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###### Securities and Exchange Commission

          - [Release No. 34-93986; File No. SR-Phlx-2022-01]

                    Pursuant to Section 19(b)(1) [1]                                          of the Securities Exchange Act of 1934 (the “Act”) [2]                                          and Rule 19b-4 thereunder,[3]                                          notice is hereby given that, on January 3, 2022, Nasdaq PHLX LLC (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (the “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 Substance of the Proposed Rule Change

                    The Exchange proposes to amend Phlx's Pricing Schedule at Options 7, Section 3, “Rebates and Fees for Adding and Removing Liquidity in SPY.” The Exchange also proposes to remove obsolete rule text within Options 7, Section 9, “Other Member Fees.”                          ( print page 3633)    

                    The text of the proposed rule change is available on the Exchange's website at                     *https://listingcenter.nasdaq.com/​rulebook/​phlx/​rules,*                     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

                    Phlx proposes to amend its pricing at Options 7, Section 3, “Rebates and Fees for Adding and Removing Liquidity in SPY.” Specifically, Phlx proposes to amend its Simple Order Customer [4]                                          Fee for Removing Liquidity in options overlying the SPDR® S&P 500 ETF Trust (“SPY”). The Exchange also proposes to remove obsolete rule text within Options 7, Section 9, “Other Member Fees.” Each change will be described below.                

#### Options 7, Section 3

                    Today, the Exchange assesses a $0.38 per contract Customer Simple Order Fee for Removing Liquidity in SPY. The Exchange assesses a Lead Market Maker,[5]                                          Market Maker,[6]                                          Firm,[7]                                          Broker-Dealer [8]                                          and Professional [9]                                          Simple Order Fee for Removing Liquidity in SPY of $0.48 per contract. The Exchange proposes to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract. Notwithstanding the increase, the Customer Simple Order Fee for Removing Liquidity in SPY remains the lowest fee for removing liquidity in SPY. The Exchange believes that the Customer Simple Order Fee for Removing Liquidity in SPY will continue to attract order flow to the Exchange despite the increase.                

#### Options 7, Section 9

The Exchange proposes to remove obsolete rule text within Options 7, Section 9.B, Port Fees. Options 7, Section 9.B refers to a technology infrastructure migration that occurred in 2019. The rule text related to the migration is now obsolete. At this time, the Exchange proposes to remove the rule text which describes the migration within Options 7, Section 9.B because it is outdated.

#### 2. Statutory Basis

                    The Exchange believes that its proposal is consistent with Section 6(b) of the Act,[10]                                          in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,[11]                                          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.                

                    The Exchange's proposed changes to its Pricing Schedule are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for options securities transaction services that constrain its pricing determinations in that market. The fact that this market is competitive has long been recognized by the courts. In                     *NetCoalition*                     v.                     *Securities and Exchange Commission,*                     the D.C. Circuit stated as follows: “[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'. . . .” [12] 

                    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.” [13] 

                    Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for options security transaction services. The Exchange is only one of sixteen options exchanges to which market participants may direct their order flow. Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. As such, the proposal represents a reasonable attempt by the Exchange to increase its liquidity and market share relative to its competitors.                          ( print page 3634)    

#### Options 7, Section 3

The Exchange's proposal to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract is reasonable. Notwithstanding the increase, the Customer Simple Order Fee for Removing Liquidity in SPY remains the lowest fee for removing liquidity in SPY. The Exchange believes that the Customer Simple Order Fee for Removing Liquidity in SPY will continue to attract order flow to the Exchange despite the increase.

The Exchange's proposal to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract is equitable and not unfairly discriminatory. Priority Customers continue to be assessed the lowest Simple Order Fee for Removing Liquidity in SPY. Priority Customer liquidity benefits all market participants by providing more trading opportunities, which attracts 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.

#### Options 7, Section 9

The Exchange's proposal to remove obsolete rule text within Options 7, Section 9.B, Port Fees is reasonable, equitable and not unfairly discriminatory. Options 7, Section 9.B refers to a technology infrastructure migration that occurred in 2019. The rule text related to the migration is outdated and would not apply to any Phlx market participant.

### 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.

#### Inter-Market Competition

The proposal does not impose an undue burden on inter-market competition. The Exchange believes its proposal remains competitive with other options markets and will offer market participants with another choice of where to transact options. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.

#### Intra-Market Competition

The proposed amendments do not impose an undue burden on intra-market competition.

#### Options 7, Section 3

The Exchange's proposal to increase the Customer Simple Order Fee for Removing Liquidity in SPY from $0.38 to $0.41 per contract does not impose an undue burden on competition. Priority Customers continue to be assessed the lowest Simple Order Fee for Removing Liquidity in SPY. Priority Customer liquidity benefits all market participants by providing more trading opportunities, which attracts 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.

#### Options 7, Section 9

The Exchange's proposal to remove obsolete rule text within Options 7, Section 9.B, Port Fees does not impose an undue burden on competition. The rule text related to the migration is outdated and would not apply to any Phlx market participant.

### 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.[14] 

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 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-2022-01 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-2022-01. 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-2022-01, and should be submitted on or before February 14, 2022.                

      ( print page 3635)    
                        For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[15] 

J. Matthew DeLesDernier,

Assistant Secretary.

# Footnotes

1.                             15 U.S.C. 78s(b)(1).                    
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2.                             15 U.S.C. 78a.                    
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3.                             17 CFR 240.19b-4.                    
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4.                             The term “Customer” applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation (“OCC”) which is not for the account of a broker or dealer or for the account of a “Professional” (as that term is defined in Options 1, Section 1(b)(45)).                         *See*                         Options 7, Section 1(c).                    
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5.                             The term “Lead Market Maker” applies to transactions for the account of a Lead Market Maker (as defined in Options 2, Section 12(a)). A Lead Market Maker is an Exchange member who is registered as an options Lead Market Maker pursuant to Rule Options 2, Section 12(a)[sic]. An options Lead Market Maker includes a Remote Lead Market Maker which is defined as an options Lead Market Maker in one or more classes that does not have a physical presence on an Exchange floor and is approved by the Exchange pursuant to Options 2, Section 11.                    
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6.                             The term “Market Maker” is defined in Options 1, Section 1(b)(28) as a member of the Exchange who is registered as an options Market Maker pursuant to Options 2, Section 12(a). A Market Maker includes SQTs and RSQTs as well as on and Floor Market Makers.                    
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7.                             The term “Firm” applies to any transaction that is identified by a member or member organization for clearing in the Firm range at OCC.                    
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8.                             The term “Broker-Dealer” applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category.                    
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9.                             The term “Professional” applies to transactions for the accounts of Professionals, as defined in Exchange Rule 1000(b)(43) 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).                    
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10.                             15 U.S.C. 78f(b).                    
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11.                             15 U.S.C. 78f(b)(4) and (5).                    
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12.                                                     *NetCoalition*                         v.                         *SEC,*                         615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).                    
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13.                             Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (“Regulation NMS Adopting Release”).                    
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14.                             15 U.S.C. 78s(b)(3)(A)(ii).                    
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15.                                 17 CFR 200.30-3(a)(12).                        
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[FR Doc. 2022-01218 Filed 1-21-22; 8:45 am]

BILLING CODE 8011-01-P