Document ID: SEC-2016-0005-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, LLC,
Posted Date: 2016-01-04T05:00Z

[Federal Register Volume 81, Number 1 (Monday, January 4, 2016)]
[Notices]
[Pages 116-118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32990]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76780; File No. SR-Phlx-2015-111]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
NASDAQ OMX PHLX Fee Schedule To Increase the Options Surcharge Fee for 
MNX and NDX

December 28, 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 December 18, 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 Exchange's Pricing Schedule at 
Section II, entitled ``Multiply Listed Options Fees (Includes options 
overlying equities, ETFs, ETNs and indexes which are Multiply 
Listed).'' \3\ The Exchange purposes to increase the Options Surcharge 
in MNX \4\ and NDX.\5\
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    \3\ The following symbols are assessed the fees in Section III 
for Singly Listed Options: SOX, HGX and OSX, and not Section II.
    \4\ MNX represents options on the one-tenth value of the Nasdaq 
100 Index traded under the symbol MNX (``MNX'').
    \5\ NDX represents options on the Nasdaq 100 Index traded under 
the symbol NDX (``NDX'').
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    While the changes proposed herein are effective upon filing, the 
Exchange

[[Page 117]]

has designated the amendments to become operative on January 4, 2016.
    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 Exchange proposes to increase the Options Surcharge for 
transactions in MNX and NDX from $0.20 to $0.25 per contract for all 
non-Customers (Professionals,\6\ Market Makers,\7\ Specialists,\8\ 
Broker-Dealers \9\ and Firms \10\) in Section II of the Pricing 
Schedule. Customers \11\ will continue not to be assessed an Options 
Surcharge in MNX and NDX. The Options Surcharge is assessed in addition 
to the Options Transactions Charges in Section II of the Pricing 
Schedule. This rule change applies to both electronic and floor 
transactions.
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    \6\ The term ``Professional'' 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 Rule 
1000(b)(14).
    \7\ 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.
    \8\ The term ``Specialist'' applies to transactions for the 
account of a Specialist as defined in Exchange Rule 1020(a).
    \9\ The term ``Broker-Dealer'' applies to any transaction that 
is not subject to any of the other transaction fees applicable 
within a particular category.
    \10\ 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.
    \11\ 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 and that is not 
for the account of a broker or dealer or for the account of a 
``Professional'' as that term is defined in Rule 1000(b)(14).
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    The Exchange believes that these surcharges will assist the 
Exchange in remaining competitive in these options by recouping certain 
fees.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \12\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act \13\ in particular, because 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 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, for example, the Commission indicated that market forces should 
generally determine the price of non-core market data because national 
market system regulation ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \14\ Likewise, in NetCoalition v. 
NYSE Arca, Inc.\15\ (``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.\16\ 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.'' \17\
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    \14\ Securities Exchange Act Release No. 51808 at 37499 [sic] 
(June 9, 2005) (``Regulation NMS Adopting Release'').
    \15\ NetCoalition v. NYSE Arca, Inc. 615 F.3d 525 (D.C. Cir. 
2010).
    \16\ See NetCoalition, at 534.
    \17\ 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'. . . .'' \18\ 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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    \18\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783).
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    The Exchange's proposal to increase the Options Surcharge for 
transactions in MNX and NDX from $0.20 to $0.25 per contract for all 
non-Customer market participants is reasonable because all non-Customer 
market participants will be assessed the same increased Options 
Surcharge of $0.25 per contract. Customers will continue not to be 
assessed an Options Surcharge. Customer liquidity benefits the Exchange 
in offering other market participants an opportunity to interact with 
this order flow on the Exchange. Also, the Options Surcharge remains 
competitive with fees at other options exchanges.\19\
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    \19\ See NYSE MKT LLC's (``NYSE Amex'') Fee Schedule. NYSE Amex 
assesses a Royalty Fee of $0.22 per contract for transactions in MNX 
and NDX. See also NYSE Arca Inc.'s (``NYSE Arca'') Fees and Charges. 
NYSE Arca, Inc. assesses a Royalty Fee of $0.22 per contract for 
transactions in MNX and NDX.
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    The Exchange's proposal to increase the Options Surcharge for 
transactions in MNX and NDX from $0.20 to $0.25 per contract for all 
non-Customer market participants is equitable and not unfairly 
discriminatory because the Exchange will continue to assess all non-
Customer market participants a uniform Options Surcharge. Customers are 
not assessed an Options Surcharge. Customer order flow is unique 
because Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts 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. 
Finally, the Exchange believes that it is equitable and not unfairly 
discriminatory for non-Customer market participants who trade these 
products to pay the Options Surcharge as the Exchange has entered into 
a licensing agreement to obtain intellectual property rights to list 
these products and seeks to recoup a portion of its costs.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose

[[Page 118]]

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.
    The Exchange's proposal to increase the Options Surcharge for 
transactions in MNX and NDX from $0.20 to $0.25 per contract for all 
non-Customer market participants does not impose an undue burden on 
intra-market competition because all non-Customer market participants 
will continue to be assessed a uniform Options Surcharge for 
transactions in MNX and NDX, in addition to other transaction fees. 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts 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.

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.\20\
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    \20\ 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-2015-111 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2015-111. 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-2015-111 and should be 
submitted on or before January 25, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-32990 Filed 12-31-15; 8:45 am]
 BILLING CODE 8011-01-P