83 FR 6299 - Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule To Exclude NDX and NDXP Options From the Strategy Caps and From Special Pricing for FLEX Transactions
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 30 (February 13, 2018)
Federal Register Volume 83, Issue 30 (February 13, 2018)
| Page Range | 6299-6301 | |
| FR Document | 2018-02863 |
[Federal Register Volume 83, Number 30 (Tuesday, February 13, 2018)] [Notices] [Pages 6299-6301] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-02863] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82653; File No. SR-Phlx-2018-13] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule To Exclude NDX and NDXP Options From the Strategy Caps and From Special Pricing for FLEX Transactions February 7, 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 26, 2018, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's Pricing Schedule to exclude A.M. and P.M.-settled options on broad-based indexes with nonstandard expiration dates from its pricing for Strategy Caps and for FLEX transactions. While changes to the Pricing Schedule pursuant to this proposal are effective upon filing, the Exchange has designated these changes to be operative on February 1, 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 [[Page 6300]] the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange lists A.M. and P.M.-settled options on the Nasdaq 100[supreg] Index with nonstandard expiration dates under the symbols ``NDX'' and ``NDXP,'' \3\ respectively. NDX and NDXP are proprietary products that are or soon will be traded exclusively on the Exchange and its affiliates.\4\ The pricing schemes applicable to these products reflects their proprietary and exclusive nature.\5\ That is, transactions in NDX and NDXP are exempt from many of the fee caps, fee waivers, and prices that otherwise apply to other options transactions. For example, transactions in options overlying NDX and NDXP are excluded from the ``Monthly Market Maker Cap'' and the ``Monthly Firm Fee Cap.'' Furthermore, for members executing facilitation orders, NDX and NDXP options transactions are excluded from waivers of the Firm Floor Options Transaction and the Broker-Dealer Floor Options Transaction charges. --------------------------------------------------------------------------- \3\ The Exchange lists NDXP on a pilot basis. See Securities and Exchange Act Release No. 82341 (December 15, 2017), 82 FR 60651 (December 21, 2017) (SR-Phlx-2017-79). \4\ NDX is listed on Phlx, Nasdaq ISE, and Nasdaq GEMX. Several NDX options are listed on Cboe, but once they expire later this year, NDX will be entirely exclusive to the Nasdaq, Inc. Exchanges. NDXP presently is listed only on Phlx, but other Nasdaq-owned self- regulatory organizations intend to list it at a later date. \5\ See Securities and Exchange Act Release No. 82341 (December 15, 2017), 82 FR 60651 (December 21, 2017) (SR-Phlx-2017-79). --------------------------------------------------------------------------- Presently, however, one category of fee cap remains applicable to transactions in NDX and NDXP. Pursuant to Section II of the Pricing Schedule, transactions in NDX and NDXP are subject to so-called ``Strategy Caps.'' Strategy Caps limit the fees that otherwise apply to certain categories of options participants when they engage in Floor options transactions while employing strategies set forth in the Pricing Schedule, namely dividend, merger, short stock interest, reversal and conversion, jelly roll, or box spread strategies. Additionally, pursuant to Section IV.B. of the Pricing Schedule, special pricing applies to transactions by Customers and Non-Customers in NDX and NDXP FLEX options.\6\ Customers presently pay no fees for such transactions, while Non-Customers pay $0.25 per contract. Moreover, 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 NDXP. --------------------------------------------------------------------------- \6\ The characteristics of a FLEX option are discussed in Rule 1079. --------------------------------------------------------------------------- The Exchange proposes to amend these two provisions of the Pricing Schedule. First, the Exchange proposes to amend Section II to exempt transactions in NDX and NDXP from Strategy Caps. Second, the Exchange proposes to apply Section II pricing to transactions in NDX and NDXP FLEX options. Accordingly, electronic and floor options transaction charges for FLEX options overlying NDX and NDXP will be $0.75 per contract for all Non-Customers. No transaction charge will apply to Customers for NDX or NDXP FLEX options. A $0.25 per contract surcharge will be assessed to Non-Customers in NDX and NDXP FLEX options. The purpose of these two amendments to the Pricing Schedule is to further refine the pricing of transactions in NDX and NDXP to reflect the exclusive and proprietary nature of these products. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\7\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 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.'' \9\ --------------------------------------------------------------------------- \9\ 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 \10\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\11\ 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.'' \12\ --------------------------------------------------------------------------- \10\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \11\ See NetCoalition, at 534-535. \12\ 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'. . . .'' \13\ 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. --------------------------------------------------------------------------- \13\ Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)). --------------------------------------------------------------------------- The Exchange's proposal to exclude NDX and NDXP options transactions from the Strategy Caps in Section II of the Pricing Schedule is reasonable because these caps apply to Multiply-Listed Options and NDX and NDXP are not Multiply-Listed Options. As noted above, NDX and NDXP are listed exclusively on the Exchange. The Exchange does not believe that such caps are necessary to incentivize member organizations to execute strategies on the Floor involving products like NDX or NDXP that are exclusive to it. The Exchange's proposal to exclude NDX and NDXP options transactions from Strategy Caps is also equitable and not unfairly discriminatory because the Exchange will apply this cap exclusion in a uniform manner. The Exchange's proposal to exclude NDX and NDXP FLEX options from Section IV.B.--FLEX Transaction Fees pricing and instead apply to such transactions Section II pricing is reasonable because the Exchange believes that FLEX option pricing will continue to be competitive despite the exclusion of NDX and NDXP. The Exchange's proposal is equitable and not unfairly discriminatory because the Exchange will uniformly exclude NDX [[Page 6301]] and NDXP FLEX options from FLEX option pricing. Moreover, the Exchange will apply to participants in NDX and NDXP FLEX options the same Section II transaction charges it applies to participants in other types of NDX and NDXP options transactions. The Exchange notes that the proposed transaction charges for NDX and NDXP FLEX options are reasonable, equitable and not unfairly discriminatory as NDX and NDXP are exclusively listed products. The Exchange seeks to recoup its operational costs \14\ 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 exchange for execution in particular products. Other options exchanges price by symbol.\15\ Further, the Exchange notes that with its products, market participants are offered an opportunity to either transact NDX or NDXP or separately execute options overlying PowerShares QQQ Trust (``QQQ'').\16\ 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.\17\ When exchanges are able to recoup costs associated with offering proprietary products, it incentivizes growth and competition for the innovation of additional products. --------------------------------------------------------------------------- \14\ 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. \15\ See pricing for RUT on CBOE's Fees Schedule. \16\ QQQ is an exchange-traded fund based on the Nasdaq-100 Index[supreg]. \17\ QQQ options overlies the same Index as NDX and NDXP, namely the Nasdaq 100[supreg] Index. This relationship between QQQ options and NDX and NDXP options is similar to the relationship between RUT, the iShares Russell 2000 Index, and IWM which is the ETF on RUT. --------------------------------------------------------------------------- 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 NDX or NDXP or separately execute options overlying PowerShares QQQ Trust (``QQQ''). 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 Index.\18\ --------------------------------------------------------------------------- \18\ See note 17 above. --------------------------------------------------------------------------- The Exchange's proposal to exclude NDX and NDXP from the Strategies Caps does not impose an undue burden on competition because no market participant would be eligible to count NDX or NDXP toward the Strategies Caps. The Exchange's proposal to exclude NDX and NDXP from FLEX Option pricing in Section IV.B. and instead apply Section II pricing to such transactions does not impose an undue burden on competition because the proposal would apply to participants in FLEX NDX and NDXP options transactions the same transactions fees that it assess for other types of NDX and NDXP options transactions. 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.\19\ --------------------------------------------------------------------------- \19\ 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-2018-13 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-2018-13. 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-2018-13, and should be submitted on or before March 6, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-02863 Filed 2-12-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 30 / Tuesday, February 13, 2018 / Notices 6299
A proposed rule change filed under Paper Comments SECURITIES AND EXCHANGE
Rule 19b–4(f)(6) normally does not COMMISSION
become operative for 30 days after the • Send paper comments in triplicate
to Secretary, Securities and Exchange [Release No. 34–82653; File No. SR–Phlx–
date of filing. However, Rule 19b– 2018–13]
4(f)(6)(iii) 32 permits the Commission to Commission, 100 F Street NE,
designate a shorter time if such action Washington, DC 20549–1090. Self-Regulatory Organizations; Nasdaq
is consistent with the protection of All submissions should refer to File PHLX LLC; Notice of Filing and
investors and the public interest. The Number SR–CBOE–2018–010. This file Immediate Effectiveness of Proposed
Exchange requests that the Commission number should be included on the Rule Change To Amend the
waive the 30-day operative delay. Exchange’s Pricing Schedule To
subject line if email is used. To help the
According to the Exchange, the Exclude NDX and NDXP Options From
Commission process and review your
proposed rule change is consistent with the Strategy Caps and From Special
the protection of investors and the comments more efficiently, please use
only one method. The Commission will Pricing for FLEX Transactions
public interest because it eliminates
confusion as to the rules that currently post all comments on the Commission’s February 7, 2018.
apply to trading on Cboe Options. The internet website (http://www.sec.gov/ Pursuant to Section 19(b)(1) of the
Commission believes that deleting rules/sro.shtml). Copies of the Securities Exchange Act of 1934
obsolete rules will add clarity and submission, all subsequent (‘‘Act’’),1 and Rule 19b–4 thereunder,2
transparency to the Exchange’s rules. amendments, all written statements notice is hereby given that on January
Therefore, the Commission finds that with respect to the proposed rule 26, 2018, Nasdaq PHLX LLC (‘‘Phlx’’ or
waiving the 30-day operative delay is change that are filed with the ‘‘Exchange’’) filed with the Securities
consistent with the protection of Commission, and all written and Exchange Commission (‘‘SEC’’ or
investors and the public interest. communications relating to the ‘‘Commission’’) the proposed rule
Accordingly, the Commission waives proposed rule change between the change as described in Items I, II, and
the 30-day operative delay and Commission and any person, other than III, below, which Items have been
designates the proposed rule change those that may be withheld from the prepared by the Exchange. The
operative upon filing.33 public in accordance with the Commission is publishing this notice to
At any time within 60 days of the provisions of 5 U.S.C. 552, will be solicit comments on the proposed rule
filing of the proposed rule change, the available for website viewing and change from interested persons.
Commission summarily may printing in the Commission’s Public I. Self-Regulatory Organization’s
temporarily suspend such rule change if Reference Room, 100 F Street NE, Statement of the Terms of Substance of
it appears to the Commission that such Washington, DC 20549 on official the Proposed Rule Change
action is necessary or appropriate in the business days between the hours of The Exchange proposes to amend the
public interest, for the protection of 10:00 a.m. and 3:00 p.m. Copies of the Exchange’s Pricing Schedule to exclude
investors, or otherwise in furtherance of filing also will be available for A.M. and P.M.-settled options on broad-
the purposes of the Act. If the inspection and copying at the principal based indexes with nonstandard
Commission takes such action, the office of the Exchange. All comments expiration dates from its pricing for
Commission will institute proceedings received will be posted without change. Strategy Caps and for FLEX
to determine whether the proposed rule Persons submitting comments are transactions.
change should be approved or cautioned that we do not redact or edit While changes to the Pricing
disapproved. Schedule pursuant to this proposal are
personal identifying information from
IV. Solicitation of Comments comment submissions. You should effective upon filing, the Exchange has
submit only information that you wish designated these changes to be operative
Interested persons are invited to on February 1, 2018.
to make available publicly. All
submit written data, views, and The text of the proposed rule change
submissions should refer to File
arguments concerning the foregoing, is available on the Exchange’s website at
Number SR–CBOE–2018–010 and
including whether the proposed rule http://nasdaqphlx.cchwallstreet.com/,
change is consistent with the Act. should be submitted on or before March
at the principal office of the Exchange,
Comments may be submitted by any of 6, 2018.
and at the Commission’s Public
the following methods: For the Commission, by the Division of Reference Room.
Trading and Markets, pursuant to delegated
Electronic Comments authority.34 II. Self-Regulatory Organization’s
Statement of the Purpose of, and
• Use the Commission’s internet Eduardo A. Aleman,
Statutory Basis for, the Proposed Rule
comment form (http://www.sec.gov/ Assistant Secretary. Change
rules/sro.shtml); or [FR Doc. 2018–02857 Filed 2–12–18; 8:45 am]
• Send an email to rule-comments@ In its filing with the Commission, the
BILLING CODE 8011–01–P
sec.gov. Please include File Number SR– Exchange included statements
CBOE–2018–010 on the subject line. concerning the purpose of and basis for
the proposed rule change and discussed
description and the text of the proposed rule
any comments it received on the
sradovich on DSK3GMQ082PROD with NOTICES
change, at least five business days prior to the date proposed rule change. The text of these
of filing of the proposed rule change, or such statements may be examined at the
shorter time as designated by the Commission. The places specified in Item IV below. The
Exchange has satisfied this requirement.
32 17 CFR 240.19b–4(f)(6)(iii).
Exchange has prepared summaries, set
33 For purposes only of waiving the 30-day
forth in sections A, B, and C below, of
operative delay, the Commission has considered the
1 15 U.S.C. 78s(b)(1).
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f). 34 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.
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the most significant aspects of such $0.25 per contract. Moreover, the (‘‘NetCoalition’’) the D.C. Circuit upheld
statements. Monthly Firm Fee Cap, Monthly Market the Commission’s use of a market-based
Maker Cap, Strategy Caps and the approach in evaluating the fairness of
A. Self-Regulatory Organization’s
Options Surcharge described in Section market data fees against a challenge
Statement of the Purpose of, and the
II of the Pricing Schedule apply to FLEX claiming that Congress mandated a cost-
Statutory Basis for, the Proposed Rule
Transaction Fees for NDX and NDXP. based approach.11 As the court
Change The Exchange proposes to amend emphasized, the Commission ‘‘intended
1. Purpose these two provisions of the Pricing in Regulation NMS that ‘market forces,
The Exchange lists A.M. and P.M.- Schedule. First, the Exchange proposes rather than regulatory requirements’
settled options on the Nasdaq 100® to amend Section II to exempt play a role in determining the market
Index with nonstandard expiration transactions in NDX and NDXP from data . . . to be made available to
dates under the symbols ‘‘NDX’’ and Strategy Caps. Second, the Exchange investors and at what cost.’’ 12
‘‘NDXP,’’ 3 respectively. NDX and NDXP proposes to apply Section II pricing to Further, ‘‘[n]o one disputes that
are proprietary products that are or soon transactions in NDX and NDXP FLEX competition for order flow is
will be traded exclusively on the options. Accordingly, electronic and ‘fierce.’ . . . As the SEC explained, ‘[i]n
Exchange and its affiliates.4 The pricing floor options transaction charges for the U.S. national market system, buyers
schemes applicable to these products FLEX options overlying NDX and NDXP and sellers of securities, and the broker-
reflects their proprietary and exclusive will be $0.75 per contract for all Non- dealers that act as their order-routing
nature.5 That is, transactions in NDX Customers. No transaction charge will agents, have a wide range of choices of
and NDXP are exempt from many of the apply to Customers for NDX or NDXP where to route orders for execution’;
fee caps, fee waivers, and prices that FLEX options. A $0.25 per contract [and] ‘no exchange can afford to take its
otherwise apply to other options surcharge will be assessed to Non- market share percentages for granted’
transactions. For example, transactions Customers in NDX and NDXP FLEX because ‘no exchange possesses a
in options overlying NDX and NDXP are options. monopoly, regulatory or otherwise, in
The purpose of these two the execution of order flow from broker
excluded from the ‘‘Monthly Market
amendments to the Pricing Schedule is dealers’. . . .’’ 13 Although the court
Maker Cap’’ and the ‘‘Monthly Firm Fee
to further refine the pricing of and the SEC were discussing the cash
Cap.’’ Furthermore, for members
transactions in NDX and NDXP to equities markets, the Exchange believes
executing facilitation orders, NDX and
reflect the exclusive and proprietary that these views apply with equal force
NDXP options transactions are excluded
nature of these products. to the options markets.
from waivers of the Firm Floor Options
The Exchange’s proposal to exclude
Transaction and the Broker-Dealer Floor 2. Statutory Basis
NDX and NDXP options transactions
Options Transaction charges. The Exchange believes that its from the Strategy Caps in Section II of
Presently, however, one category of proposal is consistent with Section 6(b) the Pricing Schedule is reasonable
fee cap remains applicable to of the Act,7 in general, and furthers the because these caps apply to Multiply-
transactions in NDX and NDXP. objectives of Sections 6(b)(4) and 6(b)(5) Listed Options and NDX and NDXP are
Pursuant to Section II of the Pricing of the Act,8 in particular, in that it not Multiply-Listed Options. As noted
Schedule, transactions in NDX and provides for the equitable allocation of above, NDX and NDXP are listed
NDXP are subject to so-called ‘‘Strategy reasonable dues, fees and other charges exclusively on the Exchange. The
Caps.’’ Strategy Caps limit the fees that among members and issuers and other Exchange does not believe that such
otherwise apply to certain categories of persons using any facility, and is not caps are necessary to incentivize
options participants when they engage designed to permit unfair member organizations to execute
in Floor options transactions while discrimination between customers, strategies on the Floor involving
employing strategies set forth in the issuers, brokers, or dealers. products like NDX or NDXP that are
Pricing Schedule, namely dividend, The Commission and the courts have exclusive to it. The Exchange’s proposal
merger, short stock interest, reversal and repeatedly expressed their preference to exclude NDX and NDXP options
conversion, jelly roll, or box spread for competition over regulatory transactions from Strategy Caps is also
strategies. intervention in determining prices, equitable and not unfairly
Additionally, pursuant to Section products, and services in the securities discriminatory because the Exchange
IV.B. of the Pricing Schedule, special markets. In Regulation NMS, while will apply this cap exclusion in a
pricing applies to transactions by adopting a series of steps to improve the uniform manner.
Customers and Non-Customers in NDX current market model, the Commission The Exchange’s proposal to exclude
and NDXP FLEX options.6 Customers highlighted the importance of market NDX and NDXP FLEX options from
presently pay no fees for such forces in determining prices and SRO Section IV.B.—FLEX Transaction Fees
transactions, while Non-Customers pay revenues and, also, recognized that pricing and instead apply to such
current regulation of the market system transactions Section II pricing is
3 The Exchange lists NDXP on a pilot basis. See
‘‘has been remarkably successful in reasonable because the Exchange
Securities and Exchange Act Release No. 82341
(December 15, 2017), 82 FR 60651 (December 21, promoting market competition in its believes that FLEX option pricing will
2017) (SR–Phlx–2017–79). broader forms that are most important to continue to be competitive despite the
4 NDX is listed on Phlx, Nasdaq ISE, and Nasdaq investors and listed companies.’’ 9 exclusion of NDX and NDXP. The
GEMX. Several NDX options are listed on Cboe, but Likewise, in NetCoalition v. Securities Exchange’s proposal is equitable and
once they expire later this year, NDX will be
and Exchange Commission 10 not unfairly discriminatory because the
sradovich on DSK3GMQ082PROD with NOTICES
entirely exclusive to the Nasdaq, Inc. Exchanges.
NDXP presently is listed only on Phlx, but other Exchange will uniformly exclude NDX
7 15 U.S.C. 78f(b).
Nasdaq-owned self-regulatory organizations intend
to list it at a later date. 8 15 U.S.C. 78f(b)(4) and (5). 11 See NetCoalition, at 534–535.
5 See Securities and Exchange Act Release No. 9 Securities Exchange Act Release No. 51808 12 Id. at 537.
82341 (December 15, 2017), 82 FR 60651 (December (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 13 Id. at 539 (quoting Securities Exchange Act
21, 2017) (SR–Phlx–2017–79). (‘‘Regulation NMS Adopting Release’’). Release No. 59039 (December 2, 2008), 73 FR
6 The characteristics of a FLEX option are 10 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 74770, 74782–83 (December 9, 2008) (SR–
discussed in Rule 1079. 2010). NYSEArca–2006–21)).
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![Federal Register / Vol. 83, No. 30 / Tuesday, February 13, 2018 / Notices 6301
and NDXP FLEX options from FLEX overlying PowerShares QQQ Trust • Send an email to rule-comments@
option pricing. Moreover, the Exchange (‘‘QQQ’’). Offering products such as sec.gov. Please include File Number SR–
will apply to participants in NDX and QQQ provides market participants with Phlx–2018–13 on the subject line.
NDXP FLEX options the same Section II a variety of choices in selecting the
transaction charges it applies to product they desire to utilize to transact Paper Comments
participants in other types of NDX and the Nasdaq 100 Index.18 • Send paper comments in triplicate
NDXP options transactions. The Exchange’s proposal to exclude
The Exchange notes that the proposed to Secretary, Securities and Exchange
NDX and NDXP from the Strategies Commission, 100 F Street NE,
transaction charges for NDX and NDXP Caps does not impose an undue burden
FLEX options are reasonable, equitable Washington, DC 20549–1090.
on competition because no market
and not unfairly discriminatory as NDX participant would be eligible to count All submissions should refer to File
and NDXP are exclusively listed NDX or NDXP toward the Strategies Number SR–Phlx–2018–13. This file
products. The Exchange seeks to recoup Caps. number should be included on the
its operational costs 14 for listing The Exchange’s proposal to exclude subject line if email is used. To help the
proprietary products. Also, pricing by NDX and NDXP from FLEX Option Commission process and review your
symbol is a common practice on many pricing in Section IV.B. and instead comments more efficiently, please use
U.S. options exchanges as a means to apply Section II pricing to such only one method. The Commission will
incentivize order flow to be sent to an transactions does not impose an undue
exchange for execution in particular post all comments on the Commission’s
burden on competition because the internet website (http://www.sec.gov/
products. Other options exchanges price proposal would apply to participants in
by symbol.15 Further, the Exchange rules/sro.shtml). Copies of the
FLEX NDX and NDXP options submission, all subsequent
notes that with its products, market
transactions the same transactions fees amendments, all written statements
participants are offered an opportunity
that it assess for other types of NDX and with respect to the proposed rule
to either transact NDX or NDXP or
NDXP options transactions. change that are filed with the
separately execute options overlying
PowerShares QQQ Trust (‘‘QQQ’’).16 C. Self-Regulatory Organization’s Commission, and all written
Offering products such as QQQ provides Statement on Comments on the communications relating to the
market participants with a variety of Proposed Rule Change Received From proposed rule change between the
choices in selecting the product they Members, Participants, or Others Commission and any person, other than
desire to utilize to transact the Nasdaq those that may be withheld from the
No written comments were either
100® Index.17 When exchanges are able public in accordance with the
solicited or received.
to recoup costs associated with offering provisions of 5 U.S.C. 552, will be
proprietary products, it incentivizes III. Date of Effectiveness of the available for website viewing and
growth and competition for the Proposed Rule Change and Timing for printing in the Commission’s Public
innovation of additional products. Commission Action Reference Room, 100 F Street NE,
B. Self-Regulatory Organization’s The foregoing rule change has become Washington, DC 20549, on official
Statement on Burden on Competition effective pursuant to Section business days between the hours of
The Exchange does not believe that 19(b)(3)(A)(ii) of the Act.19 10:00 a.m. and 3:00 p.m. Copies of the
the proposed rule change will impose At any time within 60 days of the filing also will be available for
any burden on competition not filing of the proposed rule change, the inspection and copying at the principal
necessary or appropriate in furtherance Commission summarily may office of the Exchange. All comments
of the purposes of the Act. In terms of temporarily suspend such rule change if received will be posted without change.
inter-market competition, the Exchange it appears to the Commission that such Persons submitting comments are
notes that it operates in a highly action is: (i) Necessary or appropriate in cautioned that we do not redact or edit
competitive market in which market the public interest; (ii) for the protection personal identifying information from
participants can readily favor competing of investors; or (iii) otherwise in comment submissions. You should
venues if they deem fee levels at a furtherance of the purposes of the Act. submit only information that you wish
particular venue to be excessive, or If the Commission takes such action, the to make available publicly. All
rebate opportunities available at other Commission shall institute proceedings submissions should refer to File
venues to be more favorable. The to determine whether the proposed rule Number SR–Phlx–2018–13, and should
Exchange notes that with its products, should be approved or disapproved. be submitted on or before March 6,
market participants are offered an 2018.
IV. Solicitation of Comments
opportunity to either transact NDX or
NDXP or separately execute options Interested persons are invited to For the Commission, by the Division of
submit written data, views, and Trading and Markets, pursuant to delegated
14 By way of example, in analyzing an obvious
arguments concerning the foregoing, authority.20
error, the Exchange would have additional data including whether the proposed rule Eduardo A. Aleman,
points available in establishing a theoretical price
for a Multiply Listed Option as compared to a change is consistent with the Act. Assistant Secretary.
proprietary product, which requires additional Comments may be submitted by any of [FR Doc. 2018–02863 Filed 2–12–18; 8:45 am]
analysis and administrative time to comply with the following methods:
Exchange rules to resolve an obvious error. BILLING CODE 8011–01–P
sradovich on DSK3GMQ082PROD with NOTICES
15 See pricing for RUT on CBOE’s Fees Schedule. Electronic Comments
16 QQQ is an exchange-traded fund based on the
Nasdaq–100 Index®. • Use the Commission’s internet
17 QQQ options overlies the same Index as NDX comment form (http://www.sec.gov/
and NDXP, namely the Nasdaq 100® Index. This rules/sro.shtml); or
relationship between QQQ options and NDX and
NDXP options is similar to the relationship between
18 See note 17 above.
RUT, the iShares Russell 2000 Index, and IWM
which is the ETF on RUT. 19 15 U.S.C. 78s(b)(3)(A)(ii). 20 17 CFR 200.30–3(a)(12).
VerDate Sep<11>2014 23:12 Feb 12, 2018 Jkt 244001 PO 00000 Frm 00143 Fmt 4703 Sfmt 9990 E:\FR\FM\13FEN1.SGM 13FEN1](https://thefederalregister.org/doc/83_FR_6329/page/3.svg)
Document Created: 2018-02-13 02:32:37
Document Modified: 2018-02-13 02:32:37
| 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 6299 |
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