Document ID: SEC-2021-1739-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2021-12-13T05:00Z

[Federal Register Volume 86, Number 236 (Monday, December 13, 2021)]
[Notices]
[Pages 70879-70882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26859]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93729; File No. SR-Phlx-2021-71]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Affiliated Entity Program and Relocate Certain Rules

December 7, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on December 1, 2021, Nasdaq PHLX LLC (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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\ 15 U.S.C. 78a.
    \3\ 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 1, General Provisions, and Section 2, Collection of Exchange 
Fees and Other Claims.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments become operative on December 1, 
2021.
    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 
1, General Provisions. Specifically, Phlx proposes to amend the way it 
administers its Affiliated Entity program.
    The Exchange also proposes to relocate rule text within Options 7, 
Section 1 and Section 2, Collection of Exchange Fees and Other Claims. 
As a result of these rule text relocations, the Exchange also proposes 
to update citations within Options 7, Section 3, Rebates and Fees for 
Adding and Removing Liquidity in SPY; Options 7, Section 4, Multiply 
Listed Options Fees (Includes options overlying equities, ETFs, ETNs 
and indexes which are Multiply Listed) (Excludes SPY); Options 7, 
Section 6, Other Transaction Fees; and Options 7, Section 7, Routing 
Fees. Each change will be described below.

[[Page 70880]]

Affiliated Entity
    The Exchange proposes to amend the way Exchange member 
organizations indicate their participation in the Affiliated Entity 
Program. Specifically, the Exchange proposes to amend the description 
of ``Affiliated Entity'' within Options 7, Section 1, General 
Provisions. Currently, the term ``Affiliated Entity'' is described as,

a relationship between an Appointed MM and an Appointed OFP for 
purposes of qualifying for certain pricing specified in the Pricing 
Schedule. Market Makers or Lead Market Makers, and OFPs are required 
to send an email to the Exchange to appoint their counterpart, at 
least 3 business days prior to the last day of the month to qualify 
for the next month. The Exchange will acknowledge receipt of the 
emails and specify the date the Affiliated Entity is eligible for 
applicable pricing, as specified in the Pricing Schedule. Each 
Affiliated Entity relationship will commence on the 1st of a month 
and may not be terminated prior to the end of any month. An 
Affiliated Entity relationship will terminate after a one (1) year 
period, unless either party terminates earlier in writing by sending 
an email to the Exchange at least 3 business days prior to the last 
day of the month to terminate for the next month. Affiliated Entity 
relationships must be renewed annually. Members and member 
organizations under Common Ownership may not qualify as a 
counterparty comprising an Affiliated Entity. Each member or member 
organization may qualify for only one (1) Affiliated Entity 
relationship at any given time.

    Today, member organizations are required to annually renew their 
Affiliate Entity relationship at the end of one year if they desire to 
continue the relationship. The parties must both send an email to the 
Exchange to avoid termination of the relationship, provided the 
relationship was not terminated earlier in the year. The Exchange 
believes that this process is burdensome for member organizations that 
desire to remain in the program. The consequence of not renewing is 
termination. The Exchange desires to remove the administrative burden 
associated with the requirement to annually renew and instead provide 
that the Affiliated Entity relationship will automatically renew each 
month, unless otherwise terminated. The proposed new rule text would 
provide,

    The term ``Affiliated Entity'' is a relationship between an 
Appointed MM and an Appointed OFP for purposes of qualifying for 
certain pricing specified in the Pricing Schedule. Market Makers or 
Lead Market Makers, and OFPs are required to send an email to the 
Exchange to appoint their counterpart, at least 3 business days 
prior to the last day of the month to qualify for the next month. 
The Exchange will acknowledge receipt of the emails and specify the 
date the Affiliated Entity is eligible for applicable pricing, as 
specified in the Pricing Schedule. Each Affiliated Entity 
relationship will commence on the 1st of a month and may not be 
terminated prior to the end of any month. An Affiliated Entity 
relationship will automatically renew each month until or unless 
either party terminates earlier in writing by sending an email to 
the Exchange at least 3 business days prior to the last day of the 
month to terminate for the next month. Members and member 
organizations under Common Ownership may not qualify as a 
counterparty comprising an Affiliated Entity. Each member or member 
organization may qualify for only one (1) Affiliated Entity 
relationship at any given time.

As is the case today, parties to the Affiliated Entity relationship may 
decide to terminate the relationship during any month by sending an 
email to the Exchange at least 3 business days prior to the last day of 
the month to terminate for the next month. Cboe Exchange, Inc. 
(``Cboe'') has a similar automatic renewal process for its Appointed 
OFP and Appointed Market-Maker Program.\4\ The Exchange believes that 
this amendment will streamline the workflow for member organizations by 
not requiring member organizations to renew each year to continue the 
affiliated relationship.
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    \4\ See Cboe's Fees Schedule at footnote 23 ``A Market-Maker may 
designate an Order Flow Provider (``OFP'') as its ``Appointed OFP'' 
and an OFP may designate a Market-Maker to be its ``Appointed 
Market-Maker'' for purposes of qualifying for credits under AVP. In 
order to effectuate the appointment, the parties would need to 
submit the Appointed Affiliate Form to the Exchange by 3:00 p.m. CST 
on the first business day of the month in order to be eligible to 
qualify for credits under AVP for that month. The Exchange will 
recognize only one such designation for each party once every 
calendar month, which designation will automatically renew each 
month until or unless the Exchange receives an email from either 
party indicating that the appointment has been terminated. A Market-
Maker that has both an Affiliate OFP and Appointed OFP will only 
qualify based upon the volume of its Appointed OFP. The volume of an 
OFP that has both an Affiliate Market-Maker and Appointed Market-
Maker will only count towards qualifying the Appointed Market-Maker. 
Volume executed in open outcry is not eligible to receive a credit 
under AVP.''
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Rule Text Relocations
    The Exchange proposes to relocate rule text to reorganize the 
Options 7 rules. Specifically, the Exchange proposes to relocate rule 
text within current Options 7, Section 2, Collection of Exchange Fees 
and Other Claims, into Options 7, Section 1, General Provisions, 
without change. The Exchange proposes to add an ``(e)'' and the title 
``Collection of Fees and Other Claims'' before the relocated rule text.
    Also, the Exchange proposes to add a ``(c)'' before the 
descriptions of market participants and a ``(d)'' before the Affiliate 
Entity program.\5\ The new lettering will make it easier to reference a 
specific section within Options 7, Section 1. The Exchange believes 
that the policy for the collection of fees should be within Options 7, 
Section 1 which describes other billing practices.
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    \5\ The Exchange also proposes to re-letter and re-number the 
subparagraphs in new ``(d)'' to align with other lettering and 
numbering.
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    The Exchange proposes to delete Section A of Options 7, Section 1, 
which is currently reserved.
    The Exchange proposes to relocate Section B, Customer Rebate 
Program, to Options 7, Section 2 with the title, ``Customer Rebate 
Program,'' without change. The Exchange believes that the Customer 
Rebates should be relocated to their own section for easy reference. As 
a result of that relocation, the Exchange proposes to update references 
to the Customer Rebate Program from ``Section B'' to ``Options 7, 
Section 2'' within Options 7, Section 3, Rebates and Fees for Adding 
and Removing Liquidity in SPY; Options 7, Section 4, Multiply Listed 
Options Fees (Includes options overlying equities, ETFs, ETNs and 
indexes which are Multiply Listed) (Excludes SPY); Options 7, Section 
6, Other Transaction Fees; and Options 7, Section 7, Routing Fees.
    The amendments to relocate rule text are non-substantive amendments 
that are intended solely to reorganize the current rule text.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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Affiliated Entity
    The Exchange's proposal to amend the way Exchange member 
organizations indicate their participation in the Affiliated Entity 
Program is reasonable. Today, member organizations are required to 
annually renew their Affiliated Entity relationship at the end of one 
year if they desire to continue the relationship. The parties must both 
send an email to the Exchange to avoid termination of the relationship, 
provided the relationship was not terminated earlier in the year. The 
Exchange believes that this process

[[Page 70881]]

is burdensome for member organizations that desire to remain in the 
program. The consequence of not renewing is termination of their 
participation in the program. The Exchange desires to remove the 
administrative burden associated with the requirement to annually renew 
and instead provide that the Affiliated Entity relationship will 
automatically renew each month, unless otherwise terminated. As is the 
case today, parties to the Affiliated Entity relationship may decide to 
terminate the relationship during any month by sending an email to the 
Exchange at least 3 business days prior to the last day of the month to 
terminate for the next month. Also, Cboe has a similar automatic 
renewal process for its Appointed OFP and Appointed Market-Maker 
Program.\8\ The Exchange believes that this amendment will streamline 
the workflow for member organizations by not requiring member 
organizations to renew each year to continue the affiliated 
relationship.
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    \8\ See Cboe's Fees Schedule at footnote 23 ``A Market-Maker may 
designate an Order Flow Provider (``OFP'') as its ``Appointed OFP'' 
and an OFP may designate a Market-Maker to be its ``Appointed 
Market-Maker'' for purposes of qualifying for credits under AVP. In 
order to effectuate the appointment, the parties would need to 
submit the Appointed Affiliate Form to the Exchange by 3:00 p.m. CST 
on the first business day of the month in order to be eligible to 
qualify for credits under AVP for that month. The Exchange will 
recognize only one such designation for each party once every 
calendar month, which designation will automatically renew each 
month until or unless the Exchange receives an email from either 
party indicating that the appointment has been terminated. A Market-
Maker that has both an Affiliate OFP and Appointed OFP will only 
qualify based upon the volume of its Appointed OFP. The volume of an 
OFP that has both an Affiliate Market-Maker and Appointed Market-
Maker will only count towards qualifying the Appointed Market-Maker. 
Volume executed in open outcry is not eligible to receive a credit 
under AVP.''
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    The Exchange's proposal to amend the way Exchange member 
organizations indicate their participation in the Affiliated Entity 
Program is equitable and not unfairly discriminatory. Today, any member 
organization may participate in the Affiliated Entity Program. The 
proposed changes would impact all member organizations that voluntarily 
elect to participate in the Affiliated Entity Program in a uniform 
manner.
Rule Text Relocations
    The Exchange's proposal to relocate rule text to reorganize the 
Options 7 rules is reasonable. The relocation of rule text within 
current Options 7, Section 2, Collection of Exchange Fees and Other 
Claims, into Options 7, Section 1, General Provisions, without change, 
and the re-lettering of rule text does not substantively amend the 
current rules. Also, the proposal to delete Section A of Options 7, 
Section 1 is non-substantive as the section is currently reserved. 
Finally, the proposal to relocate Section B, Customer Rebate Program, 
to Options 7, Section 2, without change, does not substantively amend 
the current rules. These relocations and updates to citations will make 
the current rules easier to reference.
    The Exchange's proposal to relocate rule text to reorganize the 
Options 7 rules is equitable and not unfairly discriminatory as the 
amendments are non-substantive and are intended solely to reorganize 
the current rule text for easy reference.

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. Cboe has a similar automatic renewal process for its 
Appointed OFP and Appointed Market-Maker Program \9\ as proposed herein 
for the Affiliated Entity Program. Also, the rule relocation amendments 
are non-substantive.
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    \9\ Id.
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Intra-Market Competition
    The Exchange's proposal to amend the way Exchange member 
organizations indicate their participation in the Affiliated Entity 
Program does not impose an undue burden on competition. Today, any 
member organization may participate in an Affiliated Entity 
relationship. The proposed changes would impact all member 
organizations that voluntarily elect to participate in the Affiliated 
Entity Program in a uniform manner.
    The Exchange's proposal to relocate rule text to reorganize the 
Options 7 rules does not impose an undue burden on competition as the 
amendments are non-substantive and are intended solely to reorganize 
the current rule text for easy reference.

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.\10\
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    \10\ 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-2021-71 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-2021-71. 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,

[[Page 70882]]

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-2021-71, and should be 
submitted on or before January 3, 2022.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26859 Filed 12-10-21; 8:45 am]
BILLING CODE 8011-01-P