Document ID: SEC-2015-0126-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2015-01-22T05:00Z

[Federal Register Volume 80, Number 14 (Thursday, January 22, 2015)]
[Notices]
[Pages 3278-3282]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00971]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74062; File No. SR-Phlx-2015-06]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Amendments to Sections II and IV of the Pricing Schedule

January 15, 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 January 13, 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.
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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 amend the Monthly Market Maker Cap \3\ and 
certain transaction fees applicable to Specialists \4\ and Market 
Makers \5\ that have reached the Monthly Market Maker Cap, which are 
located in the Exchange's Pricing Schedule at Section II, entitled 
``Multiply Listed Options.'' \6\ The Exchange also proposes to make 
conforming and clarifying amendments to Section IV, Part A of the 
Pricing Schedule entitled ``PIXL Pricing.''
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    \3\ Specialists and Market Makers are subject to a ``Monthly 
Market Maker Cap'' of $550,000 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. 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.
    \4\ A Specialist is an Exchange member who is registered as an 
options specialist pursuant to Rule 1020(a). An options Specialist 
includes a Remote Specialist which is defined as an options 
specialist in one or more classes that does not have a physical 
presence on an Exchange floor and is approved by the Exchange 
pursuant to Rule 501.
    \5\ 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.
    \6\ This includes options overlying equities, ETFs, ETNs and 
indexes which are Multiply Listed.
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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 amend certain Specialist and 
Market Maker pricing located in the Exchange's Pricing Schedule in 
Section II, entitled ``Multiply Listed Options'' in order to

[[Page 3279]]

continue to incentivize Specialists and Market Makers to transact a 
greater amount of volume on Phlx and bring additional liquidity to the 
Exchange. The pricing changes are described in further detail below.
    Today, Specialists and Market Makers are subject to a Monthly 
Market Maker Cap of $550,000 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 \7\ Order or 
specifically responding to a PIXL auction.\8\ 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.
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    \7\ PIXL is the Exchange's price improvement mechanism known as 
Price Improvement XL or (PIXL\SM\). See Rule 1080(n).
    \8\ A member may electronically submit for execution an order it 
represents as agent on behalf of a public customer, broker-dealer, 
or any other entity (``PIXL Order'') against principal interest or 
against any other order (except as provided in Rule 1080(n)(i)(E)) 
it represents as agent (``Initiating Order'') provided it submits 
the PIXL order for electronic execution into the PIXL Auction 
(``Auction'') pursuant to Rule 1080. See Exchange Rule 1080(n). Non-
Initiating Order interest could be a PIXL Auction Responder or a 
resting order or quote that was on the Phlx book prior to the 
auction.
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    Specialists or Market Makers that (i) are on the contra-side of an 
electronically-delivered \9\ and executed Customer order; and (ii) have 
reached the Monthly Market Maker Cap are assessed $0.00 per contract in 
the following symbols: AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX, 
and XLF and $0.17 per contract in Penny Pilot Options \10\ and Non-
Penny Pilot Options.
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    \9\ A 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.
    \10\ The Penny Pilot was established in January 2007 and was 
last extended in June 30, 2015. See Securities and Exchange Release 
No. 73688 (November 25, 2014), 79 FR 71484 (December 2, 2014) (SR-
Phlx-2014-77).
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    The Exchange proposes to decrease the Monthly Market Maker Cap from 
$550,000 to $500,000 and amend the types of trades that qualify for the 
Monthly Market Maker Cap to exclude fees specifically responding to a 
PIXL auction. While the Exchange is excluding fees related to 
responding to a PIXL auction as eligible transactions to reach the 
Monthly Market Maker Cap, the Exchange believes that lowering the cap 
to $500,000 will continue to incentivize Specialists and Market Makers 
to transact greater displayed liquidity on the Exchange to be eligible 
for the Monthly Market Maker Cap and, in turn, will benefit Phlx 
members and the Phlx market.
    The Exchange is also proposing to amend the fees applicable to 
Specialists and Market Makers that (i) are on the contra-side of an 
electronically-delivered and executed Customer order, and (ii) have 
reached the Monthly Market Maker Cap to assess: a $0.00 per contract 
Fee for Adding Liquidity in Penny Pilot Options; a $0.17 per contract 
Fee for Removing Liquidity in Penny Pilot Options; and a $0.17 per 
contract in Non-Penny Pilot Options. The Exchange is proposing to amend 
the language to state: ``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 Cap. . .''
    The Exchange would therefore exclude responses to a PIXL auction 
from the Monthly Market Maker Cap and those responses would be subject 
to the pricing in Section IV, A of the Pricing Schedule, as is the case 
today for all other Specialists and Market Makers that do not qualify 
for the Monthly Market Maker Cap, as well as all other market 
participants. Today, Specialists or Market Makers that are on the 
contra-side of an electronically-delivered and executed Customer PIXL 
Order and have reached the Monthly Market Maker Cap are assessed $0.00 
per contract in the following symbols: AAPL, BAC, EEM, FB, FXI, IWM, 
QQQ, TWTR, VXX, and XLF and $0.17 per contract in Penny Pilot Options 
and Non-Penny Pilot Options. With this proposal, an Initiating Order 
would be assessed $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.\11\ The Initiating Order Fee for 
Professional, Firm, Broker-Dealer, Specialist and Market Maker orders 
that are contra to a Customer PIXL Order will be reduced to $0.00 if 
the Customer PIXL Order is greater than 399 contracts. Also, with 
respect to executions in Multiply-Listed Options, when the PIXL Order 
is contra to the Initiating Order a Customer PIXL Order will be 
assessed $0.00 per contract and non-Customer PIXL Orders will be 
assessed $0.30 per contract. When a PIXL Order is contra to a PIXL 
Auction Responder, a Customer PIXL Order will be assessed $0.00 per 
contract, other market participants will be assessed $0.30 per contract 
in Penny Pilot Options or $0.38 per contract in non-Penny Pilot 
Options. A Responder will be assessed $0.30 per contract in Penny Pilot 
Options or $0.38 per contract in non-Penny Pilot Options, unless the 
Responder is a Customer, in which case the fee will be $0.00 per 
contract. When a PIXL Order is contra to a resting order or quote a 
Customer PIXL Order will be assessed $0.00 per contract, other market 
participants will be assessed $0.30 per contract and the resting order 
or quote will be assessed the appropriate Options Transaction Charge in 
Section II. All other fees discussed in Section II, including Payment 
for Order Flow and surcharges, will also apply as appropriate. The 
Exchange proposes to amend Section IV, A to indicate that the Monthly 
Market Maker Cap will no longer apply to PIXL Orders as noted above. 
The Exchange proposes to add the words ``per contract'' to Section IV, 
A where appropriate for clarity.
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    \11\ Any 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.
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    The Exchange also proposes to expand and modify the $0.00 per 
contract pricing that today is available to Specialists and Market 
Makers that are on the contra-side of an electronically-delivered and 
executed Customer order and have reached the Monthly Market Maker Cap 
in the following symbols: AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX, 
and XLF to all Penny Pilot Options, provided the Specialist or Market 
Maker is adding liquidity. The Exchange will continue to assess a $0.17 
per contract fee to Specialists and Market Makers that are on the 
contra-side of an electronically-delivered and executed Customer order 
and have reached the Monthly Market Maker Cap for Penny Pilot Options, 
when removing liquidity and for Non-Penny Pilot Options when either 
adding or removing liquidity. Finally, the Exchange would also assess 
$0.17 per contract in a non-Complex electronic auction, including the 
Quote Exhaust auction and, for purposes of this fee, the opening 
process.\12\
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    \12\ A Complex electronic auction includes, but is not limited 
to, the Complex Order Live Auction (``COLA'').
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    The Exchange believes that Specialists and Market Makers will

[[Page 3280]]

continue to be incentivized to transact a greater amount of liquidity 
on Phlx and to add and remove liquidity to the benefit of all other 
market participants.
 2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\13\ in general, and with 
Section 6(b)(4) and 6(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 the Exchange operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to decrease the Monthly Market Maker Cap 
from $550,000 to $500,000 is reasonable because by lowering the cap, 
Specialists and Market Makers will be able to take advantage of lower 
fees presumably earlier in the month because the cap is lower.
    The Exchange's proposal to decrease the Monthly Market Maker Cap 
from $550,000 to $500,000 is equitable and not unfairly discriminatory 
because this benefit would be uniformly applied to all Specialists and 
Market Makers that qualified for the Monthly Market Maker Cap. 
Specialists and Market Makers have burdensome quoting obligations \15\ 
to the market that do not apply to Customers, Professionals, Firms and 
Broker-Dealers. Specialists and Market Makers serve an important role 
on the Exchange with regard to order interaction and they provide 
liquidity in the marketplace. Additionally, Specialists and Market 
Makers incur costs unlike other market participants including, but not 
limited to, Payment for Order Flow (``PFOF'') \16\ and other costs 
associated with market making activities, which results in a higher 
average cost per execution as compared to Firms, Broker-Dealers and 
Professionals. The proposed differentiation as between Specialists and 
Market Makers as compared to other market participants recognizes the 
differing contributions made to the trading environment on the Exchange 
by these market participants. Customer liquidity benefits all market 
participants by providing more trading opportunities, which attract 
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.
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    \15\ See Rule 1014 titled ``Obligations and Restrictions 
Applicable to Specialists and Registered Options Traders.''
    \16\ Specialists and Market Makers, as compared to other market 
participants, are assessed PFOF when transacting Customer electronic 
orders.
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    The Exchange's proposal to amend the types of trades that qualify 
for the Monthly Market Maker Cap to exclude responses to a PIXL auction 
and assess Specialists and Market Makers the PIXL pricing located in 
Section IV, A of the Pricing Schedule is reasonable because all other 
market participants on Phlx, including Specialists and Market Makers 
that are not subject to the Monthly Market Maker Cap, are currently 
subject to the PIXL pricing located in Section IV, A of the Pricing 
Schedule. Pursuant to this proposal, all market participants will be 
uniformly assessed the same fees when responding to a PIXL auction. The 
Exchange believes that Specialists and Market Makers will continue to 
be incentivized to participate in PIXL, as is the case today with 
Specialists and Market Makers that do not qualify for the Monthly 
Market Maker Cap and are subject to Section IV, A pricing.
    The Exchange's proposal to amend the types of trades that qualify 
for the Monthly Market Maker Cap to exclude fees related to responding 
to a PIXL auction and assess Specialists and Market Makers the PIXL 
pricing located in Section IV, A of the Pricing Schedule is equitable 
and not unfairly discriminatory because the Exchange is proposing to 
assess all market participants, including Specialists and Market 
Makers, the same PIXL pricing located in Section IV, A of the Pricing 
Schedule.
    The Exchange believes that the pricing in Section IV, A of the 
Pricing Schedule will continue to encourage market participants to 
transact a greater number of PIXL Orders. The proposed PIXL pricing is 
competitive with other rates assessed to Specialists and Market Makers 
to transact similar orders on other options exchanges with price 
improvement mechanisms.\17\ The Exchange will continue to offer 
competitive pricing, including Customer rebates in Section B of the 
Pricing Schedule. The Exchange's current Pricing Schedule also offers 
to reduce the $0.07 per contract PIXL Initiating Order Fee to $0.05 per 
contract if the Customer Rebate Program Threshold Volume, defined in 
Section B of the Pricing Schedule, for that member is greater than 
100,000 contracts per day in a month. Additionally, the Exchange offers 
a volume incentive for Specialist and Market Maker orders (as well as 
Professional, Firm and Broker-Dealer orders) that are contra to a 
Customer PIXL Order. In that situation, the Initiating Order fee is 
reduced to $0.00 if the Customer PIXL Order is greater than 399 
contracts. The PIXL Initiation Order Fee reduction to $0.00, when 
contra to a Customer PIXL Order, is similar to the Exchange's 
assessment of fees for Firm Floor Facilitation orders. Today, the 
Exchange waives Firm Floor Options Transaction Charges \18\ for members 
executing facilitation orders pursuant to Exchange Rule 1064 when such 
members are trading in their own proprietary account. The Exchange 
waives Firm Facilitation Fees because the waiver of such fees serves to 
encourage Firms to facilitate Customer order flow. Likewise, the 
Exchange seeks to similarly assess Specialist and Market Maker fees for 
PIXL orders, which are electronic orders, as compared to floor orders, 
by encouraging Specialists and Market Makers or other Broker-Dealer 
members to initiate PIXL Orders within the PIXL auction mechanism in an 
effort to lower execution charges by transacting with a Customer PIXL 
Order. When a Firm enters an Initiating Order, similar to Firm 
Facilitation orders on the Exchange floor, market participants are 
afforded an opportunity to respond to the order which should in turn 
generate additional responders to a PIXL auction. All market 
participants are eligible to respond to an Initiating PIXL Order. 
Therefore, offering all market participants an opportunity to deliver 
orders into the PIXL auction, for purposes of price improvement, 
benefits all market participants by incentivizing order interaction in 
PIXL.
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    \17\ See BOX Options Exchange LLC's (``BOX'') Fee Schedule. 
Specifically, BOX's auction transaction fees are those transactions 
executed through Price Improvement Period (``PIP''), the Complex 
Order Price Improvement Period (``COPIP''), the Solicitation Auction 
mechanism, and Facilitation Auction mechanism.
    \18\ See Section II of the Pricing Schedule.
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    Further, the Exchange's proposal to assess Specialists and Market 
Makers the PIXL pricing in Section IV, A provides market participants 
the opportunity to lower fees by transacting a greater number of 
Customer orders. When the PIXL Order is contra to the Initiating Order 
a Customer PIXL Order will be assessed $0.00 per contract and non-
Customer PIXL Orders will be assessed $0.30 per contract. When a PIXL 
Order is contra to a PIXL Auction Responder, a Customer PIXL Order will 
be assessed $0.00 per contract, other market participants will be 
assessed $0.30 per contract in Penny Pilot Options or $0.38 per 
contract in non-

[[Page 3281]]

Penny Pilot Options. A Responder will be assessed $0.30 per contract in 
Penny Pilot Options or $0.38 per contract in non-Penny Pilot Options, 
unless the Responder is a Customer, in which case the fee will be $0.00 
per contract. Finally, when a PIXL Order is contra to a resting order 
or quote a Customer PIXL Order will be assessed $0.00 per contract, 
other market participants will be assessed $0.30 per contract and the 
resting order or quote will be assessed the appropriate Options 
Transaction Charge in Section II. Customer PIXL Orders will remain free 
in all instances and all non-Customer market participant PIXL Orders 
will be assessed a fee of $0.30 per contract in Penny Pilot Options and 
$0.38 per contract in Non-Penny Pilot Options fee uniformly. All non-
Customers market participants are assessed the same fees with respect 
to Section II when a PIXL Order is contra to a resting order or quote. 
In this case the resting contra-side orders or quotes will continue to 
pay the appropriate Options Transaction Charges in Section II. For the 
reasons noted above, the Exchange believes that the PIXL pricing, which 
will be uniformly assessed to all market participants, is reasonable, 
equitable and not unfairly discriminatory.
    The Exchange's proposal to expand the $0.00 per contract pricing 
that today is available to Specialists and Market Makers that are on 
the contra-side of an electronically-delivered and executed Customer 
order and have reached the Monthly Market Maker Cap in certain symbols 
\19\ to all Penny Pilot Options provided the Specialist or Market Maker 
is adding liquidity is reasonable because the Exchange desires to 
expand this incentive to all Penny Pilot Options to enhance the 
displayed liquidity available on the Exchange to the benefit of 
investors and other market participants. Specialists and Market Makers 
will be able to benefit to a greater extent and be incentivized to add 
liquidity in all Penny Pilot Option symbols, provided they qualified 
for the Monthly Market Maker Cap. All market participants will benefit 
from the increased Customer liquidity brought to the Exchange by this 
displayed liquidity incentive.
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    \19\ The symbols are: AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, 
VXX, and XLF.
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    The Exchange's proposal to expand the $0.00 per contract pricing 
that today is available to Specialists and Market Makers that are on 
the contra-side of an electronically-delivered and executed Customer 
order and have reached the Monthly Market Maker Cap in certain symbols 
\20\ to all Penny Pilot Options provided the Specialist or Market Maker 
is adding liquidity is equitable and not unfairly discriminatory 
because Specialists and Market Makers have burdensome quoting 
obligations \21\ to the market that do not apply to Customers, 
Professionals, Firms and Broker-Dealers. Specialists and Market Makers 
serve an important role on the Exchange with regard to order 
interaction and they provide liquidity in the marketplace. In addition, 
the proposed fees would apply only in certain circumstances where the 
Market Maker or Specialist is not otherwise subject to transaction fees 
(because the Monthly Market Maker Cap has been reached) and 
specifically on the contra-side of an electronically-delivered Customer 
order.
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    \20\ Id.
    \21\ See note 15.
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    The Exchange's proposal to continue to assess a $0.17 per contract 
fee to Specialists and Market Makers that are on the contra-side of an 
electronically-delivered and executed Customer order and have reached 
the Monthly Market Maker Cap for Penny Pilot and Non-Penny Pilot 
Options provided the Specialist or Market Maker is removing liquidity 
is reasonable because the Exchange will be assessing the same fee as 
today. The $0.17 per contract fee will continue to be assessed to 
remove liquidity. Further, this fee subsidizes Customer rebates offered 
by the Exchange.\22\
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    \22\ See Section B of the Pricing Schedule.
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    The Exchange's proposal to continue to assess a $0.17 per contract 
fee to Specialists and Market Makers that are on the contra-side of an 
electronically-delivered and executed Customer order and have reached 
the Monthly Market Maker Cap for Penny Pilot and Non-Penny Pilot 
Options provided the Specialist or Market Maker is removing liquidity 
is equitable and not unfairly discriminatory because Specialists and 
Market Makers have burdensome quoting obligations \23\ to the market 
that do not apply to Customers, Professionals, Firms and Broker-
Dealers. Specialists and Market Makers serve an important role on the 
Exchange with regard to order interaction and they provide liquidity in 
the marketplace. In addition, the proposed fees would apply only in 
certain circumstances where the Market Maker or Specialist is not 
otherwise subject to transaction fees (because the Monthly Market Maker 
Cap has been reached) and specifically on the contra-side of an 
electronically-delivered Customer order.
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    \23\ See note 15.
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    The Exchange's proposal to continue to assess a $0.17 per contract 
fee to Specialists and Market Makers that are on the contra-side of an 
electronically-delivered and executed Customer order and have reached 
the Monthly Market Maker Cap in a non-Complex electronic auction, 
including the Quote Exhaust auction and, for purposes of this fee, the 
opening process is reasonable because the Exchange will be assessing 
the same fee as today. The $0.17 per contract fee will continue to be 
assessed to these auctions and the opening process. Further, this fee 
subsidizes Customer rebates offered by the Exchange.\24\
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    \24\ See Section B of the Pricing Schedule.
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    The Exchange's proposal to add the words ``per contract'' in 
Section IV, A of the Pricing Schedule is reasonable, equitable and not 
unfairly discriminatory because the Exchange believes the addition of 
the words ``per contract'' will add clarity to the Pricing Schedule to 
avoid any confusion as to the fee.
    The Exchange's proposal to continue to assess a $0.17 per contract 
fee to Specialists and Market Makers that are on the contra-side of an 
electronically-delivered and executed Customer order and have reached 
the Monthly Market Maker Cap in a non-Complex electronic auction, 
including the Quote Exhaust auction and, for purposes of this fee, the 
opening process is equitable and not unfairly discriminatory because 
Specialists and Market Makers have burdensome quoting obligations \25\ 
to the market that do not apply to Customers, Professionals, Firms and 
Broker-Dealers. Specialists and Market Makers serve an important role 
on the Exchange with regard to order interaction and they provide 
liquidity in the marketplace. In addition, the proposed fees would 
apply only in certain circumstances where the Market Maker or 
Specialist is not otherwise subject to transaction fees (because the 
Monthly Market Maker Cap has been reached) and specifically on the 
contra-side of an electronically-delivered Customer order.
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    \25\ See note 15.
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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 because Specialists and Market 
Makers will be offered the opportunity to cap certain transaction fees 
and pay lower

[[Page 3282]]

transaction fees when they transact $500,000 versus $550,000 of 
qualifying transactions. Other market participants will continue to 
benefit from the order interaction and liquidity that Specialists and 
Market Markers provide to the marketplace.
    The Exchange does not believe that amending the types of trades 
that qualify for the Monthly Market Maker Cap by excluding certain 
transaction fees related to an order or quote that is contra to a PIXL 
Order or assessing Specialists and Market Makers the PIXL pricing 
located in Section IV, A of the Pricing Schedule will impose an undue 
burden on competition because the Exchange's proposal results in all 
market participants on Phlx being assessed the same PIXL pricing.
    The Exchange's proposal for Specialists and Market Makers to pay no 
fees after they have satisfied the obligations related to the Monthly 
Market Maker Cap, in all Penny Pilot Options, provided they have added 
liquidity, and to pay lower fees for all other types of transactions, 
including those transacted in auctions and during the opening process, 
also does not provide an undue burden on competition. As noted above 
Specialists and Market Makers have burdensome quoting obligations to 
the market that do not apply to Customers, Professionals, Firms and 
Broker-Dealers.\26\ Specialists and Market Makers serve an important 
role on the Exchange with regard to order interaction and they provide 
liquidity in the marketplace. The proposed differentiation as between 
Specialists and Market Makers as compared to other market participants 
recognizes the differing contributions made to the trading environment 
on the Exchange by these market participants. Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attract 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. For these reasons noted 
above, the Exchange does not believe that offering Specialists and 
Market Makers the opportunity to cap fees in certain symbols imposes an 
undue burden on competition.
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    \26\ Id.
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    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.

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.\27\ 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.
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    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2015-06 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-2015-06. 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 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-2015-06 and should be 
submitted on or before February 12, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00971 Filed 1-21-15; 8:45 am]
BILLING CODE 8011-01-P