market participants in NDXP will not be paid the Customer rebates in any Category because of the exclusivity of this option. Market participants would continue to benefit from NDXP options volume in terms of qualifying for Customer Rebate Tiers. --------------------------------------------------------------------------- \16\ Nasdaq intends to list NDXP on other Nasdaq-owned self- regulatory organizations in addition to Phlx at a later date. --------------------------------------------------------------------------- The Exchange's proposal to not pay the Customer Rebates in Section I of the Pricing Schedule on NDXP and count NDXP volume toward qualifying for a Customer Rebate Tier, similar to NDX, is equitable and not unfairly discriminatory because the Exchange would apply its calculation to determine the eligibility and payment of Customer rebates in a uniform manner. Further, the Exchange would not pay Customer Rebates on any NDXP transaction to any market participant. Also, any market participant is eligible to earn a Customer Rebate. Transaction Charges in Section II The Exchange's proposal to assess the same electronic and floor Options Transaction Charges for NDXP as it assesses for NDX \17\ is reasonable because the Exchange's transaction charges for its proprietary products are competitive when compared with similar proprietary products.\18\ The Exchange's proposal to assess the same electronic and floor Options Transaction Charges for NDXP and NDX is equitable and not unfairly discriminatory because the Exchange would assess the same options transaction charges to all Non-Customer market participants. The Exchange believes that assessing Customers no transaction fee for NDXP is equitable and not unfairly discriminatory because Customer orders bring valuable liquidity to the market, which liquidity 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. --------------------------------------------------------------------------- \17\ Today, electronic and floor Options Transaction Charges for options overlying NDX are $0.75 per contract for all Non-Customers. No transaction charge for NDX applies to Customers. A $0.25 per contract surcharge is assessed to Non-Customers in NDX. Also, a $0.10 per contract surcharge is assessed to electronic Complex Orders that remove liquidity from the Complex Order Book and auctions, excluding PIXL, in Non-Penny Pilot Options (excluding NDX). \18\ See Chicago Board Options Exchange, Incorporated's (``CBOE'') Fees Schedule. Russell 2000 Index (``RUT'') options transactions on CBOE, except customers, are assessed a $0.45 per contract surcharge. CBOE assesses Professionals and Broker-Dealers a manual and AIM transaction fee of $0.25 per contract and a non-AIM transaction fee of $0.65 per contract. CBOE assesses Clearing Trade Permit Holders a transaction fee of $0.22 per contract, subject to a sliding scale. --------------------------------------------------------------------------- The Exchange notes that the proposed transaction charges are reasonable, equitable and not unfairly discriminatory as NDXP will be an exclusively listed product. Similar to NDX, the Exchange seeks to recoup the operational costs \19\ for listing proprietary products. Also, pricing by symbol is a common practice on many U.S. options exchanges as a means to incentivize order flow to be sent to an [[Page 2837]] exchange for execution in particular products. Other options exchanges price by symbol.\20\ Further, the Exchange notes that with its products, market participants are offered an opportunity to either transact NDXP or separately execute options overlying PowerShares QQQ Trust (``QQQ'').\21\ Offering products such as QQQ provides market participants with a variety of choices in selecting the product they desire to utilize to transact the Nasdaq 100[supreg] Index.\22\ When exchanges are able to recoup costs associated with offering proprietary products, it incentivizes growth and competition for the innovation of additional products. --------------------------------------------------------------------------- \19\ By way of example, in analyzing an obvious error, the Exchange would have additional data points available in establishing a theoretical price for a Multiply Listed Option as compared to a proprietary product, which requires additional analysis and administrative time to comply with Exchange rules to resolve an obvious error. \20\ See pricing for RUT on CBOE's Fees Schedule. \21\ QQQ is an exchange-traded fund based on the Nasdaq-100 Index[supreg]. \22\ QQQ options overlies[sic] the same Index as NDX, namely the Nasdaq 100[supreg] Index. This relationship between QQQ options and NDX options is similar to the relationship between RUT, the iShares Russell 2000 Index, and IWM which is the ETF on RUT. --------------------------------------------------------------------------- The Exchange's proposal to add the words ``per contract'' to note 5 in Section II of the Pricing Schedule to make clear the surcharge is per contract is reasonable, equitable and not unfairly discriminatory because it will conform the language to the remainder of the transaction charges in Section II of the Pricing Schedule. The Exchange's proposal to exclude NDXP from the Monthly Market Maker Cap and the Monthly Firm Fee Cap is reasonable because NDX, another proprietary product is likewise excluded today. Market Makers will continue to be able to utilize the cap to reduce electronic Option Transaction Charges, excluding surcharges, QCC transaction fees and Floor QCC Orders, NDX and now NDXP despite the exclusions. The Exchange's proposal to exclude NDXP from the Monthly Market Maker Cap and the Monthly Firm Fee Cap is equitable and not unfairly discriminatory because no market participant would be eligible to count NDXP toward either the Monthly Market Maker Cap or the Monthly Firm Fee Cap. The Exchange's proposal to exclude NDXP from the Firm Floor Options Transaction waivers for members executing facilitation orders pursuant to Exchange Rule 1064,\23\ from the buy side of a transaction, if the same member or its affiliates under Common Ownership represent both sides of a Firm transaction when such members are trading in their own proprietary account, and from the waiver for the Broker-Dealer Floor Options Transaction Charge for members executing facilitation orders pursuant to Exchange Rule 1064,\24\ is reasonable because NDX, another proprietary product is likewise excluded today. --------------------------------------------------------------------------- \23\ This waiver applies when such members would otherwise incur this charge for trading in their own proprietary account contra to a Customer (``BD-Customer Facilitation''), if the member's BD-Customer Facilitation average daily volume (including both FLEX and non-FLEX transactions) exceeds 10,000 contracts per day in a given month. \24\ Id. --------------------------------------------------------------------------- The Exchange's proposal to exclude NDXP from the Firm Floor Options Transaction waivers for members executing facilitation orders pursuant to Exchange Rule 1064,\25\ from the buy side of a transaction, if the same member or its affiliates under Common Ownership represents both sides of a Firm transaction when such members are trading in their own proprietary account, and from the waiver for the Broker-Dealer Floor Options Transaction Charge for members executing facilitation orders pursuant to Exchange Rule 1064,\26\ is equitable and not unfairly discriminatory because no market participant would be eligible to count NDXP toward these waivers. --------------------------------------------------------------------------- \25\ Id. \26\ Id. --------------------------------------------------------------------------- Marketing Fee The Exchange's proposal to exclude NDXP from the Marketing Fee is reasonable because NDXP is an exclusively listed product, similar to NDX, which is also excluded from the Marketing Fee. The Exchange notes that Specialists and Market Makers transaction fees will remain in line with other market participants for NDXP. The Exchange's proposal to exclude NDXP from the Marketing Fee is equitable and not unfairly discriminatory because the Exchange will assess uniform transaction fees for all Non-Customers because the transaction charges, as proposed above, would otherwise be uniform for all market participants. The Exchange believes that assessing Customers no transaction fee for NDXP is equitable and not unfairly discriminatory because Customer orders bring valuable liquidity to the market, which liquidity 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. PIXL Pricing The Exchange's proposal to exclude NDXP from Section IV.A.--PIXL Pricing and instead assess NDXP transactions in PIXL the Section II pricing, similar to NDX, is reasonable because the Exchange believes that the PIXL pricing continues to be competitive despite the exclusion of NDXP. The Exchange's proposal to exclude NDXP from the PIXL Pricing in Section IV, Part A and instead assess NDXP transactions in PIXL the Section II pricing is equitable and not unfairly discriminatory because the Exchange will uniformly exclude NDXP from PIXL pricing. FLEX Transaction Fees The Exchange's proposal to assess NDXP the same FLEX Transaction Fees as are assessed for NDX today is reasonable because the Exchange desires to assess the same fees for index products. The Exchange's proposal to assess NDXP the same FLEX Transaction Fees as are assessed for NDX today is equitable and not unfairly discriminatory because the Exchange will uniformly assess FLEX fees for NDXP in a uniform manner for all market participants. Market Access and Routing Subsidy (``MARS'') The Exchange's proposal to exclude NDXP from Eligible Contracts for purposes of qualifying for a MARS Payment is reasonable because the Exchange believes that despite the exclusion of NDXP, MARS remains a competitive offering. The Exchange's proposal to exclude NDXP from Eligible Contracts for purposes of qualifying for a MARS Payment is equitable and not unfairly discriminatory because the Exchange will uniformly exclude NDXP from MARS. 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. The Exchange notes that with its products, market participants are offered an opportunity to either transact NDXP or separately execute options overlying PowerShares QQQ Trust (``QQQ''). Offering products such as QQQ provides [[Page 2838]] market participants with a variety of choices in selecting the product they desire to utilize to transact the Nasdaq 100 Index.\27\ --------------------------------------------------------------------------- \27\ See note 22 above. --------------------------------------------------------------------------- Customer Rebate The Exchange's proposal to not pay the Customer Rebates in Section I of the Pricing Schedule on NDXP and count NDXP volume toward qualifying for a Customer Rebate Tier, similar to NDX, does not impose an undue burden on competition because the Exchange would apply its calculation to determine the eligibility and payment of Customer rebates in a uniform manner. The Exchange's proposal to not pay Customer Rebates on NDXP in any Category is equitable and not unfairly discriminatory because the Exchange would not pay Customer Rebates on any transaction with NDXP to any market participant. Also, any market participant is eligible to earn a Customer Rebate. Transaction Charges in Section II The Exchange's proposal to assess for the same electronic and floor Options Transaction Charges for NDXP and NDX does not impose an undue burden on competition because the Exchange would assess the same options transaction charges to all Non-Customer market participants. The Exchange believes that assessing Customers no transaction fee for NDXP does not impose an undue burden on competition because Customer orders bring valuable liquidity to the market, which liquidity 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. The Exchange's proposal to add the words ``per contract'' to note 5 in Section II of the Pricing Schedule to make clear the surcharge is per contract does not impose an undue burden on competition because it will conform the language to the remainder of the transaction charges in Section II of the Pricing Schedule. The Exchange's proposal to exclude NDXP from the Monthly Market Maker Cap and the Monthly Firm Fee Cap does not impose an undue burden on competition because no market participant would be eligible to count NDXP toward either the Monthly Market Maker Cap or the Monthly Firm Fee Cap. The Exchange's proposal to exclude NDXP from the Firm Floor Options Transaction waivers for members executing facilitation orders pursuant to Exchange Rule 1064, from the buy side of a transaction, if the same member or its affiliates under Common Ownership represents both sides of a Firm transaction when such members are trading in their own proprietary account, and from the waiver for the Broker-Dealer Floor Options Transaction Charge for members executing facilitation orders pursuant to Exchange Rule 1064, does not impose an undue burden on competition because no market participant would be eligible to count NDXP toward these waivers. Marketing Fee The Exchange's proposal to exclude NDXP from the Marketing Fee does not impose an undue burden on competition because the Exchange will assess uniform transaction fees for all Non-Customers because the transaction charges, as proposed above, would otherwise be uniform for all market participants. The Exchange believes that assessing Customers no transaction fee for NDXP does not impose an undue burden on competition because Customer orders bring valuable liquidity to the market, which liquidity 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. PIXL Pricing The Exchange's proposal to exclude NDXP from the PIXL Pricing in Section IV, Part A and instead assess NDXP transactions in PIXL the Section II pricing does not impose an undue burden on competition because the Exchange will uniformly exclude NDXP from PIXL pricing. FLEX Transaction Fees The Exchange's proposal to assess NDXP the same FLEX Transaction Fees as are assessed for NDX today does not impose an undue burden on competition because the Exchange will uniformly assess FLEX fees for NDXP in a uniform manner for all market participants. MARS Subsidy The Exchange's proposal to exclude NDXP from Eligible Contracts for purposes of qualifying for a MARS Payment does not impose an undue burden on competition because the Exchange will uniformly exclude NDXP from MARS. 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, 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-2018-02 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-2018-02. 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/ [[Page 2839]] 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR- Phlx-2018-02 and should be submitted on or before February 9, 2018. --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-00856 Filed 1-18-18; 8:45 am] BILLING CODE 8011-01-P
![2834 Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices
exposures to its participants by proposed change to eliminate the MMD rules/sro.shtml). Copies of the
establishing a risk-based margin system Charge would have any impact on submission, all subsequent
that, at a minimum, uses an appropriate competition. amendments, all written statements
method for measuring credit exposure with respect to the proposed rule
(C) Clearing Agency’s Statement on
that accounts for relevant product risk change that are filed with the
Comments on the Proposed Rule Commission, and all written
factors and portfolio effects across
products. As described above, NSCC Change Received From Members, communications relating to the
believes implementing the proposed Participants, or Others proposed rule change between the
enhancements to the VaR Charge would While NSCC has not solicited or Commission and any person, other than
improve the risk-based methodology received any written comments relating those that may be withheld from the
that NSCC employs to measure market to this proposal, NSCC has conducted public in accordance with the
price risk and would better limit NSCC’s outreach to Members in order to provide provisions of 5 U.S.C. 552, will be
credit exposures to Members, consistent them with notice of the proposal. NSCC available for website viewing and
with these requirements. will notify the Commission of any printing in the Commission’s Public
NSCC believes that the above written comments received by NSCC. Reference Room, 100 F Street NE,
described burden on competition that Washington, DC 20549 on official
could be created by the proposed III. Date of Effectiveness of the
business days between the hours of
changes would be appropriate in Proposed Rule Change, and Timing for
10:00 a.m. and 3:00 p.m. Copies of the
furtherance of the Act because such Commission Action
filing also will be available for
changes have been appropriately Within 45 days of the date of inspection and copying at the principal
designed to assure the safeguarding of publication of this notice in the Federal office of NSCC and on DTCC’s website
securities and funds which are in the Register or within such longer period (http://dtcc.com/legal/sec-rule-
custody or control of NSCC or for which up to 90 days (i) as the Commission may filings.aspx). All comments received
it is responsible, as described in detail designate if it finds such longer period will be posted without change. Persons
above. By introducing additional to be appropriate and publishes its submitting comments are cautioned that
calculations for arriving at a Member’s reasons for so finding or (ii) as to which we do not redact or edit personal
final VaR Charge, each of which are the clearing agency consents, the identifying information from comment
designed to address the unique risks Commission will: submissions. You should submit only
presented by Members’ Net Unsettled (A) By order approve or disapprove information that you wish to make
Positions, as described above, the such proposed rule change, or available publicly.
proposal would allow NSCC to produce (B) institute proceedings to determine All submissions should refer to File
margin levels commensurate with the whether the proposed rule change Number SR–NSCC–2017–020 and
risks and particular attributes of each should be disapproved. should be submitted on or before
Member’s portfolio. Therefore, because The proposal shall not take effect February 9, 2018.
the proposed changes were designed to until all regulatory actions required For the Commission, by the Division of
provide NSCC with an appropriate with respect to the proposal are Trading and Markets, pursuant to delegated
measure of the risks presented by completed. authority.44
Members’ Net Unsettled Positions, IV. Solicitation of Comments Eduardo A. Aleman,
NSCC believes the proposals are Assistant Secretary.
appropriately designed to meet its risk Interested persons are invited to
[FR Doc. 2018–00851 Filed 1–18–18; 8:45 am]
management goals and its regulatory submit written data, views and
BILLING CODE 8011–01–P
obligations. arguments concerning the foregoing,
NSCC believes that it has designed the including whether the proposed rule
proposed changes in a reasonable and change is consistent with the Act. SECURITIES AND EXCHANGE
appropriate way in order to meet Comments may be submitted by any of COMMISSION
compliance with its obligations under the following methods:
[Release No. 34–82499; File No. SR–Phlx–
the Act. Specifically, implementing the Electronic Comments 2018–02]
proposed enhancements to the
calculation of its VaR Charge would • Use the Commission’s internet
comment form (http://www.sec.gov/ Self-Regulatory Organizations; Nasdaq
improve the risk-based margining PHLX LLC; Notice of Filing and
methodology that NSCC employs to set rules/sro.shtml); or
• Send an email to rule-comments@ Immediate Effectiveness of Proposed
margin requirements and better limit Rule Change To Adopt Pricing for
NSCC’s credit exposures to its Members. sec.gov. Please include File Number SR–
NSCC–2017–020 on the subject line. NDXP
Therefore, NSCC believes the proposed
changes are necessary and appropriate Paper Comments January 12, 2018.
in furtherance of NSCC’s obligations Pursuant to Section 19(b)(1) of the
• Send paper comments in triplicate Securities Exchange Act of 1934
under the Act, specifically Section to Secretary, Securities and Exchange
17A(b)(3)(F) of the Act 42 and Rules (‘‘Act’’),1 and Rule 19b–4 thereunder,2
Commission, 100 F Street NE, notice is hereby given that on January 3,
17Ad–22(e)(4)(i) and Rule 17Ad– Washington, DC 20549.
22(e)(6)(i) and (v) under the Act.43 2018, Nasdaq PHLX LLC (‘‘Phlx’’ or
Because the proposal to eliminate the All submissions should refer to File ‘‘Exchange’’) filed with the Securities
MMD Charge would remove this charge Number SR–NSCC–2017–020. This file and Exchange Commission (‘‘SEC’’ or
daltland on DSKBBV9HB2PROD with NOTICES
from the margining methodology as number should be included on the ‘‘Commission’’) the proposed rule
applied to all Members, when subject line if email is used. To help the change as described in Items I, II, and
applicable, NSCC does not believe the Commission process and review your III, below, which Items have been
comments more efficiently, please use
42 15 U.S.C. 78q–1(b)(3)(F). only one method. The Commission will 44 17 CFR 200.30–3(a)(12).
43 17 CFR 240.17Ad–22(e)(4)(i) and (e)(6)(i) and post all comments on the Commission’s 1 15 U.S.C. 78s(b)(1).
(v). internet website (http://www.sec.gov/ 2 17 CFR 240.19b–4.
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![Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices 2835
prepared by the Exchange. The commencing on January 4, 2017, with merger, and short stock interest strategy
Commission is publishing this notice to the symbol ‘‘NDXP.’’ executions (as defined in this Section II)
solicit comments on the proposed rule Specifically, the Exchange proposes to are excluded from the Monthly Firm Fee
change from interested persons. adopt the current index pricing Cap. NDX Options Transactions are
applicable to NDX 6 today to NDXP. excluded from the Monthly Firm Fee
I. Self-Regulatory Organization’s
Cap. NDXP will likewise be excluded.
Statement of the Terms of Substance of Customer Rebate The Firm Floor Options Transaction
the Proposed Rule Change Today, Customer Rebates in Section B Charges will be waived for members
The Exchange proposes to amend the of the Pricing Schedule are not paid on executing facilitation orders pursuant to
Exchange’s Pricing Schedule to add NDX in any Category. However, NDX Exchange Rule 1064 when such
pricing for P.M.-settled options on will count toward the volume members are trading in their own
broad-based indexes with nonstandard requirement to qualify for a Customer 7 proprietary accounts (including Cabinet
expiration dates for a period of twelve Rebate Tier. The Exchange proposes to Options Transaction Charges). The Firm
months, which the Commission recently apply the same pricing for NDXP as it Floor Options Transaction Charges will
approved.3 relates to Customer Rebates. The be waived for the buy side of a
While changes to the Pricing Exchange believes that this will transaction if the same member or its
Schedule pursuant to this proposal are continue to encourage market affiliates under Common Ownership
effective upon filing, the Exchange has participants to add Customer liquidity represent both sides of a Firm
designated these changes to be operative on Phlx. transaction when such members are
on January 4, 2018. trading in their own proprietary
The text of the proposed rule change Transaction Charges in Section II
accounts. In addition, the Broker-Dealer
is available on the Exchange’s website at Today, electronic and floor Options Floor Options Transaction Charge
http://nasdaqphlx.cchwallstreet.com/, Transaction Charges for NDX are $0.75 (including Cabinet Options Transaction
at the principal office of the Exchange, per contract for all Non-Customers. No Charges) will be waived for members
and at the Commission’s Public transaction charge for NDX applies to executing facilitation orders pursuant to
Reference Room. Customers. A $0.25 per contract 8 Exchange Rule 1064 when such
surcharge is assessed to Non-Customers members would otherwise incur this
II. Self-Regulatory Organization’s
in NDX. The Exchange proposes these charge for trading in their own
Statement of the Purpose of, and
options transaction charges for NDXP. proprietary accounts contra to a
Statutory Basis for, the Proposed Rule
Today, a $0.10 per contract surcharge Customer (‘‘BD-Customer Facilitation’’),
Change
will be assessed to electronic Complex if the member’s BD-Customer
In its filing with the Commission, the Orders that remove liquidity from the Facilitation average daily volume
Exchange included statements Complex Order Book and auctions, (including both FLEX and non-FLEX
concerning the purpose of and basis for excluding PIXL, in Non-Penny Pilot transactions) exceeds 10,000 contracts
the proposed rule change and discussed Options (excluding NDX). This per day in a given month. NDX Options
any comments it received on the exclusion would apply likewise to Transactions are excluded from each of
proposed rule change. The text of these NDXP. the waivers set forth in the above
statements may be examined at the Today, Specialists and Market Makers paragraph. NDXP will likewise be
places specified in Item IV below. The are subject to a ‘‘Monthly Market Maker excluded from the waivers.
Exchange has prepared summaries, set Cap’’ of $500,000 for: (i) Electronic
forth in sections A, B, and C below, of Option Transaction Charges, excluding Marketing Fees
the most significant aspects of such surcharges and excluding options No Marketing Fees are assessed on
statements. overlying NDX; and (ii) QCC transactions in NDX. NDXP will
A. Self-Regulatory Organization’s Transaction Fees (as defined in likewise be excluded.
Statement of the Purpose of, and Exchange Rule 1080(o) and Floor QCC
Orders, as defined in 1064(e)). NDXP PIXL Pricing
Statutory Basis for, the Proposed Rule
would likewise be excluded. Options overlying NDX are not
Change
Firms are subject to a maximum fee of subject to Section IV.A.—PIXL Pricing.
1. Purpose $75,000 (‘‘Monthly Firm Fee Cap’’). NDX transactions in PIXL will be
The Exchange recently received Firm Floor Option Transaction Charges subject to Section II pricing. NDXP will
approval to list P.M.-settled options on and QCC Transaction Fees, in the not be subject to PIXL Pricing, similar
broad-based indexes with nonstandard aggregate, for one billing month will not to NDX, NDXP will be subject to the
expiration dates on a twelve month pilot exceed the Monthly Firm Fee Cap per Section II pricing noted herein.
basis, beginning on December 15, 2017.4 member organization when such FLEX Transaction Fees
This pilot permits both Weekly members are trading in their own
proprietary accounts. All dividend, The Monthly Firm Fee Cap, Monthly
Expirations and End of Month
Market Maker Cap, Strategy Caps and
expirations similar to those of the A.M.-
6 NDX represents options on the Nasdaq 100® the Options Surcharge described in
settled broad-based index options,
Index and is traded under the symbol NDX Section II of the Pricing Schedule apply
except that the exercise settlement value (‘‘NDX’’). to FLEX Transaction Fees for NDX and
will be based on the index value derived 7 The term ‘‘Customer’’ or (‘‘C’’) applies to any
will likewise apply to NDXP in the same
from the closing prices of component transaction that is identified by a Participant for
manner.
daltland on DSKBBV9HB2PROD with NOTICES
stocks.5 The Exchange proposes to list clearing in the Customer range at The Options
Clearing Corporation (‘‘OCC’’) and which is not for
these aforementioned options, the account of broker or dealer or for the account
Market Access and Routing Subsidy
of a ‘‘Professional’’ (as that term is defined in (‘‘MARS’’)
3 See Securities and Exchange Act Release No.
Chapter I, Section 1(a)(48)). MARS Payment [sic] are made to Phlx
82341 (December 15, 2017), 82 FR 60651 (December 8 The Exchange proposes to add the words ‘‘per
21, 2017) (SR–Phlx–2017–79). contract’’ to note 5 in Section II of the Pricing
members that have System Eligibility
4 Id.
Schedule to make clear that the surcharge is and have routed the requisite number of
5 Id. assessed on a per contract basis. Eligible Contracts daily in a month,
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![2836 Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices
which were executed on Phlx. Options and sellers of securities, and the broker- Also, any market participant is eligible
overlying NDX are not considered dealers that act as their order-routing to earn a Customer Rebate.
Eligible Contracts. NDXP will not be agents, have a wide range of choices of
Transaction Charges in Section II
considered Eligible Contracts. where to route orders for execution’;
The Exchange believes that the above- [and] ‘no exchange can afford to take its The Exchange’s proposal to assess the
referenced pricing for NDX continues to market share percentages for granted’ same electronic and floor Options
be competitive and attract volume to because ‘no exchange possesses a Transaction Charges for NDXP as it
Phlx. The Exchange believes that the monopoly, regulatory or otherwise, in assesses for NDX 17 is reasonable
proposed pricing is suitable because the execution of order flow from broker because the Exchange’s transaction
NDXP represent similar options on the dealers’. . . .’’ 15 Although the court charges for its proprietary products are
same underlying, the Nasdaq 100® and the SEC were discussing the cash competitive when compared with
Index. equities markets, the Exchange believes similar proprietary products.18 The
that these views apply with equal force Exchange’s proposal to assess the same
2. Statutory Basis electronic and floor Options Transaction
to the options markets.
The Exchange believes that its Charges for NDXP and NDX is equitable
proposal is consistent with Section 6(b) Customer Rebate and not unfairly discriminatory because
of the Act,9 in general, and furthers the The Exchange’s proposal to not pay the Exchange would assess the same
objectives of Sections 6(b)(4) and 6(b)(5) options transaction charges to all Non-
the Customer Rebates in Section I of the
of the Act,10 in particular, in that it Customer market participants. The
Pricing Schedule on NDXP and count
provides for the equitable allocation of Exchange believes that assessing
NDXP volume toward qualifying for a
reasonable dues, fees and other charges Customers no transaction fee for NDXP
Customer Rebate Tier, similar to NDX,
among members and issuers and other is equitable and not unfairly
is reasonable because the Exchange
persons using any facility, and is not discriminatory because Customer orders
desires to calculate and pay rebates on
designed to permit unfair bring valuable liquidity to the market,
NDXP in a similar manner to NDX. NDX
discrimination between customers, which liquidity benefits other market
and NDXP represent similar options on
issuers, brokers, or dealers. participants. Customer liquidity benefits
the same underlying, the Nasdaq 100®
The Commission and the courts have all market participants by providing
Index. Further, it is reasonable to not
repeatedly expressed their preference more trading opportunities, which
pay Customer Rebates on NDXP in any
for competition over regulatory attracts Specialists and Market Makers.
Category (A, B or C) because this index
intervention in determining prices, An increase in the activity of these
will be exclusively listed on Nasdaq
products, and services in the securities market participants in turn facilitates
exchanges only.16 The original intent of
markets. In Regulation NMS, while tighter spreads, which may cause an
the Customer Rebate Program was to
adopting a series of steps to improve the additional corresponding increase in
pay rebates on electronically-delivered
current market model, the Commission order flow from other market
Multiply-Listed Options. By definition, participants.
highlighted the importance of market
NDXP will not be a Multiply-Listed The Exchange notes that the proposed
forces in determining prices and SRO
Option. The Exchange does not desire to transaction charges are reasonable,
revenues and, also, recognized that
pay rebates on NDXP because of its equitable and not unfairly
current regulation of the market system
exclusivity. The Exchange believes it is discriminatory as NDXP will be an
‘‘has been remarkably successful in
reasonable to continue to count NDXP exclusively listed product. Similar to
promoting market competition in its
in the total volume to qualify a market NDX, the Exchange seeks to recoup the
broader forms that are most important to
participant for a Customer Rebate. operational costs 19 for listing
investors and listed companies.’’ 11
Likewise, in NetCoalition v. Securities However, market participants in NDXP proprietary products. Also, pricing by
and Exchange Commission 12 will not be paid the Customer rebates in symbol is a common practice on many
(‘‘NetCoalition’’) the DC Circuit upheld any Category because of the exclusivity U.S. options exchanges as a means to
the Commission’s use of a market-based of this option. Market participants incentivize order flow to be sent to an
approach in evaluating the fairness of would continue to benefit from NDXP
market data fees against a challenge options volume in terms of qualifying 17 Today, electronic and floor Options
claiming that Congress mandated a cost- for Customer Rebate Tiers. Transaction Charges for options overlying NDX are
$0.75 per contract for all Non-Customers. No
based approach.13 As the court The Exchange’s proposal to not pay transaction charge for NDX applies to Customers. A
emphasized, the Commission ‘‘intended the Customer Rebates in Section I of the $0.25 per contract surcharge is assessed to Non-
in Regulation NMS that ‘market forces, Pricing Schedule on NDXP and count Customers in NDX. Also, a $0.10 per contract
NDXP volume toward qualifying for a surcharge is assessed to electronic Complex Orders
rather than regulatory requirements’ that remove liquidity from the Complex Order Book
play a role in determining the market Customer Rebate Tier, similar to NDX, and auctions, excluding PIXL, in Non-Penny Pilot
data . . . to be made available to is equitable and not unfairly Options (excluding NDX).
investors and at what cost.’’ 14 discriminatory because the Exchange 18 See Chicago Board Options Exchange,
Further, ‘‘[n]o one disputes that would apply its calculation to Incorporated’s (‘‘CBOE’’) Fees Schedule. Russell
determine the eligibility and payment of 2000 Index (‘‘RUT’’) options transactions on CBOE,
competition for order flow is except customers, are assessed a $0.45 per contract
‘fierce’. . . . As the SEC explained, ‘[i]n Customer rebates in a uniform manner. surcharge. CBOE assesses Professionals and Broker-
the U.S. national market system, buyers Further, the Exchange would not pay Dealers a manual and AIM transaction fee of $0.25
Customer Rebates on any NDXP per contract and a non-AIM transaction fee of $0.65
9 15 transaction to any market participant. per contract. CBOE assesses Clearing Trade Permit
U.S.C. 78f(b).
daltland on DSKBBV9HB2PROD with NOTICES
10 15
Holders a transaction fee of $0.22 per contract,
U.S.C. 78f(b)(4) and (5). subject to a sliding scale.
11 Securities Exchange Act Release No. 51808 15 Id. at 539 (quoting Securities Exchange Act 19 By way of example, in analyzing an obvious
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) Release No. 59039 (December 2, 2008), 73 FR error, the Exchange would have additional data
(‘‘Regulation NMS Adopting Release’’). 74770, 74782–83 (December 9, 2008) (SR– points available in establishing a theoretical price
12 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
NYSEArca–2006–21)). for a Multiply Listed Option as compared to a
2010). 16 Nasdaq intends to list NDXP on other Nasdaq- proprietary product, which requires additional
13 See NetCoalition, at 534—535.
owned self-regulatory organizations in addition to analysis and administrative time to comply with
14 Id. at 537. Phlx at a later date. Exchange rules to resolve an obvious error.
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![Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices 2837
exchange for execution in particular Ownership represent both sides of a PIXL Pricing
products. Other options exchanges price Firm transaction when such members The Exchange’s proposal to exclude
by symbol.20 Further, the Exchange are trading in their own proprietary NDXP from Section IV.A.—PIXL Pricing
notes that with its products, market account, and from the waiver for the and instead assess NDXP transactions in
participants are offered an opportunity Broker-Dealer Floor Options PIXL the Section II pricing, similar to
to either transact NDXP or separately Transaction Charge for members NDX, is reasonable because the
execute options overlying PowerShares executing facilitation orders pursuant to Exchange believes that the PIXL pricing
QQQ Trust (‘‘QQQ’’).21 Offering Exchange Rule 1064,24 is reasonable continues to be competitive despite the
products such as QQQ provides market because NDX, another proprietary exclusion of NDXP. The Exchange’s
participants with a variety of choices in product is likewise excluded today. proposal to exclude NDXP from the
selecting the product they desire to The Exchange’s proposal to exclude PIXL Pricing in Section IV, Part A and
utilize to transact the Nasdaq 100® NDXP from the Firm Floor Options instead assess NDXP transactions in
Index.22 When exchanges are able to Transaction waivers for members PIXL the Section II pricing is equitable
recoup costs associated with offering executing facilitation orders pursuant to and not unfairly discriminatory because
proprietary products, it incentivizes Exchange Rule 1064,25 from the buy the Exchange will uniformly exclude
growth and competition for the NDXP from PIXL pricing.
side of a transaction, if the same
innovation of additional products.
member or its affiliates under Common FLEX Transaction Fees
The Exchange’s proposal to add the
Ownership represents both sides of a
words ‘‘per contract’’ to note 5 in The Exchange’s proposal to assess
Firm transaction when such members
Section II of the Pricing Schedule to NDXP the same FLEX Transaction Fees
are trading in their own proprietary
make clear the surcharge is per contract as are assessed for NDX today is
account, and from the waiver for the reasonable because the Exchange desires
is reasonable, equitable and not unfairly
Broker-Dealer Floor Options to assess the same fees for index
discriminatory because it will conform
Transaction Charge for members products. The Exchange’s proposal to
the language to the remainder of the
executing facilitation orders pursuant to assess NDXP the same FLEX
transaction charges in Section II of the
Exchange Rule 1064,26 is equitable and Transaction Fees as are assessed for
Pricing Schedule.
The Exchange’s proposal to exclude not unfairly discriminatory because no NDX today is equitable and not unfairly
NDXP from the Monthly Market Maker market participant would be eligible to discriminatory because the Exchange
Cap and the Monthly Firm Fee Cap is count NDXP toward these waivers. will uniformly assess FLEX fees for
reasonable because NDX, another Marketing Fee NDXP in a uniform manner for all
proprietary product is likewise market participants.
excluded today. Market Makers will The Exchange’s proposal to exclude
Market Access and Routing Subsidy
continue to be able to utilize the cap to NDXP from the Marketing Fee is (‘‘MARS’’)
reduce electronic Option Transaction reasonable because NDXP is an
Charges, excluding surcharges, QCC exclusively listed product, similar to The Exchange’s proposal to exclude
transaction fees and Floor QCC Orders, NDX, which is also excluded from the NDXP from Eligible Contracts for
NDX and now NDXP despite the Marketing Fee. The Exchange notes that purposes of qualifying for a MARS
exclusions. Specialists and Market Makers Payment is reasonable because the
The Exchange’s proposal to exclude transaction fees will remain in line with Exchange believes that despite the
NDXP from the Monthly Market Maker other market participants for NDXP. exclusion of NDXP, MARS remains a
Cap and the Monthly Firm Fee Cap is competitive offering. The Exchange’s
The Exchange’s proposal to exclude proposal to exclude NDXP from Eligible
equitable and not unfairly NDXP from the Marketing Fee is
discriminatory because no market Contracts for purposes of qualifying for
equitable and not unfairly a MARS Payment is equitable and not
participant would be eligible to count discriminatory because the Exchange unfairly discriminatory because the
NDXP toward either the Monthly will assess uniform transaction fees for Exchange will uniformly exclude NDXP
Market Maker Cap or the Monthly Firm all Non-Customers because the from MARS.
Fee Cap. transaction charges, as proposed above,
The Exchange’s proposal to exclude would otherwise be uniform for all B. Self-Regulatory Organization’s
NDXP from the Firm Floor Options market participants. The Exchange Statement on Burden on Competition
Transaction waivers for members believes that assessing Customers no The Exchange does not believe that
executing facilitation orders pursuant to transaction fee for NDXP is equitable the proposed rule change will impose
Exchange Rule 1064,23 from the buy and not unfairly discriminatory because any burden on competition not
side of a transaction, if the same Customer orders bring valuable liquidity necessary or appropriate in furtherance
member or its affiliates under Common to the market, which liquidity benefits of the purposes of the Act. In terms of
20 See
other market participants. Customer inter-market competition, the Exchange
pricing for RUT on CBOE’s Fees Schedule.
21 QQQ
liquidity benefits all market participants notes that it operates in a highly
is an exchange-traded fund based on the
Nasdaq-100 Index®. by providing more trading competitive market in which market
22 QQQ options overlies[sic] the same Index as opportunities, which attracts Specialists participants can readily favor competing
NDX, namely the Nasdaq 100® Index. This and Market Makers. An increase in the venues if they deem fee levels at a
relationship between QQQ options and NDX activity of these market participants in particular venue to be excessive, or
options is similar to the relationship between RUT, rebate opportunities available at other
turn facilitates tighter spreads, which
daltland on DSKBBV9HB2PROD with NOTICES
the iShares Russell 2000 Index, and IWM which is
the ETF on RUT. may cause an additional corresponding venues to be more favorable. The
23 This waiver applies when such members would increase in order flow from other market Exchange notes that with its products,
otherwise incur this charge for trading in their own participants. market participants are offered an
proprietary account contra to a Customer (‘‘BD- opportunity to either transact NDXP or
Customer Facilitation’’), if the member’s BD-
Customer Facilitation average daily volume
24 Id. separately execute options overlying
(including both FLEX and non-FLEX transactions) 25 Id. PowerShares QQQ Trust (‘‘QQQ’’).
exceeds 10,000 contracts per day in a given month. 26 Id. Offering products such as QQQ provides
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![Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices 2839
rules/sro.shtml). Copies of the solicit comments on the proposed rule options. This includes new orders and
submission, all subsequent change from interested persons. changes to orders resting on the PHLX
amendments, all written statements book. The PHLX Orders feed includes
I. Self-Regulatory Organization’s
with respect to the proposed rule opening imbalance data, Price
Statement of the Terms of Substance of
change that are filed with the Improvement XL (PIXL) data and
the Proposed Rule Change
Commission, and all written Complex Order Live Auction (COLA)
communications relating to the The Exchange proposes to amend the information, in addition to the full limit
proposed rule change between the Exchange’s fee schedule at Chapter IX order book data for both simple and
Commission and any person, other than (Proprietary Data Feed Fees) to change complex orders.
those that may be withheld from the the Internal Distributor fee for Top of The fee for TOPO Plus varies,
public in accordance with the PHLX Options Plus Orders to reflect depending on whether the subscriber is
provisions of 5 U.S.C. 552, will be substantial enhancements to the product an Internal Distributor, an External
available for website viewing and since the current Distributor fees were Distributor, a Non-Professional
printing in the Commission’s Public set in 2010, as described further below. Subscriber, or a Professional
Reference Room, 100 F Street NE, The text of the proposed rule change Subscriber.3
Washington, DC 20549, on official is available on the Exchange’s website at Currently, the monthly fee for an
business days between the hours of http://nasdaqphlx.cchwallstreet.com/, Internal Distributor is $4,000, the
10:00 a.m. and 3:00 p.m. Copies of the at the principal office of the Exchange, monthly fee for an External Distributor
filing also will be available for and at the Commission’s Public is $5,000, the monthly fee for a Non-
inspection and copying at the principal Reference Room. Professional Subscriber is $1, and the
office of the Exchange. All comments monthly fee for a Professional
II. Self-Regulatory Organization’s
received will be posted without change; Subscriber is $40. The Exchange is now
Statement of the Purpose of, and
the Commission does not edit personal proposing to increase the monthly fee
Statutory Basis for, the Proposed Rule
identifying information from for an Internal Distributor to $4,500.
Change
submissions. You should submit only Since its inception in 2010, the
information that you wish to make In its filing with the Commission, the Exchange has not raised the Internal or
available publicly. All submissions Exchange included statements External Distributor fee and yet has
should refer to File Number SR–Phlx– concerning the purpose of and basis for made substantial improvements to the
2018–02 and should be submitted on or the proposed rule change and discussed product as illustrated below.4
before February 9, 2018. any comments it received on the While the Exchange has not raised the
proposed rule change. The text of these fees for TOPO Plus since its inception,
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
statements may be examined at the the Exchange has added a number of
authority.29 places specified in Item IV below. The functional enhancements to both TOPO
Eduardo A. Aleman,
Exchange has prepared summaries, set and PHLX Orders in particular, and to
forth in sections A, B, and C below, of Exchange systems in general, that
Assistant Secretary.
the most significant aspects of such enhance the value of the TOPO Plus
[FR Doc. 2018–00856 Filed 1–18–18; 8:45 am]
statements. data product. Specifically:
BILLING CODE 8011–01–P • In July 2011, the Exchange began
A. Self-Regulatory Organization’s
disseminating timestamp messages for
Statement of the Purpose of, and
SECURITIES AND EXCHANGE Statutory Basis for, the Proposed Rule 3 Chapter IX of the Pricing Schedule defines a
COMMISSION Change distributor as ‘‘any entity that receives a feed or
data file of data directly from Nasdaq PHLX or
[Release No. 34–82495; File No. SR–Phlx– 1. Purpose indirectly through another entity and then
2018–08] The purpose of the proposed rule distributes it either internally (within that entity) or
externally (outside that entity).’’
Self-Regulatory Organizations; Nasdaq change is to amend the Exchange’s fee Chapter IX of the Pricing Schedule defines a Non-
PHLX LLC; Notice of Filing and schedule at Chapter IX (Proprietary Data Professional Subscriber as ‘‘a natural person who is
Immediate Effectiveness of Proposed Feed Fees) to change the Internal neither: (i) Registered or qualified in any capacity
Distributor fee for TOPO Plus Orders with the Commission, the Commodities Futures
Rule Change To Amend the Trading Commission, any state securities agency,
Exchange’s Fee Schedule at Chapter (‘‘TOPO Plus’’) to reflect substantial any securities exchange or association, or any
IX enhancements to the product since the commodities or futures contract market or
current Distributor fees were set in association; (ii) engaged as an ‘investment adviser’
January 12, 2018. 2010. as that term is defined in Section 201(11) of the
Investment Advisors Act of 1940 (whether or not
Pursuant to Section 19(b)(1) of the TOPO Plus is a direct, low-latency registered or qualified under that Act); nor (iii)
Securities Exchange Act of 1934 market data product that allows employed by a bank or other organization exempt
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 subscribers to connect to both the Top from registration under federal or state securities
notice is hereby given that on January 9, of PHLX Options (‘‘TOPO’’) data feed laws to perform functions that would require
registration or qualification if such functions were
2018, Nasdaq PHLX LLC (‘‘PHLX’’ or and the PHLX Orders data feed. TOPO performed for an organization not so exempt. A
‘‘Exchange’’) filed with the Securities provides subscribers a direct data feed Non-Professional Subscriber may only use the data
and Exchange Commission (‘‘SEC’’ or that includes the Exchange’s best bid provided for personal purposes and not for any
‘‘Commission’’) the proposed rule and offer position, with aggregate size, commercial purpose.’’
based on displayable order and quoting Chapter IX of the Pricing Schedule defines a
change as described in Items I, II, and
daltland on DSKBBV9HB2PROD with NOTICES
Professional Subscriber as ‘‘any Subscriber that is
III below, which Items have been interest on the Exchange. TOPO also not a Non-Professional Subscriber. If the Nasdaq
prepared by the Exchange. The provides last sale information from Subscriber agreement is signed in the name of a
Commission is publishing this notice to PHLX. business or commercial entity, such entity would be
PHLX Orders includes the full limit considered a Professional Subscriber.’’
4 See Securities Exchange Act Release No. 62194
29 17 CFR 200.30–3(a)(12). order book and contains a real-time (May 28, 2010) 75 FR 31830 (SR–Phlx–2010–48)
1 15 U.S.C. 78s(b)(1). status of simple and complex orders on (approving TOPO Plus fees) (‘‘TOPO Plus approval
2 17 CFR 240.19b–4. the PHLX order book for all PHLX-listed order’’).
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Document Created: 2018-01-19 02:42:54
Document Modified: 2018-01-19 02:42:54
| 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 2834 |
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