Document ID: SEC-2015-1516-0001
Agency: sec
Document Type: Notice
Title: Self-egulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2015-09-15T04:00Z

[Federal Register Volume 80, Number 178 (Tuesday, September 15, 2015)]
[Notices]
[Pages 55397-55399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23094]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75866; File No. SR-Phlx-2015-75]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
the Phlx Pricing Schedule

September 9, 2015.
    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 August 27, 2015, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the

[[Page 55398]]

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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the Phlx Pricing Schedule 
(``Pricing Schedule''). Specifically, the Exchange proposes to amend 
Section I, entitled ``Rebates and Fees for Adding and Removing 
Liquidity in SPY'' by assessing all market participants other than 
Customers \3\ a fee of $0.15 per contract for executions against an 
order for which the Exchange broadcasts an order exposure alert in 
SPY.\4\
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    \3\ 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 broker or dealer or for the account of a 
``professional'' (as that term is defined in Rule 1000(b)(14)). The 
term ``Non-Customer'' applies to transactions for the accounts of 
Specialists, Market Makers, Firms, Professionals, Broker-Dealers and 
JBOs.
    \4\ Options overlying Standard and Poor's Depositary Receipts/
SPDRs (``SPY'') are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
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    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 by 
amending Section I, entitled ``Rebates and Fees for Adding and Removing 
Liquidity in SPY.'' Currently, Section 1 provides that no fees will be 
assessed and no rebates will be paid on transactions which execute 
against an order for which the Exchange broadcast (sic) \5\ an order 
exposure alert in SPY.\6\
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    \5\ The Exchange is correcting the word ``broadcast'' to read 
``broadcasts''.
    \6\ Exchange Rule 1080(m) provides for the broadcast of certain 
orders that are on the Phlx Book. The Exchange broadcasts orders on 
the Phlx Book by issuing order exposure alerts to all Phlx market 
participants that subscribe to certain data feeds. See Securities 
Exchange Act Release No. 68517 (December 21, 2012), 77 FR 77134 
(December 31, 2012) (SR-Phlx-2012-136). When it adopted the current 
pricing schedule provision which now is proposed to be amended, the 
Exchange stated its belief that not assessing fees (or paying a 
rebate) when removing orders from the order book in SPY where an 
order exposure alert was issued would incentivize market 
participants to remove liquidity from the Phlx Book. See Securities 
Exchange Act Release No. 69768 (June 14, 2013), 78 FR 37250 (June 
20, 2013) (SR-Phlx-2013-61).
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    The Exchange now proposes to assess all market participants other 
than Customers a fee of $0.15 per contract for such executions. Thus, 
the fee for such executions will apply to transactions for the accounts 
of Specialists,\7\ Market Makers,\8\ Firms,\9\ Professionals,\10\ 
Broker-Dealers \11\ and JBOs \12\ (collectively, ``Non-Customers''). 
The Exchange is adopting this fee at this time because it believes that 
the associated revenue will allow the Exchange to enhance its services 
and that offering this service for free is no longer a required 
incentive to remain competitive with other options exchanges.
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    \7\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a).
    \8\ A ``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.
    \9\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at OCC.
    \10\ The 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).
    \11\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \12\ The term ``Joint Back Office'' or ``JBO'' applies to any 
transaction that is identified by a member or member organization 
for clearing in the Firm range at OCC and is identified with an 
origin code as a JBO. A JBO will be priced the same as a Broker-
Dealer. A JBO participant is a member, member organization or non-
member organization that maintains a JBO arrangement with a clearing 
broker-dealer (``JBO Broker'') subject to the requirements of 
Regulation T Section 220.7 of the Federal Reserve System as further 
discussed at Exchange Rule 703.
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2. Statutory Basis
    The Exchange believes that its proposal to amend the Pricing 
Schedule is consistent with Section 6(b) of the Act \13\ in general, 
and furthers the objectives of Section 6(b)(4) and (b)(5) of the Act 
\14\ 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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange's proposal is reasonable because the proposed $0.15 
fee is lower than the standard fee for removing liquidity in SPY and 
lower than fees assessed for similar activities at other options 
exchanges. For example, the Chicago Board Options Exchange (``CBOE'') 
assesses fees ranging from $0.05 to $0.45 for executions in Equity and 
ETF Options, including SPY, and offers market makers a $0.05 rebate if 
they meet certain quoting obligations for executions in Hybrid Agency 
Liaison (``HAL''). The Exchange's order exposure alert is similar to 
HAL and the proposed rate is within the range of fees CBOE assesses for 
executions in HAL. It is also reasonable not to extend the new fee to 
Customer transactions because Customer orders bring valuable liquidity 
to the market which benefits other market participants. Customer 
liquidity benefits all market participants by providing more trading 
opportunities, which attracts Specialists and Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
    The Exchange's proposal is equitable and not unfairly 
discriminatory because the Exchange will be assessing the same new 
$0.15 fee on transactions by all market participants (except Customers) 
in the same manner. As stated above, Customer liquidity benefits all 
market participants by providing more trading opportunities, which 
attracts Specialists and Market Makers. It is therefore equitable and 
not unfairly discriminatory to not apply the new fee to Customer 
transactions.

[[Page 55399]]

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 Exchange's proposal to 
impose the new $0.15 fee on executions other than Customer executions 
does not misalign the fees related to Customer as compared to Non-
Customer orders. Today, Customers have lower fees because Customer 
liquidity benefits all market participants by providing more trading 
opportunities, which attracts Specialists and Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
The new fee does not impose any undue burden on competition as all 
market participants, except Customers will be assessed the same fee.
    The Exchange operates in a highly competitive market, comprised of 
twelve options 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.

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.\15\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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-2015-75 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-2015-75. 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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-Phlx-2015-75 and 
should be submitted on or before October 6, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-23094 Filed 9-14-15; 8:45 am]
 BILLING CODE 8011-01-P