Document ID: SEC-2020-1791-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2020-11-10T05:00Z

[Federal Register Volume 85, Number 218 (Tuesday, November 10, 2020)]
[Notices]
[Pages 71689-71690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24887]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90339; File No. SR-Phlx-2020-50]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Transaction Fees at Equity 7, Section 3

November 4, 2020.
    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 26, 2020, 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 the Exchange's transaction fees at 
Equity 7, Section 3, as discussed below.
    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
    During the week of October 26-30, 2020, the Exchange will 
temporarily relocate its place of primary operations from Carteret, New 
Jersey to Chicago, Illinois. The purpose of this temporary relocation 
is to demonstrate that the Exchange is capable of and willing to 
operate outside of the State of New Jersey in the event that the New 
Jersey State Government enacts pending legislation that would impose a 
tax on securities transactions processed within the State. If enacted, 
the tax would be prohibitively expensive and onerous, not only for the 
Exchange, but also for its member organizations and ultimately for 
investors, and the Exchange likely would have no option but to relocate 
permanently outside of New Jersey.
    Although the Exchange believes that its member organizations will 
maintain their ordinary trading activity during the relocation period, 
the Exchange also recognizes the possibility that some of its member 
organizations will adjust their trading behavior during this time, and 
that if they do so, they may fail to qualify for credits or discounted 
charges that the Exchange would otherwise provide to them if they were 
to achieve certain threshold levels of total Consolidated Volume \3\ on 
the Exchange during the month.
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    \3\ As set forth in Equity 7, Section 3(a)(1), the term 
``Consolidated Volume'' means the total consolidated volume reported 
to all consolidated transaction reporting plans by all exchanges and 
trade reporting facilities during a month in equity securities, 
excluding executed orders with a size of less than one round lot.
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    To help minimize any adverse impact of the temporary relocation on 
member organizations, Exchange proposes to amend its pricing schedule 
at Equities 7, Section 3 to state that for purposes of determining 
which of the execution charges and credits listed therein a member 
organization qualifies for during the month of October 2020, the 
Exchange will calculate the member organization's total Consolidated 
Volume on the Exchange for the full month of October as well as for the 
month of October excluding the week of October 26-30, 2020. 
Furthermore, the Exchange proposes to state that it will then assess 
which total Consolidated Volume calculations would qualify the member 
organization for the most advantageous credits and charges for the 
month of October and then it will apply those credits and charges to 
the member organization. Thus, if but for the relocation, a member 
organization would qualify for a higher credit or a lower fee tier in 
October, then the Exchange will apply that higher credit or lower fee 
tier to the member organization's trading activity during the month.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposal is reasonable and equitable 
because in its absence, member organizations may fail to qualify for 
certain volume-based credits or charges in October should they 
determine to alter their trading behavior when the Exchange relocates 
to Chicago during the week of October 26-30, 2020. The Exchange does 
not wish to penalize these member organizations for altering their 
trading behavior in response to the Exchange's decision to relocate

[[Page 71690]]

temporarily. The proposed rule would seek to avoid such a penalty by 
calculating a member organization's total Consolidated Volume on the 
Exchange, both for the full month of October and for the month 
excluding October 26-30 to determine which of those two calculations 
would result in the member organization qualifying for credits and 
charges that are most advantageous to it, and then applying those most 
advantageous credits and charges to the member organization.
    The Exchange notes that other exchanges have taken similar steps to 
avoid penalizing their members for exchange outages that would 
otherwise cause members to fail to qualify for volume-based tiered 
pricing.\6\
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    \6\ See, e.g., Securities Exchange Act Release No. 34-85025 (Jan 
1, 2019), 84 FR 2611 (February 7, 2019) (ISE-2018-102).
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    The Exchange believes that the proposed rule change is an equitable 
allocation and is not unfairly discriminatory because the Exchange 
intends for it to ensure that no member organization suffers adverse 
pricing impacts because of the temporary relocation of the Exchange to 
Chicago. That is, the Exchange does not intend for the proposal to 
advantage any particular member organization; rather, it intends for 
the proposal to avoid disadvantaging any member organization.

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. In terms of inter-market 
competition, 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 and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to 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.
    In this instance, the proposed fee change does not impose a burden 
on competition because the Exchange's execution services are completely 
voluntary and subject to extensive competition both from other 
exchanges and from off-exchange venues. If the changes proposed herein 
are unattractive to market participants, it is likely that the Exchange 
will lose market share as a result.
    If anything, the Exchange believes that the proposal is pro-
competitive in that it will help the Exchange to maintain its 
competitive standing vis-a-vis other trading venues that are not 
planning a similar operational move during this month.
    Similarly, the Exchange does not believe that the proposal will 
burden intra-market competition. As noted above, the proposal will 
simply help to ensure that no participant suffers a pricing 
disadvantage as a result of the Exchange's decision to operate from 
Chicago during the last week of October. It is not intended to provide 
a competitive advantage to any particular member organization.

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.\7\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2020-50 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-2020-50. 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-2020-50 and should be submitted on 
or before December 1, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier.
Assistant Secretary.
[FR Doc. 2020-24887 Filed 11-9-20; 8:45 am]
BILLING CODE 8011-01-P