Document ID: SEC-2018-1690-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX LLC
Posted Date: 2018-11-02T04:00Z

[Federal Register Volume 83, Number 213 (Friday, November 2, 2018)]
[Notices]
[Pages 55210-55214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23963]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84495; File No. SR-Phlx-2018-66]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Relocate the 
Pricing Schedule Rules

October 29, 2018.
    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 October 18, 2018, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II 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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[[Page 55211]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to (a) relocate rules from the Phlx's Pricing 
Schedule (``Pricing Schedule'') and current Rule 909 to the Exchange's 
rulebook's (``Rulebook'') shell structure,\3\ (b) eliminate the Pricing 
Schedule's Table of Contents, obsolete text, and reserved rules; and 
(c) make conforming cross-reference changes throughout the Rulebook.
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    \3\ In 2017, the Exchange added a shell structure to its 
Rulebook with the purpose of improving efficiency and readability 
and to align its rules closer to those of its five sister exchanges, 
The Nasdaq Stock Market LLC; Nasdaq BX, Inc.; Nasdaq GEMX, LLC; 
Nasdaq ISE, LLC; and Nasdaq MRX, LLC (``Affiliated Exchanges''). See 
Securities Exchange Act Release No. 82169 (November 29, 2017), 82 FR 
57508 (December 5, 2017) (SR-Phlx-2017-97).
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqphlx.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 Exchange, as part of its continued effort to promote efficiency 
and the conformity of its processes with those of the Affiliated 
Exchanges, and the goal of harmonizing and uniformizing its rules, 
proposes to relocate the Pricing Schedule rules and Rule 909 to the 
Exchange's shell structure. Specifically, the Exchange will relocate 
the Pricing Schedule rules described below respectively into the Equity 
7 and Options 7 sections of the shell structure (both named ``Pricing 
Schedule'').
    In addition, the Exchange proposes to delete the current Pricing 
Schedule's Table of Contents and the obsolete term ``Phlx XL II'' at 
current Chapter VI., A. Moreover, the Exchange proposes not to relocate 
current Chapters X, XI, and XII, since these are reserved rules that do 
not contain any rule text. Finally, the Exchange proposes to make 
conforming cross-reference changes throughout the Rulebook.
(a) Table of Contents
    The Exchange proposes to eliminate the existing Table of Contents 
in the Phlx Pricing Schedule. The Table of Contents is unnecessary. The 
website where the Phlx rules are listed \4\ contains hyperlinks and a 
skeleton of the available rules within the site and enables market 
participants to view all rules in that section.
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    \4\ Phlx rules are located at: http://nasdaqphlx.cchwallstreet.com.
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(b) Relocation of Equity Rules
    The Exchange proposes to adopt, under Equity 7, Section 1 
(``General Provisions'') a modified version of the current introductory 
text in the Pricing Schedule. Proposed Equity 7, Section 1(a) will 
refer to the calculation of fees in the Exchange, with a specific 
reference to the exception concerning disputes of Nasdaq PSX fees and 
proprietary data feed fees. The Exchange notes that the relocated text 
will not include the reference to disputes concerning fees for co-
location services. The co-location services rule was recently moved to 
the General 8 section of the Rulebook \5\ and the rules of the proposed 
Pricing Schedule will not apply to co-location services.\6\
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    \5\ See Securities Exchange Act Release No. 83465 (June 19, 
2018), 83 FR 29594 (June 25, 2018) (SR-Phlx-2018-46).
    \6\ See proposed Equity 7, Section 1(a): ``Policy for amending 
billing information: Corrections submitted after trade date and 
prior to the issuance of an invoice by the exchange must be 
submitted to the Exchange in writing and must be accompanied by 
supporting documentation. Only members may submit trade corrections.
    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 
PSX fees and proprietary data feed fees. The Exchange calculates 
fees on a trade date basis. Only members may submit billing 
disputes.''
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    The Exchange proposes also to relocate to Equity 7, Section 1(b) 
the portion of the Pricing's Schedule's Preface that applies only to 
equities. This will include the paragraph that reads ``For PSX 
Equities.'' The relocated text has no application to transactions in 
options and, therefore, will not be included in Options 7, Section 1(b) 
described below.
    The Exchange proposes also to relocate and renumber Phlx Rule 909 
under both Equity 7, Section 2 and Options 7, Section 2 (both named 
``Collection of Exchange Fees and Other Claims''). Rule 909 permits 
Phlx to collect undisputed or final fees, fines, charges and/or other 
monetary sanctions or other monies due and owing to the Exchange or 
other charges related to Rule 924.\7\ The Exchange believes that, 
unlike other rules in the 900 Rules Series (``Membership''), which 
generally refer to the powers of the Board of Directors and the 
authority it delegates to Senior Management of the Exchange, the direct 
debit process established in Rule 909 will be better situated among the 
relocated rules in the Equity 7 and Options 7 titles.
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    \7\ See Securities Exchange Act Release No. 61405 (January 21, 
2010), 75 FR 4888 (January 29, 2010) (SR-Phlx-2009-101) (Order 
Approving a Proposed Rule Change Relating to Collection of Exchange 
Fees).
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    Next, the Exchange proposes to relocate and renumber current 
Pricing Schedule's Chapter VIII (``NASDAQ PSX FEES'') as Equity 7, 
Section 3 in the shell structure. The text of this rule will not be 
substantively changed other than to update the capitalization of its 
title.
    Today, Chapter VI of the Phlx Pricing Schedule consists of rule 
text applicable to both equities and options. Specifically, references 
to floor pricing apply to the options market, as only that market has a 
trading floor. In Chapter VI, A. (``Permit and Registration Fees''), 
the paragraph that describes PSX Only Permit Fees describes an equity 
fee. The ``Application Fee,'' ``Application Fee for Lapsed 
Applications,'' ``Transfer of Affiliation Fee,'' ``Account Fee,'' 
``Initiation Fee'' and ``Permit Fees'' apply to both equities and 
options. Finally, the ``Inactive Nominee Fee'' and the ``Clerk Fee'' 
are floor fees and therefore apply to options only.\8\
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    \8\ As explained later, the Exchange is proposing to adopt a 
parallel rule under the Options 7, Section 8 (``Membership Fees''), 
with fees applicable to both options and equities and relocate only 
the subsections from Chapter VI that apply to options.
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    The Exchange proposes to adopt Equity 7, Section 4 (``Membership 
Fees''), A. (``Permit and Registration Fees'') by adapting text from 
current Chapter VI, A. of the Pricing Schedule. Specifically, as 
previously noted, Equity 7, Section 4, A. will consist of the following 
fees: ``Application Fee,'' ``Application Fee for Lapsed Applications,'' 
``Transfer of Affiliation Fee,'' ``Account Fee,'' ``Initiation Fee,'' 
and ``Permit Fees.'' Proposed Equity 7, Section 4 will also include 
text from the current rule which is only applicable to PSX 
transactions; thus, the Exchange proposes to relocate the text under 
the subheading ``PSX Only Permit Fees.''
    Additionally, the Exchange will relocate the callout (``*'') and 
respective

[[Page 55212]]

footnote that accompany the ``Application Fee,'' ``Application Fee for 
Lapsed Applications,'' ``Account Fee,'' and ``Initiation Fee'' 
subheadings; this is because the footnote is exclusively applicable to 
those who only apply for PSX membership, and therefore should be moved 
to the Equity 7 title.
    The Exchange notes that it will not relocate the obsolete term 
``Phlx XL II'' used in the footnote described above; the term is a 
legacy reference and its removal will not affect the rights of 
prospective or existing members of the Exchange.
    The Exchange will thus relocate and renumber the above-referenced 
rules as follows:

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         Equity 7--Pricing schedule (Proposed)                          Schedule of fees (Current)
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Section 1. General Provisions--(a)                       Pricing Schedule's Introduction
Section 1. General Provisions--(b)                       PREFACE
Section 2. Collection of Exchange Fees and Other Claims  Rule 909. Collection of Exchange Fees and Other Claims
Section 3. Nasdaq PSX Fees                               VIII. Nasdaq PSX Fees
Section 4. Membership Fees                               VI. Membership Fees
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(c) Relocation of Options Rules
    The Exchange proposes to adopt, under Options 7, Section 1(a), a 
modified version of the current introductory section in the Pricing 
Schedule. Proposed Options 7, Section 1(a) will refer to the 
calculation of fees in the Exchange, with a specific reference to the 
exception concerning disputes of proprietary data fees, which applies 
to transactions in options. The Exchange believes that this change will 
improve the readability of the rules relocated under the Options 7 
title.
    The Exchange also proposes to adopt under Options 7, Section 1(b) 
the text from the Pricing Schedule's Preface that applies only to 
transactions in options. Specifically, proposed Options 7, Section 1(b) 
will contain the text that opens with ``For Phlx Options''; the 
definitions of ``Customer''; ``Specialist''; ``ROT, SQT and RSQT''; 
``Market Maker''; ``Registered Option Trader''; ``Streaming Quote 
Trader''; ``Remote Streaming Quote Trader''; ``Firm''; 
``Professional''; ``Broker-Dealer''; ``Joint Back Office''; ``Common 
Ownership''; and ``Non-Customer''; and the rules that apply to options 
transactions fees or rebates described under the subsection ``For 
Purposes of Common Ownership Aggregation of Activity of Affiliated 
Members and Member Organizations,'' including the terms ``Appointed 
MM,'' ``Appointed OFP,'' and ``Affiliated Entity.''
    The Exchange additionally proposes that Subsections A and B 
(respectively, ``Mini Options Fees'' and ``Customer Rebate Program'') 
in the Pricing Schedule's Preface remain unchanged and be relocated to 
proposed Options 7, Section 1(b).
    As previously explained, the Exchange proposes also to adopt a 
rule, under Options 7, Section 2, for the collection of undisputed fees 
or other monies identical to current Phlx Rule 909 (``Collection of 
Exchange Fees and Other Claims''), which will parallel the rule under 
Equity 7, Section 2.
    The Exchange proposes also to relocate, renumber, and add the word 
``Section'' to each of the following chapters in the Pricing Schedule: 
I (``Rebates and Fees for Adding and Removing Liquidity in SPY''); II 
(``Multiply Listed Options Fees''), III (``Singly Listed Options''); IV 
(``Other Transaction Fees''); V (``Routing Fees''); VII (``Other Member 
Fees''); IX (``Proprietary Data Feed Fees''); and XIII (``Access and 
Redistribution Fee'').
    With respect to the text in current Chapter VI of the Pricing 
Schedule, as previously explained, the Exchange proposes to adopt 
Options 7, Section 8, A. (``Permit and Registration Fees'') which will 
include text applicable to both equities and options (the ``Application 
Fee,'' ``Application Fee for Lapsed Applications,'' ``Transfer of 
Affiliation Fee,'' ``Account Fee,'' ``Initiation Fee,'' and ``Permit 
Fees.'').
    The Exchange proposes also to remove the callout (``*'') from the 
Application, Account, and Initiation fees' subheadings since such 
footnote is applicable to those who only apply for membership with PSX.
    Moreover, the Exchange proposes to include under Options 7, Section 
8, A. portions of text from Chapter VI which apply only to transactions 
in options (namely, ``Phlx Permit Fees,'' ``Inactive Nominee Fee,'' and 
``Clerk Fee''). The Exchange additionally proposes to relocate to 
Options 7, Section 8, subsections B. (``Streaming Quote Trader Fees''), 
C. (``Remote Market Maker Organization Fee'') and D. (``Remote 
Specialist Fee'') from current Chapter VI.
    The proposed relocation of options rules can be summarized as 
follows:

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         Options 7--Pricing schedule (Proposed)                         Schedule of fees (Current)
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Section 1. General Provisions--(a)                       Pricing Schedule's Introduction
Section 1. General Provisions--(b)                       PREFACE
Section 2. Collection of Exchange Fees and Other Claims  A. Mini Option Fees
Section 3. Rebates and Fees for Adding and Removing      B. Customer Rebate Program
 Liquidity in SPY                                        Rule 909. Collection of Exchange Fees and Other Claims
                                                         I. Rebates and Fees for Adding and Removing Liquidity
                                                          in SPY
Section 4. Multiply Listed Options Fees                  II. Multiply Listed Options Fees
Section 5. Singly Listed Options                         III. Singly Listed Options
Section 6. Other Transaction Fees                        IV. Other Transaction Fees
Section 7. Routing Fees                                  V. Routing Fees
Section 8. Membership Fees                               VI. Membership Fees
Section 9. Other Member Fees                             VII. Other Member Fees
Section 10. Proprietary Data Feed Fees                   IX. Proprietary Data Feed Fees
Section 11. Access and Redistribution Fee                XIII. Access and Redistribution Fee
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[[Page 55213]]

    The Exchange believes that the changes previously explained are 
non-substantive and that they will facilitate the use of the Rulebook 
by Members \9\ of the Exchange, including those who are members of 
other Affiliated Exchanges, and other market participants.
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    \9\ Exchange Rule 100(a)(32).
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(d) Pricing Schedule Rules To Be Removed
    The Exchange proposes Pricing Schedule's Chapters X, XI, and XII 
not to be relocated to the shell structure and that they be removed 
from the Rulebook. The aforementioned sections are currently marked as 
``Reserved'' and their relocation to the shell structure is unnecessary 
since the Exchange may amend and create new rules if needed.
(e) Cross-Reference Updates
    In connection with the changes described above, the Exchange 
proposes to update all cross-references in the Rulebook that direct the 
reader to the current location of the Pricing Schedule rules and/or any 
of their subsections.
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 Section 
6(b)(5) of the Act,\11\ 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, by promoting efficiency and the structural conformity of the 
Exchange's processes with those of the Affiliated Exchanges and to make 
the Exchange's Rulebook easier to read and more accessible to its 
Members and market participants. The Exchange believes that the 
relocation and renumbering of rules in the Equity 7 and Options 7 
Pricing Schedules, related cross-reference updates, and the deletion of 
the Table of Contents, the obsolete term ``Phlx XL II,'' and unused 
Pricing Schedule chapters are of a non-substantive nature.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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 proposed changes do not 
impose a burden on competition because, as previously stated, they (i) 
are of a non-substantive nature, (ii) are intended to harmonize the 
structure of the Exchange's rules with those of its Affiliated 
Exchanges, and (iii) are intended to organize the Rulebook in a way 
that it will ease the Members' and market participants' navigation and 
reading of the Equities' and Options' Pricing Schedules.

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) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. Waiver 
of the operative delay would allow the Exchange to promptly relocate 
the Pricing Schedule rules, which the Exchange believes will improve 
the organization and readability of the Exchange's Rulebook. Therefore, 
the Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission hereby waives the operative delay and 
designates the proposed rule change operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 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 change 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 [email protected]. Please include 
File Number SR-Phlx-2018-66 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-2018-66. 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

[[Page 55214]]

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-2018-66, and should be submitted on or before November 23, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-23963 Filed 11-1-18; 8:45 am]
 BILLING CODE 8011-01-P