Document ID: SEC-2014-1498-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2014-09-09T04:00Z

[Federal Register Volume 79, Number 174 (Tuesday, September 9, 2014)]
[Notices]
[Pages 53494-53496]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21362]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72968; File No. SR-Phlx-2014-57]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Common Ownership

September 3, 2014.
    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 20, 2014, 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 proposal to harmonize the treatment of the 
aggregation of activity of affiliated member organizations for the 
purposes of assessing charges or credits.
    The Exchange requests that this filing become operative on December 
1, 2014.
    The text of the proposed rule change is set forth below. Proposed 
new language is in italics; deleted text is in brackets.

NASDAQ OMX PHLX LLC \1\ PRICING SCHEDULE

    ALL BILLING DISPUTES MUST BE SUBMITTED TO THE EXCHANGE IN WRITING 
AND MUST BE ACCOMPANIED BY SUPPORTING DOCUMENTATION. ALL DISPUTES MUST 
BE SUBMITTED NO LATER THAN SIXTY (60) DAYS AFTER RECEIPT OF A BILLING 
INVOICE, EXCEPT FOR DISPUTES CONCERNING NASDAQ OMX PSX FEES, 
PROPRIETARY DATA FEED FEES AND CO-LOCATION SERVICES FEES. AS OF JANUARY 
3, 2011, THE EXCHANGE WILL CALCULATE FEES ON A TRADE DATE BASIS.

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\1\PHLX[supreg] is a registered trademark of The NASDAQ OMX Group, 
Inc.
* * * * *

VIII. NASDAQ OMX PSX FEES

* * * * *

Aggregation of Activity of Affiliated Member Organizations

    (a) No Change
    (b) No Change
    (c) For purposes of this provision, the term[s set forth below 
shall have the following meanings:]
    [(1) An] ``affiliate'' of a member organization shall mean any 
[wholly owned subsidiary, parent, or sister of the ]member organization 
under 75% common ownership or control of that [is also a ]member 
organization.
    [(2) A ``wholly owned subsidiary'' shall mean a subsidiary of a 
member organization, 100% of whose voting stock or comparable ownership 
interest is owned by the member organization, either directly or 
indirectly through other wholly owned subsidiaries.]
    [(3) A ``parent'' shall mean an entity that directly or indirectly 
owns 100% of the voting stock or comparable ownership interest of a 
member organization.]
    [(4) A ``sister'' shall mean an entity, 100% of whose voting stock 
or comparable ownership interest is owned by a parent that also owns 
100% of the voting stock or comparable ownership interest of a member 
organization.]
* * * * *

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.

[[Page 53495]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Chapter VIII of the Pricing 
Schedule to harmonize the treatment of the aggregation of activity of 
affiliated member organizations for the purposes of assessing charges 
or credits by making it consistent with the definition of ``Common 
Ownership'' in the Preface of the Pricing Schedule which relates to 
options pricing. For purposes of applying any PSX charge or credit 
where the charge assessed, or credit provided, by Phlx depends upon the 
volume of a member organization's activity. A member organization may 
request that the Exchange aggregate its activity with the activity of 
its affiliates.\3\ Therefore, for purposes of applying any PSX charge 
or credit where the charge assessed, or credit provided, by Phlx 
depends upon the volume of a member organization's activity, references 
to an entity (including references to a ``member organization'', or a 
``participant'') shall be deemed to include the entity and its 
affiliates that have been approved for aggregation.\4\
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    \3\ See Chapter VIII of the Pricing Schedule.
    \4\ Id.
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    Currently, PSX Rules state that for purposes of applying any PSX 
charge or credit where the charge assessed, or credit provided, by Phlx 
depends upon the volume of a member organization's activity, a member 
organization may request that the Exchange aggregate its activity with 
the activity of its affiliates.\5\ The Exchange proposes to amend 
Chapter VIII of the Pricing Schedule to conform that rule to that of 
Phlx Options Pricing Rules so that equities and options members/member 
organizations are treated consistently with respect to affiliations of 
member organizations for purposes of pricing. Phlx's Options Rule 
provides, ``Common Ownership'' shall mean Participants under 75 percent 
common ownership or control.\6\ The Exchange desires to take the 
current standard of 100 percent for equities member organizations and 
align that standard to the 75 percent standard for options members and 
member organizations.
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    \5\ An ``affiliate'' of a member organization shall mean any 
wholly owned subsidiary, parent, or sister of the member 
organization that is also a member organization. A ``wholly owned 
subsidiary'' shall mean a subsidiary of a member organization, 100 
percent of whose voting stock or comparable ownership interest is 
owned by the member organization, either directly or indirectly 
through other wholly owned subsidiaries. A ``parent'' shall mean an 
entity that directly or indirectly owns 100 percent of the voting 
stock or comparable ownership interest of a member organization. A 
``sister'' shall mean an entity, 100 percent of whose voting stock 
or comparable ownership interest is owned by a parent that also owns 
100 percent of the voting stock or comparable ownership interest of 
a member organization. See Chapter VIII of the Pricing Schedule.
    \6\ See the Preface of the Pricing Schedule.
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    Pursuant to Chapter VIII of the Pricing Schedule, a member 
organization requesting aggregation of affiliate activity shall be 
required to certify to the Exchange the affiliate status of entities 
whose activity it seeks to aggregate prior to receiving approval for 
aggregation, and shall be required to inform the Exchange immediately 
of any event that causes an entity to cease to be an affiliate. In 
addition, the Exchange reserves the right to request information to 
verify the affiliate status of an entity.\7\
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    \7\ See Chapter VIII of the Pricing Schedule.
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    The Exchange intends to amend the Phlx options rules to similarly 
require the certifications and approvals as noted herein. The Exchange 
intends that this rule change and the options rule changes noted herein 
harmonize the process by which the Exchange gathers information related 
to affiliated member organizations and then in turn, for purposes of 
pricing, treat both equities and options members alike with respect to 
the application of aggregated pricing.
    The Exchange proposes to apply this pricing as of December 1, 2014 
and issue an Options Trader Alert to its members.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \9\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest, 
in that the proposal will harmonize the treatment of the aggregation of 
activity of affiliated member organizations for the purposes of 
assessing charges or credits with the treatment of the aggregation of 
activity of affiliated member organizations in relation to options 
pricing so that more member organizations will be able to benefit from 
lower charges and/or increased credits. The proposal will further serve 
to reduce disparity of treatment between member organizations with 
regards to the pricing of different services and reduce any potential 
for confusion in how activity can be aggregated. The Exchange believes 
the rule change avoids disparate treatment of members that have divided 
their various business activities between separate corporate entities 
as compared to members that operate those business activities within a 
single corporate entity. By way of example, subject to appropriate 
information barriers, many firms that are members of the Exchange 
operate both a market making desk and a public customer business within 
the same corporate entity. In contrast, other members may be part of a 
corporate structure that separates those business lines into different 
corporate affiliates, either for business, compliance or historical 
reasons, and those affiliates are not also considered wholly owned 
affiliates. Those corporate affiliates, in turn, are required to 
maintain separate memberships with the Exchange. Absent the proposed 
change, such corporate affiliates that cannot be considered wholly 
owned but are under common control would not receive the same treatment 
as members who are considered wholly owned affiliates. Accordingly, the 
Exchange believes that its proposed policy is fair and equitable, and 
not unreasonably discriminatory in permitting both wholly owned and 
common control. In addition to ensuring fair and equal treatment of its 
members, the Exchange does not want to create incentives for its 
members to restructure their business operations or compliance 
functions simply due to the Exchange's pricing structure.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that this proposed rule change may enable 
additional equity member organizations to aggregate pricing because the 
standard will be reduced from 100 percent to 75 percent for these 
member organizations. There are no current equity member organizations 
that would no longer be entitled to the aggregation as a result of this 
rule change. Further, the Exchange seeks to harmonize the manner in 
which aggregated pricing is treated on its three markets, The NASDAQ 
Stock Market LLC, NASDAQ OMX BX, Inc. and Phlx and as between equities 
and options, by developing one standard for aggregated pricing and one 
method for collecting such information on aggregated pricing to ensure 
proper validation of that pricing in the manner in which it is 
occurring on Phlx for equity member organizations today.
    Today, BATS Exchange, Inc. (``BATS'') equity members are permitted 
to aggregate share volume calculations for wholly owned affiliates. The 
Exchange [sic] allows a member to aggregate volume with other members

[[Page 53496]]

that control, are controlled by, or are under common control with such 
member.\10\ To the extent two or more affiliated companies maintain 
separate Exchange memberships and can demonstrate their affiliation by 
showing they control, are controlled by, or are under common control 
with each other, the Exchange will permit such members to count overall 
volume of the affiliates in calculating volume. BATS does not specify a 
specific percentage for such aggregation. The Exchange is specifying 75 
percent, similar to the percentage applied to Options Participants.
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    \10\ See Securities Exchange Act Release No. 64211 (April 6, 
2011), 76 FR 20414 (April 12, 2014) [sic] (SR-BATS-2011-012).
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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. The Exchange is merely seeking 
to harmonize the treatment of the aggregation of activity of affiliated 
member organizations for the purposes of assessing charges or credits 
with those rules contained in Chapter XV which relate to options 
pricing. The Exchange also believes that certain market participants 
may be able to aggregate because the standard is decreasing from 100 
percent to 75 percent.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \11\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \12\ 17 CFR 240.19b-4(f)(6).
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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.

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-2014-57 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 SRPhlx-2014-57. 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-2014-57 and should be 
submitted on or before September 30, 2014.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21362 Filed 9-8-14; 8:45 am]
BILLING CODE 8011-01-P