Document ID: SEC-2022-0960-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX LLC
Posted Date: 2022-07-20T04:00Z

[Federal Register Volume 87, Number 138 (Wednesday, July 20, 2022)]
[Notices]
[Pages 43343-43346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15445]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95280; File No. SR-Phlx-2022-29]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx 
Options 7, Section 4

July 14, 2022.
    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 June 30, 2022, Nasdaq 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 Phlx's Pricing Schedule at Options 
7, Section 4, Multiply Listed Options Fees (Includes options overlying 
equities, ETFs, ETNs and indexes which are Multiply Listed) (Excludes 
SPY and broad-based index options symbols listed within Options 7, 
Section 5.A).
    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments be operative on July 1, 
2022.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    Phlx proposes to amend its Pricing Schedule at Options 7, Section 
4, Multiply Listed Options Fees (Includes options overlying equities, 
ETFs, ETNs and indexes which are Multiply Listed) (Excludes SPY and 
broad-based index options symbols listed within Options 7, Section 
5.A). Specifically, Phlx proposes to remove the rule text within note 1 
of Options 7, Section 4 which provides a discount.
    Today, Phlx assesses the following electronic Penny Symbol Options 
Transaction Charges: $0.00 per contract to Customer; \3\ $0.48 per 
contract \4\ to Professionals; \5\ $0.22 per contract to Lead Market 
Makers \6\ and Maker Makers; \7\ $0.48 per contract \8\ for Broker-

[[Page 43344]]

Dealers; \9\ and $0.48 per contract \10\ for Firms.\11\ Today, Phlx 
assesses the following electronic non-Penny Symbol Options Transaction 
Charges: $0.00 per contract to Customer; $0.75 per contract \12\ to 
Professionals; $0.25 per contract \13\ to Lead Market Makers and Maker 
Makers; $0.75 per contract \14\ for Broker-Dealers; and $0.75 per 
contract \15\ for Firms.
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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 a broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(b)(45)). See Options 7, Section 1(c).
    \4\ Electronic Complex Orders will be assessed $0.40 per 
contract. See note 2 within Options 7, Section 4 of the Pricing 
Schedule.
    \5\ The term ``Professional'' applies to transactions for the 
accounts of Professionals, as defined in Options 1, Section 1(b)(45) 
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 Options 7, Section 1(c).
    \6\ The term ``Lead Market Maker'' applies to transactions for 
the account of a Lead Market Maker (as defined in Options 2, Section 
12(a)). A Lead Market Maker is an Exchange member who is registered 
as an options Lead Market Maker pursuant to Options 2, Section 
12(a). An options Lead Market Maker includes a Remote Lead Market 
Maker which is defined as an options Lead Market Maker in one or 
more classes that does not have a physical presence on an Exchange 
floor and is approved by the Exchange pursuant to Options 2, Section 
11. See Options 7, Section 1(c). The term ``Floor Lead Market 
Maker'' is a member who is registered as an options Lead Market 
Maker pursuant to Options 2, Section 12(a) and has a physical 
presence on the Exchange's trading floor. See Options 8, Section 
2(a)(3).
    \7\ The term ``Market Maker'' is defined in Options 1, Section 
1(b)(28) as a member of the Exchange who is registered as an options 
Market Maker pursuant to Options 2, Section 12(a). A Market Maker 
includes SQTs and RSQTs as well as Floor Market Makers. See Options 
7, Section 1(c). The term ``Floor Market Maker'' is a Market Maker 
who is neither an SQT or an RSQT. A Floor Market Maker may provide a 
quote in open outcry. See Options 8, Section 2(a)(4).
    \8\ Electronic Complex Orders will be assessed $0.40 per 
contract. See note 2 within Options 7, Section 4 of the Pricing 
Schedule.
    \9\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category. See Options 7, Section 1(c).
    \10\ Electronic Complex Orders will be assessed $0.40 per 
contract. See note 2 within Options 7, Section 4 of the Pricing 
Schedule.
    \11\ The term ``Firm'' applies to any transaction that is 
identified by a member or member organization for clearing in the 
Firm range at The Options Clearing Corporation. See Options 7, 
Section 1(c).
    \12\ Any member or member organization under Common Ownership 
with another member or member organization or an Appointed OFP of an 
Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in 
Options 7, Section 2 of the Pricing Schedule will be assessed $0.65 
per contract. See note 3 within Options 7, Section 4 of the Pricing 
Schedule.
    \13\ Any member or member organization under Common Ownership 
with another member or member organization or an Appointed MM of an 
Affiliate Entity that qualifies for Customer Rebate Tiers 4 or 5 in 
Options 7, Section 2 of the Pricing Schedule will be assessed $0.23 
per contract. See note 4 within Options 7, Section 4 of the Pricing 
Schedule.
    \14\ Any member or member organization under Common Ownership 
with another member or member organization or an Appointed OFP of an 
Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in 
Options 7, Section 2 of the Pricing Schedule will be assessed $0.65 
per contract. See note 3 within Options 7, Section 4 of the Pricing 
Schedule.
    \15\ Any member or member organization under Common Ownership 
with another member or member organization or an Appointed OFP of an 
Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in 
Options 7, Section 2 of the Pricing Schedule will be assessed $0.65 
per contract. See note 3 within Options 7, Section 4 of the Pricing 
Schedule.
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    Today, Phlx assesses an electronic Firm Penny and non-Penny Options 
Transactions Charges of $0.45 per contract for simple orders in symbols 
AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF. Phlx proposes to 
remove the $0.45 per contract Options Transaction Charge for simple 
orders applicable to AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and 
XLF and reserve note 1 of Options 7, Section 4 of the Pricing Schedule. 
The Exchange notes that the symbols listed within note 1 of Options 7, 
Section 4 of the Pricing Schedule are all Penny Symbols and would, 
therefore, with this proposal be assessed an Options Transaction Charge 
of $0.48 per contract for simple orders in symbols AAPL, BAC, EEM, FB, 
FXI, IWM, QQQ, TWTR, VXX and XLF.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\16\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\17\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \18\
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    \18\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission 
\19\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of 
a market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\20\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \21\
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    \19\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \20\ See NetCoalition, at 534-535.
    \21\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers' . . . .'' \22\ Although the court and 
the SEC were discussing the cash equities markets, the Exchange 
believes that these views apply with equal force to the options 
markets.
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    \22\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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    The Exchange believes that it is reasonable to eliminate the 
electronic Firm Penny and non-Penny Options Transactions Charges of 
$0.45 per contract for simple orders in symbols AAPL, BAC, EEM, FB, 
FXI, IWM, QQQ, TWTR, VXX and XLF. By eliminating note 1 within Options 
7, Section 4 of the Pricing Schedule, the Exchange would assess a Firm 
Options Transaction Charge of $0.48 per contract in simple orders for 
all Penny Symbols, which includes symbols AAPL, BAC, EEM, FB, FXI, IWM, 
QQQ, TWTR, VXX and XLF. Since the aforementioned symbols are all Penny 
Symbols, eliminating note 1 within Options 7, Section 4 would not cause 
any Firm to be assessed the electronic non-Penny Options Transaction 
Charge of $0.75 per contract for simple orders in symbols AAPL, BAC, 
EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF. While the Exchange is 
removing this discount for these symbols, the Exchange believes that 
its Options Transaction Charges remain competitive.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to eliminate the electronic Firm Penny and non-Penny 
Options Transactions Charges of $0.45 per contract for simple orders in 
symbols AAPL, BAC, EEM, FB, FXI, IWM, QQQ, TWTR, VXX and XLF and, 
instead, assess these symbols an electronic Firm Options Transaction 
Charge of $0.48 per contract for simple orders similar to other Penny 
Symbols. Customers would continue to pay no electronic Penny Symbol 
Options Transaction Charge. Customer liquidity benefits all market 
participants by providing more trading opportunities which attracts 
market makers. An increase in the activity of these market participants 
(particularly in response to pricing) in turn facilitates tighter 
spreads which may cause an additional corresponding increase in order 
flow from other market participants. Lead Market Makers and Market 
Makers would continue to pay a $0.22 per contract electronic Penny 
Symbol Options Transaction Charge, which is lower than the $0.48 per 
contract electronic Penny Symbol Options Transaction Charge paid by 
Professionals, Broker-Dealers and Firms. Lead Market Makers and Market 
Makers add value through continuous quoting and are subject to 
additional

[[Page 43345]]

requirements and obligations unlike other market participants.\23\ 
Incentivizing Lead Market Makers Market Makers to provide greater 
liquidity benefits all market participants through the quality of order 
interaction. The Exchange believes that it is equitable and not 
unfairly discriminatory to assess AAPL, BAC, EEM, FB, FXI, IWM, QQQ, 
TWTR, VXX and XLF an electronic Firm Penny Options Transactions Charge 
of $0.48 per contract in simple orders similar to all other Penny 
Symbols. With this proposal, the electronic Firm, Professional and 
Broker-Dealer Options Transaction Charge for simple orders would be the 
same for all Penny Symbols.
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    \23\ See Phlx Options 2, Section 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.
Inter-Market Competition
    The proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants with 
another choice of where to transact options. The Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited.
Intra-Market Competition
    The proposed amendment does not impose an undue burden on intra-
market competition. The Exchange believes that eliminating the 
electronic Firm Penny and non-Penny Options Transactions Charges of 
$0.45 per contract for simple orders in symbols AAPL, BAC, EEM, FB, 
FXI, IWM, QQQ, TWTR, VXX and XLF and, instead, assessing these symbols 
an electronic Firm Options Transaction Charge of $0.48 per contract for 
simple orders, similar to other Penny Symbols, does not create an undue 
burden on competition. Customers would continue to pay no electronic 
Penny Symbol Options Transaction Charge. Customer liquidity benefits 
all market participants by providing more trading opportunities which 
attracts market makers. An increase in the activity of these market 
participants (particularly in response to pricing) in turn facilitates 
tighter spreads which may cause an additional corresponding increase in 
order flow from other market participants. Lead Market Makers and 
Market Makers would continue to pay a $0.22 per contract electronic 
Penny Symbol Options Transaction Charge, which is lower than the $0.48 
per contract electronic Penny Symbol Options Transaction Charge paid by 
Professionals, Broker-Dealers and Firms. Lead Market Makers and Market 
Makers add value through continuous quoting and are subject to 
additional requirements and obligations unlike other market 
participants.\24\ Incentivizing Lead Market Makers Market Makers to 
provide greater liquidity benefits all market participants through the 
quality of order interaction. Assessing AAPL, BAC, EEM, FB, FXI, IWM, 
QQQ, TWTR, VXX and XLF an electronic Firm Penny Options Transactions 
Charge of $0.48 per contract in simple orders, similar to all other 
Penny Symbols, does not impose an undue burden on competition. With 
this proposal, the electronic Firm, Professional and Broker-Dealer 
Options Transaction Charge for simple orders would be the same for all 
Penny Symbols.
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    \24\ See Phlx Options 2, Section 5.
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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.\25\
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    \25\ 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 [email protected]. Please include 
File Number SR-Phlx-2022-29 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2022-29. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly.
    All submissions should refer to File Number SR-Phlx-2022-29 and 
should be submitted on or before August 10, 2022.

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15445 Filed 7-19-22; 8:45 am]
BILLING CODE 8011-01-P