Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 13641 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3This includes options overlying equities, 

exchange traded funds (‘‘ETFs’’), exchange traded 

notes (‘‘ETNs’’) and indexes which are Multiply 

Listed. 

4PIXLSM is the Exchange’s price improvement 

mechanism known as Price Improvement XL or 

PIXL. See Rule 1080(n). 

5A Complex Order is any order involving the 

simultaneous purchase and/or sale of two or more 

different options series in the same underlying 

security, priced at a net debit or credit based on the 

relative prices of the individual components, for the 

same account, for the purpose of executing a 

particular investment strategy. Furthermore, a 

Complex Order can also be a stock-option order, 

which is an order to buy or sell a stated number 

of units of an underlying stock or ETF coupled with 

the purchase or sale of options contract(s). See 

Exchange Rule 1080, Commentary .08(a)(i) [sic]. 

6A transaction resulting from an order that was 

electronically delivered utilizes Phlx XL. See 

Exchange Rules 1014 and 1080. Electronically 

delivered orders do not include orders transacted 

on the Exchange floor. A transaction resulting from 

an order that is non-electronically-delivered is 

represented on the trading floor by a floor broker. 

See Exchange Rule 1063. All orders will be either 

electronically or non-electronically delivered. 

7The term ‘‘Customer’’ defines a person or entity 

that is neither a broker-dealer nor a direct or 

indirect affiliate of a broker-dealer, and includes a 

‘‘Professional’’ as defined in Rule 1000(b)(14). See 

Securities Exchange Act Release Nos. 66755 (April 

6, 2012), 77 FR 22037 (April 12, 2012) (SR–Phlx– 

2012–42) (notice of filing and immediate 

effectiveness). 

8The term ‘‘Firm’’ applies to any transaction that 

is identified by a member or member organization 

for clearing in the Firm range at The Options 

Clearing Corporation. 

9AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, 

VXX and XLF are currently Penny Pilot options 

(together ‘‘certain Penny Options’’). The $ 0.27 per 

contract pricing proposed herein is symbol-specific 

and will continue to apply to these symbols 

whether or not they are deleted from or added to 

the Penny Pilot. 

10The term ‘‘Professional’’ means any person or 

entity that (i) is not a broker or dealer in securities, 

and (ii) places more than 390 orders in listed 

options per day on average during a calendar month 

for its own beneficial account(s). See Rule 

1000(b)(14). 

11The term ‘‘Broker-Dealer’’ applies to any 

transaction which is not subject to any of the other 

transaction fees applicable within a particular 

category. 

12The Penny Pilot was established in January 

2007 and was last extended in 2014. See Securities 

Exchange Act Release Nos. 55153 (January 23, 

2007), 72 FR 4553 (January 31, 2007) (SR–Phlx– 

2006–74) (notice of filing and approval order 

establishing Penny Pilot); and 73688 (November 25, 

2014), 79 FR 71484 (December 2, 2014) (SR–Phlx– 

2014–77) (notice of filing and immediate 

effectiveness extending the Penny Pilot through 

June 30, 2015). All Penny Pilot Options listed on 

the Exchange can be found at http://

www.nasdaqtrader.com/Micro.aspx?id=phlx. 

13A Specialist is an Exchange member who is 

registered as an options specialist pursuant to Rule 

1020(a). 

14A ‘‘Market Maker’’ includes Registered Options 

Traders (Rule 1014(b)(i) and (ii)), which includes 

Streaming Quote Traders (see Rule 1014(b)(ii)(A)) 

and Remote Streaming Quote Traders (see Rule 

1014(b)(ii)(B)). Directed Participants are also market 

makers. 

15Specialists and Market Makers are subject to a 

‘‘Monthly Market Maker Cap’’ of $500,000 for: (i) 

Electronic and floor Option Transaction Charges; 

(ii) QCC Transaction Fees (as defined in Exchange 

Rule 1080(o) and Floor QCC Orders, as defined in 

1064(e)); and (iii) fees related to an order or quote 

that is contra to a PIXL Order or specifically 

responding to a PIXL auction [sic]. The trading 

activity of separate Specialist and Market Maker 

member organizations is aggregated in calculating 

the Monthly Market Maker Cap if there is Common 

Ownership between the member organizations. All 

dividend, merger, short stock interest, reversal and 

conversion, jelly roll and box spread strategy 

executions (as defined in Section II) are excluded 

from the Monthly Market Maker Cap. 

16The term ‘‘Common Ownership’’ shall mean 

members or member organizations under 75% 

common ownership or control. 

improve the function or lessen the costs 

and burdens of the SAR? 

Ted Wackler, 

Deputy Chief of Staff and Assistant Director. 

[FR Doc. 2015–05906 Filed 3–13–15; 8:45 am] 

BILLING CODE 3710–F5–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74460; File No. SR–Phlx– 

2015–21] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Customer Rebate Program, Multiply 

Listed Options, PIXL Pricing 

March 10, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

26, 2015, NASDAQ OMX 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to modify the 

Phlx Pricing Schedule (‘‘Pricing 

Schedule’’). Specifically, the Exchange 

proposes to amend pricing in Section B, 

entitled ‘‘Customer Rebate Program,’’ 

Section II, entitled ‘‘Multiply Listed 

Options Fees,’’ 3 and Section IV, Part A, 

entitled ‘‘PIXL Pricing,’’ 4 of the Pricing 

Schedule. The Exchange proposes these 

amendments in order to: (i) Establish a 

cap on rebates specifically for electronic 

Simple PIXL and Complex 5 PIXL 

Orders and not pay rebates when 

electronic 6 Customer 7 Complex PIXL 

Orders execute against electronic 

Complex PIXL Initiating Orders; (ii) 

increase the assessment of fees for 

electronic Firm 8 Simple Orders 

underlying options in AAPL, BAC, 

EEM, FB, FXI, IWM, QQQ, TWTR, VXX 

and XLF; 9 (iii) increase the assessment 

of fees for electronic Complex Orders for 

Professionals,10 Firms and BrokerDealers; 11 (iv) increase the assessment 

of fees for adding liquidity in Penny 

Pilot Options 12 for Specialists 13 and 

Market Makers; 14 (v) clarify that the fee 

for Specialists and Market Makers that 

have reached their Monthly Market 

Maker Cap 15 in a non-complex 

electronic auction will include 

transactions which execute against an 

order for which the Exchange broadcast 

an order exposure alert; (vi) amend the 

Initiating Order Fee for Simple PIXL 

and Complex PIXL Initiating Orders; 

and (vii) amend the requirements to 

receive the PIXL Initiating Order Fee 

discount to require a member or 

member organization under Common 

Ownership 16 to qualify for a Tier 4 or 

Tier 5 Customer Rebate in Section B of 

the Pricing Schedule. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://

nasdaqomxphlx.cchwallstreet.com/, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this filing is to modify 

the Pricing Schedule to specifically 

amend fees in Section B, entitled 

‘‘Customer Rebate Program,’’ Section II, 

entitled ‘‘Multiply Listed Options Fees,’’ 

and Section IV, Part A, entitled ‘‘PIXL 

Pricing.’’ The Exchange proposes 


Rmajette on DSK2VPTVN1PROD with NOTICES
13642 Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 

17Category A and Category B rebates are 

described below. 

18A QCC Order is comprised of an order to buy 

or sell at least 1000 contracts that is identified as 

being part of a qualified contingent trade, as that 

term is defined in Rule 1080(o)(3), coupled with a 

contra-side order to buy or sell an equal number of 

contracts. The QCC Order must be executed at a 

price at or between the National Best Bid and Offer 

and be rejected if a Customer order is resting on the 

Exchange book at the same price. A QCC Order 

shall only be submitted electronically from off the 

floor to the PHLX XL II System. See Rule 1080(o). 

See also Securities Exchange Act Release No. 64249 

(April 7, 2011), 76 FR 20773 (April 13, 2011) (SR– 

Phlx–2011–47) (a rule change to establish a QCC 

Order to facilitate the execution of stock/option 

Qualified Contingent Trades (‘‘QCTs’’) that satisfy 

the requirements of the trade through exemption in 

connection with Rule 611(d) of the Regulation 

NMS). 

19Members and member organizations under 

common ownership may aggregate their Customer 

volume for purposes of calculating the Customer 

Rebate Tiers and receiving rebates. Common 

ownership means members or member 

organizations under 75% common ownership or 

control. 

20The fee reduction today is only applicable to 

Penny Pilot Options as all of the symbols, AAPL, 

BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and 

XLF, are Penny Pilot symbols. 21See descriptions of these strategies in Section 

II of the Pricing Schedule. 

various amendments to the Pricing 

Schedule as described below. 

Section B—Customer Rebate Program 

Currently, the Exchange has a 

Customer Rebate Program consisting of 

five tiers that pays Customer rebates on 

two categories, A and B,17 of 

transactions. A Phlx member qualifies 

for a certain rebate tier based on the 

percentage of total national customer 

volume in Multiply Listed equity and 

ETFs options classes, excluding SPY 

Options that it transacts monthly on 

Phlx. The Exchange calculates Customer 

volume in Multiply Listed Options 

(including SPY options) by totaling 

electronically-delivered and executed 

volume, excluding volume associated 

with electronic Qualified Contingent 

Cross Orders,18 as defined in Exchange 

Rule 1080(o).19 The Exchange proposes, 

as discussed below, to establish a cap 

for Simple PIXL Orders (Category A) 

and Complex PIXL Orders (Category B) 

rebates. Also, the Exchange is proposing 

to not offer rebates when Customer 

Complex PIXL Orders execute against 

Complex PIXL Initiating Orders for 

Category B rebates. 

Currently, a Category A Customer 

rebate is paid to members executing 

electronically-delivered Customer 

Simple Orders in Penny Pilot Options 

and Customer Simple Orders in NonPenny Pilot Options in Section II 

symbols. Rebates are paid on Customer 

PIXL Orders in Section II symbols that 

execute against non-Initiating Order 

interest. In the instance where member 

organizations qualify for Tier 4 or higher 

in the Customer Rebate Program, 

Customer PIXL Orders that execute 

against a PIXL Initiating Order are paid 

a rebate of $0.14 per contract. Today 

there is no rebate cap. The Exchange 

proposes to establish a cap for Category 

A rebates as follows: rebates on 

Customer PIXL Orders will be capped at 

4,000 contracts per order for Simple 

PIXL Orders. The Exchange believes 

that the Category A rebates will 

continue to encourage members to send 

Customer liquidity to Phlx despite the 

cap on PIXL Simple Order rebates at the 

proposed 4,000 contracts. 

Currently, a Category B rebate is paid 

to members executing electronicallydelivered Customer Complex Orders in 

Penny Pilot Options and Non-Penny 

Pilot Options in Section II symbols. 

Rebates are paid on Customer PIXL 

Complex Orders in Section II symbols 

that execute against non-Initiating Order 

interest. In the instance where member 

organizations qualify for Tier 4 or higher 

in the Customer Rebate Program, 

Customer Complex PIXL Orders that 

execute against a Complex PIXL 

Initiating Order are paid a rebate of 

$0.17 per contract. The Category B 

rebate is not paid when an 

electronically-delivered Customer 

Complex Order, including Customer 

Complex PIXL Order, executes against 

another electronically-delivered 

Customer Complex Order. Today there 

is no rebate cap. The Exchange proposes 

to establish a cap for Category B 

Customer Complex Order rebates as 

follows: rebates on Customer PIXL 

Orders will be capped at 4,000 contracts 

per order leg for Complex PIXL Orders. 

The Exchange believes that the Category 

B rebates will continue to encourage 

members to send Customer liquidity to 

Phlx despite the cap on PIXL Complex 

Order rebates at the proposed 4,000 

contracts per order leg. 

The Exchange also proposes to amend 

the rule change to specify that Category 

B Customer Complex PIXL Orders that 

execute against a Complex PIXL 

Initiating Order will not be paid a 

rebate. As noted above, the Category B 

rebate is not paid when an 

electronically-delivered Customer 

Complex Order, including Customer 

Complex PIXL Order, executes against 

another electronically-delivered 

Customer Complex Order, which 

includes a Complex PIXL Initiating 

Order. 

Section II—Multiply Listed Options 

The Exchange proposes to amend the 

discounted amount that is currently 

assessed to a Firm for electronic orders 

in certain Penny Options. Today, the 

Exchange assesses a Firm a $0.48 per 

contract Options Transaction Charge for 

electronic transactions in Penny Pilot 

Options and a $0.70 per contract 

Options Transaction Charge for NonPenny Pilot Options. The Exchange also 

offers a discount to Firms transacting 

electronic Simple Orders in certain 

Penny Options of $0.25 per contract. 

The Exchange is proposing to increase 

the discount fee from $0.25 to $0.27 per 

contract,20 resulting in a higher effective 

fee. Despite the increase in the discount 

fee, the Exchange believes that Firms 

will continue to be incentivized to 

transact volume in these symbols. 

The Exchange proposes to increase 

the discount fee for electronic Complex 

Orders to Professionals, Broker-Dealers 

and Firms in Penny and Non-Penny 

Pilot Options regarding electronic 

Complex Orders. Today, Professionals, 

Broker-Dealers and Firms are offered the 

opportunity to reduce Options 

Transaction Charges in Penny Pilot 

Complex Orders from $0.48 to $0.30 per 

contract and to reduce Options 

Transaction Charges in Non-Penny Pilot 

Complex Orders from $0.70 to $0.30 per 

contract. The Exchange is proposing to 

increase the discount fee for 

Professionals, Firms and Broker-Dealers 

from $0.30 to $0.35 per contract when 

transacting electronic Complex Orders, 

resulting in a higher effective fee. 

Despite the increase in the discount fee, 

the Exchange believes that this discount 

will continue to incentivize 

Professionals, Firms and Broker-Dealers 

to transact electronic Complex Order 

volume. The Exchange believes that the 

proposed discount fee, although higher, 

will continue to incentivize 

Professionals, Broker-Dealers and Firms 

to send order flow to the Exchange. 

Currently, Specialists and Market 

Makers are subject to a ‘‘Monthly 

Market Maker Cap’’ of $500,000 for: (i) 

Electronic and floor Option Transaction 

Charges; and (ii) QCC Transaction Fees 

(as defined in Exchange Rule 1080(o) 

and Floor QCC Orders, as defined in 

1064(e)). The trading activity of separate 

Specialist and Market Maker member 

organizations are aggregated in 

calculating the Monthly Market Maker 

Cap if there is Common Ownership 

between the member organizations. All 

dividend, merger, short stock interest, 

reversal and conversion, jelly roll and 

box spread strategy executions 21 are 

excluded from the Monthly Market 

Maker Cap. Specialists or Market 

Makers that (i) are on the contra-side of 

an electronically-delivered and 

executed Customer order, excluding 

responses to a PIXL auction; and (ii) 

have reached the Monthly Market Maker 


Rmajette on DSK2VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 13643 

22The $0.17 per contract fee that exists today is 

not changed, and the proposal in respect of the fee 

is only for electronic auction. 

23The Exchange broadcasts orders on the Phlx 

Book by issuing order exposure alerts to all Phlx XL 

II participants and market participants that 

subscribe to certain data feeds. See Securities 

Exchange Act Release Nos. 68517 (December 21, 

2012), 77 FR 77134 (December 31, 2012) (SR-Phlx2012–136) (notice of filing and immediate 

effectiveness relating to distribution of auction 

messages); and 68593 [sic] (January 31, 2013), 78 FR 

8633 (February 6, 2013) (SR-Phlx-2013–06) (notice 

of filing and immediate effectiveness to clarify 

when an order is adding or removing liquidity and 

discussing order alerts). The Exchange notes that 

there is currently an exposure alert provision in the 

Pricing Schedule, albeit for fees and rebates 

regarding SPY (Section I). 

24Any member or member organization under 

Common Ownership with another member or 

member organization that qualifies for a Customer 

Rebate Tier discount in Section B receives the PIXL 

Initiating Order discount of $0.05 per contract. 

25Moreover, any member or member organization 

under Common Ownership with another member or 

member organization that qualifies for a Customer 

Rebate Tier 4 or 5 rebate in Section B will receive 

the PIXL Initiating Order discount as described in 

Section IV of the Pricing Schedule. 

26 15 U.S.C. 78f(b). 

27 15 U.S.C. 78f(b)(4), (5). 

28See CBOE’s Fees Schedule. Credits on 

Customer orders executed electronically in AIM are 

capped at 1,000 contracts per order for simple 

executions and 1,000 contracts per leg for complex 

executions. 

Cap are currently assessed fees per 

contract as follows: $0.00 per contract 

Fee for Adding Liquidity in Penny Pilot 

Options; $0.17 per contract Fee for 

Removing Liquidity in Penny Pilot 

Options; $0.17 per contract in NonPenny Pilot Options; and $0.17 per 

contract in a non-Complex electronic 

auction, including the Quote Exhaust 

auction and, for purposes of this fee, the 

opening process. A Complex electronic 

auction includes, but is not limited to, 

the Complex Order Live Auction 

(‘‘COLA’’). 

The Exchange proposes to increase 

the Fee for Adding Liquidity in Penny 

Pilot Options, when a Specialist or 

Market Maker is on the contra-side of an 

electronically-delivered and executed 

Customer order, excluding responses to 

a PIXL auction, and has reached the 

Monthly Market Maker Cap, from $0.00 

to $0.05 per contract. The Exchange also 

proposes to make it clear that 

transactions which execute against an 

order for which the Exchange broadcast 

an order exposure alert will be subject 

to the existing fee of $0.17 per contract 

in a non-Complex electronic auction.22

This rule change should add greater 

clarity to the Pricing Schedule.23

Section IV, Part A—PIXL Pricing 

Currently, PIXL pricing for Initiating 

Orders is located in subsection IV, Part 

A (Other Transaction Fees) of the 

Pricing Schedule. Today, the Initiating 

Order Fee is $0.07 per contract or $0.05 

per contract if Customer Rebate Program 

Threshold Volume defined in Section B 

is greater than 100,000 contracts per day 

in a month. The Exchange proposes, as 

discussed below, to continue to assess 

the $0.07 Initiating Order Fee. The 

Exchange proposes, where the member 

or member organization qualifies for the 

Tier 4 or 5 Customer Rebate in Section 

B, to asses [sic] a $0.05 Simple PIXL 

Order Fee; and to indicate that where 

the member or member organization 

qualifies for the Tier 4 or 5 Customer 

Rebate in Section B it will assess a $0.03 

Complex PIXL Order Fee. The Exchange 

also proposes to amend the qualifier for 

the discounted fees. 

With respect to the qualifier, today, 

for an Initiating Order there is a fee of 

$0.07 per contract or $0.05 per contract 

if the Customer Rebate Program 

Threshold Volume defined in Section B 

is greater than 100,000 contracts per day 

in a month.24 The Initiating Order Fee 

for non-Customers, including 

Professionals, Firms, Broker-Dealers, 

Specialists and Market Makers, that 

have orders contra to a Customer PIXL 

Order is reduced to $0.00 if the 

Customer PIXL Order is greater than 399 

contracts. The Exchange proposes to 

continue to assess an Initiating Order 

Fee of $0.07 per contract, but proposes, 

where the member or member 

organization qualifies for the Tier 4 or 

5 Customer Rebate in Section B, to 

instead assess an Initiating Order Fee of 

$0.05 per contract for Simple PIXL 

Orders and a new lower Initiating Order 

Fee of $0.03 per contract for Complex 

PIXL Orders. The Exchange also 

proposes to amend the qualifier to 

receive the $0.07 [sic] per contract 

Initiating Order Fee to require a member 

to qualify for the Tier 4 or 5 Customer 

Rebate in Section B of the Pricing 

Schedule, instead of today’s 

requirement that a member’s Customer 

Rebate Program Threshold Volume, as 

defined in Section B of the Pricing 

Schedule, must be greater than 100,000 

contracts per day in a month.25 Tier 4 

and 5 of the Customer Rebate Schedule 

in Section B provides the highest 

relative rebates in the five tier Customer 

Rebate Program, in particular where the 

percentage thresholds of national 

customer volume in multiply-listed 

equity and ETF Options classes, 

excluding SPY Options (monthly), are 

also the highest. In making these 

proposals, the Exchange continues to 

incentivize members to execute 

Customer liquidity on the Exchange. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend the Pricing Schedule 

is consistent with Section 6(b) of the 

Act 26 in general, and furthers the 

objectives of Section 6(b)(4) and (b)(5) of 

the Act 27 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility or system 

which Phlx operates or controls, and is 

not designed to permit unfair 

discrimination between market 

participants to whom the Exchange’s 

fees and rebates are applicable. 

Section B—Customer Rebates 

The Exchange believes that capping 

rebates on electronic Customer PIXL 

Simple Orders at 4,000 contracts per 

order for Category A or 4,000 contracts 

per order leg for Customer Complex 

PIXL Orders for Category B is reasonable 

because it will, with the cap, allow the 

Exchange to continue to attract 

Customer liquidity to the Exchange. 

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. Additionally, the Chicago 

Board Options Exchange Incorporated 

(‘‘CBOE’’) similarly caps AIM 

transactions at 1,000 contracts.28

The Exchange believes that capping 

rebates on electronic Customer PIXL 

Simple Orders at 4,000 contracts per 

order for Category A or 4,000 contracts 

per order leg for Complex PIXL Orders 

for Category B is equitable and not 

unfairly discriminatory because these 

amendments to Category A and Category 

B apply uniformly to all market 

participants to whom Category A and 

Category B apply. 

The Exchange believes also that it is 

reasonable to no longer offer a $0.17 per 

contract rebate for Customer Complex 

PIXL Orders that execute against a 

Complex PIXL Initiating Order because 

the Exchange believes this rebate 

incentive is no longer necessary for this 

particular service to increase order flow 

to the Exchange. 

The Exchange’s proposal to no longer 

offer a $0.17 per contract rebate for 

Customer Complex PIXL Orders that 

execute against a Complex PIXL 

Initiating is equitable and not unfairly 

discriminatory because the Exchange 


Rmajette on DSK2VPTVN1PROD with NOTICES
13644 Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 

29See MIAX’s Fee Schedule. MIAX assesses firms 

a $0.27 per contract fee for transactions in Penny 

classes. This fee is assessed to an EEM that enters 

an order that is executed for an account identified 

by the EEM for clearing in the OCC ‘‘Firm’’ range. 

30All of the symbols, AAPL, BAC, EEM, FB, FXI, 

IWM, QQQ, TWTR, VXX and XLF, are currently 

Penny Pilot Options. This fee discount is only 

available on these symbols and therefore not 

available for Non-Penny Pilot Options. 

31See, e.g., the International Securities Exchange 

LLC (‘‘ISE’’) Schedule of Fees. 

32See Rule 1014 titled ‘‘Obligations and 

Restrictions Applicable to Specialists and 

Registered Options Traders.’’ 

33Firms 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 may not exceed 

the Monthly Firm Fee Cap per member organization 

when such members are trading in their own 

proprietary account. All dividend, merger, and 

short stock interest strategy executions (as defined 

in Section II of the Pricing Schedule) are excluded 

from the Monthly Firm Fee Cap. Reversal and 

conversion, jelly roll and box spread strategy 

executions (as defined in Section II) are included 

in the Monthly Firm Fee Cap. QCC Transaction 

Fees are included in the calculation of the Monthly 

Firm Fee Cap. See Section II of the Pricing 

Schedule. 

34See the NASDAQ Options Market LLC’s 

(‘‘NOM’’) pricing at Chapter XV of NOM’s 

Rulebook. 35See Rule 1014 titled ‘‘Obligations and 

Restrictions Applicable to Specialists and 

Registered Options Traders.’’ 

will not pay such a rebate to any market 

participant. 

Section II—Multiply Listed Options 

The Exchange believes that increasing 

the assessment for Firms executing 

electronic Simple Orders in certain 

Penny Options from $0.25 to $0.27 per 

contract is reasonable because the 

Exchange would continue to offer a 

discount to Firms which will continue 

to attract liquidity. This 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. In 

addition, this fee is consistent with fees 

associated with Miami International 

Securities Exchange LLC (‘‘MIAX’’).29

Despite the increase from $0.25 to $0.27 

per contract, the Exchange believes that 

Firms will continue to be incentivized 

to send volume to the Exchange. 

The Exchange believes that increasing 

the assessment for Firms executing 

electronic Simple Orders, and thereby 

offering a smaller discount, in certain 

Penny Options 30 from $0.25 to $0.27 

per contract is equitable and not 

unfairly discriminatory because it 

applies uniformly to all Firms. Further, 

the proposed amendment will continue 

to allow the Exchange to incentivize 

Firms to send electronic Simple Orders 

in these symbols to the Exchange and 

because pricing by symbol is a common 

practice on many U.S. options 

exchanges 31 as a means to incentive 

order flow to be sent to an exchange for 

execution. The Exchange believes it is 

reasonable to continue to use a pricing 

reduction to provide additional 

opportunities for members to increase 

their participation in the market. The 

Exchange’s fees will be competitive 

with fees at other options markets. 

Although the Exchange will still be 

assessing Firms more than Customers 

(which do not pay the Option 

Transaction Charge in Penny Pilot or in 

non-Penny Pilot options), Customer 

order flow enhances liquidity on the 

Exchange for the benefit of all market 

participants and 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. Although Firms will still 

be charged more for Penny Pilot Options 

than Specialists and Market Makers who 

are charged $0.22, Specialists and 

Market Makers have obligations to the 

market and regulatory requirements, 

which normally do not apply to other 

market participants.32 They have 

obligations to make continuous markets, 

engage in a course of dealings 

reasonably calculated to contribute to 

the maintenance of a fair and orderly 

market, and not make bids or offers or 

enter into transactions that are 

inconsistent with a course of dealings. 

Finally, as proposed, Firms will be 

charged only $0.27 in these particular 

Penny Pilot Option symbols, which is 

less than the Professional and BrokerDealer charge of $0.48 (for Penny Pilot 

Options). Moreover, the proposed 

differential does not misalign pricing, in 

that Firms already benefit from certain 

pricing advantages that Broker-Dealers 

do not also enjoy (for example, the Firm 

Monthly Fee Cap).33 The proposed fee 

reduction that will apply to Firms but 

not to Broker-Dealers is equitable and 

not unfairly discriminatory for the same 

reasons that the Firm Monthly Fee Cap 

which applies to Firms and not to 

Broker-Dealers is equitable and not 

unfairly discriminatory. The fee 

reduction proposed herein, like the 

Monthly Firm Fee Cap, provides an 

incentive for Firms to transact order 

flow on the Exchange, which order flow 

brings increased liquidity to the 

Exchange for the benefit of all Exchange 

participants. To the extent the purpose 

of the proposed Firm fee reduction is 

achieved, all the Exchange’s market 

participants, including Broker-Dealers, 

should benefit from the improved 

market liquidity. Further, competitive 

forces are influencing the price 

reduction in these symbols for Firm 

orders. 

The Exchange believes it is reasonable 

to increase the assessment applicable to 

Professionals, Broker-Dealers and Firms 

that transact Electronic Complex Orders 

from $0.30 to $0.35 per contract, thereby 

reducing the discount, because this 

discount will continue to attract 

liquidity and benefit all market 

participants by providing more trading 

opportunities, which attracts Specialists 

and Market Makers. The Exchange’s fees 

will continue to remain competitive 

with fees at other options markets.34

Today, a Professional, Firm and BrokerDealer are assessed the highest 

electronic Options Transaction Charges 

in Penny Pilot Options of $0.48 per 

contract, as compared to other market 

participants. Despite the fee increase, 

the proposal will allow the Exchange to 

incentivize these market participants by 

offering the opportunity to lower 

Options Transaction Charges as 

described herein. 

The Exchange believes it is equitable 

and not unfairly discriminatory to 

increase the assessment applicable to 

Professionals, Broker-Dealers and Firms 

that transact Electronic Complex Orders 

from $0.30 to $0.35 per contract because 

the Exchange will assess Professionals, 

Broker-Dealers and Firms the same 

electronic Options Transaction Charges 

in Penny Pilot Options. The Exchange 

does not assess Customers an electronic 

Options Transaction Charge in Penny 

Pilot Options because Customer order 

flow enhances liquidity on the 

Exchange for the benefit of all 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. Specialists and Market 

Makers are assessed lower electronic 

Options Transaction Charges in Penny 

Pilot Options as compared to 

Professionals, Broker-Dealers and Firms 

because they have obligations to the 

market and regulatory requirements, 

which normally do not apply to other 

market participants.35 They have 

obligations to make continuous markets, 

engage in a course of dealings 

reasonably calculated to contribute to 


Rmajette on DSK2VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 13645 

36 Id. 

37See MIAX’s Fee Schedule. MIAX assesses firms 

a $0.27 per contract fee for transactions in Penny 

classes. This fee is assessed to an EEM that enters 

an order that is executed for an account identified 

by the EEM for clearing in the OCC ‘‘Firm’’ range. 

38See the NOM pricing at Chapter XV of NOM’s 

Rulebook. 

the maintenance of a fair and orderly 

market, and not make bids or offers or 

enter into transactions that are 

inconsistent with a course of dealings. 

The proposed differentiation as between 

Customers, Specialists and Market 

Makers and other market participants 

recognizes the differing contributions 

made to the liquidity and trading 

environment on the Exchange by these 

market participants. 

The Exchange believes that increasing 

the assessment from $0.00 to $0.05 per 

contract rebate for Adding Liquidity in 

Penny Pilot Options is reasonable when 

Specialists or Market Makers are on the 

contra-side of an electronicallydelivered and executed Customer order, 

excluding responses to a PIXL auction; 

and have reached the Monthly Market 

Maker Cap. This is because Specialists 

and Market Makers will continue to pay 

a lower fee as compared to other market 

participants and should be incentivized 

to continue to add liquidity. 

The Exchange believes that increasing 

the assessment from $0.00 to $0.05 per 

contract rebate for Adding Liquidity in 

Penny Pilot Options is equitable and not 

unfairly discriminatory when 

Specialists or Market Makers are on the 

contra-side of an electronicallydelivered and executed Customer order, 

excluding responses to a PIXL auction; 

and have reached the Monthly Market 

Maker Cap. This is because Specialists 

and Market Makers are assessed lower 

electronic order fees as compared to 

Professionals, Broker-Dealers and Firms 

because they have obligations to the 

market and regulatory requirements, 

which normally do not apply to other 

market participants.36

The Exchange believes that clarifying 

that transactions which execute against 

an order for which the Exchange 

broadcast an order exposure alert in an 

electronic auction is also subject to the 

$0.17 per contract fee is reasonable, 

equitable and not unfairly 

discriminatory because the Exchange is 

not proposing to amend the manner in 

which the fee is applied, but rather 

provide additional clarity to market 

participants that responses to an order 

exposure alert shall be treated by the 

Exchange in a similar manner as other 

auctions for purposes of applying this 

fee. 

Section IV, Part A—PIXL Pricing 

Today, the Exchange assesses an 

Initiating Order Fee of $0.07 per 

contract or $0.05 per contract for Simple 

PIXL Orders. The Exchange believes 

that its proposal to adopt an alternative 

of $0.03 per contract for Complex PIXL 

Orders (with the qualifier that a 

Customer must qualify for the Tier 4 or 

5 Customer Rebate in Section B of the 

Pricing Schedule) is reasonable. This is 

because the Exchange believes this 

additional incentive will further 

incentivize members to send price 

improving seeking orders to PIXL as 

well as bring additional liquidity to the 

Exchange in an effort to earn the 

Initiating Order discount. Amending the 

qualifier from 100,000 contracts to 

qualifying for a Tier 4 and Tier 5 

Customer rebate is reasonable because 

this simply establishes a different metric 

that requires members that desire to 

earn the discounted PIXL pricing to 

send additional Customer order flow to 

the Exchange with the new qualifier. 

The Exchange notes that in order to 

remain competitive, the Exchange must 

implement fees and rebates that are 

competitive with pricing at other 

options exchanges that offer a similar 

auction opportunity. The PIXL 

electronic auction represents an 

increasingly important and crucial 

segment of options trading. The goal is 

creating and increasing incentives to 

attract orders to the Exchange that will, 

in turn, benefit all market participants 

through increased liquidity at the 

Exchange. The proposal is designed to 

continue to incentivize market 

participants to send liquidity to the 

Exchange. The Exchange believes that in 

addition to currently assessing an 

Initiating Order of $0.07 per contractor 

[sic] today, its proposal to adopt an 

alternative fee of $0.03 per contract for 

Complex PIXL Orders (with the qualifier 

that a Customer must qualify for the 

Tier 4 or 5 Customer Rebate in Section 

B of the Pricing Schedule), and a $0.05 

per contract for Simple PIXL Orders 

(with the qualifier that a Customer must 

qualify for the Tier 4 or 5 Customer 

Rebate in Section B of the Pricing 

Schedule), is equitable and not unfairly 

discriminatory. The volume discount 

will be applied uniformly to all 

according to liquidity brought to the 

Exchange by non-Customers. The 

Exchange would offer all market 

participants, other than Customers who 

are not assessed an Initiating Order Fee, 

an incentive to transact large sized 

orders in PIXL. The Exchange believes 

that the proposal will continue to attract 

liquidity, which benefits market 

participants and provides the 

opportunity for increased order 

interaction on the Exchange. 

The Exchange desires to incentivize 

members and member organizations, 

through the Exchange’s rebate and fee 

structure, to select Phlx as a venue for 

bringing liquidity and trading by 

offering competitive pricing. Such 

competitive, differentiated pricing exists 

today on other options exchanges. The 

Exchange’s goal is creating and 

increasing incentives to attract orders to 

the Exchange that will, in turn, benefit 

all market participants through 

increased liquidity at the Exchange. 

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. The 

Customer Rebate Program amendments 

in Section B of the Pricing Schedule do 

not create an undue burden on 

competition because the caps applicable 

to PIXL Orders will apply uniformly to 

all market participants. The Exchange’s 

proposal to increase the assessment for 

Firms executing electronic Simple 

Orders in certain Penny Options from 

$0.25 to $0.27 per contract does not 

place an undue burden on competition, 

rather this reduction will continue to 

attract liquidity which benefits all 

market participants by providing more 

trading opportunities, which attracts 

Specialists and Market Makers. In 

addition, this fee is consistent with fees 

assessed by MIAX.37

The Exchange believes it is reasonable 

to increase the assessment applicable to 

Professionals, Broker-Dealers and Firms 

that transact Electronic Complex Orders 

from $0.30 to $0.35 per contract, thereby 

reducing the discount, because this 

discount will continue to attract 

liquidity and benefit all market 

participants by providing more trading 

opportunities, which attracts Specialists 

and Market Makers. The Exchange’s fees 

will continue to remain competitive 

with fees at other options markets.38

Today, a Professional, Firm and BrokerDealer are assessed the highest 

electronic Options Transaction Charges 

in Penny Pilot Options of $0.48 per 

contract, as compared to other market 

participants. Despite the fee increase, 

the proposal will allow the Exchange to 

incentivize market participants by 

offering the opportunity to lower 

Options Transaction Charges as 

described herein. 

The Exchange believes its proposal to 

increase the assessment applicable to 

Professionals, Broker-Dealers and Firms 

that transact Electronic Complex Orders 


Rmajette on DSK2VPTVN1PROD with NOTICES
13646 Federal Register / Vol. 80, No. 50 / Monday, March 16, 2015 / Notices 

39See Rule 1014 titled ‘‘Obligations and 

Restrictions Applicable to Specialists and 

Registered Options Traders.’’ 

40 Id. 41 15 U.S.C. 78s(b)(3)(A)(ii). 42 17 CFR 200.30–3(a)(12). 

from $0.30 to $0.35 per contract does 

not create an undue burden on 

competition because the Exchange will 

continue to offer a discount to these 

market participants that pay the highest 

Penny Pilot Options transaction fees. 

The Exchange does not assess 

Customers an electronic Options 

Transaction Charge in Penny Pilot 

Options because Customer order flow 

enhances liquidity on the Exchange for 

the benefit of all 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. Specialists and Market 

Makers are assessed lower electronic 

Options Transaction Charges in Penny 

Pilot Options as compared to 

Professionals, Broker-Dealers and Firms 

because they have obligations to the 

market and regulatory requirements, 

which normally do not apply to other 

market participants.39

The Exchange’s proposal to increase 

the fee assessment from $0.00 to $0.05 

per contract rebate for Adding Liquidity 

in Penny Pilot Options when Specialists 

or Market Makers are on the contra-side 

of an electronically-delivered and 

executed Customer order, excluding 

responses to a PIXL auction, and have 

reached the Monthly Market Maker Cap, 

is reasonable. This is because 

Specialists and Market Makers do not 

create an undue burden on competition 

because market makers have obligations 

to the market and regulatory 

requirements, which normally do not 

apply to other market participants.40

The Exchange’s proposal to clarify 

that transactions which execute against 

an order for which the Exchange 

broadcast an order exposure alert in an 

electronic auction does not create an 

undue burden on competition. This 

amendment will bring additional clarity 

to the fees. 

The Exchange believes that the 

proposed new volume discount for PIXL 

Fees creates additional opportunity for 

incentivizing Professionals, Firms, 

Broker-Dealers, Specialists and Market 

Makers to bring additional liquidity to 

the market. The Exchange believes that 

effectively assessing lower fees or 

paying rebates when a market 

participant brings a certain amount of 

Customer orders creates competition 

among market participants to remove 

liquidity from the Phlx Book. This 

competition does not create an undue 

burden on competition but rather offers 

all market participants the opportunity 

to receive the benefit of the pricing 

when transacting options. Also, 

providing an ability to earn greater 

discounts incentivizes order flow into 

the auction. 

The Exchange operates in a highly 

competitive market, comprised of 

twelve exchanges, in which market 

participants can easily and readily 

direct order flow to competing venues if 

they deem fee levels at a particular 

venue to be excessive or rebates to be 

inadequate. Accordingly, the fees that 

are assessed and the rebates paid by the 

Exchange, as described in the proposal, 

are influenced by these robust market 

forces and therefore must remain 

competitive with fees charged and 

rebates paid by other venues and 

therefore must continue to be reasonable 

and equitably allocated to those 

members that opt to direct orders to the 

Exchange rather than competing venues. 

The proposed fees are designed to 

ensure a fair and reasonable use of 

Exchange resources by allowing the 

Exchange to recoup costs while 

continuing to attract liquidity and offer 

connectivity at competitive rates to 

Exchange members and member 

organizations. 

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.41 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 

necessary or appropriate in the public 

interest, for the protection of investors, 

or 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 Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2015–21 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2015–21. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such 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– 

2015–21, and should be submitted on or 

before April 6, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.42

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–05857 Filed 3–13–15; 8:45 am] 

BILLING CODE 8011–01–P 


Rmajette on DSK2VPTVN1PROD with NOTICES